Fulfillment provider Airhouse made a “major layoff” and transferred customers to third-party logistics partners in April after a potential funding round fell through, CEO and co-founder Kevin Gibbon announced in a LinkedIn post Wednesday.
The company was on the brink of closing the round before it collapsed at the last minute, instituting the layoff on April 12, Gibbon said. The amount of people Airhouse laid off wasn't specified, but the reduced headcount meant the company couldn't support all of its customers.
Airhouse, which relies on partner 3PLs for warehousing goods, decided to transfer its customers to work directly with the 3PLs that had been serving their businesses. Airhouse stopped sending over orders to the 3PLs' warehouse management systems on Monday.
Gibbon said the company gave affected customers weeks of notice that this was happening, although he added that some are having trouble with the transition.
"We continued to push orders to the 3PL without charging them for anything to make the transition as smooth as possible," Gibbon said. "However, given how much Airhouse does in the background, we knew this was not going to be a smooth transition but we unfortunately had no other choice."
Airhouse customer Bask Suncare was "left with hundreds of unfulfilled orders, completely scrambling to migrate to a new fulfillment partner" as a result of the changes, founder and CEO Mike Huffstetler said on X Tuesday. Gibbon responded that Airhouse gave Huffstetler specific dates Bask Suncare would need to make the transition by, which Huffstetler disputed.
Gibbon helped launch Airhouse in 2020 after his shipping company Shyp shut down in 2018. Airhouse has positioned itself as a fulfillment platform to help brands with e-commerce operations and logistics, and it saw promising growth in its early days.
In March 2022, Airhouse closed an $11 million funding round that included strategic investors Flexport and Easypost. Gibbon said in a blog post about the round that the company had "quintupled revenue" and doubled its headcount.
"This additional capital will allow us to expand our team so we can continue scaling alongside our existing and new customers by continuing to build features and functionality that meet their ever-changing needs," Gibbon said in the post. "We will also continue scaling our partner network with plans to expand Airhouse globally."
In December, Airhouse had been working to add additional U.S. warehouse locations to its network. It also planned to further grow its international reach through its facilities partnership with SEKO Logistics.
But this year's layoffs and customer transfers raise questions about Airhouse's future. The business model for companies like Airhouse that lean on 3PL partners aren't sustainable, said Matthew Hertz, co-founder of Second Marathon Consulting, which helps e-commerce brands find fulfillment providers. This is especially the case in an environment where venture capital and private equity funding to help them grow is harder to come by.
"The 3PL space is a low-margin business," Hertz, formerly Shyp's VP of business partnerships, told Supply Chain Dive. "A 3PL that's really killing it and doing well is making 10, 12, 15% margins. For you to be a 4PL, essentially a middleman, to sit on top of that and make margin is just nearly impossible."
