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Tokyo-based Beer and Tech, the Japanese startup behind a houseplants delivery flower delivery service called HitoHana announced on Wednesday that it has fundraised 100 million yen (about $890K US) in the latest fundraising round. This round was led by Global Brain with participation from Anri. Technically it was the series B round, but due to Beer and Tech pivotting the direction of the business since the latest funding is actually equivalent to a series A round. In the previous rounds Beer and Tech raised funds from Anri, Primal Capital, and East Ventures.

Norihisa Morita, who previously worked for an internet ad agency, and his team founded Beer and Tech in August of 2014. In October of the same year the company announced its Smart Reservation service at Incubate Camp 7th, the bootcamp program by Tokyo-based VC firm Incubate Fund. The company continued the service for almost one year, but decided there was a limited scale, and Morita, who comes from a family of orchid farmers, has since pivoted to focus on problems that crop up in the flower and plant industry by starting HitoHana in 2015.

Honing in on consumers’ demand for interior decoration

As a variety of products are being sold online, the flower and plant industry is one area where digitization has not advanced. In fact, many of current flower and plant e-commerce site basically offer the same potted plants and bouquets which can be bought in offline stores; so, the realization of the long tail for products, which is one of the big advantages of e-commerce, is by and far not being accomplished.

site for businesses, but then judged that it is impossible to make the service stand out because the orders stemming from corporate demands concentrate on obtaining adequate products, cheap and fast. He decided to specialize in the demand for individual’s interior decoration in accordance with the texture of the room and furniture which is paid for by themselves.

In physical flower shops in town, there are limitations on the variations of products, so consumers are limited when choosing products that suit their tastes. HitoHana has established a fulfillment center that can freely combine plants, vases, bowls and the like to create innumerable variations of products. Based on a multitude of order information, the company built a system to accurately discover the hit products and predict future big sellers in order to replenish stock.

When we think about potential competing companies in the Japanese flower and plant industry, online and offline, we come up with names like Hibiya-Kadan Floral, Aoyama Flower Market, Hana Cupid, E-flora, etc. Unfortunately, statistics relating to the number of orders and e-commerce sales are not disclosed anywhere, but based on the premise that the number of website accesses converts at a certain ratio, the ranking of the number of accesses should generally reflect the permutation of their online sales. HitoHana, with less than two years since the start of the service, has surpassed veteran businesses and ranks in the top five, largely thanks to the success of its product variations and SEO (search engine optimization) measures. Currently HitoHana deals strictly in potted plants, but even so, it is just a matter of time before they reach the top in this field.

Leveraging fine-tuned logistics for consignment business

Although there are exceptions, it is generally difficult to send plants such as potted plants by ordinary courier service. Considering constraints in packing, attending to those plants that require temperature control and delivering tall or irregularly-sized plants, in the end, it seems that it is more efficient for the company to create its own logistics network.

When ordering a plant with HitoHana, your item will be delivered using the company’s own logistics network if your address is within the Tokyo metropolitan area. However, Beer and Tech also conducts consignment sales at storefronts of retailers throughout the city by delivering products making the use of vacancy in the logistics. For example, consumers can purchase furniture and potted plants together in these stores while coordinating their interiors. Morita related confidently that here, as with e-commerce, the company uses its own logistics to efficiently deliver goods and replace products in addition to applying a data-driven approach, so depending on store campaigns and consumer needs it is easy upgrade the product lineup.

One example of placing the burden of the logistics of physical stores onto e-commerce businesses, and taking efforts to optimize over-the-counter product lineups, can be seen in the recent tie-up of Japanese major sports retailer chain Alpen and a big name in shoe-centric e-commerce site Locondo. As major chains with physical stores shift to SPA (Specialty retailer of Private Apparel) in order to reduce costs and gain profits, they learn more about the D2C (Direct to Consumer) model, so we can expect to see more linking up of e-commerce companies, with their ability to offer variety and efficient fulfillment and logistics, with physical stores in the future.

Currently, HitoHana operates in the Tokyo metropolitan area under its own logistics, and for other areas the company users regular delivery services to convey orders from interior coordinators and renovation companies, meaning there is no need for stock replacement.

Based on the funds raised this time, the company will open fulfillment centers in Osaka, Nagoya, Fukuoka and other areas and wants to expand its own logistics network so that services equivalent to those in the Tokyo metropolitan area can be offered nationwide. The company deals only with potted plants for now, but plans to adopt flower experts like florists to handle cut flowers, etc.

In this same field, Bloom & Wild, which was founded in the UK in 2013, has raised about 6.25 million pounds (about 930 million yen) while US benchmarks include 1-800-Flowers (NASDAQ:FLWS) and The Bouqs Company established in 2012 (which has raised $43.1M US so far).

Translated by Amanda Imasaka
Edited by Masaru Ikeda