Is Grand St. the distribution engine the hardware movement has been looking for?

By Richard Nieva , written on February 15, 2013

From The News Desk

Everyone is still trying to figure out the future of retail. If you’re a tech hardware company, life is even harder – because you’re also trying to wrap your head around retail's present.

Unlike software, hardware needs a physical distributor, and there’s only so much room (or economic opportunity) at Best Buy, or even the Apple store. And direct sales through a product’s website are only highly successful for the buzziest of companies.

Grand St., a Brooklyn-based website that sells products from little-known hardware makers as well as some better established ones, thinks it has the answer: create a store thats a mish-mash of hardware, and give customers easy access.

The team writes up editorial blurbs on each product to really explain it to an audience. The company buys shipments from mostly smaller, often quirky, hardware companies – ones that often have no distribution outside of their own websites – and marks them up for a profit. The site is invitation-only for now, but will launch widely next month.

To be clear, when I say hardware, I’m talking about companies with a consumer-facing physical product, like Nest or Ouya.

If all goes well, Grand St. has the potential to be the hardware equivalent of the App Store: an easy, quick way to get hardware to an end user, instead of software. If it goes badly, it could be more like an online Spencer's Gifts.

Grand St. is part of a growing movement in the tech industry to ease the logistical, financial and production burdens for a new generation of hardware startups. Crowdfunding is an obvious example – Kickstarter helped birth the above-mentioned Ouya and the Pebble smart watch, two oft-cited success stories. San Francisco-based Lemnos Labs, which has been around since 2010, is an incubator that works only with hardware companies.

The problem of distribution has come up in every single conversation I’ve had with investors and CEOs entrenched in the hardware business. While it’s easier for a high profile company like Nest – with its ex-Apple cred -- to find a place at Best Buy, for the majority of other companies, the risk is too great, and most retailers aren’t willing to take the chance of units growing dusty on shelves.

Crowdfunding has been a gamechanger for hardware companies. But the problem, though, has been the highly publicized shipment flubs, with a bulk of companies missing their deadlines. “The danger with crowdfunding is in setting expectations. If people think they are actually buying something that can get shipped, there is a communication issue there,” says Lemnos Labs cofounder Jeremy Conrad. That’s why sites like Christie Street have popped up to protect buyers. (By the way, what’s the deal with the New York street name companies?)

Grand St. tackles the expectations and manufacturing problem in a different, more company-centric way. Once a small company has enough products to go to market, Grand St. makes no bones about how limited the units are. Each product is on the site for 10 days before it is taken down to make room for new products. Then products can reappear on the site at a later date.

For a customer, it feels a bit too daily deal-ish for comfort, but there is an important rationale for it, says founder Amanda Peyton. It helps give the hardware company relief, so it can restock its inventories.

Case in point, one of Peyton’s favorite products, a hackable clock called Wise Clock, was barely able to produce enough units for a complete shipment. The founder said he wanted to sell the clocks, but needed help putting them together. Because they believed in the product, the 5-person team at Grand St. stayed up all night assembling the clocks. “This guy didn’t even have 10 clocks! But we wanted to help,” says Peyton. If he couldn't even make the first 10, imagine how backed up he would be if the product remained on the site and orders came in continuously.

But the company has its challenges. In terms of selection, it seems more like an island of misfit toys than a highly curated experience of a site like Fab. Peyton counters by saying the duds are important to finding out what people like and don't like. Still, a dud means a shipment of unmoved units. She says that hasn’t been a problem as of yet because units have been moving fine during the site's short, invite-only run. As the site grows, sharper curation might become more important.

There's also a subtler challenge the company faces. Grand St.’s approach is particularly mission based. The company seems to have the right intentions, but there’s a certain idealism to it that could hurt the company if it’s not checked.  “We want to help these hardware products find their audience,” says Peyton. That’s not just mumbo-jumbo CEO talk. (After all, who else would stay up all night to put together clocks?) That could bring the company down if a sense of charity gets in the way of making sure only the best products are on the site.

Peyton says that if they can't find the right audience for an item, it's a reflection on the team, as much as it is on the product. That seems unreasonably lofty. Sometimes, there are just bad products.