On Wednesday, in an industrial area on the south side of Asheville, a grand opening of a new business will be held. The company is called “Ernest;” it provides customizable warehouse spaces for startups, particularly e-commerce startups outgrowing garages and spare bedrooms.

There is a need for this, and co-warehouses are popping up around the state.

Co-working – shared office space –  works OK for small companies selling something intangible – like marketing services, or software. But when you sell physical things, you need more. With Ernest, you get both: secure warehouse space and the common co-working area.

The warehouse part “is a small fulfillment center for individuals,” says Jami Daniels, the CEO. “This is an active work space.  They would be fulfilling their own orders. And then they’d have access to a loading dock, and pallet jack, and a forklift and UPS coming every day. The office space is “more like a traditional co-working environment . . . little conversation zones, like a library.”

“In the warehouse part, you have your own station. It’s either 200 square feet or 500 square feet or 1,500 square feet. It’s your own work space. It’s got a locking door and walls and power. You have your own little realm in the warehouse part,” she says.

“We didn’t invent this concept, but we’re the first ones to do it here, and it’s still kind of a fledgling concept.”

Third-generation entrepreneur

Ernest is building on a 75-year legacy. Daniels is the third generation of an Asheville business family that, until the pandemic hit, ran a commercial printing company in a big chunk of its approximately 60,000-square-foot building, along with a call center and fulfillment operations.

The company is named for her grandfather, Ernest Daniels, who came to Asheville from Florida in the 1940s for treatment of tuberculosis. He started up a business in 1948 literally from a park bench, typing letters for local companies. He built that into Daniels Business Services. When he passed away in 1964, at 55 after a lengthy illness, his death was front page news in the Asheville Citizen.

His son, Jim Daniels – Jami’s father – took over the firm in his late 20s, bought a large local commercial printer in 1972 and built the business into Daniels Graphics. He was a well-known Asheville civic and business leader until his passing in 2016.

Jami Daniels, a graduate of UNC Greensboro, joined the family business around 20 years ago. When her father became ill, she stepped into the leadership role. In 2020, when the pandemic hit, a big part of their printing business suddenly went away, materials for events. Think about the glossy brochures and fliers that you accumulate going from booth to booth at trade shows. Covid stopped a lot of conferences, conventions, trade shows and festivals for a couple of years.

“Our company was deeply affected by Covid because so much work revolved around events, more so than I would have appreciated before there were no events,” Daniels says.

After that business went away, Daniels started the process of selling the printing division to an Allegra franchisee.

Disruption, but opportunity

But Daniels still had a large building, with good access to Interstate 40.  And she had an idea.  The same economic forces that disrupted printing presented an opportunity.

“A lot of cottage industry popped up,” says Daniels, “and a lot of entrepreneurial ideas that had kind of been in the background, people started saying, ‘You know, why don’t we go ahead and try the hot sauce, or whatever?’”

The data shows this. In the 20 years before the pandemic, weekly new business formations, tracked as applications for federal tax identification numbers ran between 1,000 and 2,000 in North Carolina. They started rising in the summer of 2020, peaking at more than 4,500 in mid-January 2021, and they are still running high.

Finding the right space is a challenge for product-focused startups.

“It seemed like there was a really big gap here between having your own 50,000-square-foot warehouse, or kind of being stuck in the garage,” she says. “Like there’s not a lot of middle ground here.”

“The gap we’re looking to fill is that thing that helps you scale out of the garage, but you’re not quite ready to choke down a traditional commercial lease.”

The co-warehouse part of her building takes up around 30,000 square feet. Customers can rent for 30 or 60 days, or even a year.  The walls can be moved to adjust to customer needs. “And at some point, my assumption is people will be up and out,” she says. She will start with 17 units, with four larger ones, 1,500 square feet each.  It will take a while to determine the optimal configuration. “We’re not sure until we get the market in here and see what people want.”

Another 20,000 square feet of her building is where her fulfillment operation is located.  This had its roots in the trade show business, shipping marketing materials and equipment that sales reps needed around the country. What has happened, as e-commerce has grown, is more businesses need help now with fulfillment – getting product directly to consumers.  This is particularly true as companies that had been strictly business-to-business and selling through stores and distributors, have found themselves selling direct.

“They could give you a pallet, but they didn’t really have a mechanism to send out a zillion individual orders,” Daniels says

Having that fulfillment side means that co-warehouse tenants can take advantage of it if a big order needs to be shipped. “In our model, we are still doing fulfillment here.  If you’re a member of our co-warehouse and you needed just a couple of extra hands for a couple of hours, I can give you flex staff. We can do all of it or we can give you two guys.”

Again, this is part of the scaling up.  The co-warehouse customers don’t need their own shipping and receiving department yet. They just need enough help, just like they need enough space.

She runs another business operation – a call center – that some co-warehouse clients may want to access. Daniels provides an array of customers with staffers trained to handle calls for different businesses, firms that absolutely have to have calls answered by live humans.  These folks have been working from home since the pandemic, which suits them fine, she says

What is our business?

Ernest is a case study of how an enterprise keeps going by correctly answering the most important question: What business are we in? Her company’s expertise for years was helping customers solve difficult problems. That was its business, really.  E-commerce has lots of logistical problems, especially for startups with a product.

“We’re still figuring out the solution, the complicated needs, just in a different way,” she says  “If you called a commercial real estate broker and said, ‘Oh, I want 500 square feet for six months,’ they’d tell you to pound sand.

“You don’t want to hire some guy to work in your garage. You’re not going to accept a pallet to your garage. It’s a really heavy lift to look at a five-year, triple net [lease],” she says.  “On this end of the state, there’s really not a lot of commercial choices, so I feel like we’re really filling a gap.”