Hong Kong storage start-ups jockey for piece of the action

With space at a premium in the city, several rival e-commerce start-ups have emerged offering on-demand storage of household and personal items

PUBLISHED : Friday, 03 April, 2015, 6:03am
UPDATED : Friday, 03 April, 2015, 6:03am

In crowded Hong Kong, a start-up race-to-the-bottom has begun, and the contestants have barely passed the starting line.

In the past seven months, five companies - Boxful, Spacebox, Klosit, StuffGenie and GoNLive (GNL) - have emerged to import a winning business model to a city strapped for space. Each offers the same service: a person with too much stuff lying around will open an app and order a plastic box to be delivered to their flat. The customer then throws his or her junk into the box (winter clothes, old photo albums, for example), and it is sent to a warehouse for storage. The customer is charged a minimal fee - usually about US$7 dollars per month - for each box.

These businesses leverage the internet to manage box booking, database technology to tackle warehousing, and use tracking technology to oversee a box's location. But their real technological innovation lies in a specific form factor - a reusable plastic box.

Boxful was founded by Norman Cheung and Carl Wu, whose last venture was Zooq, an e-commerce company that sells women's clothing. The pair acquired US$1.5 million in angel funding for Boxful, making it one of the better-backed storage start-ups in the city.

StuffGenie's team also has roots in China's fashion industry. Co-founder Miles Davison worked as general manager of Lifestyle Logistics in Shenzhen for two years, where he helped oversee warehouse space that housed inventory for luxury brands. He teamed up with his brother Charlie, a web developer, to build StuffGenie.

"We know that this on-demand valet storage model is not new, but we felt we had an opportunity to do it better than other companies had been," says Miles.

Louis and Stuart Cerne of Spacebox are another sibling team looking to crack the market. While the two don't have a logistics background, they co-founded Enecore, a climate mitigation consulting firm that they later sold to an investor. Unlike Boxful and StuffGenie, the Cerne brothers' discovery of the box-on-demand model was accidental.

"We started out looking at made-to-measure furniture," says Louis. "In Hong Kong, the problem is that apartments are weirdly laid out and furniture never quite fits. Through that process, the idea became to take storage out of the house."

Mark Sims of GNL claims he conceived of the company as part of a class project while completing his MBA. The founder ended his seven-year tenure at Oracle in September 2013 to start the venture, which remains bootstrapped to date.

Klosit's founders won't reveal themselves, but a source familiar with the team says they have experience in logistics.

According to an August 2014 report from Colliers, 820,000 households in Hong Kong contain no dedicated storage space. If half of these households demanded storage space of 15 square feet, the market size of self-storage would be about 6.15 million square feet - about three times Colliers' estimate of the city's existing self-storage space.

Derek Kwik, managing partner at investment firm Brave Soldier Ventures (HK), says the move towards on-demand self-storage comes down to speed.

"Investors and founders out here, they see a trend picking up in the US, and they have a finite amount of time to build up something that's similar," he says. "Each country is going to have their own subset of competition. Any place in Asia that meets a high-rent, low-space requirement, storage becomes an issue."

What we need to focus on is a brand people trust and respect
Louis Cerne, Spacebox co-founder

The on-demand storage model allows for a finite amount of creativity. Some companies talk of targeting businesses, while others express interest in an Airbnb-esque "store at your friend's house" model. Yet if there is one true point of differentiation for these start-ups, it lies behind the scenes. Keeping fleets and warehousing in-house ensures a higher degree of control over storing people's valuables. Outsourcing logistics to third-parties is cheaper, but increases the likelihood of a mishap - which could tarnish the firm's credibility.

"In traditional e-commerce, if a buyer buys a pair of shoes on Amazon, and it doesn't get to your house, Amazon will happily send you another pair of shoes just to keep you happy. But you can't lose someone's photo albums and apologise for it," says Kwik. "The accountability for personal storage is a higher level than it would be for e-commerce."

Most of Hong Kong's on-demand storage firms have outsourced their logistics procedures to varying degrees. StuffGenie, for example, works with an established logistics provider to handle delivery and warehousing. Van drivers wear StuffGenie T-shirts and are trained to use StuffGenie's box scanners and warehouse management technology, even though they're not official StuffGenie employees.

GNL and Spacebox, meanwhile, keep most of the carrying procedures at arm's length. Aside from a few loyal drivers (GNL pays some retainer fees), vans are obtained through call centres or services such as GoGoVan. Spacebox even separates box delivery into a hub-and-spoke-type model, whereby a freelance van drops off a set of boxes at a makeshift distribution point, while in-house delivery men drop the boxes off to individual customers.

"We have no interest in running fleets of vans or renting warehouses and, generally speaking, in accruing assets we need to manage," says Louis Cerne of Spacebox. "What we need to focus on is creating a brand people trust and respect."

The Boxful team has run in the opposite direction. Most of their competitors have worked out special short-term deals with warehouses to accommodate their box-by-box business model. But Cheung and Wu have taken out long-term leases on both warehousing and fleets, and say they're considering acquiring these assets. Real estate is "100 per cent dedicated to Boxful", and all labour is on the Boxful payroll.

Of course, while the in-house model theoretically ensures better security and service, there's a high risk involved - if leased or purchased assets go unused, you've just wasted your money.

As most of these firms are less than six months old, it's quite likely that it will take months - perhaps more than a year - for signs of a market leader to emerge. Curiously, however, when asked if they believe on-demand storage will be a winner-takes-all market, most start-ups replied that they did not.

"This is not an industry where, at least at this stage of development, there are strong network effects," says Louis Cerne of Spacebox. "Of course, if you become a recognised brand then you attain a certain degree of dominance. But I don't believe there will be any one company that will become the one on-demand storage company in any city."

Tech in Asia