On Wednesday 11th October Wired Magazine held its famous Retail conference in London.
8 startups from Europe were shortlisted to pitch on the Startup Showcase stage. A panel of judges from Wired, EY and Here East judged the companies for: - How disruptive is each presenter’s idea? - How innovative is their technology / science? - How relevant is the problem they are trying to solve?
.....and the winer is.....[DRUM ROLL].....STOWGA!!!
Here is a write up plus slides of the pitch our Founder Charlie gave to win the coveted prize.
Stowga is a B2B warehouse market place that connects warehouses with under-utilised capacity with customers looking for on-demand warehousing services.
Warehouses get to monetise unused space.
Customers get access to warehousing that they can scale up and down - just paying for what they use - without being tied into a long term lease.
I started this business because I used to work for a firm that owned warehouses. Lots of them. What they had realised that over time every single one of our warehouses was under-utilised for parts of the year.
Empty space. Just sat there, not just not making money but actually costing them.
It turns out this story is the same the world over - every warehouse on the planet – even when occupied - has under-utilised space in it for large periods of time.
On the flip side we knew our warehouses were in high demand. If any of you have experience of this, it’s incredibly hard to find warehouse. There is no database of warehouses. Warehouses don’t have websites (why would they?) so it’s hard to find a warehouse, and when you do the pricing is all over the place. There no taxonomy which means that there are loads of hidden fees and confusion. In short it’s an opaque market.
And an opaque market is an inefficient one…. And it’s a huge market. It’s not exactly a sexy market but to get your head around how big it is stop and look around you. Every single man made object around you will have been through a warehouse at some point. probably several warehouses as it moves around the world from being a raw material, to being manufactured, to being ready for retail. It’s a huge, global, but to most of us invisible, market - the backbone of global trade.
What Stowga does is create a marketplace to match buyers and sellers in a simple to use, streamlined platform to smooth out this inefficiencies.
The benefits it brings to warehouses are obvious - we bring them new customers at zero upfront cost, allowing them to monetise otherwise dead space. It’s bonus income straight to the bottom line.
But this being Wired Retail what we really want to talk about is what it means to our customers - who nearly all are retailers.
Fixed to Variable
On-demand warehousing allows customers to only pay for what they use.
Normally this is pallet space, also includes value-add services like pick and pack, fulfilment, etc. It’s a pay-as- you-go model, but the key thing is that you are not tied into a lease. This is huge because the average warehouse lease is 5 years (for big retailers it can be up to 25 years). Suddenly you switch a fixed, long term cost into a variable one. It means as your business scales up and down, so to does your warehousing. It’s a dynamic model not thinking in years but weeks. Our customers get charged for the space they used on a per week basis.
Buffer + Agile
When every link in the supply chain is variable, what our model empowers businesses is to have an entirely fluid supply chain.
This is game changing.
The effect of this is two fold:
For businesses doing well they can scale up as fast as they want. They can be agile. One of our clients - Vimto used to have 3 massive distribution centres. Now they have 12 smaller regional sites through us. This means they have a distributed model - which means they are by definition closer to customers. Shorter deliver distances mean quicker deliver (important now for retailers looking to compete with Amazon), but also reduced driver and fuel costs.
It also means they can innovate like a startup.
One of our clients wanted to break into the Welsh market. Before they would have had to have sent soemone to Wales, write a report, find an agent who would find them a warehouse, then negotiate a lease...and then take on that warehouse for years.
Now with Stowga they made one enquiry through our website. We had several options for them within minutes and they took a warehouse and actually moved in 2 weeks later! If it doesn't work out they can shut it down. It's far more efficient, and it allows them to be fast, agile and innovative.
For other companies Stowga acts as a buffer against market volatility.
This graph is USD/GBP for the last 5 years - the average length of a warehouse lease.
Imagine being a retailer with a time machine. Would you commit to that warehouse in 2012 if you knew your import costs were going to go up 30%?
No business should be committing themselves like that.
In just 2 months after Brexit the Pound devalued by 20%. If warehouse occupiers had on-demand warehousing they could just scale down to react to external market conditions.
As it is they don’t and are committed to the space but the good for me is that many of these are retailers are now sellers of space on our platform. They don’t use as much space as they once did so are now making money from that dead space.
I’ll end by trying to frame this in the bigger picture. The cost of every product you buy is made up of the raw cost (design, manufacturer and market) and the cost of carry. The cost of carry is the logistics - and that’s not just the postage and packaging cost of delivery, that’s the cost of the product through it’s entire life from raw material to end consumer. It typically accounts for 1/3 of any product. Most of that is made up of storage, transport and other risks - pilferage and obscurity. If you enable dynamic warehousing you can easily halve these costs.
Think about that.
More efficient warehousing means less transport, less things going missing, less things becoming obsolete. To put it into context whilst our politicians are all arguing over trade agreements, if our country’s companies adopted better logistics technology the benefits of the efficiencies would far outweigh the even most disastrous trade agreement scenario.
Every company here today at Wired Retail should be preparing for uncertainty. If you’re a retailer the very best thing you can do is to hedge yourself against that in your supply chain - switching to the on-demand model that Stowga provides will not only simplify your business, it will free it and transform your economics in good times and bad. Every retailer has a supply chain, and at the heart of the supply chain is the warehouse. If your warehousing strategy at the back-end is not optimised then nothing you do at the front-end really matters.