Hoard­ers, re­joice! Stor­age star­tups will valet your stuff

New­com­ers chal­lenge the in­dus­try’s haul-it-your­self gi­ants “We’re a very af­flu­ent so­ci­ety. Peo­ple buy, buy, and buy”

Bloomberg Businessweek (Asia) - - CONTENTS - −Pa­trick Clark The bot­tom line Star­tups are try­ing to carve out a slice of the ex­pand­ing stor­age in­dus­try by of­fer­ing on-de­mand pickup and de­liv­ery.

A ware­house worker at stor­age startup Red­Bin spent 75 min­utes on a re­cent morn­ing pi­lot­ing a van from com­pany head­quar­ters on the Brook­lyn wa­ter­front to an apart­ment build­ing in Har­lem, where he dropped off two empty plas­tic boxes. Then he drove back to Brook­lyn. Four days later, Red­Bin dis­patched an­other van to re­trieve the con­tain­ers, now full, which the com­pany will store for $5 per box per month.

It may not seem like a speedy path to riches, but founder Tom An­der­son be­lieves his busi­ness is des­tined to pros­per for a sim­ple rea­son: U.S. con­sumers are a lot bet­ter at ac­quir­ing than they are at let­ting go. A se­rial en­tre­pre­neur whose last com­pany man­aged lo­gis­tics for U.S. mil­i­tary con­trac­tors ship­ping cargo to Afghanista­n, An­der­son launched Red­Bin in Septem­ber. He also owns a self-stor­age cen­ter in Oak­dale, Long Is­land, which has al­lowed him to study the be­hav­ior of the Amer­i­can pack rat up close.

To An­der­son, the on-de­mand model seemed like a good way to reach cus­tomers who live in cramped apart­ments that are far from tra­di­tional stor­age fa­cil­i­ties, which are more abun­dant out­side city cen­ters. Red­Bin doesn't charge for the first four pick­ups and de­liv­er­ies, and cus­tomers can sum­mon their bins with 24 hours' no­tice us­ing the com­pany's smart­phone app. “We're build­ing a bridge be­tween a per­son's need to see their stuff and their need to keep it in stor­age,” he says.

In New York, Red­Bin is com­pet­ing with on-de­mand stor­age com­pa­nies in­clud­ing Box But­ler, a sub­sidiary of Iron Moun­tain; MakeSpace, a ven­ture-backed startup that also op­er­ates in Wash­ing­ton and Chicago; and Clut­ter, which raised $9 mil­lion in Oc­to­ber from Se­quoia Cap­i­tal.

Sim­i­lar ser­vices have cropped up in Bos­ton, Den­ver, Los An­ge­les, and San Fran­cisco. There are enough play­ers that Boxbee, a startup backed by Google Ven­tures, has ded­i­cated it­self to mak­ing soft­ware to help on-de­mand stor­age com­pa­nies man­age ware­houses, de­liv­ery ve­hi­cles, and billing.

The star­tups' busi­ness mod­els vary slightly—Red­Bin stores boxes that mea­sure three cu­bic feet and a hand­ful of spe­cialty items, such as bi­cy­cles and air con­di­tion­ing units, while MakeSpace, which has raised $10 mil­lion from Up­front Ven­tures and oth­ers, will take your pi­ano. But all of­fer de­liv­ery ser­vice to en­tice cus­tomers who would oth­er­wise have to do the heavy lift­ing them­selves. “When we started look­ing at this in­dus­try, we un­der­stood the need for stor­age; we just didn't un­der­stand why the ex­pe­ri­ence was so poor,” says Clut­ter co-founder Ari Mir. So the Cal­i­for­nia com­pany hired movers to help cus­tomers pack, pho­to­graph, and trans­port their be­long­ings. Sixty per­cent of stor­age cus­tomers live in 25 U.S. metropoli­tan ar­eas, says Mir, and his com­pany is fo­cus­ing on those mar­kets.

More than 50,000 self-stor­age fa­cil­i­ties are in the U.S. All told, stor­age busi­nesses will gen­er­ate $33 bil­lion in 2016, es­ti­mates re­search firm IBISWorld, up from $24 bil­lion in 2010. “We're a very af­flu­ent so­ci­ety,” says Ellen Faye, pres­i­dent of the Na­tional As­so­ci­a­tion of Pro­fes­sional Or­ga­niz­ers. “Peo­ple buy, buy, and buy.”

Be­cause con­struc­tion of stor­age

cen­ters flagged dur­ing the re­ces­sion, de­mand for lock­ers has out­stripped sup­ply. Oc­cu­pancy rates and rents are at all-time highs, ac­cord­ing to Chuck Gor­don, chief ex­ec­u­tive at Spare­Foot, a web­site that helps peo­ple com­par­i­son shop for the best deals.

Those trends have been a boon to the new­com­ers, help­ing them stay com­pet­i­tive on price while they of­fer bet­ter ser­vice than self-stor­age fa­cil­i­ties. It has also prompted some of the larger oper­a­tors, in­clud­ing Malvern, Pa.-based CubeSmart, to ex­per­i­ment with on-de­mand.

What's not clear, says Gor­don, is whether the star­tups are at­tract­ing a new kind of stor­age user or grab­bing cus­tomers who would have rented space from tra­di­tional oper­a­tors. “There's a to-be-de­ter­mined num­ber of reg­u­lar stor­age cus­tomers choos­ing this op­tion be­cause it's more con­ve­nient,” he says. “Does 5 per­cent of the mar­ket want this, or 50 per­cent? That's the big ques­tion.”

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