The Place: Anywhere in the UK there are big, empty warehouses really.
The Story: Like all good business ideas, this one comes from someone spotting a problem and thinking – I could solve that.
And who might that someone be? Charlie Pool, CEO of Stowga. He comes from an asset management background (Delin Capital to be exact) but back in the summer of 2015 he heard via the real estate specialists at Delin that there was ‘trouble at mill’.
How so? The warehouses were only full for part of the year and for the rest of the time they lay empty and not earning anything at all. So obviously Mr Pool had a Eureka moment and set up Stowga.
Yeess. Obviously I get it. But just go over it again for the benefit of everyone: Sigh. It’s all about the utilisation of space in the industrial retail sector. Change is inevitable and is a matter of when and not if. It’s happened everywhere else already after all.
Umm, has it? Duh. Spare residential space is now sorted by AirBnB. Spare office space is sorted by WeWork and spare retail space is sorted by Appear Here. So now it’s the turn of the Cinderella in the story – industrial warehousing.
I’m going to be honest here. Not really my field: So listen up – currently 25% of warehousing is given over to retail involving FMCG and food, another 25% is all other retail. A further 25% is used by logistics firms (mainly for e-commerce fulfilment) while the final quartile is set aside for manufacturing companies. But for some parts of the year every warehouse is underused and for a portion of the estate you can make that the whole of the year.
Surely not the season of good cheer: No, Christmas is the main time when everything is chockablock as you would expect. But warehouses have moved from just being sheds to being more complex and with e-commerce demand only going one way, Pool is confident Stowga is poised to rise the wave!
Objection your honour. Can people not just build more warehouses in the locations where they are most needed? Aha, warehouse planning is always four to five years behind the curve. Roads to the warehouses need to be built, sometimes affordable housing for the warehouse workers needs to be organised, and all in all Houston, we have a supply/demand mismatch.
So, at last, we get to it. This is what Stowga does…Yes. But it specialises in speed. Someone might just want to use a warehouse for three months but it takes three months to negotiate a traditional lease going through the usual legal routes. Blah Blah. So last century.
I can see how an Appear Here analogy would work: Indeed, in fact the Stowga CTO was originally at Appear Here. But Charlie Pool says that the similarities end there. Appear Here is supply constrained. Stowga is demand constrained.
So that means, there are no customers: Correction – there are customers – it’s just finding them. Appear Here can do great photos of beautiful shops in city centres but nobody builds attractive warehouses. The onus is much more on Stowga to find out what exactly people might need and then find them the perfect site.
That’s funny. What could they need except a big old empty space for their stuff? And that just shows how little you know. They need to know exact locations, what facilities the places have (is it temperature controlled, does it have CCTV, are there employees/security staff in situ), what the local infrastructure is like, pick & pack capabilities on-site, I could go on.
OK, OK: On the plus side, warehouse owners do not need much incentive to try to monetise their under-performing assets.
Which means in English? If you are a supermarket with a warehouse that is not generating any income because it is lying empty waiting for a delivery two months hence, then any rent you can get for that site is better than nothing.
Thank you: For example, Stowga is doing business with a large supermarket player which had become a big buyer of retail warehousing stock. They will do rental deals well under the market rate because sweating an asset makes complete sense. So instead of renting at £1.50 per week per pallet, Stowga might be able to get it at £1 per week per pallet for a client – big savings.
Show me how this works for the buyers: Take Vimto. In 2016 it wanted to break into the Welsh market but doing a traditional rental deal would have locked into a five to 10 year lease.
Bad news? BAD news. Called in Stowga. Found a site in an hour. Vimto paid £500 per week and moved in to its temporary home within two weeks. Now that’s agile. And they’re paying less in rental costs than the usual consultancy-led approach would have charged just for its initial feasibility report.
Did they carry on with it? Absolutely. They originally had three massive fulfilment centres now they have 14 around the country and would like to make it to 25. This is much more local and direct. They might just have 50 pallets of a product here and 25 there but it makes a lot of business sense.
I can’t knock it as an idea: The system allows companies to flexibly re-evaluate their delivery distances, and save on driver and fuel costs too.
And how many sites does Stowga have at its disposal? 4,000 of the beauties. So if you are unceremoniously booted out of one site for any reason, there will always be another nearby. Although according to Mr P as soon as companies hear that they are paying by pallet space and there are no long leases they queue up to use Stowga anyway.
Well, I just can’t see what could ever go wrong: The main issue is convincing the market to adopt a different approach. Stowga is adamant that if only 25% of existing warehouse space was offered on a flexible basis then much of the problems in finding warehouses would be eliminated. It’s just down to persuading people that moving from a lease-based to a more service-based model is the way forward – both the supply and demand side.
Aaah, ‘twas ever thus: And, ahem, it may be that the people making these kinds of decisions can sometimes be a bit cautious. A little bit, how shall I put it?
Nervous middle management…Yes, best to start at the top with the CEO or go via the marketing people – the people with a bit of vision and daring. People with a je ne sais quoi about them, an entrepreneurial joie de vivre.
Someone like me then? No, not really.
PCMS is a global provider of IT software and services for the retail industry. PCMS offers a full-range of integrated commerce solutions across selling touch points and also provides turnkey managed services and cloud hosting. Its client list includes John Lewis, Marks & Spencer, Waitrose, Whole Foods, as well as Walgreens in the US and fashion brands including Prada and Ferragamo across Europe.