+ How to scale a luggage storage marketplace
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One month ago, Airbnb announced that employees can live and work anywhere in the world.
“This means you can move from San Francisco to Nashville, or from Paris to Lyon. You’ll have the flexibility to do what’s best for your life—whether that’s staying put, moving closer to family, or living in a place you’ve always dreamed of.” - Airbnb
Several other companies have followed suit. For many people (esp. millennials and gen-z), it means having the opportunity to explore more parts of the world, whether it’s living that van life, working out of a communal house, or just living in a different city every quarter of the year. More and more people are becoming digital nomads.
According to Project Untethered, there were 4.8M Americans that identified themselves as a digital nomad, and it more than tripled in 2021 to 15.6M. The founder of Nomad List, Pieter Levels, predicts that by 2035, there will be more than a billion digital nomads globally.
The founder of Bounce, Cody Candee, has been living a nomad lifestyle way before the start of the pandemic. After graduating from college, Cody took a product manager job at Intuit. He spent time in India, the UK, and other parts of the world for different projects. These experiences have shaped how he views the world. Cody believes in minimalism and loves the freedom to pursue cool opportunities in different cities. In fact, all his belongings can be packed in just three pieces of luggage.
However, this is not the case for most people. The ‘aha moment’ came when he realized that people often plan their lives around their belongings.
“One time, some colleagues and I decided to get together in San Francisco one night. One of the colleagues said they would join us. However, they had to first go home to drop off their bags, and then they’d come all the way back. I realized that there had to be a better solution.” - Cody
Let’s dive into how Cody and his team validated the idea for Bounce and grew both sides of the marketplace.
Idea validation journey
In 2017, Cody teamed up with his co-founder Aleksander Rendtlsev to get the idea off the ground.
The initial idea for Bounce was an app that would allow you to summon your bags away from you and back to you. With a tap of a button, someone would pick up your bags and then come back at a time you want. Think of it as Uber for bag pick-up and drop-off.
To validate this idea, they had to first test a core hypothesis:
#1 Would people feel comfortable handing over their valuables to some strangers from the internet?
To quickly validate this core hypothesis, Cody and his co-founder Aleksander put up a simple landing page website with the promise that they would come and pick up your stuff and bring it back to you. To make sure people see the page, they bought some Google ads and targeted people in New York City.
“We put something live that seemed like it could be real and used that to get real customers so that we could build a product around it. Five minutes after putting up the Google Ads, someone called my phone and asked for the pricing. I quickly hit mute and I was like, ‘Alex, Alex, how much should I charge them?’. That’s when we decided how much to charge the person.
Later that day, we showed up to meet this lady at a Starbucks, and to make it seem a little bit more legitimate, we brought another suitcase with us so we could say that we’re Bounce and we deal with more suitcases than just yours’ ” - Cody
They fulfilled their first 20 orders on Citi Bikes themselves to get Bounce off the ground.
It was clear to them that there was enough interest in this idea, but to understand the scalability of this idea, they had to answer another key question:
#2 How to make the unit economics work?
Despite the interest from the demand side, the delivery model was quite logistically challenging. It was exhausting to ride around on Citi Bike to pick up and drop off bags. They also did some back-of-the-napkin math and realized that it seemed unlikely that they could pay drivers enough money to make the unit economics work.
To scale this business, they had to rethink the model. They iterated on two other approaches that could drastically reduce the logistical costs:
Drop off your bags at one location and pick them up at any other locations in the same city
Drop off and pick up at the same location
The first approach would still involve a delivery person, but it would be a lot easier since it does not involve a direct hand-off with the customer. However, there were enough people willing to drop off and pick up their bags from the same location that Cody and Aleksander just started running with that one since it was so much easier and eliminated the need for delivery altogether.
Key lesson - optimizing for speed
The entire idea iteration process took about a week. One of Cody and Aleksander’s key metrics in the early days was speed to launch. They were not afraid to try things and move fast to experiment with new ideas without the kinks worked out. They started by validating the key assumptions that would make or break the business with a simple landing page and some AdWords and kept iterating on new ideas from there.
Today, many of the bookings came from the Bounce mobile app. For the first year, however, they relied solely on the web platform (which they built in a month) to increase their execution speed. As a result of this relentless focus, they grew the business to $100K+ annualized revenue within 7 months of starting the company.
Growth - supply and demand
Bounce is a classic two-sided marketplace. The suppliers on the platform are the storage partners. Customers from the demand side are people that need to store luggage. Let’s look at how they cracked both sides of this marketplace.
Supply-side value props
The reason that a store would partner with Bounce is straightforward - this partnership increases their revenue. Not only does Bounce help them to monetize their unused storage space without causing too much of a hassle, but the platform also helps them to bring in additional foot traffic, which increases revenue for their core services.
To understand the monetization potential of the platform, I looked into one of the storage spaces near me in San Francisco. It had 40 customers in April based on reviews and took home north of $1000 per month based on some of my assumptions. This number is not bad for a small business, especially if these customers also end up purchasing some of the services that the store sells.
Supply selection framework
Bounce’s selection framework for the supply side is loose. Any store can be a storage partner as long as they have some storage capacity. Customers care a lot more about the proximity than the type of storage space. When you are carrying three 50 pounds of luggage around the city, even three blocks away can be seen as too far.
Bounce has three main criteria for selecting storage partners:
Consistent opening hours
Storage space (can be just a closet in the back of a store)
Good customer service (based on online reviews and an interview)
As a result of this loose framework, most storage partners are different small businesses that have some unused storage space. Some of the interesting ones include magic shops, adult video stores, and even the Museum of Hangovers.
Bounce’s storage coverage is constantly growing, with 7000+ locations on the platform.
One growth driver is the organic growth loop within the business. A lot of business owners have more than one location. If one store proves to be successful, the business owner could easily expand to all the locations that they have. Even if the owner has only one store, they are likely to tell their other business owner friends about this new revenue stream.
Besides organic growth, Bounce also acquires new locations through outbound sales and partnerships. Bounce has an outbound sales team that is constantly reaching out to potential storage partners that might be a good fit. Partnerships are also a key part of supply-side growth. At the end of 2021, Bounce announced a partnership with UPS which added 4500+ new locations to the platform.
Bounce is growing rapidly on the demand side with tens of thousands of users using it every month. Besides performance and content marketing, Bounce also has two strong growth levers - international expansion and service expansion.
But first, let’s look at why customers use Bounce.
Demand-side value props
People need to store bags for a myriad of reasons. There are a few different personas that Bounce targets:
Travelers - business travelers and leisure travelers who might need to store their luggage during their trips
Commuters - people who travel in and out of the city every day and might not want to bring their stuff to the city every time
Professionals - professionals who might need to carry more stuff with them as a part of their job, such as salesman who are showing physical products
Event attendees - sometimes, you can’t store bags at a venue (e.g. baseball game) so you need to store them elsewhere
Bounce makes sense because it wins on two key axes that a customer cares about the most - proximity and cost. Bounce has 7000+ places in 1000+ cities which means that they have good coverage in most major cities. Some of the big ones include Lisbon, Paris, London, and Rome. In addition, it has an affordable and transparent pricing model. For the bag storage service, Bounce charges $5.9 flat per item per day regardless of the size of the bag. This pricing tends to be 50% cheaper than competitors’.
Another one of Bounce’s main growth drivers is international expansion. International expansion is important because it attracts new customers and adds more value to the existing customers. By expanding to a new country, Bounce increases its TAM and taps into a brand new customer pool in the local market. For existing customers, broader storage coverage means that it will become more convenient for them when they go travel to different countries. As Bounce continues to expand internationally, it strengthens its global network effect similar to the one that Airbnb has.
Bounce has an agile approach to international expansion. Where they expand next is mostly based on search demand for the keyword ‘luggage storage’.
“We track where people are searching for ‘luggage storage’. If we see a lot of demand, we will direct our effects there and set up a bunch of stores fast. Right now, for example, there is very little demand in most of Asian because of COVID. Once that turns around, we will make sure to get a ton of shops in the key cities that Asia that people are searching for.” - Cody
Besides luggage storage service, Bounce also offers a package acceptance service, which they launched last year. You can ship any package to 2000+ Bounce package acceptance locations.
“The package service was a top customer request, particularly in cities like New York. This is especially useful to them compared to PO Boxes or Amazon lockers because it provides a single nearby location where the customer can get all their packages. Customers don’t want to go to one place for Amazon packages, one place for UPS, one place for FedEx. Customers like having a dedicated address they can give out and collect all their parcels from.” - Cody told TechCrunch
This new service solves a different pain point for the customer but Bounce can very easily cross-sell to the same customer base. Additionally, this new package acceptance service provides a more recurring revenue stream for the company. Besides the standard pay-as-you-go model, Bounce offers a subscription plan for power users who receive many packages each month.
Some closing thoughts…
This startup journey has not been entirely smooth for Bounce. Similar to most other companies, Bounce’s business completely froze during the first three months of the pandemic. One of the biggest strengths of the company is its resiliency and its ruthless focus on rapid experimentation. It kept retargeting different countries that slowly opened up during the pandemic and this agility helped the company to slowly get back on its feet.
By the end of 2021, Bounce was getting 10K+ new customers every month. Two months ago, Bounce closed a 12M Series A round led by a16z.
Here is a picture from Cody’s LinkedIn that best summarizes this journey:
Check out Bounce!
See you soon 👋,