AirHouse

AirHouse is a web based service that connects online merchants, who need storage space,  to the homeowners, who have space to offer on rent. It is a two sided marketplace designed  to offer on-demand warehouse solution. 

Over the last decade, fueled by the likes of Amazon Inc, online retail has had  continuous growth. During the Covid-19 pandemic e-commerce had a 19% global sales  growth just for 2020 [1]. The USA alone saw an increase by $244.2 billion or 43% in 2020,  rising from $571.2 billion in 2019 to $815.4 billion in 2020 [2]. It is clear that the pandemic  accelerated the e-commerce adoption but it also brought to fore new issues. To be  successful in this changing business landscape, one needs to understand why not every  brick and mortar business has been successful in online retail (example: ToysRus). A study of  online shoppers identified that 70% of such consumers will abandon the shopping cart for  two reasons – shipping costs and delivery time [3]. Industry giant Amazon Inc has established  the benchmarks in online retail. Fast delivery is 2 days or less and free shipping is taken for  granted. Consumers will take speed and convenience over brand/trust. It is then logical that  positioning goods closer to end consumers makes better delivery promises possible at lower  costs. However, warehousing and distribution center growth has not scaled at the same rate  as e-commerce. In Q4 2022 the USA warehouse vacancy rate was 3% which is 300 bps  lower than its 10-year average of 6.5%. Due to the supply-demand imbalance the rental rates  for warehouse space has been steadily increasing. In 2022 the average rents went up by  21.6% annually, while some markets recorded increases of more than 40% [4]. The situation  with vacancy rates is further exacerbated by certain industries hoarding the warehouse  space – renting out space more than they need anticipating cyclical business [5]. It is no  wonder then that even the Amazon Inc has prioritized establishing more than 1500  neighborhood warehouses across the USA to cut down shipping/distribution costs and meet  delivery time targets [6]. A mass casualty of this trouble with warehouse/distribution center s  are businesses that are either small scale or have a product that does not necessarily need  large square footage. Such small players are getting squeezed out of the warehouses by  larger businesses that provide stable and high turnover of products. Warehouses/distribution  centers prefer them because not only they provide stable leases but because the handling  fees (with higher movement of products) bring in higher revenues [7]. Building new  warehouse space is not easy and not always commercially viable. For example the new  Amazon logistics facility in Mission Bay, SF cost Amazon $200M to buy and another at least  $125M to build which will yield 650,000 square feet of storage space – that is a staggering  $200 per square feet not counting cost of the land [8].  

It is clear that the warehouse/distribution center space for direct to consumer industry  is a problem waiting to be solved. In this paper we will present ‘AirHouse’ – a ‘two sided  market’ solution to this problem that will not just augment vacancy rates but can also sustain  seasonal supply/demand cycles.