Why B2B May Have Pioneered The Sharing Economy

The sharing economy is making waves right now. Have a car as well as some spare time? Drive for Uber. Have an extra bedroom in your apartment? Rent it out through Airbnb. Innovations such as these have given rise to on-demand consumerism, and now analysts are talking about corporations catching on.

The on-demand economy’s popularity means Flexe, a startup that links businesses to other businesses that have extra warehouse storage space to rent out, is being heralded as the Airbnb of logistics and inventory.

But as Flexe co-founder and CEO Karl Siebrecht told PYMNTS in a recent chat, he doesn’t care much for that comparison. In fact, he said, this on-demand business model is nothing new in the B2B world. Will Airbnb now be referred to as the Flexe of consumer travel and accommodation? Probably not, but based on Siebrecht’s breakdown of what he does in warehousing, maybe it should be.

New Funding For A New Concept

Flexe launched as a way for companies with extra, unused warehouse space to rent it out to other businesses in need. Businesses can sign up for Flexe for free to list their unused storage capacity, and companies that need more storage can find a listing that meets their criteria.

[bctt tweet=”Flexe launched for companies with extra warehouse space to rent it out to others”]

“Functionally,” Siebrecht said, “what we do is help make the match.”

Flexe charges commission off each transaction, and provides a way for the companies to manage, also on the Flexe platform, the inventory stored in these locations, as well as the ability to schedule deliveries, monitor product type and levels, track pallet locations, and so on.

Investors seem to have confidence in the idea. Flexe just announced a $4.4 million investment round led by Fritz Lanman, Second Avenue Partners, Hank Vigil and SV Angel.

According to Siebrecht, the idea came straight from a friend with the exact need the company provides. “The problem he always had,” Siebrecht said, “was that it was difficult for him to project his business growth. He was in high-growth mode, and it was hard to predict inventory levels – that, exacerbated by the fact that his business was fairly seasonal.”

The Flexe co-founder said that his friend, who ultimately ended up being his first customer, said he knew other companies had extra warehouse storage space available. “I know somebody’s got the capacity, but I don’t have any way to practically do business with them,” Siebrecht said of his friend’s dilemma. “What, do I knock on their door?”

The Cash Flow-Data Link

As businesses know all too well, inventory management is key to managing working capital. And while Flexe certainly takes some of the burden off business owners, Siebrecht said the service provides an extra bump to corporate finances that they wouldn’t have had otherwise.

The warehousing industry, he explained, usually requires businesses to purchase warehouse space for several years at a time. So if, for example, a small business needs warehouse capacity and signs a three-year lease for 30,000 square feet or storage, but they don’t use that entire space for the entire duration of that rental, “that’s cash just flowing out the door,” Siebrecht said.

For the businesses that rent out their unused space, he added, they can make money off what they’re already paying for anyway. “That’s essentially pure margin,” he said. “So it has a very meaningful impact on cash flow.”

On the flip side, for businesses that are buying up that extra warehouse space, Siebrecht said these companies can reduce cash flow risk by taking advantage of a more pay-as-you-go service, negating the need for a multiyear contract even when growth forecast is less predictable.

Data, Siebrecht said, is crucial to making this all happen.

The Flexe platform integrates data aggregation to monitor inventory levels and items, and automates turning that data into invoices for companies, and for Flexe itself, to get paid.

“Our software knows exactly what day a pallet was dropped off, what day it was picked up, and tracks all of the storage charges,” he explained. “The system generates an invoice for the goods owner and a payments statement for the warehouse, all of which is derived from the same data.”

Airbnb For Warehousing? Not Exactly

With news of new venture capital, reports have started to pick up on Flexe – and the comparisons to Airbnb can’t be avoided. The platform lets businesses rent out extra warehouse space, just like Airbnb lets consumers rent out unused apartment or home space, right?

But for Siebrecht, that association is problematic.

“The Airbnb comparison is OK, because there are some similarities,” he said. “But I don’t think it’s a great one.”

The biggest difference, he said, is that Airbnb is C2C, while Flexe is B2B. And while the market has recently touted enterprise’s move into the on-demand, sharing economy by using services like Airbnb, Uber and on-demand logistics service providers, Siebrecht explained that in fact, this business model is hardly new in the B2B world.

It’s called collaborative logistics, he said, and it’s “relatively commonplace.”

For example, businesses that truck goods from Point A to Point B will work out a deal with another company that might need its own goods transported from Point B to Point A. Or, Siebrecht added, FedEx and UPS will often take advantage of unused cargo space in the belly of commercial airlines like Delta or American Airlines for their own package transportation.

Maybe the B2B world was more ahead of its time than the consumer world gives it credit for.

[bctt tweet=”It’s really about driving better asset utilization”]

“The economic arrangement makes sense for both parties,” Siebrecht stated. “Whether the asset is the belly of a plane, or a semi truck on the road, or a warehouse, it’s really about driving better asset utilization for the person who owns the asset, and providing an on-demand service for the party makes use of excess capacity.”