'Airbnb for warehouses' start-up Cargoz experiences surge in Dubai business

A Dubai logistics start-up that offers on-demand warehouse space has experienced a sharp increase in its business in the past 12 months.

Cargoz, which started operations in 2022, connects small and medium enterprises in need of short-term and long-term warehousing space with companies that have extra capacity.

The tech company, which is similar to Airbnb or Booking.com for commercial warehousing and storage, experienced a threefold increase in revenue last year, with a similar increase in the number of customers.

Cargoz is in the process of expanding from Dubai to the Saudi Arabian capital, Riyadh, where many of its investors are based.

The company was founded by Premlal Pullisserry, chief executive, and Lijo Antony, chief technology officer, after they identified a gap in warehousing industry while working at another storage company and noticed the high costs associated with warehouse leasing.

“After Covid, we were growing really fast and we wanted to acquire more warehouses but every time we wanted additional space, we had to go to an agent to lease a warehouse and then we had to put all our security systems and everything else in place,” Mr Pullisserry tells The National.

“It used to take a lot of time and it also used to take a lot of cash before you start.”

Cargoz aimed to secure spaces in established warehouses for on-demand storage that could be leased out on a short or long-term basis at lower costs.

Mr Pullisserry says SMEs wanted flexibility in storage space and monthly payment options.

“Traditionally, if you want warehouses in the region, you have to take a yearly lease. That's the only model that you come across, generally speaking, if you're an SME,” he says.

“But what we saw after Covid is that people didn't want to get into long-term leases because during Covid, SMEs were hit really badly, both legally and financially by taking up a lease that they're not able to maintain.”

Mr Pullisserry says they discovered “there were a lot of empty warehouses in the market” that weren’t being leased.

“There was capacity available but they were not able to sell it,” he says. “So we thought we would try to connect it using technology. That's the whole idea.”

Much like Airbnb and Booking.com, Cargoz is a tech company and does not own any of the warehouse space it leases.

It operates a commission-based model, taking a percentage of the revenue, depending on the size and the contract duration.

“We charge anywhere between 5 to 15 per cent,” Mr Pullisserry says.

The company's revenue grew 400 per cent last year, with an increase in users of around 500 per cent in the same period, he says.

Its typical client base is what he describes as “the unknown SMEs”.

“Not the big names, not the corporates [but] the ones who are looking for one container up to five containers for a few months,” he says.

Maximise revenue

Customers can either contact Cargoz with their requirements and agree on a price or book directly through its website.

Spaces are available providing a range of conditions to suit the contents, including climate-controlled, chemical, dry, open yard, food, medical, cold and general storage.

The company has developed a listings section on its website where customers can view the warehouse spaces, see the pricing and reviews – similar to Airbnb.

“Instead of calling up for a quote, you will be able to see and book [the] warehouse,” Mr Pullisserry says.

He says the tech has allowed storage companies across the city to maximise revenue during typically fallow periods of the year.

“If you talk to a warehouse CFO, one of the things that they really worry about is every square foot that is unused in your warehouse is actually a cost on you,” he says.

“Most of the warehouses are 30 per cent to 40 per cent empty because they always keep the seasonal capacity in mind, which means if, for two months in the year, they need, let's say, 5,000 square feet, but the rest of the year, it will just be 3,000 square feet occupied – that’s 30 to 40 per cent extra which is unused.”

Mr Pullisserry says because they are utilising unused space, Cargoz can lease it at a discount, which is then passed on to the customer. He estimates this to be an average of 40 per cent, depending on location and the type of space.

“The customer gets a lesser price. The warehousing company gets a chance to make some revenue, which otherwise was zero before. And we get to take a small commission on it,” he says.

In its Q1 2024 UAE Real Estate Market overview report, consultancy JLL said every location in Dubai’s industrial market saw average rental increases compared to a year ago.

Jebel Ali Free Zone saw rents soar 26 per cent, boosted by the new India-UAE trade agreement and plans to establish a digital marketplace that would enable customers to globally buy goods from the facility.

It said the overall industrial market continued to see “strong demand outpacing available supply in prominent submarkets”.

“These areas are anticipated to attract even greater attention from key market players, potentially resulting in an upward push on rental rates,” the report said.

Cargoz has more than 1.5 million square feet of storage space available, spread over more than 1,000 warehouses in Dubai, Sharjah, Abu Dhabi, Umm Al Quwain and Ajman, with 200,000 square feet of this space currently used.

In August 2022, Cargoz secured undisclosed pre-seed funding from Nama Ventures to assist its UAE expansion plans.

The following year, it secured an undisclosed bridge funding round from Nama Ventures, RAZ Group and other angel investors from the UAE and Saudi Arabia.

In January, it announced an undisclosed seed funding round, led by Nama Ventures with the participation of RAZ Holding, Innovest Properties, and other regional family offices and angels, which will be used to support its soft launch in Riyadh this year.

Cargoz has space in 25 warehouses in Riyadh and has started to receive bookings from customers.

“Our investors are very helpful and they really add a lot of value, unlike a lot of investors who say that they will add value,” Mr Pullisserry says.

“They helped us speed up the process and having Saudi investors really adds a lot of value when you want to expand to a market like Saudi [Arabia].”

Q&A with Premlal Pullisserry, chief executive, Cargoz

What are the biggest challenges you have faced as a start-up?

One of the challenges here in the UAE was to get the right team members. Hiring is a big challenge for us. It consumes a lot of our time. Getting the right team member for the right cost is important for us.

Another thing is, early on, trying to educate customers about this new model. That education phase is a little challenging because people were not used to this model. They hadn’t seen this work in real life.

At the same time, on the warehouse side, asking the owners to test the product that we're providing was also a challenge.

Where do you want to be in five years?

In our opinion, five years is too long for an early-stage start-up. However, we hope to be operational in the Mena region and all the major port cities around the region. We aim to provide the best customer experience for SMEs in the warehouse industry.

If you could do it all differently, what would you change?

We would've launched in Saudi Arabia a bit earlier.

What other successful start-up do you wish you had started?

Nothing that I wish I had started. It would've been a great learning experience if I had the chance to join Airbnb in the early days.

Who is your role model?

There are many. Steve Jobs for the focus and clarity with which he executed his business.

Paul Graham for his profound philosophy on start-up journey and growth, and Peter Thiel for his insights into how to look at market sizes.

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