The hydroponics industry is picking up pace globally. Agro2o Founder Yash Vyas talks to Jumpstart about AI and IoT-integrated smart hydroponics and its prospects. At India-based smart hydroponics startup Agro2o, a bunch of greens, including basil and lettuce, are flourishing in a device sitting in [...]
Lessons in Strategic Acquisitions with Boxful Co-founder Norman Cheung
The epitome of a densely-packed metropolis, Hong Kong experiences the problems of clutter and cramped spaces faced by most other big cities. As the tech scene heated up, startups providing on-demand storage were an instant hit. But characteristic to any business hub, the sector was subject to vicious competitiveness.
Boxful, founded in 2015, was one of the first onto the scene. Its service, which at the time of launch offered box storage and wardrobe box storage, soon appeared on taxis, minibuses, and advertisements in subway stations. According to Co-founder Norman Cheung, there were once almost 30 firms competing in the same space: some independent ventures, and some launched by established storage companies. Five years on, few remain.
Cheung attributes this Hunger Games-esque decline in the competition to several factors. The company’s distinctive turquoise-green boxes, for one, helped to cement the Boxful brand in people’s minds, even if they couldn’t remember the exact name at first. It helped enormously that many Hong Kong apartments can barely squeeze five people into a room, let alone have any space left over for storage. But above all, having significant funding and using it in the right places has served Boxful the best.
The company’s most recent move to expand its reach and product offering was the acquisition of Yan Yan, a family-owned Hong Kong relocation company established in 1960. Famous for a series of advertisements that played on television in the 1980s, Yan Yan is a well-known brand amongst Hongkongers. As of June 2019, it’s now a part of Boxful.
“It took about a year and a half to sort out, negotiate, and get all the legal work done,” says Cheung. “So, now we’re integrating–we’re looking under the hood and trying to fix a lot of things.”
These upgrades include digitizing paper records, mobile support, and improving the outdated pricing system, to name just three. But the acquisition is expected to contribute many synergies to both companies, including cross-referrals between Boxful and Yan Yan customers.
A modern business with a heritage brand
It was a very demand-led decision for us to make this acquisition,” says Cheung. “We just had too many customers coming to us, telling us: we’d love to use your storage service, but can you also help me move these things from A to B?”
Boxful’s team, with a strict schedule of pickups, didn’t have the bandwidth to assist with moving furniture. The volume of requests for help with moving was such that the company began to look at how it could incorporate relocation into its product offering. It was then that Cheung remembered Yan Yan.
“They were established in 1960, and they were the market leaders in local relocation in the 60s, 70s, and 80s,” he says. “It was a company that every Hong Kong person growing up around that time would know.”
Boxful found the owners fairly receptive when a suitable offer was brought to Yan Yan’s shareholders. Over time, they were finding it challenging to keep up with the highly-competitive relocation market.
“I can’t think of any lower barrier to entry than the local relocation market,” says Cheung. “All you need is yourself and a couple of buddies, and as long as you have a truck or you have the ability to rent a truck, you can actually go into the local relocation business.”
Due to the ease of entry, Cheung says the market in Hong Kong is extremely fragmented, with over 100 operators in the city. Boxful is now banking on the idea of using Yan Yan’s well-known brand name, and leveraging it with promises of price transparency and professionalism to get an edge on competitors.
In addition, combining Boxful’s relatively younger audience (people in their 30s and 40s) and the older age bracket of Yan Yan (those in their 50s and above) has already proved to be synergistic in terms of customer acquisition.
Typically, older firms are known to acquire startups in efforts to integrate new tech solutions with their existing products. In contrast, Boxful’s Yan Yan acquisition is something of an anomaly, bringing specific branding and company-culture challenges to the relatively young startup.
“[Yan Yan] is an old brand. We didn’t want to change its heritage, but we wanted to update the look and make it feel younger and more relevant,” says Cheung.
In hopes of permeating the startup’s culture and values across both companies, many of Boxful’s staff have been infused into both the relocation team and the Yan Yan head office. Several departments, including Marketing, Finance, and Tech, are also now shared.
While Cheung’s team is trying not to dilute Yan Yan’s culture and brand, he acknowledges that the company has been family-owned for a long time, contributing to a much more traditional work ethic that could benefit from agility and flexibility.
“Things like putting customers first, ensuring that our staff all work in one cohesive team, service quality–we wanted to make sure we upgrade all these things and keep it at the same standard that we have at Boxful,” says Cheung.
Another key aspect of integrating the two brands is an update to the pricing system. Most local relocation services enjoy being able to charge ‘seafood prices’–arbitrary quotations based on anything from how frazzled a customer seems to where their home is located. Boxful has built an instant quotation system for Yan Yan’s relocation team, who are all provided with tablets to generate a final quote for customers on-site.
While Cheung admits that ‘seafood prices’ may be more profitable for operators in the short-term, he believes transparency and consistency in pricing is the more sustainable strategy in the medium- to long-term. Not only will it build customers’ trust in the brand, but it will also help the team stay on the same page.
The second half of 2019 saw several changes to Yan Yan’s operations, such as updating the domain name from [yanyanmovers.com] to [yanyan.hk]. Cheung says the first half of this year will bring more significant changes, including upgrading the fleet and the uniforms, and standardizing toolkits for the relocation team.
Becoming a regional market leader
This acquisition isn’t Boxful’s first rodeo, but the company’s previous buyouts have all been orchestrated either to eliminate competition or to ease Boxful’s entry into another market.
Their 2015 acquisition of Hong Kong competitor Go N Live (GNL), for example, was purely “opportunistic,” according to Cheung.
“Boxful and GNL were in the same type of business, so it was more of a competitor acquisition,” he says. “We were acquiring that company for the leads, the customer base, for the data. And also for some of the know-how.”
Similarly, buying myBOX in Seoul and ALL IN Storage in Taipei allowed Boxful to cut their scaling period in these markets by at least a year, accelerating the usual process of learning about the customers and the usage patterns in a new market. Not only did Boxful benefit from having premade sales channels and experienced staff already on the ground, but any competitors angling to make the same move would now need to start from scratch.
“We’ve never relied on [acquisitions] as a source of growth, but more as an opportunity into a new market, an opportunity to gain certain new data or customers or knowledge,” says Cheung.
An acquisition like Yan Yan goes to show that Boxful’s ambition isn’t limited to regional domination in the on-demand storage sector. It speaks to the company’s intent on improving mobility and cleaner living in urban cities.
While usage patterns in specific markets can be affected by changes in any of more than 30 factors (including the rate of car ownership and the real estate price per square foot), Cheung believes that the pace of continuing urbanization in the Asia-Pacific region will dictate the demand for Boxful’s solutions.
“The issue with urban cities is, they only get more dense and cluttered over time. It never goes the other way,” he says. “So if you believe in urbanization, be it Hong Kong or Taipei or Shanghai, or any other city, then there’s an increasing need for services like ours.”
Nayantara is Jumpstart’s Editorial Associate.