Getting Close to Customers: Why Proximity Plays Are On the Rise
Proximity matters more than ever. Think about it: as consumers, we’re ordering more and more online, and we expect it to show up right away. And it’s not just stuff: we also want quick, convenient access to food, health and wellness, and entertainment. What we’re asking companies for is speed — and proximity is a great hack for that. In order to reach consumers quickly, companies need access to warehouses and industrial spaces near population centers.
But spaces like that are a rarity. The Wall Street Journal reports that increased demand for proximity, rising industrial rents, and conversion of eligible locations into housing and hotels have made it hard to access last-mile spaces. That’s forced companies to get creative. One company that’s making the most of its urban spaces: Miami-based Reef Technology.
Reef Technology used to be a parking management company called ParkJockey. But in the last few years, they realized that the real estate they were sitting on — approximately 4500 locations in North America — could do more than temporarily house cars. So Reef pivoted. Now, they turn parking lots and garages into logistics hubs for companies. Reef’s spaces have housed ghost kitchens for major restaurant chains (a rollout that’s been rife with legal and permitting issues), Covid-19 rapid testing sites, and a network of micro-fulfillment centers. They raised $1.5 billion over three funding rounds and recently acquired Bond, an Israeli e-commerce logistics platform developer that offers access to hyperlocal delivery partners and micro-fulfillment centers, and 2nd Kitchen, a virtual kitchen startup. The company coined a new term to describe their business: Proximity-as-a-Service.
Proximity-as-a-Service businesses are growing as companies seek to get their goods and services physically close to customers without making traditional real estate investments. Researchers predict that the micro-fulfillment market will be worth $36B by 2030. Retailers are increasingly opening ‘dark stores’ — spaces that are fully dedicated to fulfilling online orders. And that’s not to mention all ghost kitchens, pop-up shops, entertainment, mobility, and home management offerings Proximity-as-a-Service companies can offer.
Silicon Foundry Partner Chad Shuford explains that Proximity-as-a-Service is critical to realizing the full potential of e-commerce, on-demand, and direct-to-consumer trends.
“Customers and companies are more digitally connected than ever,” Shuford explained. “Proximity-as-a-Service levels up the physical connectivity between customers and companies to be more on par with their ever-deepening digital connectivity. It has the power to deliver familiarity, speed, trust, and convenience in an efficient, low-tech, sustainable way.”
Proximity-as-a-Service providers, he adds, have the potential to be more than just anonymous facilitators operating temporary spaces: they can be curators that offer trusted and popular hyperlocal resources that bring back a sense of community to neighborhoods.
“Proximity creates deeper, more intimate bonds between customers and companies. It unlocks new possibilities for enhancing people’s lives,” Shuford said.
The New Frontier of Proximity: Homes
Shuford anticipates that repurposing parking lots is just the beginning of the race to gain proximity to consumers. The next destination for goods and service providers: neighborhood homes.
Homes are now the epicenter of our lives–more so than ever before,” Shuford explained. “They function, especially in light of the pandemic, as our offices, gyms, dressing rooms, restaurants, warehouses, doctors’ offices, civic centers, and recording studios. Gaining access to that–or at least being down the street from it–is the greatest proximity of all.”
Shuford envisions a model where a Proximity-as-a-Service provider takes vacant homes in select neighborhoods and outfits them with relevant goods and services. Each home would be staffed with a hyperlocal home management specialist and used as a living catalog to advise, guide, service and support the rest of the neighborhood.
“What’s possible from our homes has changed,” he said, “and how we use our homes has changed. But the way we manage them has not. Proximity as-a-Service could change that.”
If turning homes into hubs proves a viable model for bringing goods and services directly to customers, it’s conceivable that a network of hubs across the country could profoundly impact the retail, food, mobility, healthcare, and home management industries. Shuford says the benefits could be extensive. Hyperlocal SMBs could have built-in markets. Home management could become greener and more efficient, with homes serving as nodes in a circular supply chain. And most importantly, people’s lives could improve.
“Managing our homes in a more thoughtful, efficient way improves families’ quality of life,” Shuford said. “Proximity is how we accomplish that.”