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canada competes

Even before you read it, you know that little sticky note on your front door means you've failed. That hilarious blender you bought online, the one with the googly eyes and lopsided smile painted on it, the one that was absolutely going to floor your party guests this weekend – it showed up, but you weren't home. Now, as you drive to some package-claim purgatory in the middle of nowhere, you swear you'll never buy anything online again.

It's not just you. By some estimates, a whopping 60 per cent of all deliveries fail on the first attempt. But where you might see little more than an annoying trip to a courier's package depot, three University of Waterloo grads saw an opportunity to build one of the hottest tech start-ups on the continent.

It's called BufferBox, and it is, at its core, a simple locker rental service. Instead of entering your own shipping address when you make a purchase online, you sign up with the service and use one of their addresses. The package is then delivered to a secure BufferBox locker – a rectangular green block with a touchscreen interface that makes it look a little like a larger version of an automated parking garage ticket-payment machine. When your package arrives, BufferBox sends you a notification e-mail with a PIN that unlocks the locker so you can pick up your order whenever you want. No more missed deliveries. "We just saw this really cool problem that could be solved with technology," says Aditya Bali, one of the company's co-founders. "There's this massive pressure to improve the service of e-retailing while lowering the cost."

This might seem like a thin business plan, but missed shipments have billion-dollar implications. Besides delaying couriers in failed efforts to bring the customer to the door, missed shipments also pose a serious challenge to the burgeoning same-day delivery market, in which companies like Amazon are investing millions. That whole business falls apart if the package you order in the morning shows up after you've left for work. By hooking up with a service like BufferBox, e-commerce companies can reliably predict that their shipments won't fail.

Since its founding in 2011, BufferBox has been on the tech industry's version of a superstar trajectory. Earlier this year, Mr. Bali and his two co-founders successfully pitched BufferBox at tech investment house Y Combinator's Demo Day. This earned them a spot on influential technology blog TechCrunch's 10-best list of start-ups from the event. The blog described the company as "the future of how you'll receive packages."

That exposure helped the company land more than $2-million in venture funding, and connect with a prized partner: 7-Eleven. Because a locker service is only useful if it has plenty of easily accessible locations, a partnership with the 24-hour convenience-store chain – which has close to 8,000 locations in North America and another 39,000 overseas – means that BufferBox can greatly expand its reach. For 7-Eleven, the deal makes sense because it generates more foot traffic inside its stores, meaning more potential purchases. So far, BufferBox has installed six lockers in 7-Elevens in Toronto, and plans to open more in Canada, as well as south of the border.

BufferBox does face competition – most notably from Amazon. The online retailer has recently ramped up a service called Amazon Locker, with the intention of putting its boxes inside various brick-and-mortar stores, including chains such as Staples – which, much like 7-Eleven, is more than happy for the boost in potential customers. "Amazon has 20 per cent to 30 per cent of the e-commerce market," says BufferBox co-founder Mike McCauley. "Every other retailer needs to offer the same type of service, but they don't have the volume to justify it."

That's where BufferBox comes in. Amazon Locker is pretty much exclusively reserved for Amazon products (and is currently unavailable in Canada). BufferBox is aimed at everyone else. The company is currently testing its technology with Walmart Canada's e-commerce division, which accounts for 2 per cent of the retailer's sales. Google has also shown interest, and recently began using BufferBoxes for internal package delivery at its Waterloo office. Besides giving BufferBox visibility within the offices of a tech giant known for acquiring promising start-ups, the Google deal also opens the door for Mr. Bali and his partners to generate revenue as an internal corporate mail service.

So far, BufferBox's lockers can only be found in Waterloo and Toronto (they can be accessed at the city's Union Station hub). New York is next. As the tech start-up tries to build a user base, it is offering the service for free until the end of 2012. After that, customers will pay between $3 and $4 per delivery.

Ultimately, BufferBox's success will depend largely on its much bigger and deep-pocketed competitor. But the co-founders and their seven employees are overwhelmingly optimistic that the e-commerce shipment market is big enough to support more than one player. "Amazon spends $4-billion on outbound shipping every year," says co-founder Jay Shah. "The industry has never seen this much volume."

Editor's note: Google snapped up BufferBox just days ago.

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