Imagine the Possibilities … With Ancillary Services
|Copyright 2014 by Virgo Publishing.|
|By: Kimberly Hundley|
|Posted on: 10/01/2004|
Competition in self-storage isn’t going away; it’s getting tougher. In many markets, storage is regarded as a mass-produced commodity. What sets your facility apart? Don’t hesitate to take a hard look at how you compare to the guy down the block, because potential clients surely will. Enhanced customer convenience and expanded services is a proven recipe for outpacing the pack. Those who exceed expectations by going beyond vanilla self-storage are more likely to be here tomorrow, and to enjoy higher profits. Current ancillary offerings include truck rentals, records storage, wine storage, mobile options, mailboxes and business centers and, of course, retail sales. One or more may be right for you.
WHAT: A mobile-storage company delivers a box-like container to the customer who fills and locks it. The storage company picks up the container and returns it to the facility.
HISTORY:A relative newcomer to the industry, mobile storage emerged less than a decade ago. Big boys such as Shurgard Storage Centers and Public Storage heavily invested in the niche, but in 2003 backed off due to poor profits. Customers simply didn’t see the delivery service as valuable enough to justify the extra expense, according to Shurgard. Others, however, such as Door-to-Door Storage in Kent, Wash., and Storage Banc of St. Louis, have found success.
INSIDER ADVICE:Try to target commercial businesses because they rent for long periods, a crucial element to success in mobile storage. The short-term renter is a real liability.
PROS:Mobile storage sets you apart from the competition. Customers like the added convenience of delivery when they are moving, storing or both. It also allows expansion of the self-storage customer base beyond the typical 5-mile radius and competition with moving and storage companies. Some operators stack boxes not requiring climate control in previously unusable perimeter space.
CONS:Obstacles include low customer awareness and high start-up, operating and labor costs. Insufficient cooperation between independent operators hinders the potential for one-way interstate business. Some potential clients find the rates intimidating—you may have to charge double the rental rate to make up costs. Coordination of resources is a challenge.
NEW AND EXCITING:The Mobile Self-Storage Association (MSSA) was recently created to facilitate interstate shipment of containers between operators and assist those entering the business. The association’s goal is to foster cooperation and boost customer awareness. Charter memberships are $1,000. For more information, call 314.872.1600; visit www.ms-sa.org.
INVESTMENT CHECKLIST:Start-up capital is needed for containers, tarps, flatbed trucks, forklifts, drivers and more. Costs vary but can be as high as $2 million. Alternative opportunities exist as an agent or cooperative network member for other companies.
A)DropBox Inc. provides containers made from sturdy steel—life expectancy is 20 years and capacity is 30-plus tons. Also available are trailers with self-contained hydraulic power; guidance/support for industry newcomers. (888.388.7768, www.dropboxinc.com)
B) Havener Enterprises produces waterproof, rust-resistant steel containers, easy to set up and tear down. Assembly takes less than 30 minutes. Sizes range from 300 to 900 cubic feet of storage. (815.935.0138, www.havenerenterprises.com)
C) HomePak is an easy-to-use, exterior-grade, plywood container featuring a swing-open metal door. Also offered are consumer promotional materials; a lease-to-own program; and referrals to delivery systems. (800.566.8263, www.homepak.com)
QUOTABLE: “If you haven’t done your homework [on mobile storage], you’re going to have a hard time. You have to understand your resources and the logistics. Your capacity will be limited by the number of trucks, containers and labor you have on a given day.” (Randy Weissman, president of Storage Banc and MSSA executive member.)
WHAT:Wine-storage units or lockers are created on the self-storage property, usually in a specially designed, insulated area with a dedicated HVAC system.
HISTORY:Wine storage cropped up as a rare ancillary self-storage business in the mid-80s. Demand grows as more baby boomers collect wine and need a place to store and age their cases.
INSIDER ADVICE:Unless you’re sure of your market, start small and add on later if necessary.
PROS:Wine storage can produce a per-square-foot return higher than traditional climate-controlled storage, and competition is still relatively low. Rental rates run about $1.50 per case monthly; an eight-case locker nets $144 annually. The service brings an upscale image to your facility, and may result in crossover customers.
CONS:Success is defined by geographic location—if you’re not in wine country, people must collect wine in your area. Wine storage is considered expensive to build due to temperature, humidity and light control, and top-notch security. You’ll have to deal with government liquor regulations. The fill-up rate is slower than for self-storage. Plan for heavy marketing.
NEW AND EXCITING:Interstate shipping of wine is limited or not allowed in most U.S. states, which hurts storage businesses. The U.S. Supreme Court is expected to re-examine interstate commerce regulations this fall, possibly lifting the ban.
INVESTMENT CHECKLIST:For a wine room, you’ll need proper insulation, a dedicated HVAC system supplying precise environmental conditions for wine, a back-up system and generator, separate secure entry, and lockers. Security should include video-surveillance cameras and individually alarmed lockers or storage rooms. Example: One facility spent more than $70,000 to construct 640 feet of wine storage featuring 88 lockers.
A)Roll Right Industries Inc. of California includes locker boxes in its complete line of mini-storage products. (800.848.8106, www.rollright.com)
B) DHS Worldwide Software Solutions, based in Florida, offers software for wine-storage management. (800.377.8406, www.dhsworldwide.com)
C) Wisconsin-based Aprilaire supplies humidifiers. (608.257.8801, www.aprilaire.com)
QUOTABLE: “Before starting, get out and talk to everybody—merchants and distributors. I did that, and everybody said it was the greatest idea in the world, but the biggest issue is how to get that to the public.” (David Leonard, owner, Grand Central Self Storage, featuring Michigan’s fi rst wine storage facility. After one year, only seven of 54 lockers are rented.)
KEEP ON TRUCKIN’
WHAT: Trucks and trailers are rented to the public at your self-storage site. You have the option of owning the trucks, leasing them or becoming a dealer for a truck-leasing company.
HISTORY:The jury is in: Truck rentals and storage meld beautifully. The 10 largest self-storage companies offer it, and upward of 50 percent of all facilities are believed to be in the business. U-Haul International estimates 3,500 of its dealers are storage operators. On The Move Inc. calculates 8 percent of the country’s 30,000 storage facilities lease or own its trucks.
INSIDER ADVICE:Every truck-rental call is an opportunity to sell storage space and boxes. Comp your rental truck instead of a month’s rent for contracts and bolster your bottom line. Truck lease or purchase allows total autonomy over who rents and at what cost. Plus you can brand your truck and it becomes a moving billboard. However, leasing also requires a substantial monthly payment. As a dealer/agent, your cash investment is minimal.
PROS:A successful rental business can bring in $1,500 a month per truck, and your customer is right there. U-Haul research shows 23 percent of customers who rent a truck from you also will rent a unit. The convenience of truck rentals on-site makes you more competitive. Some facilities offer free truck use to hook new contracts.
CONS:Truck rental requires more energy and salesmanship from a manager. Call volume for the service is generally higher than for storage alone, so time is a factor, too. You must have room at your site to park the trucks. Maintenance and insurance are concerns for those with their own trucks. Availability is a worry for dealers in summer months, etc.
INVESTMENT CHECKLIST:Become a dealer, and all you need is space, Internet access and a dedicated phone line, according to U-Haul, which also will assist with an online billing system. Commission averages 20 percent. Cost to lease a truck of your from On The Move is about $875 a month and includes bells and whistles. Don’t forget to set up a commission for managers who sell the service.
A)Texas-based On The Move Inc. supplies trucks (buy or lease), insurance, hand trucks, furniture pads and rental-form agreements. Graphics can be put on trucks to advertise a self-storage business. (800.645.9949, www.onthemovetrucks.com)
B) U-Haul International, headquartered in Phoenix, offers the opportunity to become a dealer with no investment.
Affiliation allows operators to save money on software and merchant fees. (800.528.0361, www.uhaul.com)
QUOTABLE: “You can have a facility that’s too small for trucks, but the biggest potential negative is the work, responsibility and due diligence that go along with offering a truck.” (Kirk Nash, owner, On The Move Inc.)
DOWN TO BUSINESS
WHAT:Business amenities much like those at a Kinko’s are offered to tenants. Services may include a copy machine, fax, phone, ATM, Internet connections, private work areas, conference rooms, mailboxes, packaging and shipping, and drop-off service.
HISTORY:The concept is new, but industry research indicates business centers fulfill a growing niche of self-storage customer, such as the home-based business owner who is expanding.
INSIDER ADVICE:Receiving and shipping packages is easy, profitable and a huge attraction to commercial customers. Coin-operated faxes and copiers don’t get used; instead charge per page on a debit-card account.
PROS:Most of the industry targets the residential customer, so a business center is rare and attracts valuable commercial clients. Diversification makes your investment more secure and helps level the winter seasonal slump with business tenants. Additional income can be made off copies, faxes and shipping. Mangers don’t have to invest much time in the operation.
CONS:Without a base of commercial tenants, a business center won’t get used. The public likely won’t expect selfstorage facilities to have such services, so lively marketing may be necessary.
NEW AND EXCITING:Mini-offices are starting to be included in a few self-storage facilities that target the commercial client.
INVESTMENT CHECKLIST:To position yourself as a business center, at least provide phones, faxes, shipping/receiving, copiers and e-mail. Private mailboxes, a conference room, notary service, mini-offices, a retail area with office supplies, and Internet connections are also possibilities (think Wi-Fi).
QUOTABLE:“The way I look at it, commercial tenants are the ultimate tenants. Typically, they pay on time, stay a long time, and aren’t as sensitive to price bumps. If that’s the kind of tenant you want, it’s a minimal amount of work to give them a big benefit.” (Mitch Rhoads, owner, Denver Storage Solutions of Colorado, on his popular business center and shipping services.)
CHECK OUT THE MERCHANDISE
WHAT:Packing supplies and security items are for sale in a facility area set aside for retail.
HISTORY:Retail has increasingly become a part of self-storage as the industry gets more competitive, and ever-busier customers take advantage of one-stop shopping. They get convenience, and owners reap additional profits.
INSIDER ADVICE:Once customers decide on a self-storage facility, they aren’t fazed by reasonable markups on locks and packing supplies. Ask your customers what products they need so you know what to stock.
PROS:The majority of retail items can be marked up 100 percent and you don’t need a huge investment to get started. Almost any size facility can make room for a display area, perhaps designating an empty, close-by unit. By advertising a packing-supply store, you surpass the competition by attracting leasers who want the convenience. Shoppers who come in for boxes may end up renting, too.
CONS:Selling retail is more work for manager and staff—products don’t fly off the shelves by themselves. Planning should include marketing strategies, advertising, window signage and an attractive display. Other jobs are sales tracking, inventory, pricing, restocking, taxes and maintenance. Product that is chosen unwisely may have to be sold at a loss.
NEW AND EXCITING:Some facilities are selling their moving supplies online or adding office products to the mix as a customer convenience.
INVESTMENT CHECKLIST:Every facility should sell locks, tape, markers and three sizes of boxes. Other products to stock include bubble-wrap, packing paper, garage-sale kits, and sofa and mattress covers. An investment of $500 can get you off the ground with a few items and promotional aids, while $2,000 should outfit an attractive retail area. Factor in effective marketing and advertising tools. Staff will need sales training and an incentive program, i.e. commissions. You may want to buy software to track sales, etc., or work with a supplier who provides it.
A)Chateau Products of Florida has more than 400 self-storage products including disc locks, padlocks, retail-store fixtures and packing supplies. (800.833.9296, www.chateauproducts.com)
B) Ohio-based Supply Side manufactures, distributes and develops products and merchandising programs. (800.305.6110, www.suplyside.com)
WHAT: Storage facilities offer private mailbox rentals.
HISTORY:About three years ago, some self-storage shops began installing banks of postal boxes to rent to existing customers for additional income. Theoretically, with proper advertising and a high-profile location, postal-only customers would begin to crossover into storage.
INSIDER ADVICE:If you don’t have commercial renters, hassling with mailboxes is “a big pain” for a minimal profit, according to many facilities. As part of a business center, however, the service is a value-added incentive for commercial contracts.
PROS:With a minimal one-time investment, owners and operators can boost their long-term monthly incomes. Once rented, the boxes pay for themselves quickly. Current tenants are prospects, particularly if they are small-business owners, marina users or college students. Manager time can be minimal, with about 30 minutes spent daily sorting mail for 30 boxes, and the postal boxes take little maintenance.
CONS:Not every location is suited to private mailboxes (PMBs). Evaluate your tenant mix and location; few residential customers will be interested. Red tape and paperwork with the U.S. Postal Office is substantial. The service may attract shady customers involved in mail fraud. Mail forwarding, mail holding and lost keys are also hassles.
INVESTMENT CHECKLIST:Mailboxes run about $500 for a bank of 30 and $400 for a bank of 10 larger compartments. Smaller boxes rent for approximately $15 monthly, though many stores are charging only $5 and swapping several months of free rental for a contract.
RESOURCES:Research the trials and tribulations of commercial mail-receiving agencies at www.postalwatch.org, which includes links to official regulations.
QUOTABLE:“I don’t like it one bit. I can be in the middle of a rental agreement, and a slew of people will come in not having their mailbox key, asking for help. You would probably make more money with a $100 banner saying ‘We sell boxes’ than you would investing $1,000 in mailboxes plus an hour of your manager’s time per day.” (Chris Sanders, manager, Foothills Self Storage of Upland California, which rents about 20 of its 70 boxes, many to outside customers.)
“So far the mailboxes have not yet been a profit center. They are, however, a value-added benefit that we can offer to our tenants. I think that to be a true profit center, you would have to market them heavily. It appears that the United States Postal Service is moving more and more into these types of products and services—mailboxes, boxes, moving supplies—everyday.” (Scott Harris, president, Dana Management Group, one year after initiating mailbox service with self-storage.)