Risky Business
Copyright 2014 by Virgo Publishing.
By: Amy Campbell
Posted on: 10/01/2003



 

When mobile storage emerged a few years ago, it seemed like the next big thing. Sometimes called portable storage, it was convenient, expanded a self-storage operator’s market beyond the typical 5-mile radius, and enabled self-storage to compete with moving and storage companies. Now, some companies, including big guys Shurgard Storage Centers and Public Storage, are re-evaluating their commitment to mobile storage. And many have found mobile storage isn’t as easy or convenient as they imagined. This begs the question—is mobile storage a viable business?

To be fair, mobile storage is still in its infancy. Emerging on the market less than a decade ago, it is often likened to pizza delivery. Simply put, a mobile-storage company delivers a box-like container; the customer fills it and locks it. The storage company picks it up and returns it to the facility, earning a profit on the pick-up and delivery and the monthly rental of the storage container. Mobile storage essentially cuts out the moving middle man.

“Every self-storage customer has a need for transportation,” says Randy Weissman, president of Storage Banc. The St. Louis, Mo.-based storage company offers four types of storage, including mobile storage. “Why not solve that need? If we make it easy to get things into storage, maybe we will attract the fringe customer who would love to clean out the basement, garage or attic, but doesn’t want to hassle with renting a truck to get their belongings into storage,” he says.

It is this concept that drew many companies to mobile storage. It was a new market, a niche, and seemed to go hand-in-hand with self-storage. The attraction drew Tim Riley from his post as director of marketing for Shurgard. He launched Door To Door Storage in 1996. With the slogan “You pack it up. We pick it up,” Door To Door set out to revolutionize the mobile-storage delivery service. To date, the Kent, Wash.-based company services 3,000 towns and cities nationwide.

Around the same time Riley founded Door To Door, Shurgard and Public Storage jumped on the mobile bandwagon. Shurgard opened five Shurgard To Go warehouses, primarily on the West Coast, investing an estimated $21 million. Public Storage expanded its mobilestorage operation rapidly, reaching 55 facilities in 14 states. In the past year, both companies have pulled back, closing facilities, and essentially putting the kibosh on future mobile-storage expansion. “We have backed off certain cities because we are still trying to make the business model work,” says Steve Tyler, Shurgard’s senior vice president of operations for sales and marketing. The Seattle-based company closed two of five facilities in 2002 after a huge loss in 2001. “We have not found a business model that works,” Tyler says. “Maybe someone else can. On paper, I still believe mobile storage makes sense. Some day, someone will figure out a way to make it work.”

Riley, Weissman and others are unwavering in their quest to make mobile storage a profitable business. “Coming from my years in selfstorage leadership, it is a surprisingly difficult business for many who have tried and failed, but it can and does work,” says Riley. “Further, many people don’t want to work that hard to make money, and this is a business that you have to manage on a minute-by-minute basis.”

Bump in the Road

Many liken the challenges mobile storage faces today to the same ones self-storage overcame in its early days. Lack of customer awareness, an unproven business model, expensive start-up costs and operating expenses, are just a few. “As an entrepreneur, we always tend to think the last person who tried this business was an idiot, or that we know what the real problem is and have the ëkiller’ answer to solve it,” Riley says. “Unfortunately, this business quickly chews up and spits out people with that type of attitude.”

“I don’t think some of the people who have tried mobile storage understand what is involved,” agrees Weissman. “I’ve talked to so many people who just don’t have a clue about what it takes to be successful in this business.” Weissman gives the example of one operator who purchased the equipment—containers, roughly 20 tarps, a truck and forklift—and was hoping to rent out all 100 containers over Memorial Day weekend. “He didn’t think about the fact that his one truck held only five containers,” he points out. “If he averaged one hour per stop and two containers per customer, he could put out 16 containers per day. By the second stop on day two, he would run out of tarps. That doesn’t account for stops to pick up any full or empty containers.”

For Shurgard, the lack of success boils down to one issue: economics. “Our customer base does not value the delivery-service portion enough to be willing to pay for it. That, in a nutshell, is the biggest issue,” Tyler says. “They directly compare the price of pick-up and delivery to our self-storage, and the vast number of customers sticks with self-storage when they do the comparison.”

Another problem is lack of awareness of what the product is. “Awareness of the service is very low, but growing,” Riley says. “It is certainly a factor limiting the growth of the industry today. In many ways, it suffers the awareness problem that mini-storage had in the early ’70s.”

One of the barriers to success in mobile moving and storage is cooperation among independent operators, says Henry Cox, president of South Carolina-based Box Trotters Inc. “If a local mobilestorage operator is set up for local moving and storage only, it places great limitations on the business’ ability to grow, and on the operators’ ability and resources to serve the largest segment of consumers possible,” he says.

A final oversight mobile-storage operators seem to make is in the capital investment in equipment, Cox adds. “Many seem to be following the pack, and they are selling the business or liquidating the assets. Whereas, others seem to be making prudent, wise investments in equipment that is long-lasting, requires minimal maintenance and is internationally standardized. For operators investing in nonstandardized equipment, it can be the deathblow from the beginning.”

Riley spent several years partnering with Seattle-Tacoma Box Co. inventing just the right container. The mobile storage containers are 5 feet wide by 8 feet long and 7 feet tall, which is generally accepted as the industry standard.

Smooth Ride

So what does it take to make mobile storage work? “I have been at this business 24 hours a day, seven days a week, 365 days a year for more than seven years, and that answer is still changing, and changing rapidly,” Riley says.

However, Riley has gleaned some insight over the years. “It is a very different business than traditional storage and needs to be a separately run and managed entity,” he says. Also, a good amount of capital is vital. Mobile-storage operators need containers, tarps, flatbed trucks, forklifts and much more on a grand scale. Start-up costs vary but can reach as high $2 million and are largely undefined in this market.

“Many have grossly underestimated the operating expenses to run the business because many of the operating expenses are tiny, little soft costs that add up to one of the largest numbers on my P&Ls,” Riley says. “Many believe they can make the business work on a small scale with less than 2,000 containers, and that gets them. Some operators think they can get away with shoddy or no customer service, and that kills them.”

Another fundamental: pricing the service high enough to cover expenses. “Many think they can price the service low or give away the pick-up and delivery,” Riley says. Charging double the rental rate of self-storage is not uncommon.

As with self-storage, location is a key factor, Weissman says. “One reason some companies fail in this business is they don’t believe the location of their warehouse is important because product is delivered. We believe location is important. Just because we deliver a mobile vault to a customer doesn’t mean he doesn’t want it stored reasonably close to where he lives or he won’t come to your location to pay the bill or access his goods,” he says. “Operating out of an old, dirty warehouse in a questionable part of town because the rent is inexpensive may not be the best way to set up shop. We also air-condition our pick-up and delivery warehouse. We sell the service as a safe, secure way to store your goods.”

Another way mobile-storage operators are hoping to ensure the success of this struggling industry is through an alliance. Aptly named The Mobile Storage Alliance, the group began with a core group of operators, including Weissman, Riley, Hal Spradling from All Canadian Self Storage, and Steve Wilson from Hide-Away Storage Services. The Alliance has since grown. In March, a meeting in Sarasota, Fla., drew nearly 30 companies to mull over three major issues: vault shipping, marketing and legal concerns.

The primary focus of the Alliance is to facilitate interstate shipment of self-storage containers between operators. The group is also considering joint purchase of transportation and logistic equipment, insurance, tarps, containers and software. “Our Alliance has introduced operators to one another and helped facilitate relationships,” Weissman says.

Despite the hard work and long odds, some believe they’ve uncovered the secrets to the success of mobile storage. “As long as American consumers want to save time, labor, money, and have convenience, the demand for container moving and storage will grow, along with the service providers who are stepping up to serve their needs,” Cox says. “The service providers that will invest in operating knowledge and training, and network and co-op with other parties with like interests, will flourish and grow value and wealth.”

Out of the Box
An easier way to go mobile

For self-storage operators unwilling or unable to invest in mobile storage, Box Trotters Inc. offers an alternative. Storage operators can become a cooperative network member, sales agent, service agent or any combination of these titles. Here are some of the benefits:

EQUIPMENT AND ASSET INVESTMENT—Box Trotters sponsors capital equipment purchases that enable cooperative purchases to be made, resulting in larger orders and reduced investment.

COOPERATIVE ADVERTISING—In select areas, Box Trotters will participate in cooperative advertising campaigns and shared advertising investment.

BROCHURES AND PROMOTIONAL MATERIALS—Box Trotters provides free promotional materials to its associates.

SERVICE-AGENCY SHIPMENTS—Box Trotters will authorize service agents who pick-up and deliver container moves in certain areas.

SALES-AGENCY SHIPMENTS—Box Trotters pays generous commissions to self-storage operators who sell Box Trotters’ long-distance container moving and storage service. This is an excellent way for independent selfstorage operators to generate added revenue without having to spend the time required to manage a truck-rental agency.

WEBSITE BENEFITS—Box Trotters encourages those who want to be affiliated to sign up at the website. The company gives sales, service and cooperative members access to a large variety of moving and storage leads.