There are some people who believe you should learn from your mistakes. I believe its a lot less painful to learn from the mistakes of others.
The self-storage industry has no shortage of smart, experienced professionals. Sad to say, for the most part, not enough of that experience is in retailing. This fact, combined with the need to focus on realty and rental issues, doesnt leave much time to devote to retailor, as some like to call it, ancillarysales. So mistakes are sometimes made. The following are five of the more common errors and suggestions for how to avoid or correct them.
Mistake No. 1: Underestimating the Value of Retail
Some owners dismiss retail sales because it represents less than 5 percent of their gross sales. What they overlook is retail margins are in the 40 percent to 70 percent range. If they did the math, theyd find retails contribution to their bottom line can easily exceed the norm for rental units. As one owner looked at it, his retail sales had the same impact on his profitability as would adding several units to his operation and at a far lower capital investment.
And retail is especially valuable when the facility is doing well. As occupancy approaches capacity in a market that wont accept major rate increases, retail can be one way to sustain revenue growth.
Finally, to the investment-minded, try this: Multiply your projected annual retail sales by the cap factor in your market area. The result is what retail products will add to the value of your facility if you decide to sell it.
So the bottom line is: Dont underestimate what retail can do for your bottom line!
Mistake No. 2: Overestimating the Importance of Price
Most storage owners have no problem setting their rental rates. They know who their competition isand isnt. They take into account their location, facility condition and amenities. The manager of one state-of-the-art facility bragged that his prices were the highest around and nearly all his units were occupied.
Yet, when it comes to retail, a lot of owners are shy about pricing. They compare their price points to the biggest big box store in town and worry that they cant compete. What they forget is they, as consumers, will often happily pay more than big-box store prices for goods and services. Why? For the convenience of it.
Think about it: Why do you shop at convenience stores, clothing boutiques and small neighborhood retailers? Because of their service and ease of use. Its simply not worth the hassle to drive farther and wait in line just to save a couple of bucks, right?
Dont you think some of your storage customers could find a cheaper rental rate? Why dont they? Maybe its because youre better and more convenient. So why would another 30 cents for a box or $3 more for a lock drive customers into the arms of Wal-Mart?
Retailers test price points. Their goal is to find what the market will bearin other words, how high prices can be set. Your goal should be the same. Dont get blinded by price when buying, either. Driven by their need to offer skimpy prices, some facility owners spend way too much time and energy trying to buy cheap. To get the lowest prices, theyll buy too much of low-end products and tie up their capital for months on end.
Professional retailers, on the other hand, buy the best quality they can because they dont want complaints. They know the goods they sell affect their image. More important, they consider the cost of inventory and stock only what they need for the near future. They save time and money by consolidating orders. They keep their number of suppliers as low as possible.
The lesson here is: When selling and buying, dont overlook convenience and quality.
Mistake No. 3: Stocking Only Your Best Sellers
One facility manager I visited said, I dont sell much retail. I can just sell small, medium and large boxes here only the best sellers. Looking at his six dusty rolls of tape dangling from two hooks, some odds and ends, and the few boxes, I cant say I was surprised. The display was depressingly sparse. There was no attempt at signage, and there was a mixture of oddball brandsno doubt the result of buying as cheaply as possible. Youd think hed never gone to a supermarket.
Ever wonder why grocery stores carry so many different types of soup, not just different brands but many varieties of one brand? Chicken noodle far outsells cream of cabbage with lima beans. So why doesnt the store just stock the best seller and be done with it? The secret is all those secondary varieties actually help to sell more chicken noodle. The company knows it and the stores know it.
Where different varieties are displayed in relation to best sellers is scientifically determined to maximize the consumers desire to buy, and the plan is followed religiously. Its called a plan-o-gram, and it works.
If you want your best sellers to sell even better, you must place them in a larger, more diverse setting of products. While its true you wont sell as many box cutters as boxes or tape dispensers as tape, youll find that you sell more than if the boxes and tape sit there alone and forlorn.
Which items you should add to your display and where they should be placed are questions to ask your retail-products supplier. The best companies will provide you with a pictorial diagram showing what you should carry given the available space. By the way, plan-ograms whether stock or customized should be free. No reputable supplier would charge for helping you generate more business.
To sum up: Featuring just the best sellers is a sure way to make them poor sellers.
Mistake No. 4: Believing Products Sell Themselves
I know some retail suppliers will say their products sell themselves because of their packaging, displays or plan-o-grams. Dont you believe it. While its true all these elements will help customers decide what to buy, they wont boost your average sale nearly as much as a knowledgeable salesperson will.
Now this doesnt mean your managers have to take a lot of time away from their duties to make retail sales. It means that given good product information and training, they can learn not only to answer questions but to suggest other purchases while displaying the friendliness and service that will reflect well on your business.
And since you dont have time to see to this training, ask your retail-products supplier if he can supply it. Today, Internet-based training in the form of interactive webinars has proven to teach and energize managers in an efficient and time-saving manner.
In short: If suppliers want you to sell their products, they should do the employee training.
Mistake No. 5: Thinking the Only Customers Are Renters
Despite the We Sell Boxes pyramids displayed in front of nearly every self-storage facility, too many managers are still surprised when someone just wants to buy their retail products but not rent a unit. The new breed of owners and managers, on the other hand, is actively appealing to customers as well as to renters.
Because the newest facilities are built with larger offices/stores and provided with enough parking spaces, many find themselves becoming a new kind of convenience store in their community. Parcel shipping services instituted to serve renters are also attracting outsiders. Carpet-cleaner rentals are bringing in a lot of walk-in business. Propane sales are another source of added revenue that seems to be catching on. Once you consider your facility as, above all, a place of business, you may find you can add profit in a variety of non-traditional ways.
One potential gold mine is your current and past customer lists. Here you have people who know where youre located and have a good impression of you. What products or services could you offer that would appeal to them? Dont forget seasonal or temporary offerings. If youre drawing a blank, give your retail supplier a call. If the company really knows retail, it should be able to make some good suggestions.
Finally, and most important, the way to make more money with retail sales is to think like a retailer. Itll change the way you buy, sell, price and display product and relate to customers. And thinking of your customers as customers forever is never a mistake.
Rob Kaminski is vice president and general manager of Supply Source One, a division of Schwarz Supply Source, which has been a national retail supplier for more than 100 years. With a dozen warehouses across the country, the company has one of the self-storage industrys most complete selection of retail products as well as office, maintenance and janitorial supplies, which can be ordered in combination to simplify delivery and reduce costs. For more information, visit www.supplysourceone.com.