For many years, the self-storage industry has offered a practical storage solution for the individual user and an economical alternative to expensive office space for corporate clients. But the nature of the business is that customers come and go due to seasonal and other considerations, causing operators to continually look for ways to reduce their vacancy.
Taking the self-storage concept one step further, the up-and-coming segment of the industry is mobile self-storage--storage that comes to the customer. Many users believe mobile storage offers the ultimate in convenience, an increasingly popular attribute in today's fast-paced world. But as those who have entered the mobile-storage business know, and those contemplating such a move will find out if they do their homework, breaking into the industry is not as simple as it might sound.
An Urban Enterprise
Because of the capital-intensive nature of mobile self-storage and the market size required to produce returns, the common mobile-storage model of today only works in large metropolitan areas, says Tim Riley, founder of Door To Door Storage Inc. Regions of fewer than 1.5 million population are probably not large enough markets, he says. Riley's company operates in four key West Coast regions: the greater Seattle area; the San Francisco Bay area including Marin County, the East Bay and the San Jose areas; Los Angeles and Orange counties; and greater San Diego.
Actually acquiring the money to get the ball rolling also presents challenges. "There's a difficulty to financing this business, whereas there's typically bank financing available for someone who wants to get into traditional self-storage," Riley says. "In our business, the capital costs typically require a sizable equity investment. Anybody looking at the business should plan on having a minimum of $2 million."
The shopping list for startups is extensive, Riley points out. First, there are the containers: A minimum of 2,000 is what you probably need to base your business model on. Warehouse space, trucks and forklifts also figure into the equation, not to mention a labor force qualified to operate the heavy machinery. Another major expense not encountered on the same scale by operators of traditional self- storage is that of implementing a computer system. "There are no off-the-shelf (software) systems," says Riley. "The three largest mobile-storage operators out there today have all developed proprietary software to run their own businesses."
And it doesn't appear likely that self-storage software producers will rush to accommodate the mobile-storage business, Riley adds. "If the market were bigger, someone might do it," he says. "But the complexity level of the systems we use is probably three to four times that of what a traditional mini-storage uses. It's everything a software developer hates: complex business processes and a small market. So there's not a lot of potential right now for a vendor to make money." What would likely happen first, says Riley, is one of the mobile-storage operators would license the use of its system. "One of us (operators) could market the software and the business processes that we've developed, if we were motivated to do so."
The Size of the Box
The size of container to use is a crucial consideration, with determining factors being the ceiling height of your warehouse space, how high you're looking to stack the containers (three or four high vs. two), and portability considerations. Many seem to think a box height of 7 feet is optimal, according to Rob Nist, marketing manager for Seattle-Tacoma Box Co., which designed and built the wooden vaults used by Door To Door.
"We've made all kinds of containers--probably 15 different models now," Nist says. "It's starting to settle into a 5-by-8-by-7-foot-tall model. With a door on the end, it's a pretty ideal container. It maximizes stability, gives people the ability to store their couches, and they can go four high in a warehouse if you have a 30-foot-clear building, which is really key to making a good profit. When we built the thing, we had it rated to stack four high."
An 8-foot-high container causes handling issues, however, such as difficulty securing and removing the covers, and residential-delivery problems caused by the box being too tall when on the back of a truck. And because the maximum allowable cargo weight (usually 2,000 pounds) nearly always fits within the smaller vaults, there's no competitive advantage to having an 8-foot container, Riley adds. "They're going to tip more when they're on the forklifts, and you can't get them under carports or into garages."
Another manufacturer, Kontane Inc. of Hickory, N.C., produces the HomePak™ mobile-storage container, which is also made of wood but features a metal roll-up door. Also in the works is a model with a swing-open metal door, which will enable the box height to be reduced while maintaining the same capacity.
Kontane not only produces the HomePak, but also helps potential entrepreneurs get started in the business. "What we see as the most critical factor for a startup is their marketing," says Dustin Deal, sales manager for Kontane. "We put together a marketing package with our HomePak brand name that would help them get started, so they don't have to start at square one and develop all their own advertising. We have a package that includes Yellow Pages ad layouts, newsprint ad layouts, full-color brochure clip logos and photos, things of that nature that will help them get started, along with our advice on what marketing has worked or has seemed to work. That's one step we take that we feel is beneficial."
Kontane also offers a computer-aided warehouse-design service. Though this feature is designed more for the company's customers in the moving and storage industry, it can also be of assistance to a new mobile-storage operator who is acquiring warehouse space. "We take the floor plan of their warehouse, along with where the columns are and what their ceiling height is, and we help them best lay out that warehouse so they can maximize their inside storage space," says Deal. "For a lot of the self-storage people who are acquiring a warehouse to do this, that is something they're very interested in because they've never really dealt with this type of storage before. You have to account for aisles for a forklift, where the dock doors are and all that, so it really helps them out a lot."
Long-Distance Market Covered
While customers needing mobile storage on a local scale turn to companies like Door To Door, there are also those in need of a similar service when executing a move between cities. Box Trotters, based in Conway, S.C., fills the mobile-storage niche for the long-distance market.
"For example, when a consumer is moving from Point A to Point B--let's say from Los Angeles to Atlanta--they often need storage at their destination for two or three months," says Henry Cox, president of Box Trotters. "For them, being able to place a container in storage at their destination without physically having to be there to coordinate all this activity in terms of unloading, reloading, etc., is important."
In the aforementioned example, if a customer needs a 20-foot container in Los Angeles, Box Trotters delivers it and gives them a specified length of time--usually a couple of days--to load it. The company then returns, picks up the container and ships it by intermodal stack train to Atlanta, where it is taken off the train and transported to a terminal for storage.
With gasoline prices reaching all-time highs in many regions over the past few months, another popular option for Box Trotters customers has been to ship their cars in the containers along with their household possessions. "We've had several customers call us after their move this year and tell us that they were able to get a plane ticket, and the cost savings balanced out to where, if they were moving 3,000 miles, it would cost them more in fuel to drive," Cox says. "Intermodal stack train per mile, compared to a truck, is much more economical from a fuel standpoint."
Box Trotters offers potential entrepreneurs an opportunity to get involved with the company as sales representatives, service agents and dealers. "For someone who is interested in providing this type of service, it could be as simple as setting up an affiliate website," says Cox. "In our business, the training and the knowledge goes much deeper than the typical drop-box storage model, because ours involves much more transportation. The easiest way is for them to get started is as a sales rep. We can set up a website, provide them with the Yellow Pages ads as well as a host of ways to market and sell their services. We start things off as a relationship with a sales rep, and this basically allows them to learn as they go."
After a sales rep has been on the job about a year, Box Trotters does a market study to analyze the transportation, as well as the demographics, of the local marketplace. At this point, a sales rep may have an interest in becoming a service agent, which requires an investment in assets beyond the sales promotion aspects of their business. This involves the would-be agent acquiring a truck and various types of trailers to deliver containers. Then the company arranges clearance for them to go into the rail terminals and receive , deliver and return the containers.
"There's not a lot of investment for the sales rep, but the service agent does have considerable investment," says Cox. "We want to make sure that our service agent is not just buying equipment. We want to make sure that they have a financial future there, and that we have continuity with their business model and with their business relationship. We basically encourage them to train for about a year, sell for about a year, and we'll just go from there with it."
Operators who enter the mobile- storage business with the idea of pricing the service competitively with traditional self-storage are doomed to failure, says Riley. "You can't be a wimp on prices in this business," he says. "You've probably got to get a 30 percent to 40 percent price premium over traditional self- storage in your market to make money in this business because the costs are so much higher. You've got trucks, fuel, skilled labor such as truck and forklift drivers, and soft costs associated with things such as regulatory requirements and paperwork. It can come through rents, pickup and delivery fees--however you want to bake the cake. But it's got to net out to 30 percent to 40 percent."
Riley says when customers are educated about the advantages of mobile storage--including the fact that it eliminates the need for truck rental as well as for double loading and unloading--they willingly pay the higher rates. "Customers recognize the convenience," he says.
Premium prices are also justifiable, says Riley, because it's critical that new operators resist the temptation to skimp on equipment costs up front. "Some try to cut corners with trucks that carry less than five containers," he says. "They try to do it with little trailers, but the problem is you can't get the scale with the little trailers. You've got to get a truck that can carry five vaults.
"Also, get the piggyback forklifts. People sometimes don't like them because they cost $30,000 to 40,000 each, but without them you'll pay it in labor costs about three or four months into the business, so why not just get the right equipment up front and eliminate the extra costs? The payback period is so quick, why fight it?"
Taking the Plunge
Riley feels the mobile-storage business is still in what he calls its "research and development phase." "It's much like the mini-storage business was in the early- to mid-1970s where there was a lot of experimentation going on, with some hits and some real misses," he says.
Why has mobile storage taken longer to grow and mature than was expected when it first hit the scene in the mid-1990s? A major reason is awareness. There likely are many thousands of traditional self-storage customers who would opt for mobile storage, if only they knew about it. There are also millions of others who live in regions that are currently too small to be served by mobile-storage operators. However, progress on the first front has the potential to assist the second. As awareness of mobile-storage service grows in its current markets, economies of scale might allow it to become viable in smaller markets.
Nist, who deals with several mobile-storage companies, says there are two key things mobile-storage operators must have: "They have to have the right mentality. As odd as it sounds, this isn't the storage business. You have some of the same customers, but it is a very high level of service. If you can't commit to the service level, you're going to struggle."
The second attribute is a willingness to promote, Nist says. "Anyone who uses the service thinks it's the greatest thing ever. So companies that initially were quiet about what they were doing will probably talk more now because they realize that the more it's recognized in the marketplace, the greater the customer base will be."
Though he sees the mobile-storage business from a slightly different angle, Nist feels the industry is starting to build momentum. "We're seeing a lot of increased volume now," he says. "I think it's starting to really catch on." Illustrating his point through analogy, he adds, "Twenty years ago, everyone who wanted a pizza went to the pizza parlor. Today, you pick up the phone and they deliver to your door. People love service."