Self-Storage Aggregators: A Symptom of a Larger Problem
By Matthew Van Horn
Over the last few weeks you’ve probably heard about the self-storage aggregator issue that has been burning through our industry. First, I’d like to acknowledge Randy Smith for the solid white paper he wrote on aggregators, sometimes called self-storage directories. You can review this white paper at http://www.nostorageaggregators.com. I would also like to say that he isn’t wrong about the threat. Quoting one of my industry colleagues, “he’s probably about 3 to 5 years early,” which is great because as a society we tend to let small problems become larger ones before we address them.
I’ve used a few different aggregators in my self-storage operations and have mixed feelings about them. Aggregators are not the cause of our industry’s problem, but just a symptom of a larger one that looms in the self-storage industry.
I want to begin this blog by addressing why I think aggregator are unique in self-storage versus the airline or hotel industries. The self-storage industry is not the airline or the hotel industry. There are a few differences in why aggregators in those industries have thrived. Self-storage customers use self-storage products in a much different way than they use either hotels or airlines.
First, one of the biggest influencers on our customers’ desire to use a particular self-storage facility is this question: “Is the facility close to my home or business?” Most people will not drive 10 miles further because a competitor offers a rate that’s a few bucks below a facility closer to their home or business. Compare this to airlines where it’s very easy to fly either Delta or Southwest at most airports.
Second, our customers use self-storage for much longer periods of time. The length of time a residential customer uses self-storage varies between markets, but the national average has previously been between 11 and 14 months. A self-storage facility should be able to complete at least one rent increase within that time period to help make up for the upfront discount. This type of long-term rate increase is not possible in either the hotel or airline industry.
Last, the airline and hotel industry do not have a great reputation among customers. People who travel frequently have known for years they were being ripped off by airlines and hotels. Travelers are sick and tired of being nickeled and dimed for everything from room rates, phone calls, parking fees, Internet access, bag fees, pillows and change fees. In addition, customers have always feared car dealerships. Potential customers had no idea if what they were paying for a car was reasonable or if they were being taken to the cleaners. The self-storage industry does not have this reputation, thus I’m not sure the aggregators will be able to take hold of this industry as they have the airline or hotel industries.
Aggregators are really a symptom of a larger problem within the self-storage industry. The problem is the self-storage industry is extremely slow with integrating new technology. This has left it vulnerable to outside interests. Self-storage aggregators rely on high placement in the search engines (i.e. Google, Bing and Yahoo) to generate customers. It’s extremely costly and time consuming to optimize listings in every market.
The best way to combat this type of competitor is to invest in your own Web development program and education. The Internet isn’t new, but is now one of the most important—if not the most important—marketing medium available to self-storage operators. Yellow Pages and print advertising are mostly done, except for a few markets. My youngest niece doesn’t know what the Yellow Pages are, but she knows how to find information using her Kindle Fire. Terrestrial radio is slowly being eliminated by satellite radio, Pandora and Spotify. Television as we know it won’t last long—Amazon, Apple and Netflix will see to that. Social media will become even more important than it is now. Over the next few years smartphones and tablets will become the center of everyone’s world and they already are if you’re under the age of 25.
It’s paramount as a self-storage operator to invest in researching, understanding and implementing these new technologies. Self-storage aggregator Sparefoot received a $2 million investment in June 2011. These companies are investing in their infrastructure, so self-storage operators must do the same.
There’s so much to write about on this topic, it’s impossible to touch on everything in one blog post. My colleague Jim Ross and I will be speaking on technology and how it’s shaping the industry at the Inside Self-Storage World Expo in Las Vegas on March 14. The topic is “10 Things You Should Be Doing Now In Regards To Self Storage Technology and Software.” If you have any questions, please post them in the comment section below. I look forward to seeing everyone at the 2012 ISS Expo.
Matthew Van Horn is vice president of Cutting Edge Self-Storage Management, a full-service management company specializing in management, feasibility studies, consulting and joint ventures within the self-storage industry. For more information, visit www.cuttingedgeselfstorage.com . Follow the company on Twitter, @Cuttingedgemgt, and on Facebook at Cutting Edge Self-Storage Management.