By Mat Seguin
Canada is in a technical recession. With the Canadian dollar slump, oil prices dropping, and big retail chains like Target and Future Shop being squeezed out of the market, this is the time to adapt and evolve to ensure the future of self-storage and protect against the possibility of declining revenue.
The quick and easy fix for many Canadian operators is to drop unit prices and delay rent increases. Since space is our only inventory, we can’t recuperate lost revenue on empty units. But these tactics will only remain effective until the competition does the same—and then what? Instead of slashing rates, operators should focus on their value and explore new products and services that can generate additional income.
Re-Evaluate Your Value
Discounting makes future rent increases difficult since tenants then expect to negotiate their rate throughout their tenure. These same customers complained about the increase in taxes when we were forced to switch from Goods and Services Tax to Harmonized Sales Tax, like somehow our industry had control over that! If you discount rent, tenants may also come to expect discounts on other ancillary services.
Don’t get me wrong … The bulk of my customers are price-sensitive, but they’ve also bought into my company’s overall value proposition. We have a well-thought-out, predefined discount program that staff uses as they see fit. Our managers know how to sell solutions, which involves asking questions to properly qualify the prospect’s needs. They’re then able to use their discounting tools to meet them.
Offer More Value
Another approach is to examine what you currently offer customers and see where you can make improvements. This will not only give you a competitive edge, it could help justify rent increases. We see other industries switch up their value proposition, so why can’t ours be equally dynamic?
Examining what you offer to customers is another way of redefining your value proposition. This can add significantly to your operating costs, but with a bit of creative thought, you may be able to overcome some financial hurdles. Successful examples of this include offering new tenants free use of the company truck upon move-in, or renting trucks and allowing customers to use them while picking up the gas tab.
My storage business recently partnered with a hand-tool company so all of our locations serve as drop-off spots for tools in need of repair. We get $15 per tool as well as quarterly bonuses. We already have the infrastructure to handle the influx of business, so the revenue is all upside.
We’re also looking at setting up a mover-affiliate program in which we give new customers a $100 voucher that can be used with our moving-company partners. We calculated the average rent and tenure, and such a program would equate to a 6 percent discount. This has virtually no setup cost. We can determine expiration dates and turn the program on or off as we see fit.
Another strategy we might try is handing out moving-merchandise vouchers for units of certain sizes. Since we make 100 percent profit on retail items, the cost to our company is only half the voucher amount. The average move can incur $400 to $500 in packaging expenses, and we expect to get most, if not all, of that business. This can have a cumulative effect, as a growing number of people will see our facilities as places that sell moving supplies.
These value-added incentives don’t have to be extravagant and costly to work. Other offerings worth examining include conference rooms, mailbox rentals, micro workstations and smaller storage units.
Review Maintenance and Operation
Once a facility maintains a certain level of occupancy, many operators reduce their maintenance expenditures. This may leave the property looking less than perfect. Examining what your office looks like, how your retail merchandise is displayed, and the overall look of your landscaping and buildings is a productive exercise. Put yourself in a prospect’s shoes. Would you rent from your company? If the answer is “probably not,” identify which areas need work and make improvements.
Reviewing your operational process will also prove fruitful. What can your management software do? Can you add online billpay to your website? What about using your software’s revenue-management tools? Some vendors now offer an e-lease to help reduce your dependency on paper and offer more convenience to customers. Imagine saving money while also advertising it as a sales feature.
Even if Canadian storage facilities aren’t yet experiencing a decline in revenue, there’s a benefit to routinely examining the “storage experience.” Companies like Apple, Google and Tesla attribute their success to differentiating themselves in their respective market places and staying current with clients’ needs. They aren’t successful because they’re big; they’re big because they’re successful.
Mat Seguin is the director of operations for A1 Mini U-Store-It, which operates five self-storage locations in Ottawa, Canada. He has more than 17 years of experience in the industry, specializing in new-facility management and business development. To reach him, call 613.282.4510; visit http://a1mini.com.