October 1, 2007

7 Min Read
Pack and Ship = Profit for Self-Storage!

Savvy self-storage operators go to great lengths to maximize their revenue on the storage side of the business. Super successful operators also pay very close attention to the profit that can be generated from add-on sales.

The storage industry has matured in many ways, the least of which is the development of sites in retail locations with high traffic, good visibility and easy access. In the early days, developers thought storage sites would eventually make good retail, hotel or commercial locations. But the business has grown in an unexpected manor. Instead of land banking for other future uses, developers are choosing good retail sites for self-storage itself. Whoever thought these rows of garages would some day compete with big-box retailers for land?

But as traffic counts and visibility improve, land costs increase. How do we justify paying such high prices for self-storage parcels? There are several ways. For example, you can increase net-rentable square footage, or create a unit mix with a smaller average unit size. Or you can explore store-within-a-store business opportunities.

One of the most exciting of these profit centers is a pack and ship service, which offers several key benefits to the self-storage operator. The most important are:

  • It creates door swings.

  • It uses existing resources.

  • It involves only a low to moderate investment.

Creating Door Swings

Most storage operators are interested in driving additional traffic to their site. Even facilities at near optimal occupancy desire higher traffic and waiting lists that may justify increased rental rates.

Most operators agree commercial customers are a promising target market and, in many ways, preferred over residential customers. A pack and ship operation targets commercial users, driving them to your store. It certainly appeals to consumers, but higher anticipated volume and repeat visits come from the business customer.

Commercial users will visit your store to drop off packages as well as to purchase packing services. Most high-volume shippers will have daily parcel pickups and do their own packing, with your operation serving for overflow or late-drop packages. The key to converting these drop-off customers into storage customers is to create awareness of the storage service and supplement your marketing effort with a coupon to entice them.

During certain times of the year, pack and ship will create residential or consumer door swings. Those high-traffic occasions are:

  • During the winter holidays 

  • Back-to-school time 

  • Tax time 

  • Special occasions (wedding, graduation, etc.)

Using Existing Resources

For most self-storage stores, the holiday season is the slowest time of year. From Halloween to Valentines Day, we typically experience the least foot traffic. But great newsthis is the busiest time for pack and ship! Its a perfect opportunity to use existing staff to maximum potential. If your occupancy levels have historically dropped during this season, pack and ship may help balance revenue.

The extent to which you promote the packing side of the service will dictate how much staff time is needed. A very high-traffic and profitable packing business could be served by adding some part-time staff during the peak season, which most operators would be happy to do given the increased traffic and income.

Relative to office square footage, generally fewer than 50 square feet are needed to operate a pack and ship business within a self-storage operation. This store-within-a-store concept will only nominally increase operating expenses, though most operators will want to devote additional financial and human resources to the marketing effort. Increased or additional signage is typically the most expensive investment, followed by extra Yellow Pages advertising or direct mail. The conversion of pack and ship customers to storage customers will depend on in-store marketing, largely person-to-person.

Managing the Investment Requirements

The cost to implement a pack and ship store will vary based on the level of automation. Its possible, though very labor-intensive, to operate on a totally manual basis. The risk involved in doing so is high, however, given the volatility of carrier rates. Easy, time-proven software packages are available that mitigate this risk. Packing techniques can also be automated.

Here are some typical costs involved:

As you see from this example, if your net income is approximately $11,500 and youre using 55 square feet, youre generating approximately $209 in revenue per square foot. And these are fairly conservative estimates. Even if you dont net any profit but are able to rent just one additional space per month from the added door swings, pack and ship will still be worthwhile.

Dealing With Carriers

Once you have a business plan, the key to making pack and ship work is striking a deal with the carriers. At a recent tradeshow for the Associated Mail & Parcel Centers (AMPC), the pack and ship trade association, FedEx said it is not interested in allowing self-storage operators to be official distribution points. But if a storage property has an account and wants packages to be picked up, thats not a problem. FedEx has free software that can be integrated with a scale, but unlike true pack and ship software, its not designed to accommodate other carriers.

UPS was interested under the same terms as FedEx. It also said it does not have an authorized shipper program whereby a storage operator can be a reseller; but it is possible to apply for a UPS Store franchise, and the benefits (and costs) are dramatically greater. There have been some storage properties that have purchased a UPS Store franchise, and they have been very successful. For a reference point, a logical startup budget would be well in excess of $100,000 and require specific square footage and personal resources.

The United States Postal Service has a program that would work well if integrated into a storage property. Different from its predecessor, the CPU (contract postal unit), the newly approved shipper program gives the store operator much more flexibility.

DHL is open to approving self-storage applications and is working with consultants and marketing partners to possibly deliver its kiosk, the DHL Shipping Spot, to resellers in the industry. There are a handful of self-storage consultants in the process of developing store-within-a-store programs for facility operators too. Taking care of all the details, creating win-win programs with agreeable carriers, developing marketing plans and training staff are the most important services to be offered. Making the business simple and easy at very little cost is the goal.

What Are the Risks?

The greatest risks involved in pack and ship are really management issues. Proper training and support coupled with technology will mitigate most of them. But what can go wrong?

Shrinkage. This refers to packing materials being stolen or misused by staff or customers. Negative rate arbitrage. A manual calculation of costs or improper updating of shipping software could cause rates to be quoted at a loss.

Damage to contents packed. Improper training in how to pack box within a box, the preferred packing method by carriers, could result in damaged goods, for which the packer would be liable.

Packing of contents forbidden by carriers. Employees must be trained on what can and cannot be shipped and packed. Training to identify suspicious packages is available, as is a packers certification course through AMPC.

Inadequate marketing. The possibilities for profit are amazing, but will require some time and energy on behalf of staff and management. You dont want to leave money on the table by skimping on marketing. On the other hand, imagine providing a service that will bring any of the following enterprises through your front door:

  • Online auction sellers (eBay) 

  • Overflow from larger than usual orders by frequent shippers (fulfillment centers, mail order, warehouse operations) 

  • Professionals such as doctors, lawyers and accountants who do not have time or staff for packing and shipping 

  • Retailers such as tourist-oriented businesses that ship packages for visitors so they dont have to travel with purchases 

  • Mail-order and Internet sales professionals 

  • Hotel and hospitality centers, offering pack and ship as a guest accommodation 

  • Governmental agencies 

  • Hospitals, clinics and drug stores

Think about anyone who ships packages. They are all prospective clients and profit centers. Consider that you can use advertisement of the pack and ship service to open the door for marketing self-storage space. One thing is for sure: Youll want an experienced partner to set up the pack and ship business and train your staff to pack and sell! 

RK Kliebenstein is the leader of Coast-To-Coast Storage, a self-storage consulting firm. The company is developing several store-within-a-store turnkey operations, including pack and ship. Mr. Kliebenstein is also the author of How to Make Money in Self- Storage, a book about add-on profit concepts. For more information, call 877.622.5508, ext. 81; e-mail [email protected]; visit www.askrk.com

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