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Lessons Learned in Hong Kong: Insight From MiniCo Self-Storage

Opening a self-storage business in an international market like Hong Kong has many potential pitfalls, but success is highly rewarding. MiniCo Self-Storage shares what it learned about developing and operating facilities in the region.

November 13, 2015

6 Min Read
Lessons Learned in Hong Kong: Insight From MiniCo Self-Storage

By Marilyn Leslie

Opening a self-storage business in a new market has many potential pitfalls, but success is highly rewarding. Although the Asian self-storage industry is growing, the first pioneers had to learn by trial and error. Johnny Cash once said, “You build on failure. You use it as a stepping stone.” This is what we did when launching the MiniCo Asia Ltd. brand, which operated as MiniCo Self-Storage, in Hong Kong. Here’s what we learned from our experience.

Leasing vs. Buying

Under the misconception that purchasing property would be prohibitively expensive and daunting in Hong Kong, we chose to rent space for our first facility. We found leasing a building to be quite an adventure. Applying the U.S. pricing and leverage model was a mistake. We didn’t realize real estate appreciation was the major factor in any local business decision. Property owners constantly look for the highest and best value. Often it’s more profitable to demolish a building and start over.

MiniCo Self-Storage in Chai WanThree years into our lease, with our storage facility at 100 percent occupancy, we received notification the building was being redeveloped as a mall. We had 30 days to move our customers and hand over an empty shell. We decided to purchase our next building.

Onsite Signage

Hong Kong sometimes appears to be one giant sign! What we learned is it’s essential to adapt any facility signage to the physical condition and location of the building. Our first sign was a 40-foot banner we placed on the 10th floor of the site. Visibility was excellent, but wind played havoc with the canvas. Over a period of three years, we repaired or replaced the sign four times. This was an expensive lesson. Future signs were well-placed and durable.

Expansion

In an attempt to add space to an existing store, we leased a satellite location one block away. Overflow customers were directed to the additional space using current staff. However, inconvenience, lack of onsite employees and limited signage resulted in low interest, occupancy and revenue. We duplicated the concept at a different location, with more proximity to an established store, offering more convenient access and a wider variety of unit sizes. This approach was more successful.

Marketing

MiniCo Self-Storage Taking the concept of self-storage to Hong Kong required a lot of education—for ourselves and potential customers. Due to high traffic and visibility, marketing via a subway billboard seemed like a good idea. In reality, it was expensive and ineffective. Large concentrations of people moving quickly don’t notice a single sign, and we didn’t have the resources for multiple signs at different locations.

Affordable, late-night television advertising also drew limited interest and poor response. Other failed marketing efforts included ads in a high-end magazine, instant messaging and a premium inside-cover position in the Yellow Pages. Fliers were very effective in the beginning; however, as the competition copied the concept and flooded the market, they became less effective.

We found it necessary to constantly monitor our marketing results. Sourcing of storage inquiries became the priority in targeting our advertising dollars. We learned an Internet presence was highly successful and critical to getting our message to potential customers. Moveable billboards, such as a bus or van, attracted significant interest and inquiries. The most important elements of advertising proved to be consistency, ever-changing content and visibility.

Retail Sales

There’s no magic formula to determine the demand for retail products when setting up business in a new self-storage market. We found this out the hard way. One of our vendors offered us a good, one-time deal on 200 household-tool kits. The price was right and the product was high-quality. However, after 10 years, more kits had been given away than sold.

Customer demand was high for closet rods and shelving, due to the nature of goods being stored. Specialized cylinder locks were readily accepted as part of the rental process. This was good for retails sales as well as enhanced security and uniformity. There was little or no demand for affordable tenant insurance. Most customers in this market willingly accepted the risk of loss and chose not to insure. However, expatriate customers were very receptive and usually purchased the insurance.

There was no demand for services we initially provided. For example, stores close to mass transit were desirable, but there was no demand for transportation from train to store. Accessible parking was used on a limited basis, as few customers drove to the facility. We were able to serve more than 1,000 customers with only three parking spaces. We then leased the other spaces on a monthly basis.

Culture

To be successful, a self-storage operator must know his customers’ expectations, which can be very different depending on the culture. In Hong Kong, price is very important. Everyone wants a gift or discount. We used both successfully.

Cultural awareness is necessary in building customer trust. Hong Kong residents are superstitious about numbers, atmosphere, lighting and the environment. We actually changed some unit numbers in response to tenant sensitivity. For example, four is considered an unlucky number; therefore, units on the fourth floor were numbered without a leading four. This was problematic when doing the daily walk-through or trying to find a specific unit.

We also installed additional ceiling fans to satisfy some customers. In an effort to improve security, we added a secondary code system to each unit. This proved too cumbersome for some of our customers’ household help. Another facility installed a huge closed-circuit TV monitor in the reception area, but some customers felt it was an invasion of their privacy.

Staffing

In the beginning, there were no experienced self-storage professionals in Hong Kong. We initiated a training program to get staff up to speed, working closely with each employee to instill knowledge and confidence. Though their loyalty and work ethic were unsurpassed, they were hesitant to disagree or deliver bad news, even when it was critical to the facility’s success. Difficult customers traumatized them, and they didn’t want to identify problems or issues. They also had no sense of urgency. Through training and counseling, we ultimately developed a superior, effective group of professionals.

With an obsessive focus on customer service, we learned to adapt our business ideas to our customers and employees. It resulted in loyalty and growth for our brand.

Marilyn Leslie has been involved in the self-storage industry since 1998, when she began her career as chief financial officer for MiniCo Inc. She was part of the company’s pioneering effort to enter the Hong Kong self-storage market and is a former board member and treasurer of the Self Storage Association of Asia. Ms. Leslie was president of MiniCo Asia Ltd. from 2004 until the company was sold in February 2015. She’s currently the chief operating officer for New Empire Ventures Inc., which is developing self-storage properties in the United States. For more information, visit www.newempireventures.com.

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