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THE PRICE WAR BEGINS
Competing With Traditional self storage
By Elizabeth Ferrin
Yesterday, mobile self storage was the new kid on the block. Self storage professionals were curious about this new innovation in storage, but initially held back from offering it at their own facilities to first ensure it was a long-term winning product. Customers were also intrigued by this new service. They enjoyed the ease of having a container delivered to their homes, eliminating the need for renting a moving truck and hauling large goods to far away self storage stores.
At that time, the real estate market was brisk and people who were moving soon came to realize the benefits mobile storage could offer them in their transition from one home to another. They saw that they could easily remove all clutter from a house while it was on the market and rent a mobile storage unit to store their goods until the home sold. Then, they could use the same mobile storage company to redeliver the storage container, pack all their household goods, and possibly even use the facility’s drivers to move the container to their next home, whether it was located down the street or across the country.
Today, times have clearly changed. While mobile self storage continues to offer many benefits to its customers, the real estate market has stalled in most parts of the U.S. Suddenly, there are fewer people moving who are looking for help from mobile storage companies. As a result, both demand and prices have been slumping as more mobile storage operators set up shop, bringing new competition to almost every market.
As the business climate and real estate markets continue to evolve, many mobile operators are wondering how to stay afloat. With fewer movers, they are now faced with the prospect of going head-to-head with traditional self storage in the fight for new customers. This prospect has led a large number of mobile operators to consider price drops to help stay competitive through the current economic cycle.
Customers’ Choice
Bringing mobile storage prices more in line with traditional self storage was a priority for HideAway Storage Services. “We changed our pricing on January 1, 2007,” says Gary Crawford, president of the Bradenton, Fla.-based company. “We felt that there were two types of customers using mobile storage:―short-term and long-term.”
In general, short-term customers are prime candidates for mobile storage. Short-term tenants do not normally need regular access to their stored goods and they appreciate the ease and convenience mobile storage offers. However, their tenancy usually lasts less than five months, opening the door to lower occupancy rates.
Long-term tenants, on the other hand, may stay for years and years. They may develop a solid business relationship with the storage business and become one of the facility’s most valued clients. However, aside from the benefit of initially not having to rent a truck to transport their goods into storage, mobile storage is often not the best option for the long-term renter.
Those who need to access their stored goods generally have to pay a redelivery free and then wait for a period of time before the storage container can be delivered. These customers soon realize that there are drawbacks to being unable to gain immediate access to their belongings. In addition, many long-term customers are also more attracted to traditional storage because of its lower pricing, knowing that they will be paying the monthly rental fee for months or even years to come.
These long-term renters, like all customers, are price sensitive. “We made a strategy decision to lower our prices to make our mobile prices equal to traditional storage to attract the longer-term tenants,” Crawford says, adding that the goal of lowering prices was not to take tenants away from traditional self storage products. On the contrary, his own business offers both traditional and mobile storage containers.
Crawford says he is satisfied anytime a tenant chooses his business over a competing store, regardless of the customers’ choice to use mobile storage or traditional self storage. His goal in equalizing pricing was simply to level the playing field and let his customers choose the best product for their individual storage needs. “The result of the price drop was that the number of boxes we rented went up, but our revenue went down a little because of the lower prices,” he says.
“However, offering both products at the same price has also helped to educate the customer about our mobile product. We don’t mind traditional and mobile storage competing. It’s just a different way of storing. We just wanted to take all of the angst from the customer, and let them pick for themselves which one is best.”
Differing Responses
Other mobile storage stores are decreasing prices, as well, but their discounts are more a reaction to the real estate market and the economy in general. “We have recently done a decrease in our pricing, which we typically do at this time of year,” says Kara Harkins, manager, The StoreRoom Mobile Storage in Lexington, Ky. “However, we went lower this year than we’ve gone before.”
While Harkins doesn’t directly pricecheck the competition at traditional self storage stores, she keeps her finger on the overall market and noticed that business had recently tapered off. “There’s been a slowdown in people moving with the housing market slowdown,” she explains.
“During the summer season, we had customers who were de-cluttering to sell their homes. But, they were eventually having the items delivered back to their old addresses instead of taking them to a new place. It may be that they were pulling their houses off the market or it may be because they just did not have enough in their budgets to cover the monthly storage fees.” The facility was losing customers and decided to act quickly by reducing rates. “We looked at the other mobile operators and their comps and decided to drop our monthly storage prices,” Harkins says.
“But, we have been able to increase and almost double our delivery fee.” Other mobile storage companies are holding on to last year’s pricing structure. “I have cut prices in the past, but I look at mobile as a premium product that would always cost more than regular storage,” says Randy Weissman, president of St. Louis, Mo.-based Storage Banc, adding that he offers both traditional and mobile storage at his store. He also says that meeting the customer’s needs is key, but adds that he will likely always assign higher rents to mobile storage products.
While these three mobile self storage operators may have differing opinions and plans for pricing, it is important to keep in mind that they are all operating under different circumstances in various parts of the United States. In addition, they all have their own business strategies, which is an important component of pricing. In fact, without a solid understanding of a company’s business model, a quick glance at pricing may be deceptive.
“It may appear that some mobile storage businesses are giving something away at a price that’s less than traditional, but you have to remember that they’re not really competing with self storage,” says Weissman. “Instead they’re competing with moving trucks. While the mobile storage store may only charge $49 per month, they’ll have a high turnover. They’re renting that container two, three, or more times per month, so they’re really getting $150 per month. A lot of people run their businesses based on how many times they can turn a unit over in a month.” companies will hang in there and make it. Others will not. We’re just trying to stay ahead of pricing”
Many agree that the trend toward lower pricing will eventually help to level out the mobile storage business and separate the successful stores from those on a path to failure. “I can tell you that if people give it away, then they won’t be able to make it and cover their overhead,” says Weissman. “In business, you have to be out to make a profit.”
Nevertheless, many facilities are willing to do whatever is necessary to compete, even if that means lowering prices. While there is currently much uncertainty based on the deteriorating housing market and a growing amount of competition, the truth is that mobile self storage is an important and valuable product. Many storage customers now prefer the ease and convenience of mobile storage over traditional self storage facilities; hence, there is money to be made in mobile storage. Those operators who monitor the market, keep up with pricing changes, and offer the products their customers demand are most likely to survive the price wars and thrive both now and in the future.
Elizabeth Ferrin is a freelance writer and editor based in Maple Grove, Minnesota. She is a frequent contributor to Mobile self storage Magazine and the Mini Storage Messenger.
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