Welcome to 2017, storage friends! This year the conversation is even louder about what the traditional companies will do in order to keep up with the potentially disruptive on-demand companies.
The on-demand storage industry continues to grow while the battle between competitors escalates as they know that eventually, only few will survive. Upgrades are a necessity, or else the older businesses will have the same fate as Blockbuster in the movie rental industry. The takeaway is that the traditional self-storage industry should look to better utilize technology to improve the way consumers seek and access storage.
In 2016, MakeSpace and Clutter both raised series B rounds of VC investment to the tune of $20 million and $17.5 million each, which must illustrate that their initial foray into on-demand storage has been successful enough for VC investors to double-down. In January 2016, Livible took a national survey that clearly backs up the investments. Out of the 522 people that responded, 63% said they preferred on-demand, which is up from 42% from their previous survey. A year later, those numbers are only bound to be even higher. 62% of that same survey said that the time-saved and accessibility were the key factors. Convenience is the biggest reason for the shift from traditional to On-Demand storage. Consumers don’t want to deal with the hassle of filling out a file of papers just to get to their storage unit. That’s for the Stone Age.
…”Out of the 522 people that responded, 63% said they preferred on-demand, which is up from 42% from their previous survey…”
How can the traditional and local private self-storage businesses continue to survive and compete?
There is the inherent attractive flexibility of renting your own self-storage unit and not having anyone touch your goods, and there’s also the convenience of being able to access that unit on any given hour or day that the storage facility is open (most are open 7 days a week for 8-12 hours a day). However, the biggest threat to traditional self-storage by the on-demand offerings is that they remove the hassle of getting the items to the storage unit and having to choose that unit in the first place; no need for a truck; no need for heavy lifting.
So, how can the self-storage industry respond to this? The free move-in truck with a new unit rental has been a longtime successful concession, i.e. get a quote from On The Move Inc., a move-in truck insurance and rental agency that supplies a large percentage of self-storage facilities across the country.
However, a free rental truck still doesn’t take away the heavy-lifting issue that on-demand storage removes. On-demand storage uses inexpensive labor to grab the items to be stored and then label and scan them individually. Question is, why don’t self-storage companies from using an off-the-shelf inventory labeling and scanning system and do on-demand themselves? Self-storage owners already control the most expensive asset: storage space. For example, O’Neill systems offers one for the traditional moving industry, DHS offers one for the records management business, and Storeganise, a startup out of Hong Kong, offers a software and barcode scanning system off the shelf specifically for the self-storage industry.
“Question is, why don’t self-storage companies use an off-the-shelf inventory labeling and scanning system and do on-demand themselves? Self-storage owners already control the most expensive asset: storage space.”
Can the huge marketing budgets of the VC-funded MakeSpace and Clutters’ conquer the behemoth industry of self-storage?
On one hand, a $30M Series B&C funding round is HUGE in the tech startup business, almost guaranteeing that the VCs value the company at $100 Million at the time of funding. But in the world of self-storage real estate, a typical Southern California Class A self-storage property will trade at between $25M – $30M, a small rural facility will trade at close to $1M, and there are more than 46,000 facilities across the country…Time for traditional self-storage to wake up and protect itself.
To prevent a Netflix-like attack on the self-storage industry by the on-demand companies, the traditional self-storage industry should look at ways to respond to consumer demand for less heavy-lifting and less hassle with finding a moving truck. Here’s a simple starting checklist:
- Look at off-the-shelf scanners and labeling software to manage storage items that may be gathered in an on-demand model
- Re-purpose the labor already on-site at the property to respond to on-demand request from customers
- Re-purpose the “free” move-in truck that is probably already sitting at your property, or share a truck between multiple properties that you own
- Offer on-demand storage on your Website. If this all seems like a mystery, call your Web developer (or if your developer is doesn’t understand, call me and I’ll talk you through it)
Who knows, on-demand storage may be a supernova that quickly fizzles-out in a couple years, but in any case, you want to be prepared to compete against it if it doesn’t.
In other news from around the self-storage industry:
2016 Earnings Notes from Around the Industry:
-CubeSmart made $61.05 million through Q3 in 2016.
-Mobile Mini made $27.7 million though Q3 in 2016
-Public Storage made 1.04 billion through Q3 in 2016
-ExtraSpace made $306.86 million though Q3 in 2016
-National Storage Affiliates Trust made $18.7 million through Q3 in 2016
SoCal moving companies are joining together in not assisting the Chargers with moving to Los Angeles. On the website, WeWontMoveYouChargers.com, 28 San Diego companies are listed as protesters and have almost 20 from L.A. as well. HireAHelper.com has led the campaign and Ryan Charles, their Head of Sales and Marketing, considers it the last attempt to keep the team from moving. Charles has been a Charger’s fan for life and although his call to action will most likely not succeed, it comforts him knowing that he didn’t give up on his hometown team. The Chargers are set to play their 2017 season at the StubHub Center in Carson.