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ISSUE: Sep/Oct 2008
The Retail RevolutionGrowing Profits One Sale At A TimeBy Elizabeth Ferrin   It all started with a single lock. Decades ago, a pioneering self-storage facility sold a new customer a lock from the floor of the rental office and unknowingly spurred a revolution. While this manager likely sold the lock as more of a customer convenience than profit generator, retail sales have become a vital and growing part of a self-storage business’ bottom line. Today, locks remain a top offering at self-storage facilities, but the selection has expanded over time. In addition to locks, items like boxes and moving supplies are extremely common at self-storage businesses. Some facilities are even stocking unexpected items like office supplies, snack foods, and greeting cards. Thinking Inside The BoxLeading the way in both sales and profit margins is the cardboard box. “The sales money is going to be in moving boxes,” says Jim Bryan, president of Move ‘N Store in Phoenix, Ariz. “Approximately 65 percent to 70 percent of total sales dollars come from boxes. About 15 percent comes from padlocks, 15 percent from packaging, and miscellaneous sales account for the remaining money.”Bryan is quick to add that box and lock sales can greatly improve a facility’s bottom line. “The profitability on retail is generally very high,” he explains. “Markups of 100 percent are very common.” However, it is important to note that inflation has started to eat away at some of the profits brought on by retail sales. “Boxes are starting to have a margin issue because the cost of cardboard has gone up substantially,” states Barry Gorenstein, vice president of operations of Germantown, Md.- based Storage Investment Management. “Last year, there were three or four price increases in boxes. Locks have also gone up about 20 percent in the past year because the cost of steel has been going up.” In spite of the rising prices and falling profit margins, retail sales have become increasingly vital to a self-storage facility’s success. “Retail is extremely important for self-storage businesses,” says Gregory A. Call, president of Irvine, Calif.-based Self StorageWorks. “That’s especially true these days, as storage has become so competitive and tenancy has begun to decline in some markets.” Call goes on to explain that the slow economy has caused many average residential tenants storing their own household goods, or discretionary renters, to empty out their units. “Discretionary users make up about five percent to 20 percent of the market and they’ve started bringing their stuff back home,” he says. “Because of the decline of these users, self-storage facilities have to do something to make up for the loss.” Creative Retail StrategiesMany self-storage facilities have turned to retail sales to successfully bridge the revenue gap. Of course, competition in this area is extremely intense, leaving some managers hunting for creative ways to amp up sales at their sites.Moving online is one popular solution. “In each of the facilities that we manage or own, everything we sell is also sold online,” says Call. “Customers can go to the Web site, order online, come in and pick it up, or have it delivered within a certain distance of the facility.” He is quick to add that only 40 percent of the company’s retail customers are also renters. The remaining 60 percent are buyers who walk in off the street or are directed to the facility from its Web site or signage. Along with online sales, retail setups in kiosks and booths are two nontraditional sales venues growing in popularity. Displays at various apartment or multi-family residential locations and community events are also becoming increasingly common. “I know of some facilities that will do special promotions with colleges,” says DiNardo. “The manager loads up moving supplies in the back of a truck and sells them on campus.” This tactic is especially effective at the end of the year as students are packing up and moving out of their dorm rooms. In addition to unique selling strategies, a growing number of self-storage facilities are experimenting with creative merchandise. For instance, facilities that have eBay stores tend to stock a variety of boxes and material for packaging and shipping. Items like tools and snacks are also increasingly finding their way to self-storage facility shelves. “We’re getting into more diverse offerings at our facilities,” says Call. “We have USPS postal centers with about 50 different products. Along with boxes, packing material, and tape, we also sell gift wrap, gift bags, and greeting cards to attract the attention of people coming into the facility.” Of course, there are some drawbacks to offering a broad product line. Less popular items can be hard to stock and distribute. “I’m aware that people are attempting to come up with creative items to sell, but items that are impulse buys have to make sense,” says Bryan. “Boxes and padlocks make sense. Items like tools may or may not make sense. Out of the box items compete with a lot of constituencies out there and only account for a small five percent of retail sales.” Instead of focusing on stocking the most unique items, it may be more productive to spend time working toward increasing sales of the facility’s most popular products. A good place to start is with a thorough evaluation of the retail display area both inside and outside the rental office. The Display DilemmaIt is paramount that managers have well-organized, interesting displays in the office showcasing the retail items available for purchase. “It’s important to display everything in an appealing format,” advises Gorenstein. “When it’s displayed well, customers tend to buy more.”For creative display ideas, managers may want to spend some time browsing the aisles of successful retailers like Target® and Kinko’s®. These stores have devoted a great deal of money and effort into creating successful displays and are known for having some of the best looking retail areas in the business. Managers who see an idea they like can then try to recreate the look at their own self-storage facility.
It is paramount that managers have well-organized, When thinking about box displays, consider offering discounts for large orders and bundles. “We should all be offering bundled boxes,” says Call. “Bundles help build the volume of your sales. Instead of buying one or two boxes, customers will buy a bundle.” Call is quick to add that his facilities offer buyers a 100 percent return guarantee on boxes they do not use, giving customers the added security of knowing they will not end up with many more boxes than they need. In addition, the bundles come with a substantial discount over the standard per box rate, giving buyers a strong incentive to purchase a larger quantity. “Bundles will build sales up by about 50 percent if done right.”interesting displays in the office showcasing the retail items available for purchase. Another packaged deal could involve a box and supply kit specially designed for a specific unit size. For example, the 5-by-5 bundle could include several small or medium sized boxes, a permanent marker, labels, tape, and packing material. Again, managers would want to offer the kits at a discounted rate in order to generate interest and increase sales. Signs For SuccessSignage is also an important tool for increasing retail sales at a self-storage facility. “Retail sales really start outside your facility,” says Call. “You’ll need signage and bundled boxes placed in front of the facility so customers know what you have.”Utilizing eye-catching banners, flags, and signs both inside and outside the facility is yet another good method for increasing overall awareness of the products for sale. Of course, it is important to advertise the retail offerings all over the site. Banners saying “We sell boxes,” can easily be hung in the truck rental area to grab the attention of customers and help them remember to buy boxes while they are on site picking up a truck. Advertising the retail offerings at the facility should be one of the manager’s top goals. “You need to tell people about the items you sell,” says Bryan. “Tell them you sell corrugated boxes and packing materials, and use signage where allowed. I also strongly recommend putting it in your Yellow Pages ads and on the Internet.” Inside the facility, well thought out displays should be the focal point of the office. If the facility has a model storage room, take the time to stage it with the boxes and packing supplies sold on site. “Many facilities are absolutely full of merchandise,” says Call. “It becomes a business within a business. People should be able to stop in and buy products or use services as a convenience to them without having to use storage.” Bringing In BuyersIn addition to adding dollars to the facility’s bottom line, offering retail goods for sale tends to increase traffic to the self-storage facility. Many times, customers will come in off the street looking to buy boxes or moving supplies. They may not need to rent a unit at that time, but the goal is to create a good experience for them and help them remember the self-storage facility when the time comes to put their goods into storage.Pricing It RightOf course, pricing is an important consideration when it comes to maximizing a facility’s retail profits. In general, self-storage facilities tend to be less expensive for boxes and moving supplies than competitors like Staples® and the UPS Store®. In some cases, self-storage facilities are significantly cheaper. For managers who feel unsure about pricing, it may be wise to shop the competition and get a sense of the going rate in a particular market.“My recommendation to self-storage facilities in general is to do a little research,” says Bryan. “Figure out what the market rate is for products, but keep in mind that you do have a bit of a captive audience.” He quickly adds that most customers are willing to pay a little more for the convenience of one-stop shopping rather than having to drive to a competitor’s facility to save a little money. Whether the goal is to bring more traffic into the facility or to help generate some additional income, it’s clear that retail has come to self-storage and it is here to stay. “In terms of the future, there’s a big opportunity out there,” says Bryan. Facilities that get the word out about their retail offerings and position themselves as one-stop shops are likely to succeed in the slow economy. In short, customer convenience is paramount. Managers and facilities that embrace the retail revolution are likely to draw customers from facilities that don’t offer the convenience of retail sales, giving them a bright future full of added profits and continued business success. Display IdeasSmall Offices Can Make Big Retail Profits
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