In any industry, there are disruptors. Innovators. Dreamers. Ambitious entrepreneurs who look at an industry and ask, “what if?” Self storage is no different. In fact, it’s ripe for a little innovation. The traditional storage facility has had a long and successful run - it’s been an American fixture since the first storage facilities opened in Texas in the 1970s. And for the most part, the simple ‘rent it and store it’ business model still dominates the market. So the big question is: are trendy valet self storage brands here to stay? Or are they just one of the many failing “Uber for…” startups that we’ve seen since the success of ridesharing apps? You be the judge - read on to learn all about trending storage startups and how to compete with them as a traditional self storage business.
America’s metro areas are undergoing a space crunch - and it gets worse every year. It’s bad news for renters, but great news for storage facility owners. The fight for square footage has many real estate investors rushing to get into self storage, only to find that city planners are pushing back just as hard. Popular urban and suburban areas are often saturated with storage, and city planners prefer to allot the space to businesses that generate more tax revenue and employ more people than self storage. For young storage investors, it’s also tough to get enough capital to launch your business. With these challenges, the scene was set for the birth of the self storage startup.
Peer to peer self storage applies the AirBnB business model to self storage. The leading startup in the space, Neighbor, connects people who have stuff they need to store (renters) to local homeowners and business owners (hosts) who have extra space in their garage, attic, or basement. Their goal is to help homeowners make money off unused space, while connecting people who need storage space with trusted neighbors who live in close proximity to their home. The storage space sizes can be odd (like an 8’ x 13’ storage shed or a 48’ x 12’ backyard), but rates for space on Neighbor are substantially lower than traditional storage: you can rent a 10’ x 10’ basement space in Salt Lake City for just $46 a month.
The first reaction most storage owners have to Neighbor’s business model is usually a scoff/eye roll combo. How the heck is that going to work when the renter doesn’t pay and their stuff goes into lien? Who gets sued if the renter’s stuff is destroyed or their boxes bring bed bugs into the host’s home? It’s tricky, and it seems like there are a lot of things that could go wrong. Neighbor’s FAQ page outlines how they handle most of it (renter’s insurance and “host guarantees”), but I still don’t think I’d want to make my basement into a storage unit for who-knows-what. No matter how low you drop your unit prices, what self storage facility owners absolutely can’t compete with is Neighbor’s location advantage. Neighbor puts self storage on every corner in America, in the most desirable neighborhoods, and the most heavily populated urban city centers. Right now, they’ve really only taken off in Utah, but they’re hoping to expand to offer more storage space in high-cost cities like San Francisco and New York City where they’ll have a major price advantage.
On-demand storage services bring the Uber business model to self storage. With the tap of a button, a renter can make self storage a hands-off experience. Valet storage services pick up your items from your home, store them in a secure warehouse, and bring them back to your home at your request. Some full-service self storage brands even help you pack your stuff by photographing and cataloging your items so you know what’s inside every box or storage container. Others take it a step further to do some good by offering pickups for donation items to nonprofits like Goodwill or Salvation Army. There are several startups in this space, but the leaders are Clutter and MakeSpace. Other brands, like UrBin, Livible (formerly Storrage), and Brute Storage (formerly Boxbee) are fighting to get into the space.
Technology is at the heart of on-demand storage’s “cool factor.” Renters can request storage space and pickup for their items with just a swipe, making renting a unit as easy as browsing Tinder. In dense metro areas where many tenants may not own a vehicle, pickup and delivery is a must-have. If renters also lack the driveway or yard space for a portable storage unit, valet storage is the answer. Another advantage of full-service self storage: their warehouses are usually out in the middle of nowhere (or even unlisted on online maps), so they can find a warehouse space for a bargain and still charge a premium for their services. Right now, on-demand storage is most popular in bustling, crowded cities like Los Angeles, Chicago, New York, and Seattle. Valet storage is definitely a competitor to watch out for in the future - especially if Amazon decides to throw their hat in the ring.
Cloud storage for physical stuff and valet self storage are very similar: they’re both picked up on-demand, stored in warehouses, and delivered to renters. They’re both very tech-heavy and focused on convenience. But there is one major difference between cloud storage for physical stuff and on-demand self storage services, and that is the concept of sharing. Like a library service or a photo storage app that allows you to share pictures with friends and family, cloud-based self storage services allow renters to lend the things they store to others who need it. It’s a very futuristic model for self storage, where the term “possessions” starts to become pretty loose. With this business model, renters can rent out their stuff to others and people in need of stuff can browse items that are available for rental. Pretty weird, huh?
The leader in the cloud self storage space is Omni. This San Francisco-based startup is still in beta, but it’s futuristic business model is attracting a lot of attention. As a skeptic, my first thought is, “uhhh, I do not want some random person borrowing my stuff.” But the concept of a stored “stuff library” for people to share and use fits in perfectly with the minimalist living movement - the very trend that threatens the future of traditional self storage. Since Omni is still so young, we’ll have to wait and see how it plays out. Whether the startup succeeds or not, cloud self storage services definitely succeed at pushing the boundaries of what self storage can be.
All of this innovation really isn’t doom and gloom for traditional self storage - it’s just bringing our industry into the limelight and adding a little more variety. If you’re currently sitting on one or more storage properties, consider yourself the envy of most storage startups: they’d kill for a premium space like yours where they could offer their services. If your traditional storage facility is in a market like New York City or San Francisco where storage startups are all the rage, you can still compete and win renters. It’s just a matter of adapting! Check out the tips below to give your storage business a little more of a competitive edge against trendy startups.
Other than peer to peer storage space, most new storage startups aren’t the most affordable option on the block. With attention-grabbing coupons and promos, your traditional storage business can maintain a price advantage fairly easily. Plus, long-term tenants also value the accessibility and familiarity of the traditional storage model like yours. You can capitalize on your old-fashioned customer service and history as a trusted business in your community and bring in new tenants who would rather do the heavy lifting on their own and know that no one else is messing with their stuff. Give the people what they want by offering a familiar service at affordable prices and raising rent regularly to keep up with the market.
On-demand storage uses technology to hook new renters who appreciate an easy-to-use website, and your traditional storage facility can do the same thing! Self-service technology tools like a responsive website, simple online rentals, a user-friendly pay online portal, an interactive storage space calculator, and e-sign for leases makes renting a unit online from your storage facility just as easy for newbies as renting on-demand storage. Another plus: self-service technology is very affordable and easy to get for storage brands large and small. Check out what’s popular at a trade show near you or get in touch with a self storage technology expert.
Last but certainly not least, keep a close eye on what’s going on in your market and don’t be afraid to do something out of the box. Traditional storage owners have a lot to gain from premium storage offerings, and an uptick in demand for valet storage signals that renters aren’t hesitant to pay more for convenience. By offering amenities like business storage, wine storage, classic car and RV storage, free wi-fi and conference spaces, and package acceptance and delivery at your office, you can create a more luxurious experience for your tenants.
If you have large units that are difficult to fill, it wouldn’t hurt to reach out to storage startups to see if they’d be willing to rent warehouse space from you for their on-demand services. If you own a fleet of moving trucks, storage startups might also be interested in renting them from you - they’re often low on capital and looking for a way to get their foot in the door without investing a big chunk of money into vehicles. Find opportunities in your market by keeping a close eye on disruptors to see how people are responding to popular trends.
Thanks for reading! If you liked this blog post, you may also like: Storage by the bin: A new business model for self storage, Your next storage manager may be a robot, and What technology do you need to run an unmanned self storage business? (Infographic).