Know Your Competition
You May Be Your #1 Competitor
by Donald Jones
One evening in January, there was a meeting in one of our Central Texas communities. The residents came in numbers to share their concerns regarding a new self-storage development being considered through the city’s planning and zoning committee. During the course of two hours it became evident the public knew nothing about the industry or the strides the industry has made to be more appealing to their community. Everything they said related to what they had seen in the past and the term “not in my backyard” became the mantra as they attempted to move the development elsewhere.
There is no way we can blame the residents of this community for not really knowing why a developer would want to enter the market because they are not informed. However, how often do we ask our employees to give us fairly simple information as it relates to their home market and they do not have an answer? The developers who are coming into local markets know the competition very well and the reason new developers are coming is because they firmly believe they can offer a better product and better service.
But, is it true?
As we evaluate our own properties, how do we match up against the competitors in a given market? Who is responsible for gathering specific information, and who is responsible for managing the information when it is obtained? While these answers are generally determined by owners or management company staff, frequently the task is filtered down to the staff at the specific location.
For years, the industry asked property staff to do competition studies that are essentially an exercise in price shopping. Yet, is price really the true measure of the competition? Upon replacing a management company recently, I had an opportunity to interview the two remaining employees regarding their jobs. I asked both a very simple question, “Who is your #1 competitor?” Both answered the question exactly the same, both were wrong, and they were replaced.
This was not a power move for the property, it was necessary because the employees didn’t have a clue that they themselves are their #1 competition. They came to believe that no matter what they did, they could not overcome the prices of their competitor. They were so consumed with the pricing they had been tracking for years (which is much lower than their own), that they believed they could not compete. They were in fact beat, but not by their competition. They were beaten by themselves for not knowing the facts.
We have executed competition analysis in more than 30 states for a variety of reasons, the most important of which is to gather accurate data that allows us to make good decisions. Without solid information it is difficult to make good business decisions. When we do these studies, pricing only occupies one small portion of the information gathered. All other details about a property are critical. And when left unmeasured, the gauge used to measure one’s position in the market can become skewed.
Consider using some of these categories when obtaining information and see if it makes a difference in the quality of your analysis: property information, marketing sources, rates by product type, hours of operation and access, amenities, facility rating, construction and special notes.
Property information does not just include an address, but how customers communicate with the property and who they communicate with. During a recent visit to a property, I asked the manager for pricing. His reply, “Our rates are online.” My retort, “Would you like me to leave and check the rates online?” Initially baffled by the statement, he took note. When you shop the competition, how does the manager respond during the visit? Friendly and inviting, or put off and dismissive? Clean and in uniform, or sloppy and unkempt? Are they instructive and reassuring in teaching a potential tenant about self storage, or presumptive that the visitor knows the business already?
Marketing sources are widespread in the industry. There are many vendors who offer tools to assist in lease-up, rate management, software, etc. When properties are researched, are competitors using the same search engine aggregator? What variability exists between competitive websites—are some sites more powerful than others? When researching pins on mapping programs is the information accurate? When considering who has the best Internet presence, what conclusions can you draw? How a property markets itself will affect their potential draw. How does the subject property compare?
Rates by product type are an extremely important metric. In the example earlier about the employees who were released, their competitor was a Class C facility with no climate control, while the employees were managing a Class A facility with four different product types. When obtaining rates, gather information that is relevant. If a facility does not offer parking, there is no need to obtain pricing for that product type. Get the rates that matter most for the decisions you are trying to make.
Also, consider the ever-increasing amount of admin fees and insurance requirements placed upon tenants. Are these done categorically through institutional players, or are these locally- owned properties that have some level of flexibility? Will the competition require tenants to purchase locks on site or can they bring their own? What specials are being offered and are they necessary in the market or the subject property?
Hours and access can vary with every property. During some studies in a specific market, we learned that every storage property offered gate access only until 7 p.m. The reason was their fear of theft after 7 p.m. Instead of the market working on security improvements, they reduced customer access and convenience. When evaluating properties, are they accessible both via human communication as well as physical access?
Amenities are the aspects of a self-storage facility that will appease the tenants with an effort to make their rental experience more convenient and more secure. This list could include items such as: resident managers, kiosks, electronic gate access, enhanced lighting, storage carts, online payment options, cylinder lock security, elevators, insurance, truck rentals or moving supplies. Staff can inquire about other specific items like multi-unit discounts, or 24-hour access for special occasions. Understanding the amenities offered by the competition will allow one to understand more clearly what changes might be required, or it may just be a matter of simply being aware.
Facility rating is a subjective item but it includes things that are intangible. What is the appearance of the competitor? What is the ingress/egress? Are signs crisp and clean, or lackluster and tattered? Is the location highly visible, or on a back road with low visibility? How was the management? Attentive and helpful or barely helpful? Is the office fresh, clean and roomy, or is it cramped with the management lifestyle (food, pets, etc…) and the corresponding sights and smells?
Construction is a way to determine age of a facility and the true comparative value to other self-storage facilities in a trade zone: steel construction vs. block construction; heavy outside swing doors vs. light gauge roll up doors; concrete drives vs. gravel paving; quality lighting vs. limited lighting; and fencing that appears secure vs. fencing that can easily be breached.
Special notes represent things that weren’t specifically asked for but need to be noted. This could include various specials being offered. This might include a comment about new construction or how the mystery shopper felt during the visit. Would he/she have rented on the spot because of the great experience, or were they in a rush to move to the next facility?
When assignments are given to monitor the competition, it needs to be understood that rates have value, but they are only a small part of the overall competitive value. There have been many instances where a self-storage competitor is within a mile or two of a subject property, but they have ZERO competitive influence because the shopped property was just flat pathetic and the experience was miserable. If only rates are obtained, one might get a $50 price for a 10 x 10 non-climate storage unit compared to the $85 price that a quality property is charging. An uninformed owner might consider reducing rates.
There is a practice between various institutional players to obtain rates on a monthly basis, or in some cases, on a weekly basis. After having shopped storage facilities for 23 years, I’ve learned that rates just don’t move that much for the majority of the industry. Performing a quality rate analysis on a quarterly basis is more than sufficient and performing a quality competition analysis, including property visits on a bi-annual basis, is reasonable. However, always consider seasonal influences (e.g. rates increasing prior to summer).
After all data is gathered, then there is real value in sitting down with staff, district managers and owners to discuss what to do with that data. How will a facility be managed in the future? What plan can be written for the next six months to train the onsite management to improve the quality of the facility and to improve the customer experience? What items are tangible and can be seen and felt by future tenants?
RENT WHAT YOU HAVE
When all is said and done, there is a phrase that rings true with every storage property: “Rent what you have, not what you wish you had.”
If a property only has non-climate storage, then embrace it and make it the best non-climate property in the market. If a property only has small units available to rent, then enhance the marketing on those small units. If the property only has a unit with a swing door and the latch is very difficult to close, then fix it and make the experience better for future tenants.
The manager of a given property should be committed to the objective of leasing up the property and their mind set should be geared accordingly. Rather than having a three-page list of storage units on the desk, they should be prepared with a very short list of five to eight storage units that are absolutely perfect for a prospective tenant. If they concentrate on renting one or two of those in a given day, they will do so.
Understanding the competition is a tool that is used to make better business decisions. The assignments to gather information should be specific. We need to understand the differences in the properties and the effectiveness of their onsite personnel. Onsite managers need to see how their counterparts are treating prospective tenants and begin to apply best practices.
Prospective tenants do not have brand loyalty when it comes to renting storage. They make decisions based on personal experience and by feeling comfortable with the management and the processes of a given storage facility. Make business decisions and hire personnel prospective tenants will appreciate.
Our very last point, there is one thing that YOUR facility has that NO other self-storage facility has in your market: YOU. When all is said and done, YOU are the difference, so make the difference.
Donald Jones established his consulting service in 2004 concentrating on property management, feasibility studies, acquisitions and development. With 24 years experience, he is a top 100 operator five years in a row.