Stay Independent Amid Industry Consolidation
How Self Storage Operators Can Stay Independent Amid Industry Consolidation
As an independent self storage operator, sometimes you feel like an ant: a tiny speck in a big world. But when it comes to both ants and self storage businesses, looks can be deceiving. A single ant may seem minuscule, but together a colony of ants can build a veritable city that extends 25 feet into the earth. The same is true of independent self storage operators, who together make up 85 percent of the industry.
Growing concerns about consolidation have left many self storage operators feeling voiceless, but by harnessing the power of that 85 percent, individuals can band together and have a say in the future of the industry.
In other words, when you band together, you’re no longer just ants, but the colony.
Consolidation in Self Storage
Independent self storage operators are increasingly challenged by price surges on software, restrictions on the ability to choose vendors, and lack of access to technological innovations. The reason for this? Consolidation. In March of 2018, SpareFoot acquired SiteLink. Just six months later, SpareFoot also acquired storEDGE. In March of 2019, Sparefoot/SiteLink/StorEDGE (at this point, we might as well call it SpareLinkEDGE_ (recommending parenthesis because the dashes default to question marks when posted to StorageFront) consolidated the industry even further by acquiring credit card processing service Select Merchant Solutions (SpareLinkEDGE Solutions, perhaps?). This placed Chuck Gordon, CEO of SpareFoot, at the helm of all of these companies. This means that this one consolidated entity now handles self storage rentals, self storage software and credit card processing.
Sparefoot may be the largest example of self storage consolidation, but there are many others. In October of 2018, PTI Security Systems acquired Automatit, which placed the digital marketing service under the longtime security system provider’s umbrella, now PTI, which is on the market itself. In August of 2018, Fullstream, a software and payment business holding company, acquired self storage management software provider Domico. In February of 2019, Fullstream went on to purchase another self storage management software provider—Storage Commander. According to a news item published that same month through Inside Self Storage, Fullstream is “actively seeking further acquisitions across multiple software verticals.”
Consolidation may be a big talking point in the self storage industry, but it’s a concept that has made waves in other industries from banking (JP Morgan Chase), to cable tv (Time Warner-Charter), telephony (all the Baby Bells), airlines (United-Continental, Delta-Northwest, American-US Air), entertainment (Disney-Pixar) and oil (Exxon-Mobil).
”The belief is that a more powerful product can help smaller operators compete more effectively than they would be able to if they were just pulling together a whole bunch of disparate systems and trying to compete with larger, more scaled operators who have greater access to technology and larger budgets,” said Chuck Gordon in a presentation on consolidation at the 2018 Self Storage Association Fall Conference and Trade Show in Las Vegas.
What it Means
As experienced in other industries, consolidation in the self storage industry can have serious ramifications for operators. As a business owner, you may see increased fees for using a platform or for your preferred vendors providing services to you via API (Application Programming Interface) fees. Another possibility is losing access to that vendor entirely because they are either unwelcome competition to the host system or the incumbent simply wants to stifle competition. We are seeing more and more selective service offers or costs based on this process.
These costs gnaw away at your profit. Plus, in markets where you cannot raise rents, they not only hit your bottom line but reduce your enterprise value. What happens in the next market turn down? Imagine an outside force transferring your equity value to theirs, right under your nose.
The API Effect
Speaking of APIs, another side effect of consolidation is higher costs associated with this crucial piece of technology. An API is responsible for linking directories and websites to your property management system, sharing content on social media, listing auction-able storage units, providing call centers with live inventory and so much more. Consolidation can also negatively impact your self storage business by denying you access to an open API. For example, if you’re forced to use property management software that doesn’t integrate with your preferred self storage directory, your live prices and inventory won’t be listed there and customers using those online resources won’t (or can’t) book a storage unit at your facility.
That brings us to another crucial component of this discussion: who owns your data? We have heard from more and more owners that the access and use of their data is coming at a cost, or it's being used to target services back to them. If you are restricted in free access to your data, or there is a cost to use it, who really owns it?
In an October 2018 blog post for the Self Storage Association, Don Clauson, CEO of Strat Property Management and Chairman of the Self Storage Association said, “My worry is that consolidation could lead to a scenario where our choice of vendors becomes limited. The effect then could be an increase in operational costs for our self storage facilities, including those for which we were not previously charged. We have already seen some increases in costs during the last few years and I believe it is likely we will see this trend upwards in the near future.”
What Independent Self Storage Operators Want
Independent self storage operators want an alternative to consolidation. They want open APIs, a robust choice of quality vendors and ownership over data. They don’t want to have their decisions made for them; they want to own their futures.
“You can just see what’s happening as the industry contracts and condenses,” says David Edward of Golden State Storage. “Smaller players in the industry have to think of a better way of doing things.”
“I think that independent owners need to band together much like the hotel industry needed to band together,” says Brian Caster of A1 Self Storage. “If you remember back in the day, all the motels and hotels were owned by mom and pops, but as the Motel 6’s and Holiday Inns came out and started multiplying, they drove the small operators out.”
Democracy Through Critical Mass
Are you worried about the increasing trend of industry consolidation? Are you wondering where your data is going? Are you concerned about the effects that mergers, acquisitions and lack of access to open APIs are going to have on the future of your business?
Most importantly, do you want an alternative to rising vendor prices and lack of choice?
The answer is in that 85 percent that we mentioned earlier. We’re talking about democracy through critical mass. Independent self storage operators can band together to stand up against the rising fees and shrinking vendor options that define consolidation.
All self storage operators should have a say in how their data is used. All self storage operators deserve access to the vendors they want. And yes, all self storage operators should benefit from open APIs. This is how independent self storage operators can stay that way without falling behind.