Retail Rules: Making The Most Of Your Merchandise

Posted by Brad Hadfield on Dec 30, 2023 11:24:43 AM

“Convenience is king,” declared the Wall Street Journal recently, noting that, more often than not, customers are choosing convenience when it comes to making purchase decisions. While product and price are still big considerations, the outlet notes that convenience can often steal the crown.

Self-storage owners know this, of course, which is why in recent years the trend has been toward providing easy access to units both physically, through smart technology, and virtually, through online rentals.

Another way that many self-storage owners provide convenience to their customers is by offering a variety of retail products. While some locations are bound to have more success than others with retail, the majority recognize that these offerings are basically a necessity.

Retail As A Revenue Stream

While renting storage units is the bread and butter of any self-storage business, retail items can still provide a nice revenue stream if it’s done right. A recent Storelocal article recommends devoting 25 percent of a facility’s office space to management comfort and 75 percent to merchandising retail items. The self-storage cooperative also notes that “the money you make per month in self-storage retail sales could be worth more than the actual rental fee of one unit.”

Anne Ballard, president of marketing, training, and developmental services at Universal Storage Group, is a big proponent of selling retail. “We make $19 on retail for every unit leased,” she says. “Pre-COVID we were doing $40 per unit, and in time I think we’ll get back to that figure.”

She does note that, much like offering tenant insurance, retail sales are 100 percent driven by the manager. “Set goals for employees, but be realistic,” says Ballard. “If you tell employees to sell 5,000 boxes a month, they’ll give up. So start low—maybe set a goal of selling 10 boxes to every move-in. If it’s working, slowly increase it. And make retail sales qualify for bonuses, just like all other income sources, to incentivize employees.”

Ray McRae, vice president of Storage Solutions, agrees that retail is a worthwhile endeavor. “Since a large majority of customers using storage are somewhere in the process of moving, boxes and supplies are a nice complement to the storage business.”

According to Building Design+Construction, he’s right: The company recently revealed that more than 40 percent of self-storage rentals are purchased due to a move or household downsizing, with another 45 percent renting due to a lack of space or the need to store for business purposes. Either way, they all have one thing in common: The need for retail items.

Retail For Convenience

Not all self-storage locations are ripe for retail, but that doesn’t mean they don’t offer items consumers have come to expect.

“Retail isn’t that big of a revenue stream for us,” says Jeff Halmekangas of McDowell Mountain Community Storage. Despite not having a significant impact on the bottom line, he still carries the necessities. “I look at retail as a value-added resource. I often use retail items as freebies to help secure a deal. I may comp a lock, offer a complimentary mattress cover, or put together a moving kit containing boxes, tape, and other items.”

Continues Halmekangas, “I think community discounts, like ‘first month free,’ is what will really tip the scale in your favor with a potential tenant. But, with all the competition out there, you still need to offer retail so people don’t go elsewhere … we just generally use those types of products to make the sale.”

Chris Rudel, president of the Rudel Company, which operates three properties in Arizona, feels similarly. “Boxes and packing supplies don’t net a big profit, but they do help bring in customers.”

The Right Way To Retail

Although she acknowledges that not all self-storage locations need to be in the retail business, Ballard says that if you want to sell retail, you’ve got to think like a retailer. “Selling self-storage retail begins on the phone,” Ballard explains. “When someone inquires about a rental, the employee needs to say, ‘By the way, don’t pack yet … we have all the supplies you’ll need right here and can show you how to pack the right way.’”

When the customer does come in, they should be counseled on what items they need. “An employee should never ask the customer what they want or need,” says Ballard. “They usually don’t know. Instead, they should ask, ‘What will you be packing?’”

This type of question is designed to start a conversation. “Once the customer says what they’re packing, the employee should take them ‘shopping’ and demonstrate their experience,” says Ballard. “Staff should be able to make recommendations based on what the customer is packing. For example, if they have a lot of books, they’ll need small boxes, or it’ll be too heavy to carry. If they have china or precious items, again small boxes to keep the items safe. Now, if it’s Tupperware and pillows, they should suggest large boxes, because they hold a lot, but the items are light. Packing a closet? They should suggest wardrobe boxes. They need to be experts.”

Ballard says that customers often think they’re purchasing too many boxes, when in fact they often don’t purchase enough. To take this out of the equation, Universal Storage Group has a buy-back program. “Any unused boxes we buy back and put back into inventory. But, as is often the case, we rarely have anyone return boxes. They generally come back for more!”

Adds McRae, “Buy-back programs encourage volume selling. Offering to buy back unused boxes that are in the same condition as when they were purchased eases consumer concerns about overestimating quantities and being stuck with unused materials.”

Pricing Self-Storage Retail

There are a number of ways to price self-storage retail items. Some facility owners stick to the manufacturer’s suggested retail price (MSRP). Others may use “keystone pricing.” This markup formula simply doubles the wholesale cost. This method may work for specialty items, like mattress covers, which can be hard to find, but it may not be the best way to price commodities that can be found cheaper at any convenience store, such as permanent markers.

“Since we’re really just offering our retail items as a convenience, we don’t mark them up much,” says Rudel.

Ballard, on the other hand, marks up merchandise 2.125 percent. “This means that 55 percent of the sale is profit,” she says. Her pricing structure does change when bundling, however. “Bundled products come with a 15 percent discount, and it’s worth it. We move more merchandise; the customer gets a better deal.”

McRae also believes in bundling. “Bundle pricing is great for volume selling. You sell more and the customer saves more. It’s a win-win.”

Merchandising Self-Storage Retail

Self-storage retail today looks more like a well-organized Walgreens and less like a messy closet. Gone are the days of putting a few boxes and supplies on a shelf and hoping they’ll sell themselves.

Lainey Becker, account manager with Supply Side USA, a leading supplier of packaging, shipping, moving, and storage products, says that self-storage retail displays should look like a well-stocked showroom. “Make sure the space is used correctly for the amount of product you have,” she advises. “If the space is too small for all your offerings, it’ll be cramped and customers won’t be able to find what they want. If the space is too large compared to your offerings, it’ll look empty and not compelling.”

Ballard agrees that displays must be eye-catching. “You can’t just put out a single sample,” she explains. “People want to see merchandise stacked up to chest height, individually priced, and highlighted with attractive overhead signage.”

Some locations use furniture movers to move things around easily. When floor space is at a premium, Ballard also suggests using slat walls, typically in 8-foot sections, for items like locks, bubble wrap, labels, and so on.

“Make sure your merchandising sells for you,” Becker adds. “Your categories should be grouped together to ‘drive the basket.’ Put the tape next to the bubble wrap, the labels next to the Sharpies, [and] the rope next to the boxes.”

“Also, be sure pricing is clear,” encourages Becker. “People are more likely to walk out if they’re confused instead of asking for help, especially if an employee is tied up with another customer.”

Adds McRae, “The more showroom space you have the better merchandising you can do with your retail products. If you are limited on showroom space, try to utilize as much wall space as you can.”

While it’s important to have enough product to fulfill customer needs, “Just be sure not to hold on to too much inventory if you’re not moving a lot of it,” says Halmekangas. “Boxes, for example, can break down, absorbing moisture and collecting dust. The last thing you want is to lose money with retail.”

Ballard suggests checking inventory monthly to ensure the facility has what it needs and to move any items that may be getting long in the tooth. “Use any older items that aren’t moving as freebies for new tenants or as display items,” she recommends.

Keeping Current With Retail

While some self-storage retail items are evergreen, new products are always being released and operators need to be aware of them to determine if the offerings are right for their retail program.

“Maybe it’s time to think outside the box,” says Halmekangas, who notes that unused box inventory can go to waste. “Consider offering plastic bins. Customers love them and they offer more protection from the elements, critters, and so on.”

There is one item that everyone agrees is a must-have: “Locks,” says McRae firmly. “At a minimum, you have to sell locks.”

Thankfully, there are many options to offer. While some self-storage facilities are turning to smart technology for unit security, Maggie Bode, director of business development for Davinci Lock, agrees that locks are a retail necessity. “Our combination disc lock, the SS-978, is really taking off because customers don’t want to carry keys.”

Bode explains how the company’s lock system allows for automated and contactless lock removal. “The system uses a standard combination lock with an encrypted serial code engraved on it. Using DaVinci software, serial codes can be decrypted to retrieve lock combinations, and authorized employees can provide lock combinations to tenants.” DaVinci’s website portal and app comes with it and allows for easy integration with facility management software.

Wei Hsu, sales manager for Baton Locks USA, also favors physical locks. “I think the pendulum may be swinging back when it comes to lock systems. The industry is not there yet when it comes to biometric locks or Bluetooth pairing. We’ll get there, and Baton Locks will be there, but right now having our cylinders makes a unit more secure and reduces liability through lock-out functions.”

Can Retail Go Remote?

While fully unmanned self-storage models aren’t yet the norm, many operators are embracing the concept of remote management in a “semi-manned” fashion. For example, they may employ a regional manager who’s responsible for any in-person requirements across several facilities, or a local manager who’s performing key tasks from home, but the site isn’t manned for the majority of the time.

While these advancements are meeting the needs of owners and renters, where does that leave the retail business? “If you’re fully remote, retail’s not going to work,” says Ballard. “To be successful in retail, you have to have someone on site to engage and sell leads.”

Bode may disagree. She envisions facilities of the future that offer retail items remotely through their website (and not through an on-site vending machine, which has been suggested before).

“No one has quite figured it out yet, but a way to do it might be to offer retail items online after someone has paid to rent a unit. They make their retail purchases, and the operator collects the items from their inventory and places them in the unit prior to tenant move-in.”

Despite the effort involved, Bode says, “It keeps the revenue with the facility owner, rather than putting it into the hands of Home Depot.”

Keep On Truckin’

They won’t fit into a retail display, but some self-storage facilities go the extra mile by offering truck rentals. Ray McRae, vice president of Storage Solutions, says that while truck rentals can be a lucrative side business–and a great competitive differentiator–there are many factors to consider.

“One of the biggest barriers to a quality truck rental operation at a storage facility is simply space to accommodate an inventory of trucks,” he explains. “However, if you have the extra parking, it can be a profitable side business.”

One thing to keep in mind when introducing trucks to your storage operations, McRae says, is building damage. “Keep an eye out for this and remember the customer is responsible for damage to your property.”

He says that when offering truck rentals, self-storage operators should never lose focus on their core business: self-storage. “You need to make sure your team can handle operating both the storage business and the truck rental business. If one has to give, it’s got to be the truck rentals.”

He also recommends separating the self-storage business from the truck rental offering. “Sometimes you may receive negative reviews from truck rental customers who are not storage customers simply because your storage facility is the truck rental representative. But don’t allow the truck rental company’s problems to become your problem. Reassure the customer who has had a bad experience that your brand is not the cause of the problem, and then work with the truck rental company to get it resolved.”

Chris Rudel, president of the Rudel Company, thinks that truck rentals simply distract from the self-storage business itself. “Truck rentals are readily available anywhere. Not offering rentals is not going to break your business.”