Earlier this week, one of Zapala Go’s customers was talking about a storage unit that would go through inventory so it could be auctioned off. That particular unit had been in storage for almost 20 years. After hearing that, the whole team in the back office immediately traced a parallel between this story and Storage Wars, that famous TV show. Comparisons apart, we’ve started talking about how long storages might look profitable for a company but might end up being a nightmare. If reality TV pictures it in a ludic, funny way, we know that reality might be different.
In a quick Google search, you can find recent news giving details about the billion dollar market for Australian storage companies. According to a report published in August 2016 by IBISWorld, there are almost 700 players in the industry, generating $1.1 billion in revenue and profits around 20 per cent.
Over the past years, the increase in rents and property made people look for storage solutions as their belongings would no longer fit in smaller spaces. The boom in the digital scenario, and particularly e-commerce, also increased the demand for renting storage spaces on a monthly basis.
In the Australian reality, storage companies can only auction an unit after payments are overdue and the owners didn’t take further action after being notified several times. When the auction date is scheduled, the owners are also notified and they can still solve the situation through a financial settlement, which would put the auction off.
The business that was born through these auctions is also worth a billion dollars. Most people think they will be the lucky ones to find units with diamond rings, valuable antiques and rare items. It’s not hard to find an unit being auctioned for ten times its original value. Even though the inventory is available for everyone that is interested, stubbornness and hope make sure the price goes up in a surreal percentage rate.
Through a business perspective, long (and almost lost) storage units are a bad deal for one simple reason: it might be showing you that your warehouse isn’t being managed as it was supposed to. Apart from all the problems involved in calling a certain owner, notifying him/her, having staff ready to do inventory, inspections and much more, that space has a fixed cost for your entire operation. And the price of it is always keeping up with current inflation rates.
It makes you wonder if instead of one long lasting customer, with old contracts and values, four or five new customers, in a smaller gap of time, would have been more profitable.
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