Message from Toby Whittaker
Managing Director, Store First Ltd
"If you have no critics, you’ll likely have no success."
That is a quotation from a famous American civil rights activist of the 1960s, Malcolm X.
Judging by our critics at the Self Storage Association [SSA], Store First is a runaway success!
The SSA’s CEO, Rennie Schafer, has recently written in their periodical Self Storage Focus magazine that the SSA decided to contact Deloitte’s to complete an “independent” review of Store First’s business model. Given that, for several years, Deloitte’s has also been commissioned to produce the SSA’s annual survey, and given that the SSA presumably paid Deloitte’s for their efforts in reviewing Store First, that would not – in my opinion – make Deloitte’s particularly independent!
Given the substantial inroads which Store First is clearly making into the profits of the SSA members, it is not difficult to imagine that there will be a level of bias against Store First in the brief for such a report. It has indeed become apparent from speaking to new customers of Store First that SSA members have sought to use the SSA’s comments and extracts of the report simply to dissuade them from using Store First. In fact, this is actively encouraged in Mr Schafer’s article in the SSA magazine. A hidden commercial agenda based on scaremongering perhaps?
What baffles me about the SSA article is how it can fail to understand that it is comparing its own traditional business model with a completely different business model. Why is the SSA setting itself up as the guardian of my investors? Is the SSA qualified to give investment advice? I expect and encourage all my investors to take truly independent advice from a regulated Independent Financial Adviser.
Does the SSA, even now, understand how my business model differs from those of its members? I really do not think it is particularly difficult to grasp – but, for the sake of clarity, let me explain.
Store First does not borrow millions of pounds from banks to buy, build or fit-out its sites. The SSA’s 2014 survey announced that Safestore has managed to bring its loan to value ratio down to about 40% [source].
Very good: but it doesn’t really compete with Store First’s loan to value ratio of 0%, though, does it?
Of course Store First can afford to undercut its competitors. It simply does not have the massive overheads and cost of funding which its major competitors have.
At the same time we are not interested in falling into line with how the SSA would like to control the market. For example by discouraging its members from publishing full prices online it facilitates a “get as much as you can get away with” philosophy which is the industry norm. At Store First we are breaking that model by being upfront and honest with total transparency about our pricing – and the SSA simply don’t like it.
And why the SSA can’t grasp the VAT advantage which Store First has, I cannot understand. It seems simple to me but, again, allow me to explain.
If your turnover of VAT taxable services for the previous 12 month period is more than £81,000 (the current threshold) you must register for and charge VAT.
My competitors rent out their own storage units so all of the rental income is theirs to keep. They will easily break through the £81,000 per annum threshold and therefore must charge VAT. But my investors, who own individual storage units, will not, unless they have individually bought more than £1m worth of my storage units.
So if the individual investor’s rental income turnover per year is under £81,000 threshold they don’t have to register for VAT and don’t have to charge it to their tenant.
Simple, isn't it? Not really hard to understand!
We are simply complying with the UK tax laws. Do they like it? Of course not, but it comes back to a fundamentally different business model which happens to have a different VAT impact on the rental income.
So I repeat, why is the SSA so concerned to be giving advice to my Investors – advice which should only be given by those qualified to do so?
The answer is “fear”. Fear that the success of my business model is causing their members to lose profits at an alarming rate. That fear is realisation that their industry is changing and we are not going to go away.
Store First is competition and the SSA and its members seem very much afraid.
I think that the SSA’s problem is that its members are stuck in their ways and don’t know how to change. They are reacting in fear and panic. Mr Schafer is encouraging the SSA’s members to campaign against me! What a negative attitude!
Instead of repeating groundless complaints and moaning, surely my competitors should be taking a long hard look at their own business models and get their acts together. Unlike some, I do not fear competition. Competition is good. It delivers a better deal for investors and consumers alike. The SSA and its members should be looking carefully at what is happening in the retail world.
Who would have thought a few years ago that discount stores such as Aldi and Lidl could be bringing the giants down? Tesco did not seem to see it coming.
"It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one most adaptable to change."
– Charles Darwin
It is time the SSA started adapting to change within the industry.
The real question is can the SSA and its members adapt and remain financially viable? The simple fact is their returns are based on artificially high rental rates which they have managed to maintain over the years.
Enlightening advice by Mr Schafer to SSA members “most importantly try to avoid getting into a price war with Store First” … because I “have the ability to reduce rates to levels that are simply not profitable”!
What an admission from the CEO of the SSA! Yes I can and do charge rates that are simply not profitable for his SSA members; members who are presumably paying substantial amounts to their banks in charges and interest, substantial amounts in overheads and to their managing directors and CEOs (in Safestore’s case an eye-watering range of £342,000 to £994,500 for the CEO [source]) and in the case of PLCs, dividends to keep its shareholders happy. BUT the rates I charge are perfectly profitable for Store First.
That is the whole point. Shake-up your business models, SSA members and then maybe you can compete rather than whinge.
I am very proud of what I have achieved with my Store First business model. My operation has been running for 4 years now and is still expanding. I note from the SSA’s 2014 Annual Survey that Big Yellow, Safestore and Access did not open any new facilities in 2013. The 2014 Survey says that 88% of respondents to it opened no new facilities during the year.
Store First on the other hand is constantly on the look-out for new sites and buildings. In fact, if you think you know of any that might be suitable, let me know!
And remember it is not only Store First’s competitive rates which puts it streets ahead of the competitors. It’s the FREE facilities I offer at my outlets, like Wi-Fi, boardrooms, gymnasiums, showers, mail and collection services, fully fitted kitchens, etc. Which of my competitors’ offer a free pick-up service?! Store First has a fleet of dedicated delivery vans giving a free pick-up service to those wishing to store with me saving our customers the costs of hiring a van for the day.
Let's take a look back at what Store First has achieved this year:
- We are the fastest growing self storage company in the UK
- We have opened the largest Self Storage centre in Europe
- We are the first and still the only self storage company in the UK to provide full open and honest pricing on our website
- We've innovated our storage services by offering a deliver and collect storage model, Cleverbox, as a nationwide service
- We continue to offer the best prices AND the best facilities in the industry
- We have trebled our occupancy levels in the past 8 months alone
It really is a win-win situation for my investors. Not only can they rent out their units at super-competitive prices and get a good investment return, but their customers will also enjoy the best prices and facilities available.
I suggest that the SSA should stop being concerned about my investors and start trying to compete and improve its industry instead of letting it stagnate. Gone are the days of milking the public for whatever price they can get away with via hidden pricing, tired facilities, extortionate insurance rates and constant rent uplifts every 6 months.
Store First is changing the face of self storage in the UK forever – and for the better.
"If you can’t fly then run, if you can’t run then walk, if you can’t walk then crawl, but whatever you do, you have to keep moving forward."
– Martin Luther King
I suggest that the SSA members heed the advice in the quote above – and I shall look forward to watching them try to catch up with me.