2.
Barriers to Entry. Barriers to entry are modest. There are no significant technologies to acquire or license, no research and development investment, or expensive equipment needed. Existing firms do not possess patents that prevent other entrants from operating effectively. Some companies may choose to invest in more advanced service offerings for customers, including refrigerated storage, storage for boats/RVs and other larger items to enhance competitiveness, but depending on the individual market, these options are not required.
In fact, a large portion of the industry is made up of small, independent operators who were able to launch their businesses with only a modest investment in real estate, warehouse building construction/modification, and general start up costs. Particularly notable in demonstrating the low barrier to entry in this industry is the fact that "there are some 27,650 small business entrepreneurs (90% of all self-storage companies) who own and operate just one "primary" self-storage facility." (SSA, 2010).
3.
Supplier Power. The supply elements used by the self-storage industry are primarily: real estate (for facility locations), construction and engineering firms (who build and maintain facilities), labor, and power utilities (electricity for lighting, refrigeration and other facility operations). Mobile self-storage companies are also dependent on the price of fuel for delivery/pick-up trucks. Suppliers of fuel and electric power and market prices for these commodities are not subject to any control by self-storage companies; likewise, the real estate market. Suppliers of construction and engineering services have little power, as self-storage companies can always select or switch to another service provider.
The industry is "labor-intensive: average annual revenue per worker for a typical company is about $110,000. About 90% of self-storage companies operate one facility." (First Research, 2009). However, as labor in the industry does not require specialized educational degrees or training, only general skills, the pool of available labor is large, especially in recessionary times, and has little power.
4.
Buyer Power. Buyer power is relatively high. For the most part, buyers are individual consumers, families, or businesses. While commercial customers typically make up about 25-30% of a facility's business (Lucas, 2009), there are few "enterprise" customers or large-scale users of self-storage facilities who are in position to negotiate for more favorable contract/pricing terms or otherwise exert pressure on the industry as a whole. Indivudual storage operators, however, may often find themselves with a single or small number of commercial customers who have more power with respect to that specific operator.
Additionally, because of the large number of self-storage and mobile storage operators in the industry, buyers have many choices, thus brand identity and price sensitivity can exert an impact on the buyer's decision. Additionally, geographic location can also be a factor for fixed-location self-storage facilities. Customers are more likely to choose a facility closer to their work/home or other convenient location. Self-storage companies must compete for customers based on price, special offers, and amenities/additional services, such as air conditioning and 24-hour security.
Buyers would incur "switching costs" to chance providers, in the form of time, inconvenience and cost to move items from one storage facility to another, so are less likely to switch once their items are stored. But at the point of their initial selection of a self-storage operator they exert significant power.
5.
Rivalry. Rivalry is high. Because of the low barriers to entry and the competition for customers, self-storage firms must continually invest in marketing, sales promotions, and service improvements to attract new customers and bring back repeat customers. "The profitability of individual companies depends on marketing and pricing. Large companies enjoy economies of scale in administration, marketing, and purchasing and are often better able to finance acquisitions. Small companies can compete by specializing in local markets or by offering niche services. About 90% of self-storage companies operate one facility." (First Research, 2009). This includes operators of franchise locations.
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