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processes are to be handled. Ref. 16/002C Published: March 17 2016
Page 1
A MEMBER OF THE UNIVERSITY OF HONG KONG GROUP
香 港 大 學 機 構 成 員
AMY YIP CINTY LI
SC STORAGE: BIG DATA BEHIND MINI-STORAGE
Have you ever imagined the digital footprints you left behind would come back to you? That
every search you made on Google, every web page you browsed, every comment you wrote
on Facebook had been monitored, and someone—in fact, a mini-storage company—was
mining this data in bulk and repackaging it to tailor a product for you?
SC Storage was the leading mini-storage operator in Hong Kong where property prices
skyrocketed while apartment sizes shrank in the last decade. The company offered self-
accessed storage spaces for both individual customers and corporate clients. Company CEO
Kevin She unintentionally started the company in 2001, but gradually grew it into a
distinguished business and industry leader. Since the barriers to entry in the mini-storage
industry were low, competition was fierce. In the company’s latest innovative move that rides
on the information technology wave, CEO Mr. Kevin She adopted big data analytics to
identify the top 5% of its most profitable clients, thus enabling the company to close deals
faster and at higher rents.
How can SC Storage maintain its leading position while looking for more businesses? In what
directions can big data take the company in terms of marketing, sales and cost management?
SC Storage
The Beginning
When K. She finished his studies in information technology in Canada and came back to
Hong Kong to help out in his family business of plastic-bag manufacturing in the late 1990s,
business was not good, as many manufacturing enterprises had moved to China to enjoy a
competitive cost advantage. K. She then went to study for an MBA in the United States.
When he came back Hong Kong again in 2001, the family business was so heavily in debt
that it had to close down.
K. She recalled the day when he met with other owners of the premises, asking them whether
they had left their sites vacant as many factories had done. They said no: they had divided the
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space into wired compartments and rented them to the hawkers downstairs. K. She followed
suit, marking the floor with tape like a parking garage and renting the spaces out. “It was soon
after September 11 and the economy was bad. But downsized businesses needed storage,” K.
She recalled.
I got 60 to 70 tenants renting my warehouse! I searched and found this was
called mini-storage or self-storage, and no one has done that in HK.1
K. She was planning to do this temporarily while looking for work in investment banking.
When a reply from Citibank finally came, K. She was very pleased and prepared to start work
as an iBanker – until he found out Citibank was hiring him to sell credit cards.
It was then I decided not to look for work anymore and concentrate on this self-
storage business. And I have been working in this ever since.2
K. She inherited the company name from his father and called it SC Storage. He said the
company was the first mini-storage company to operate in two locations: Hong Kong and
Shenzhen. Relocating his cost center to the neighbouring Chinese city of Shenzhen enabled
him to put a pricing structure in place that was 25% lower than everyone else.3
At the turn of the millennium, SC Storage did not face much competition. K. She recalled that
most storage companies were run casually by older men who only worked on weekdays. But
K. She ran it as a serious business, building a company website and introducing a new range
of services, such as 24-hour access to storage space. He said he brought that model from the
West and chose premises close to subway stations for the convenience of his customers.4
Since then, although Hong Kong went through many economic dips, SC Storage not only
survived but also grew to be the market leader in the mini-storage industry in the territory,
grabbing a 25% market share in 2015, according to K. She.
The Turning Point
Hong Kong went through a severe downturn in 2003 when the deadly epidemic Severe Acute
Respiratory Syndrome (SARS) hit the territory. Everyone wore masks and social contact was
cut to a minimum. Business and property prices plummeted. K. She was offered a rental
property at Amoy Industrial Center at HK$1 per sq. ft. This was just a short walk from Amoy
Gardens, a densely populated estate where the first case of the SARS epidemic was detected.
In about a month, more than 300 cases of SARS were found in Amoy Gardens.5
Wearing a mask, K. She went to check out the property, the only industrial building next to
the densely populated Amoy Gardens close to the Kowloon Bay subway station. At an
extremely attractive price of HK$1 per sq. ft., K. She rented the whole building, converted
them into storage spaces and then rented to his customers at HK$10 per sq. ft., making a gross
profit of 900%.
1 She, K. Interviewed by authors (12 October 2015).
2 Ibid.
3 South China Morning Post (July 5, 2013) “Thank Small, Gain Big”,
http://www.scmp.com/article/1276206/think-small-gain-big (accessed 8 October, 2015). 4 Ibid.
5 Department of Health, Hong Kong Government (17 April 2003) “Outbreak of Severe Acute Respiratory Syndrome (SARS) at
Amoy Gardens, Kowloon Bay, Hong Kong: Main Findings of the Investigation”, http://www.info.gov.hk/info/sars/pdf/amoy_e.pdf (accessed 12 January 2016).
SC Storage: Big Data behind Mini-storage (Ref.: 16/002C)
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That became the turning point for the business. Since then, it has generated enough money for
K. She to buy new property every three months.6 [See Exhibit 1 for a photo of the building
that has served as the company headquarters ever since, with Amoy Gardens in the
background.] The property value appreciated 10 times over the years.
K. She’s most memorable purchase was buying a property priced at HK$800,000 with only
HK$10,000 in hand. The property was being auctioned because the seller could not afford the
mortgage. K. She knew it was a bargain and raised his hand during the auction. Then, in 12
hours, he borrowed from his parents and relatives and wrote a HK$80,000 check for the down
payment. Asking the seller to lengthen the escrow period, he meanwhile started renovating
and renting the site out, demanding clients to pay two years of rent in advance. Using the
same strategy, K. She acquired more than 40 industrial building units, or one-third of his
storage space, which helped to save on operating costs,7 40% of which was in mortgage and
rent.8
Customers rented the storage space by the month or year. K. She said the company renovated
its spaces every three years. SC Storage’s clients included individual and corporate customers.
Individual customers stored personal items and needed easy access with flexible timing.
Company clients usually stored archive documents and rarely retrieved them, so larger
storage spaces for corporate clients were often situated in more remote areas where the rent
was lower.
People used to store CDs and books. With advancement in technology, things are
now digitized and people store different things like off-season clothes and seasonal
appliances such as heaters and fans.9
Customers could call in or sign up online. When they arrived at the premises and opened an
account, they were given a smart card for 24-hour access to their storage.
Another Opportunity amid Economic Downturn
When Lehman Brothers set off a worldwide recession in 2008, many companies went out of
business. K. She took the opportunity to acquire industrial properties in Tun Mun, an
industrial area in western Hong Kong.
By the end of 2015, SC Storage had 59 self-storage locations in Hong Kong and two in
Macau, mainly in industrial buildings. Most of its storage units ranged from 40 to 300 sq. ft.
[See Exhibit 2 for the Hong Kong and Macau locations of these storage facilities.]
6香港電台 E 線金融網 (9 August 2015) “時景恆 時昌迷你倉創辦人 - King Sir 會客室”,
https://www.youtube.com/watch?v=eOn9TVWX2gI (accessed 14 November 2015) [Radio Television Hong Kong E Finance Net (9 August 2015) “Kevin She, Founder of SC
Storage at King Sir’s Room”, https://www.youtube.com/watch?v=eOn9TVWX2gI (accessed 14 November 2015)] 7梁佩君 (14 August 2014) “億萬迷你倉王 - 時景恒”, 壹周刊 http://tvb4life.pixnet.net/blog/post/185375064-
%E8%B2%A1%E7%B6%93%E4%BA%BA%E7%89%A9-
%E5%84%84%E8%90%AC%E8%BF%B7%E4%BD%A0%E5%80%89%E7%8E%8B%E3%80%80%E6%99%82%E6%99% AF%E6%81%92 (accessed September 23, 2015) [Leung, Pei Kwan (14 August 2014) “Kevin She - King of Billions of Million
Mini Storage”, Next Magazine,
http://tvb4life.pixnet.net/blog/post/185375064- %E8%B2%A1%E7%B6%93%E4%BA%BA%E7%89%A9- %E5%84%84%E8%90%AC%E8%BF%B7%E4%BD%A0%E5%80%89%E7%8E%8B%E3%80%80%E6%99%82%E6%99%
AF%E6%81%92 (accessed September 23, 2015)] 8 香港經濟日報 (1 November 2014)“時昌時景恒及陳果華:港人愈住愈細 迷你倉發展大有
空間,” [Hong Kong Economic Times (1 November 2014) “SC Storage Kevin She and Matthew Chan: Hong Kong apartments
get smaller, lots of opportunity for ministorage”
http://ps.hket.com/content/462536 (accessed October 5, 2015)]. 9 She, K. Interviewed by authors (12 October 2015).
SC Storage: Big Data behind Mini-storage (Ref.: 16/002C)
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Self-Storage Industry in Hong Kong
According to Colliers International, a global commercial real-estate service company, only
8% of the 1.1 million private residential units in Hong Kong were over 1,076 sq. ft., and 88%
of these were equipped with a storage room. Of the remaining 92% of private units, i.e.,
apartments smaller than 1076 sq. ft., only 18% were equipped with a storage room. That left
852,000 private residential units, 76% of the total, lacking a dedicated storage area.10 Average
household space per person in Hong Kong was 167 sq. ft., versus 980 sq. ft. in the US. This
means a standard twin bed takes up 8-15% of an average household space, and all excess
items might very well be stored off-site to make room for daily dwelling. 11 Real estate
consultation and research company CBRE, in a 2015 report, concluded that self-storage in
Asia was primed for growth, due to demographic changes, strong business activity involving
expansion and contraction of office space, and growing investor interest, as demand was
being driven by the four “Ds”: death, divorce, density and dislocation.
Despite the acute demand for space, CBRE found that self-storage development and services
in Asia were generally 20 years behind those in the United States. It estimated per capita
storage space in Hong Kong in 2015 was 0.36 sq. ft., and projected it to grow to 0.86 sq. ft. in
10 years.12
When K. She first started the business, there were only a few mini-storage operators in Hong
Kong. With a growing number of manufacturers gradually moving to China and other Asian
countries, many industrial buildings were left vacant. As residential property prices
skyrocketed, people began to make use of the industrial space. Self-storage commanded rents
four times as high as other uses for the same space, including manufacturing, grade-C offices
or warehouses. In Hong Kong, the internal rate of return for sub-leasing underutilized space
for self-storage was 23%. The business therefore attracted many operators and young
entrepreneurs with new ideas and innovative approaches to storage, such as K. She, and the
industry grew rapidly.13
By 2014, 70 self-storage operators in Hong Kong occupied a combined gross area of 3.5
million sq. ft. in around 300 locations scattered throughout the territory, with an average size
of 10,000 sq. ft., divided into 14-90 sq. ft. units. The majority of these operated under a
franchise model. 14 Of the 70 operators, four took up more than half of the market in terms of
gross occupied area. Exhibit 3 shows that SC Storage was first in terms of gross area in 2014.
Most operators had a company website, but SC Storage was the only one that had a site that
included chat and instant message functions, as well as practical tips on relevant topics such
as packing.
Because of the low barrier to entry in the business, competition was fierce. One of SC
Storage’s strongest competitors was started by an ex-colleague of K. She. Back in the days
when K. She first started the business, he shared his creative ideas and vision with his
10
Colliers International (August 2014) “Self-storage in Hong Kong: A Growing Niche”,
http://www.colliers.com/- /media/files/marketresearch/apac/hongkong/white-paper/self-storage-aug-2014.pdf?la=en-gb
(accessed 30 December 2015). 11
CBRE Global Research (June 2015) “Demographic Changes Drive Demand for Self-Storage Space in Asia”,
http://www.selfstorageasia.org/Resources/Documents/Industry%20Report/CBRE%20Asia%20Pacific%
20Major%20Report%20_%20Self%20Storage_%20June%202015.pdf (accessed 12 October 2015). 12
CBRE Global Research (June 2015) “Demographic Changes Drive Demand for Self-Storage Space in Asia”,
http://www.selfstorageasia.org/Resources/Documents/Industry%20Report/CBRE%20Asia% 20Pacific%20Major%20Report%20_%20Self%20Storage_%20June%202015.pdf (accessed 12 October 2015). 13
Steimle, J. (19 June 2015) “Innovation and Economic Growth Drive Self Storage Industry In Asia”, Forbes,
http://www.forbes.com/sites/joshsteimle/2015/06/19/innovation-and-economic-growth-drive-self-storage-industry-in-asia/
(accessed 30 December 2015). 14
Hong Kong Business Magazine (September 2014) “How Hong Kongers can pack up, store and stow away”,
http://www.selfstorageasia.org/Resources/Documents/Member%20Publications/HKMag/Hong% 20Kong%20Business%20%20Magazine%20Sep%202014%20Self%20Storage%20Article.pdf (accessed 12 January 2016).
SC Storage: Big Data behind Mini-storage (Ref.: 16/002C)
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colleague, who eventually left to start his own competitive business. But, according to K. She,
mini-storage was a recession-proof business:
When the economy is good, people shop and accumulate stuff or renovate. We do
more fun and creative ads; when the economy is bad, businesses close and people
move to smaller houses. Hence they need storage. Then we use discount rent in the ad
to attract more business. Even newspapers lower their ad fees in bad times so we can
use this opportunity to build our brand awareness. We can also hire better people
and buy cheaper property when the economy is bad.15
SC Storage’s Strategies
SC Storage had enjoyed steady development over the years as it adopted a few key strategies
in response to the overall environment:
Innovative Marketing
When the company first started, SC Storage did not have a huge advertising budget. But K.
She believed that an easy-to-remember telephone number was vital to its success. Matt Chan,
a Eurasian with Caucasian features who spoke Cantonese fluently, was an icon for the
business. An accountant by profession, Chan was K. She’s business partner. The CEO
recalled why he put Chan in the ad:
Matt speaks very fluent Cantonese and whenever we talk in Cantonese in the subway,
people turn around and look. So I think if he appears in our ad, in traditional Chinese
costume with glasses, it would be a blast. And it was!16
The company’s TV ad ran in late nights and also appeared on the company’s website. [See
Exhibit 4 for how Chan appeared as a company icon on its webpage and in the storage
location.]
The classic TV ad you saw was all shot with friends and relatives. The last row was
the renovation workers. We booked the TV crew for two hours and any overrun would
cost more. We did not want to pay OT so we just asked everyone to yell out our
telephone number. Little did we know that it worked very well!17
The telephone number and mug shot also appeared on minibus and bus stops. Other
innovative marketing strategies, often low-budget, included giving truck drives free truck
canopies printed with the company logo and phone number:
We only have three trucks of our own. But with over 100 trucks running around town
with our company information, people thought we had a large fleet.18
15
She, K. Interviewed by authors (12 October 2015). 16
Hong Kong Profile (2010) “Kevin She – SC Storage”, http://www.hongkongprofile.com/2010/02/si-kin-heng.html
(accessed 5 October 2015). 17
梁佩君 (14 August 2014) “億萬迷你倉王 - 時景恒”, 壹周刊 http://tvb4life.pixnet.net/blog/post/185375064-
%E8%B2%A1%E7%B6%93%E4%BA%BA%E7%89%A9-
%E5%84%84%E8%90%AC%E8%BF%B7%E4%BD%A0%E5%80%89%E7%8E%8B%E3%80%80%E6%99%82%E6%99 %AF%E6%81%92 (accessed September 23, 2015) [Leung, Peikwan (14 August 2014) “Kevin She - King of Billions of
Million Mini Storage”, Next Magazine, http://tvb4life.pixnet.net/blog/post/185375064-
%E8%B2%A1%E7%B6%93%E4%BA%BA%E7%89%A9- %E5%84%84%E8%90%AC%E8%BF%B7%E4%BD%A0%E5%80%89%E7%8E%8B%E3%80%80%E6%99%82%E6%99%
AF%E6%81%92 (accessed September 23, 2015).] 18
Ibid.
SC Storage: Big Data behind Mini-storage (Ref.: 16/002C)
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The company also distributed flyers before Chinese New Year fairs for seasonal business
operators, and before school term for overseas students. It also gave non-smoking signs
printed with the company name and phone numbers to local restaurants.19
Online Marketing
Starting in 2003, SC Storage became the first mini-storage operator to be listed in a Yahoo
banner. Beginning in 2009, it started joint-venturing with property owners and doing
crossover advertising. These low-cost but innovative marketing strategies helped SC Storage
to achieve a 70% brand recall rate with an advertising expenditure of under HK$2 million,
merely 5.5% of company revenue in 2011, compared to an industry standard of around 10%.20
Apart from advertisements, SC Storage utilized its web site, blog, Facebook pages, and
sponsored charity events to raise brand awareness. For example, it had held a “How messy is
your home?” competition on Facebook and asked readers to submit pictures of their messy
homes online. The prize was an iPad. 21 Its latest strategy included a quiz that involved
guessing where a toy-storage location would be. The prize was an SC Storage cash coupon.
[See Exhibit 5 for the latest Facebook cross-selling campaign.]
The company website included useful tips on de-cluttering homes and maximizing space, as
well as estimating how much storage was required based on the square footage of a client’s
house. It was also equipped with a live chat function so customer representatives could
instantly respond to customer queries.
Dynamic Marketing
With 18,000 customers spanning 61 branches in Hong Kong and Macau, the company’s
transaction information was a huge data mine for different kinds of analysis, and a basis for
classifying customers into subgroups and setting optimal pricing. 22 A typical SC Storage
customer was a married female, 30-60 years old. “So we need to keep the storage places clean
and organized,” K. She explained. Beginning in February 2015, he began to analyze his
customer base and found that secretaries could tolerate larger rent increases because their own
money was not involved. But the company required a sample size of at least 32 to make the
statistics significant. According to their analysis, SC Storage customers could be grouped into
several categories, each commanding different selling strategies. Figure 1 below shows the
types of customers and how SC Storage dealt with each of them.
19
Ming Pao (4 August 2011), “低成本行銷 拋磚引玉” [Low Budget Marketing to Get the Foot in the Door]
http://www.mpfinance.com/htm/finance/20110804/columnist/fz3_fz3a1.htm (accessed 16 November 2015).
20
She, K. (12 May 2012). “Case Sharing on Business Reinventing”, speech and presentation at Hong Kong Trade
Development Council Entrepreneur Day,
http://www.hktdc.com/resources/fair/1213/eday/s//4977/1338863176243_KevinShe.pdf (accessed 8 Oct 2015). 21新浪香港財經 [Sina Hong Kong Finance] (4 August 2011) “時景恒失業賦閒 創迷你倉王國” [“Unemployed and idle Kevin
She founded Mini Storage Kingdom”], http://finance.sina.com.hk/news/-1-3980838/1.html (accessed 23 September 2015).] 22
Unwire.hk (12 June 2015) “「你用 Mac 入黎估你有錢,無優惠 Lu…」- 迷你倉玩串大數據” [“You Use Mac, Then You
Are Rich, Thus No Discount – Mini Storage Plays on Big Data”] http://unwire.hk/2015/06/12/sc-storage/people-interview/ppl_interview/ (accessed 4 October 2015).
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Figure 1: SC Storage customer categories and corresponding selling strategies
Customers Characteristics Hypothesis Strategies
Housewife
Bargain hunter Price-sensitive Sell cleanliness and
safety
Seniors Move slowly Like personal
service
Give them storage
closer to the
entrance, bigger
fonts
Renovation worker Do not mind poor
location and quality
(such as water
leakage)
Price-sensitive Sell them poor
location at a lower
price
Walk-in In a hurry Price-insensitive 15% premium
Highly profitable
customer
Longer contracts
and business clients
Will bring stable
business at a higher
margin
Forward the call to
a direct line with
dedicated
salesperson
Area-specific
customers (those
coming from a
certain area, e.g.,
Tak Bo Gardens)
Live within five-
minute walk to
storage
Tend to stay long-
term
Lock in with low
entry price and then
lure into longer
contracts
With the popularity of e-commerce, SC Storage also enhanced its competitiveness by
strengthening online services. “We are the first mini-storage in Hong Kong that allows clients
to rent and pay for a storage space online. With a few extra clicks, netizens can easily
compare prices. So we usually offer discounts for customers who rent online,” K. She said.23
The online discount was 12%, but walk-in customers paid a 15% premium. “Same thing as
you walk into the Four Seasons Hotel and ask for a room on the spot – non bargain hunter,” K.
She explained.24 But instead of saying 12% off, they would give “one month free” as an
incentive for a year-long rental. The CEO explained that the business used a dynamic pricing
system, “We have this information on our website: This is internet price only, not on the
phone or walk-in price. Emails have to be replied to in 10 minutes otherwise the customers
would go elsewhere.” 25
The Selling Process and Digital Retargeting
As soon as potential customers entered their basic information on the website, their calls
would be directed to different groups of sales personnel. For example, a call from a housewife
in the middle of the afternoon would be directed to a more talkative saleswoman who would
chat at length before closing a deal. On the contrary,
Men want to close the deal quickly. So we structure their webpage to include a female
picture and quickly lead to the information page for them to sign up for storage.26
K. She said they promoted differently to male and female customers. If the potential customer
was a woman, their webpage would include a man holding a handful of clothes in front of an
overcrowded closet, a typical example of why women needed seasonal clothing storage. On
23
She, K. Interviewed by authors (12 October 2015). 24
Ibid. 25
Ibid. 26
Ibid.
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the other hand, the opening webpage for a male customer would include more female pictures.
[See Exhibit 6 for web pages for female customers.]
Since employing this tactic of digital retargeting, the company had been making 7.5% greater
profit than their competitors because customers “rent faster and longer” because the company
was targeting the correct market segments.27
Leveraging Big Data: Looking for Patterns in an Ocean of Information
In 2014, SC Storage hired a math PhD who had experience in mini-storage in the US to be its
consultant and researched on how to increase revenue by utilizing big data. Within a year, the
company witnessed an 8% growth in revenue, which was expected to increase to 20% in the
future.28 Starting in August 2015, SC Storage began to mine the internet’s huge big-data
deposits after it identified a vendor in the field. The vendor could detect what a browser was
watching at a specific time and asked if SC Storage wanted to make a bid. SC Storage would
then decide if they wanted to buy these customer profiles and send the users an ad. SC
Storage would track potential customers and automatically modify its website for each
customer type. Big data collected customers’ Facebook and web-cookie information, and
found certain groups of customers, such as 40-year-old married males, exhibited similar
behaviors around how long they rented and how much they were willing to pay. SC Storage
could then modify sales strategies for this group and estimate promotion budgets more
accurately.29
If there is a customer who has viewed she.com and other fashion sites we can
conclude this is a woman. We then load a different landing page for females only; if
the customer is a man in the renovation business, we load a simpler page with female
pictures and quickly lead him to the customer profile so they can close the deal
faster.30
Even the pricing for different types of customers was different. For a bargain hunter,
discounts were given right away, such as HK$950 rather than the regular price of HK$1,000.
If someone was looking to make a deal faster and price was secondary, they could get an
immediate space at a higher price, such as HK$1,200.
K. She said they started looking into this by analyzing company statistics two years ago. They
found that more people found out about their company on mobile phone than through
billboards.
This trend will only go on. If we get the digital landscape, we can dominate the flow
of customers and the small players cannot survive. When the small players cannot
survive, we can offer to co-manage and charge them.31
K. She said the average client contract was three to 3.5 years:
A bell curve would show our customers ranges from renting for one or two months to
five or six years. But it is not true. It is a power law curve where the top 5% of our
customers are the most profitable. They are 10 to 20 times more profitable than the
median curve. The key is how to find these customers. These are the people who stay
27
She, K. Interviewed by authors (12 October 2015). 28
Ibid. 29
Ibid. 30
Ibid. 31
Ibid.
SC Storage: Big Data behind Mini-storage (Ref.: 16/002C)
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for 10 or 20 years and they do not say a word despite yearly rent increase. This is the
biggest function of big data.32
Now that SC Storage had identified a certain type of customers, the company wanted to
snatch them from its competitors:
Our analysis showed that after retargeting we are making 7.5% more profit than our
competitors. If we can make 12 to 13% more, we can buy them out. We can use the
same platform for our competitors’ customers. Overseas, they are doing over 10%.
The trend in Big Data is consolidation – to pull in more data points.
K. She said that in overseas countries math PhDs were hired to work on these formulas. “This
is a game where the winner takes all. When we push them enough, the customers will all
come to us and the small players will work with us – instead of paying Google, they pay us
and we give them some customers,” K. She said. With economies of scale and the presence of
larger data points, SC Storage could do more analysis and focus on more specific groups of
customers who would be more likely to secure longer contracts with less price sensitivity. He
believed that knowing where these customers were would mean winning half of the battle:
We need to control the flow of customers. We have controlled the industrial buildings:
we own more percentage of warehouses than other players. We control the supply. If
we can control the demand, we can win. Sounds cruel? 33
K. She said that generally if you raise the rent, customers would leave. “But if big data can
analyse and predict precisely the maximum rent level at which customers would still stay,
then we can keep the customers and earn more, and relieve the pressure from inflating rent,”
he said. 34 Big data could also enhance efficiency in human-resources deployment: “If a
storage has many long-term tenants, we would transfer the better salesperson from this unit to
storages with higher turnover to close more deals,” he added. 35
Innovative Products
Despite being located in industrial buildings, SC Storage’s interiors were brightly lit and
guarded by digitalized automated doors and security cameras. Customers could access their
storage at any time, provided they brought their smartcard. The bright blue doors signified
each storage unit, all of which were protected by padlocks. Neatness, tidiness and cleanliness
had revolutionized the warehouse industry and opened up a new market for retail customers to
store their everyday items. [See Exhibit 7 for SC storage-space interiors.]
Since competition was fierce in the industry, mini-storage operators had to offer unique value
to retain customers As K. She said, you had to offer something unique that others could not
copy. For example, after talking to customers, he decided to offer bike storage for bikers,
since SC Storage already had storage locations along bike trails. Customers could take their
bikes from one storage location, bike over to and store their bikes at another location. Apart
from deeper and narrower storage spaces for bikes, the premises for bike storage were also
equipped with shower and lounge areas so bikers could freshen up. It was also possible to
hold workshops on bike maintenance. Customers would also have access to complimentary
pumps and racks.
32
Ibid. 33
Ibid. 34
Unwire.hk (12 June 2015) “「你用Mac 入黎估你有錢,無優惠 Lu…」- 迷你倉玩串大數據” [“You Use Mac, Then You
Are Rich, Thus No Discount – Mini Storage Plays on Big Data”]
http://unwire.hk/2015/06/12/sc-storage/people-interview/ppl_interview/ (accessed 4 October 2015). 35
She, K. Interviewed by authors (12 October 2015).
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On another front, K. She noticed cartons of red wine piling up in some storage locations. He
investigated and found that the government had just cancelled the red-wine tax and many of
his customers, expecting a rise in red-wine prices, had begun to stock up. He then extended
his business to red-wine storage equipped with constant temperature control. [See Exhibit 7
for SC storage space interiors.]
K. She also planned to introduce toy storage equipped with reinforced glass panels so toy
collectors could show off their own and appreciate others’ collections.36
K. She said they also
had some storage solely for women, where they could take showers, change into stored
clothes, and blow-dry before going out directly from the storage facility. “It was as if they are
living at home,” he said.
Third Party Management: New Source of Revenue
Apart from acquiring property, SC Storage also formed joint ventures with property owners
who had lower efficiency levels. They might rent out 90% of their premises and make
HK$100,000. If SC Storage could rent out the same premises and make $130,000, K. She
would propose third-party management to the owner. SC Storage would manage the property
and share the profits:
This business needs to have new customers to generate profit. But with third party
management I do not need new customers. I use their existing customers. We can
raise rent and share profit. If it does not work, we can leave. This will be a trend in IT,
in Big Data. The bigger player will get stronger. We need to control the supply of
customers.37
Caring for employees
Training was mandatory for all staff. K. She also promoted a culture of learning and sharing
by establishing an education fund to help employees pursue further education. Business
flourished, with SC Storage boosting turnover from HK$36.67 million in 2009 to HK$160
million in March 2016.38 K. She was named Young Entrepreneur of the Year in the 2011
DHK/SCMP HK Business Awards.
Challenges
Despite a market-leader position and a seemingly rosy future for the mini-storage industry
attained by leveraging big data, the CEO conceded that the company was facing some
challenges:
Lack of Technology-Savvy Talent
It was difficult to find programmers who understood the industry and were able to write
programs to predict and capture the type of customers who would close deals online:
The bottleneck in online marketing is in programming. We have the ideas and test
results but need experts to write the programmes to do online transactions.39
36新浪香港財經 [Sina Hong Kong Finance] (4 August 2011) “時景恒失業賦閒 創迷你倉王國” [“Unemployed and idle Kevin
She founded Mini Storage Kingdom”], http://finance.sina.com.hk/news/-1-3980838/1.html (accessed 23 September 2015).] 37
She, K. Interviewed by authors (12 October 2015). 38
She, K. E-mail exchange with authors (10 March 2016). 39
She, K. Interviewed by authors (12 October 2015).
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Lack of Good Frontline Staff
Frontline retail-staff shortages were also a problem. The company often trained new staff who
then left. But K. She said the company still needed to train them, and was aiming at further
automate business procedures to alleviate the dependence on human presence. For example,
with digital devices installed, customers could rent and access their storage in the middle of
the night. “We still need to train our staff. We used undercover customers to evaluate our staff:
from whether they smile or stand up to greet the customer etc. The company also subsidized
staff to go on further studies,” he said. 40
Small Business Scale
Hong Kong was still a small market, as was its business scale. There were simply not enough
data points to do various kinds of tests. K. She said effects of marketing tests were relatively
easy to analyse but it took some time to spot trends following rent increases.
Privacy Issues in Mining Big Data
Even though big data seems to be a powerful way to identify consumer trends, there were also
concerns about privacy issues and possible leakage of personal information. K. She said they
had to fully explore the power of big data before any compliance issues actually arose.
Continuous Innovation
As of 2015, the average rent for storage was around HK$20 per sq. ft., with yearly rent
increases of 11% to 12%. The CEO said that as the market leader, SC Storage needed
innovative ways to increase conversion rates and profits. While some competitors liked to
install nice floors to command higher rents, K. She said:
We are in a niche market. I like to do things practical. We need to hit the target easily.
Then we can lower the cost of acquisition.… We need to look at the whole picture: we
can raise rent and not be afraid of tenants running away: For example with 20,000
customers, if we raise rent by 10%, 1,000 customers would leave; if I raise rent by
20%, 4,000 people leave; but with a lower ad budget, I can spend less to retain the
same profit.... The easier you can replace your customers, the bigger the bargaining
power you have and you can squeeze your profit margin. So we need to think about
different components.
Identifying the Right Customers
Identifying the right customers and locking them in for the long term was essential in
sustaining the business. K. She theorized that three types of properties called for very
different price sensitivities. At a 50% rent increase, office and apartment tenants would leave,
but busy and wealthy mini-storage renters might tend to stay. Considering mini-storage unit
prices as a proportion of a renter’s income, if storage rental was only 1% of such income,
customers might stay to avoid hassle. “With big data, we want to find these people,” he said.
40
She, K. Interviewed by authors (12 October 2015).
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Slow Periods
With the recession in 2015, K. She’s business dropped a little, but he knew how to take
advantage of adversity and surf along. “We acquired property when the price is low,” he said,
adding that property appreciation generated higher returns than business operations. In
previous bad times, the business took the opportunity to recoup, hire better talent, and clean
up non-paying storages.
Overall Lack of Awareness of Self-Storage
According to a survey on self-storage, only 23% of respondents aged 18-49 in Hong Kong,
and 15% in Singapore, were currently using or had used self-storage services within the past
year. Given the industry’s brief history, more marketing and education would be necessary to
expand the customer base.41
Way forward
As 2015 concluded, SC Storage dominated the Hong Kong mini-storage industry, with 25%
market share in terms of revenue, with its nearest rival taking 19%, according to K. She.42
On
the technology front, K. She would continue leveraging big-data analysis to target customers
who were both less price-sensitive and ready to lock in longer contracts. He contemplated
how big data would uncover further market intelligence and demographics, and how this new
information could help him grow his business. Would consolidating smaller players be an
option? Or working together with property owners to secure longer leases?
On the other hand, if SC Storage dominated most of the market and favored long-term, quiet
clients, customers needing short lease terms and/or bargain hunters would end up having
limited choices. How should the CEO entertain these customers?
Meanwhile, a group of energetic youngsters from Singapore visited the company. As 2016
began, the CEO was keen on expanding his business to Singapore. Yet for SC Storage,
Singapore was already a mature market. As a newcomer from overseas, what kind of niche
could SC Storage offer to compete with local operators? K. She wondered what type of
strategy he should employ in Singapore. At the same time, would expanding to Singapore
spread company resources thin and weaken its position in Hong Kong?
41
CBRE Global Research (June 2015) “Demographic Changes Drive Demand for Self-Storage Space in Asia”,
http://www.selfstorageasia.org/Resources/Documents/Industry%20Report/CBRE%20Asia%20Pacific%
20Major%20Report%20_%20Self%20Storage_%20June%202015.pdf (accessed 12 October 2015). 42
She, K. Interviewed by authors (12 October 2015).
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Learning Objective:
This case describes the emergence and growth of SC Storage, a mini-storage company in
Hong Kong that grew to be the industry leader because of its unique products, innovative
marketing strategies and recent leveraging of big data. SC Storage revolutionized the
warehouse industry and expanded by taking advantage of the shortage of storage space in
crammed Hong Kong apartments and business units amid soaring property prices. Students
will be briefed on SC Storage’s development and required to analyze its success factors and
recommend future directions.
Suggested Questions:
1. What distinguishes SC Storage from its competitors?
2. Assume the role of CEO Kevin She. How would you leverage big data to further expand
your business?
3. Would you consider cooperative or/and consolidation marketing strategies for SC storage
and other Hong Kong storage companies?
4. What challenges does SC Storage face when expanding overseas?
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EXHIBIT 1: A PHOTO OF THE BUILDING THAT HAS SERVED AS THE COMPANY HEADQUARTERS EVER SINCE, WITH AMOY GARDENS IN THE BACKGROUND.
Source: Authors
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EXHIBIT 2: THE HONG KONG AND MACAU LOCATIONS OF THESE STORAGE FACILITIES
SC Storage location in:
Hong Kong Island 12
Kowloon 20
New Territories 27
Hong Kong 59
Macao 2
TOTAL 61
Source: Company web site, http://www.scstorage.com/#scmap (accessed 16 February, 2016)
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EXHIBIT 3: MARKET SHARE OF SELF STORAGE OPERATORS IN HONG KONG
In terms of gross floor area occupied in 2014
Operator Market share %
SC Storage 21.6
Store Friendly 18.2
Apple Storage 7.3
Hong Kong Storage 4.1
Profit Storage 3.5
Red Box Storage 2.4
Others 43.1
Total 100
Source: Ipsos Business Consulting research and analysis provided by SC Storage
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EXHIBIT 4: COMPANY ICON: MATT CHAN
Screenshot of an opening webpage showing Matt Chan in Chinese costume with
company phone number and slogan: “One stop service in moving and storage.” Source: company web page,
http://www.scstorage.com/?utm_source=scstorage.com%2Ftips&utm_medium=referral
&utm_campaign=tips (accessed 16 February 2016)
A backdrop at Amoy Industrial Center for customers to pose with Matt Chan
Source: Authors.
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EXHIBIT 5: THE LATEST FACEBOOK CROSS-SELLING CAMPAIGN
The feed (left) showcases company icon Matt Chan and Toys Club representative promoting a
sweepstakes on where SC Storage will open its toy storage. Winner would receive a $150
cash coupon for use at SC Storage.
Meanwhile, Toys Club’s (right) updated cover photo cross-advertizes the club and SC Storage.
Source: Facebook (accessed 12 January 2016)
https://www.facebook.com/scstorage81777778/ (accessed 12 January 2016)
https://www.facebook.com/hktoysclub/?fref=ts (accessed 12 January 2016)
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EXHIBIT 6: WEB PAGE FOR FEMALE CUSTOMERS
Source: company webpage - screen shot of an opening webpage catering female readers