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This case was prepared for class discussion purposes and is not intended to demonstrate how business decisions or other

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

SC Storage: Big Data behind Mini-storage (Ref.: 16/002C)

CENTENNIAL COLLEGE Page 2

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)

CENTENNIAL COLLEGE Page 3

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)

CENTENNIAL COLLEGE Page 4

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)

CENTENNIAL COLLEGE Page 5

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)

CENTENNIAL COLLEGE Page 6

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).

SC Storage: Big Data behind Mini-storage (Ref.: 16/002C)

CENTENNIAL COLLEGE Page 7

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.

SC Storage: Big Data behind Mini-storage (Ref.: 16/002C)

CENTENNIAL COLLEGE Page 8

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)

CENTENNIAL COLLEGE Page 9

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

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EXHIBIT 7: SC STORAGE-SPACE INTERIORS

Ordinary self storage Bike storage

Wine storage Wine storage

Source: Company webpage