Co-opetition: The Morphing Role of MoversBy John B. Sculley, SCRP Vice President – Managing Director RIS Consulting Group There have always been trucks. Before relocation became an alphabet soup of RMCs, DSPs, HSA and CRPs, movers served the fundamental need of mobility: “Get my stuff to my new home.” It’s complex, sensitive and unglamorous work in a highly competitive industry. Movers are under-recognized for their routinely strong service performance despite thin profit margins and high customer/client expectations.
Corporate employers, though, tend to know a good thing when they see one. Despite the onslaught of corporate outsourcing and RMC service bundling over the last two decades, about half of corporate mobility programs involve direct contracts with movers, either at the agent or van line levels, rather than delegating this to a relocation management company. These buyers feel they gain more in service attentiveness and price/performance leverage from this direct contracting. The real estate community may not realize, though, that household goods shipment management takes many forms in corporate mobility programs. Here’s a brief recap of how today’s mover options have evolved. The pioneering corporate relocation programs of the post-WWII period recognized that they needed a service that didn’t exist: consistent high-quality nationwide moving and storage. Most moving companies at that time were small, local, private operations operating independently from each other. They could not efficiently handle coast-to-coast shipments because they lacked storage and service partners and would have too many empty “deadhead” trips without cargo. With the emergence of high corporate move volume in the 1950s and ’60s, the moving industry responded by banding together into national van lines. Local agencies began marketing under national brand names and established work-sharing and pricing arrangements that enabled them to solicit corporate national accounts. They did so very effectively, and most major employers took on several movers as their preferred transportation partners. This was not in conflict with the rest of the relocation industry at that time. The companies that we regard today as RMCs were, back then, purely a corporate real estate solution, providing guaranteed buyouts of transferee homes so that the employer would not have to do so directly. Theses home-buying companies enjoyed explosive growth throughout the 1960s and ’70s. By the 1980s though, economic recession and collapsed real estate markets drove the home-buying companies toward diversification. Household goods moving was an obvious revenue target, considering that, at most companies, it is the second-largest relocation expense after real estate costs. Home-buying companies began to present themselves as relocation managers beyond just real estate functions, and they offered to procure and manage household goods shipment services on behalf of their corporate clients. This pitch won some quick traction, particularly for lower-volume relocation programs, because the RMC could generate deeper discounts on its aggregate volume than many clients could secure separately. RMCs began to dislodge movers from long-held direct corporate relationships, and the peaceful coexistence of the early years between movers and relocation companies was abruptly changed. As RMCs gained strength in brokering household goods services, movers faced a big strategic challenge. On the one hand, the RMCs’ newfound ability to direct move volume made them an attractive growing market segment, even at discounted rates. On the other, RMCs were now a real competitive threat to take away movers’ direct corporate accounts, or at least to wedge into them and siphon off middle-man commissions and escrows. Few movers felt they could afford to choose only one or the other of these paths, so they tended to try to do both, in what became known as the “co-opetition” strategy:
Along the way, though, some movers have forayed into direct competition with RMCs by taking on ownership of full RMC services alongside their household goods services. They tended to believe that offering a one-stop shop would preempt their clients from outsourcing household goods to another RMC. It would raise their visibility and importance to their clients. So these movers entered the RMC business, usually by acquiring existing RMCs, and challenged other RMCs for corporate accounts, often at the risk of offending and losing their Co-opetition RMC partnerships. As they did so, they often found that their brand identities as movers were not so helpful in competing with established RMCs, so their own captive RMCs were often re-branded separately from the household goods parent (or common-ownership affiliate). United owned Pinnacle, Suddath owns Lexicon, Armstrong owned Primacy, Allied and North American own Sirva, etc. Some, though, chose to soldier on under their established mover brands: Xonex, Graebel, Crown, MI Group, etc. No “magic bullet” branding strategy has emerged, as they recognized that both approaches have had successes and failures. Graebel Companies is a fascinating example, having divested its original vast household goods business and now continuing as an RMC only, a true metamorphosis. What can we expect in the coming years? First off, the RMC business has become too demanding for a boutique version to survive. Mover-owned RMCs will need to be serious, broadly capable players who can muster the table stakes for technology, global footprint and funding. It’s not for the half-hearted or as an ego-venture. We think this will push some owners to exit the RMC realm. Those that recommit to this strategy may do well though, and we look to Crown, Bristol, Sirva, AIReS, Santa Fe, Graebel Relocation, Lexicon and others as having the potential to thrive in full relocation services by building on their household good legacies. John B. Sculley, SCRP, is vice president – managing director, RIS Consulting Group. Please email him your comments and questions. |