Janus was the Roman god of change and transition. He had the ability to see both the future and past—a gift from the Roman god Saturn for his generous hospitality. The Romans represented Janus as having two heads facing opposite directions—one reflects on the past while the other contemplates the future. Few would disagree that the moving and storage industry is currently in the process of change and transition.
The industry has a history of competitive, regulatory, and financial challenges and today’s industry leaders are faced with even greater issues as they prepare for the future. Similar to Janus, the current situation demands that the industry look to the past as well as the future to survive the journey ahead.
I began my career in the moving and storage industry in 1983 as a mover. The transportation industry was three years into operating in a deregulated environment. At that time, moving and storage benchmark rates were collectively agreed to by industry participants as a result of the antitrust immunity provided for the industry. However, all activity of the rate bureau was still under the watchful eye of the federal government. Latitude was given to moving companies, allowing them to discount the benchmark or tariff rates. I recall hearing a lot of drivers complaining about how tough the industry was getting and how they could no longer make a buck “hauling sticks” (a term used for moving furniture in the trucking industry). They blamed salespeople and their discounts for reduced driver earnings.
I went into sales in 1988, and can recall a customer asking me why all the moving companies were discounting their prices. It was such a part of the industry that I never really questioned it. It was just something we did. Most moving companies at the time allowed discounting of 20 to 25 percent. The reason I discounted our services was to remain competitive and win the business. The bigger question was, “why is discounting such a common practice in the moving industry?” Even today, it is common to see discounting levels of 50, 60, and even 70 percent in some cases. One cannot fully grasp the moving and storage industry’s current practices without understanding its history.
Our story begins during a time when dirt roads and horse-drawn carts were commonplace but hiring someone to move your household possessions was not…
Humble Beginnings
In the early days of civilization, only rulers and the wealthy could afford the luxury of paying someone to transport their household goods. Common modes of transportation at the time were animal, cart, wagon, or ship. The average person owned few possessions and families often stayed in the same home for multiple generations. For these reasons (and the fact that for most people unforced movement of homes and possessions was an unaffordable luxury at the time), professional moving was a rare occurrence.
As waves of immigrants started migrating to America, they often brought a few of their prized possessions with them to the “New World.” The United States population grew rapidly and this expansion helped foster a more mobile society. Covered wagons were the first “self-move” option for transporting possessions as countless families moved West.
Years later, after undergoing a railroad construction boom between 1830 and 1860, railroads became America’s primary mode of transportation for passengers, freight, and the long-distance movement of household goods.
During this time, local delivery companies would transport household goods by horse-drawn wagon to a warehouse where they would be packed and crated for shipping. The items then would be moved to a rail depot and placed in a rail car. Many moving companies were built adjacent to rail lines so that rail cars could be loaded directly from the floor of the warehouse. After the rail car reached the final destination, the crates would then be unloaded at the warehouse, uncrated, and finally delivered to the new home—by a different local delivery company. Most of these early delivery companies—or “wagon firms”—performed moving services as a sideline to their primary business of drayage and livery stable (livery stables boarded horses and kept horses and carriages for hire).
From Rails to Roads
During World War I (1917-1918), paved roads and motorized trucks were becoming more commonplace in the United States as a result of a greater need for efficient transportation to support the war effort. In his book “History of the Moving & Storage Industry in the United States,” Stanley “G” Alexander credits Ward B. Hiner (founder of American Red Ball Transit Company) as the first interstate mover in 1919. Hiner conceived the idea of moving household goods from city to city in motorized vans rather than by railroad. Long distance “motor-van” moves eliminated the cost and trouble of crating furniture and reduced the number of times that furniture had to be handled. Hiner’s vision that the future of interstate moving was in motorized vehicles came to fruition. By the mid 1920s, motorized vehicles were an integral part of the industry as significant highway construction projects were being subsidized by the government. This took place in part because of the government’s desire to limit the American economy’s dependence on the powerful railroad industry.
Until 1928, the moving industry consisted of a number of individual companies operating independently. These companies had no problem finding customers for local moves or moving out of the area; however, they struggled to find customers for out-of-state return shipments. For a number of years, the only way an out-of-town driver could find a return shipment was to ask a local moving and storage company if it had a shipment going to (or near) a desired destination. Many companies established “move boards” in their offices where they posted available shipments for out-of-town drivers on bulletin boards. An out-of-town driver considered himself lucky to find a shipment going to his next destination. This inefficient system caused drivers to sit idle for long periods of time while they waited for a return shipment. If none were found, they would simply return home with an empty truck, thereby cutting into their profits.
‘Co-Operation’
In 1927, Aero Mayflower Transit Company of Indianapolis, Indiana (which later became Mayflower Transit), earned the distinction of being the first household goods carrier to be granted a 48-state operating certificate by the Interstate Commerce Commission. In 1928, the National Furniture Warehouseman’s Association (NFWA) organized the Inter-City Removals Bureau. An important outgrowth of this bureau was a non-profit organization created to assist independent moving companies in finding return shipments for their drivers. According to Alexander’s book, Martin J. Kennelly from the Chicago. Illinois, firm of Werner-Kennelly and a group of his associates in the industry formed this co-operative organization. These companies “allied” together to serve a common purpose and formed the first moving “van line” in the industry. The name of this new van line was Allied Van Lines. Allied provided its members with a communication and dispatching service that supplied information on shipment locations as well as where trucks and equipment were positioned to haul these shipments. This resulted in greater dispatching efficiency and profitability for member companies and their drivers. It also allowed these companies to expand their service coverage area as they relied more on their co-operative networks, rather than their individual hauling resources.
During World War II (1941-1945), the moving and storage industry briefly reverted to transporting long-distance moves by rail car because there was a shortages of vehicles, tires, and fuel that were diverted to the war effort. After World War II, the industry saw a dramatic increase in personal and business moves as soldiers returned home from the war and the economy blossomed. Homebuying increased and businesses grew to keep up with new consumer demands. The United States Census Bureau shows that approximately 20 percent of the population moved each year from 1946 through 1967. Subsequently, these reports show a steady decline in the annual mobility rate—with the exception of a 20 percent anomaly in 1983. According to the Pew Research Center, the most recent Census Bureau mobility statistic shows that “…only 11.9 percent of American’s changed residences between 2007 and 2008, the smallest share since the government began tracking this trend in the late 1940s.”
Rates and Regulation
Arguably, the two issues having the greatest effect on the industry during the past 100 years are rates and regulation. More specifically, the manner in which the industry establishes rates for the services it provides and the extent of government regulation in the industry. Since the early 1930s, the government has struggled with how rates should be developed in the moving and storage industry, as well as in the entire motor carrier industry.
Prior to 1935, the motor carrier industry was subject only to state regulation. In the article, “Unfinished Business in the Motor Carrier Deregulation,” Thomas Gale Moore, a senior fellow at the Hoover Institution, discusses the influence over state regulations by the powerful railroad industry: “Between 1914 and 1931 pressure from railroads and court decisions based on railroad suits were the chief forces behind the state regulation of trucks and buses... Railroads had recognized almost from their inception that motor carriers, trucks, and buses offered competition in the most lucrative portion of the railroad market….” The railroad industry attempted to minimize their competition by influencing state regulations that soon became “unfriendly” to motor carriers.
Concurrently, the United States was experiencing the Great Depression (1929-1941). In 1932, President Franklin Roosevelt created an economic recovery plan called the “New Deal” in an effort to restore the economy. During this time period, many economists said that it was important for the United States government to control free market enterprise by regulating certain competitive practices. Their belief was that “cut-throat” competition had hurt many businesses, causing “deflation” in the United States (prices had fallen by more than 20 percent in some industries), which was hampering the economic recovery. In 1933, the National Industrial Recovery Act (NIRA) was passed by Congress to promote “codes of fair competition.” As a result of NIRA, each carrier in the motor carrier industry was required to file a schedule of minimum rates and tariffs with the motor carrier rate bureaus. This was the beginning of federal regulation in the moving and storage industry. In 1935, NIRA was struck down by the United States Supreme Court when a decision found the act to be unconstitutional.
To continue their objective of promoting “fair competition” in the motor carrier industry, Congress passed The Motor Carrier Act of 1935 after NIRA was struck down. This new act stabilized pricing and placed the motor carrier industry under federal regulation, instead of state regulation, to protect the young industry from the railroad. The act also helped smaller companies survive by preventing larger companies from offering volume discounts resulting in lower freight costs. The Interstate Commerce Commission (ICC) received authority from this act to regulate the moving industry and all motor carriers that were engaged in interstate commerce. The ICC restricted entry into the industry and approved specific carrier routes. It also required that each carrier provide reasonable “minimum and maximum” rates for their services.
Congress later passed the Reed-Bullwinkle Act in 1948, allowing rate bureaus operating under “ICC-approved agreements” to establish rates “collectively” with full immunity from antitrust laws. During the next several years, the industry became stronger and more profitable within this regulated environment and the governmental fear of “cut-throat” competitors disappeared.
De-regulation
The pendulum for regulation began swinging back toward deregulation in the 1980s when the 1980 Motor Carrier Act repealed interstate motor carrier regulation to promote increased competition. The household goods moving industry, along with other transportation related industries, were given the right to collectively establish a benchmark tariff. This “antitrust” immunity allowed for a level playing field and made it easier for purchasers of moving services to compare prices. The moving companies were free to discount rates in the published tariff to compete for business. Discounting in the industry began with a few high-volume business contracts and later spread to the private transferee market. The Household Goods Carrier Bureau would meet periodically to determine the base tariff level and recommend modifications to the tariff to reflect marketplace conditions. Carriers that participated in the tariff were then free to discount from the tariff rates to compete as they saw fit. This led to a “vicious cycle” of tariff modifications followed by increased discounts as moving companies tried to balance the cost of doing business with the necessity of remaining competitive. As a result, during the past 30 years, profit margins in the industry have continued to shrink while the cost of labor, fuel, equipment, real estate, and insurance continue to increase.
Further deregulation took place in 1995 with the ICC Termination Act of 1995 (ICCTA). This act “terminated” the existence of the Interstate Commerce Commission and placed the moving and storage industry under the authority of the Federal Highway Administration within the Department of Transportation. The act removed more of the original economic control in favor of greater competition by removing most of the remaining regulatory framework that was established in 1935. The ICCTA also requires a periodic review every five years of motor carrier bureau agreements by the newly established Surface Transportation Board (STB).
The industry experienced a drastic regulatory change on May 7, 2007, when the Surface Transportation Board announced the decision to end “collective ratemaking.” The board decided that the rate bureaus were no longer needed in the current deregulated environment. The STB further stated that these bureaus were “anti-competitive” and no longer served the public interest. As a result, collective actions ended and individual carriers had to publish their own separate tariffs. This ruling went into effect on January 1, 2008.
Despite developing their tariffs independently and now having new rate and pricing freedom, individual carriers structured their new tariffs similar to the original industry-wide tariff that existed in 2007. Some companies also offer a “flat-rate, all inclusive” option based on weight and distance (sometimes referred to as single-factor rate pricing). Although an improvement because of its simplification compared to traditional pricing, this method is still based on a discounted tariff. Both the industry and its clients have clung to a pricing methodology that is similar to the original tariff. This has allowed corporate customers to easily compare pricing differences between vendors of household goods moving services. While there is logic behind this, it also seems reasonable for innovative companies and corporate clients to move beyond these traditional methods of pricing. The new deregulated environment presents opportunities for tariff simplification, discount elimination, and, perhaps, newer pricing formats with greater cost predictability.
Containerized Competition
In the 1990s, the moving industry was faced with a new competitor commonly referred to as containerized moving and storage. New companies and existing freight companies were now offering to transport containers that were loaded and unloaded by customers as an economical alternative to full-service moving. Some of those companies soon enhanced their containerized moving by providing professional loading and unloading services. Some traditional movers and van lines have developed an “in-house” containerized moving program or have chosen to partner with existing containerized moving or freight companies. Containerized moving draws market share from
both the self-moving as well as the full-service moving and storage industries. It remains to be seen what effect this niche industry will have on the moving and storage industry in the future.
Crossroads
From horse-drawn carts on dusty roads to a $12 billion industry with 8,000 companies across the United States, the moving industry once again stands at a crossroads. In this deregulated environment, industry leaders must decide how to prepare for the future. Will we learn from the lessons of the past? Will a visionary leader emerge such as Hiner, who in 1919 could visualize the future of long-distance moving in motorized vehicles? Will the industry grow? Conversely, will the industry shrink due to telecommuting, driver shortages, containerized alternatives, and a decrease in overall demand?
These are questions that need to be considered as the industry chooses the direction of its future. In reflecting on the history of the moving and storage industry it seems appropriate to close with a quote by Mignon McLaughlin that offers a fitting analogy: “the past is strapped to our backs. We do not have to see it; we can always feel it.”
While many may never take the time to “see” and understand the history of the moving industry, the effect from its past can nonetheless still be “felt” in many of its current practices today. By learning from its past, perhaps the industry will be in a position to create a better future.
Eric Reed, CRP, GMS, is director of business development for Berger/Allied, Fullerton, California. He can be reached at +1 714 449 6671, at ericr@bergerallied.com, or www.ericreed-online.com.