Posted on December 11th, 2014
The moving and storage industry is a $15 billion industry in the United States. About 42 million families each year use a moving company, or pay in some way for their relocation. And international relocations are growing as fast as domestic ones. Do-it-yourself storage during moves is a growing industry as well, now bringing in about $22 billion a year. But how did this all get started? Here’s some history on the moving industry.
In ancient times, moving was conducted on sled-like objects (called travois by the French), which were loaded with belongings and pulled by horse or by hand. At this time, humans moved often, and had few belongings to take with them. However, once the agricultural period began, humans began to move less often. They also became more stationary, and accumulated belongings, making it more difficult when they did choose to move. Shortly thereafter, the wheel, and then the axel, were invented. From there, humans invented the wooden cart, the wagon, and eventually the rail car.
The moving industry in the United States was created during the 1800s, around the development and expansion of the continental railroad, and during the great migration west. The first specialized cover wagons, called conestoga wagons, appeared around 1800. They would travel in groups of 5 or 6 families to get to their new homes. Once the railroad became more developed, Americans started travelling and moving via train. People would put their belongings onto wagons, and have them taken to warehouses that were located close to railroads. Moving companies would then load their belongings onto rail cars, and then put them into a warehouse at the intended destination. From there, the possessions would be put onto another wagon, and taken to the family’s new home. This was the first case of paid moving in the U.S. However, at this time these companies performed these services as side revenue. The mid-twentieth century would bring the advent of full-time moving companies.
Not long after the development of the conestoga wagon, motorized trucks that were designed to transport personal belongings began to crop up. The very first moving vans were two-axel trucks that ran on two-cylinder air-cooled engines. These replaced horse-drawn vehicles to carry personal belongings more safely during moves.
As the country grew and expanded, more and more opportunity appeared for those in the moving business. Warehouses made of steel and concrete were being built, and storage became a blooming business. The storage industry began growing in Britain before it did in the U.S. It began when British banks were asked to safeguard items for their clients when they went on extended trips.
In 1927, Aero Mayflower Transit Company (later to become Mayflower Transit) became the first household goods carrier to be awarded an operating certificate in 48 states by the Interstate Commerce Commission. The National Furniture Warehouseman’s Association founded the Inner-City Removals Bureau in 1928. This organization assisted independent moving companies in finding return shipments for their drivers. 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, which provided its members with a communication and dispatching service. This service supplied information on shipment locations as well as where trucks and equipment were positioned to transport shipments.
After WWII, the generation of the baby boomers began. This rise in population caused many Americans to seek out the countryside. As suburbs began to grow and take control, moving companies saw a huge spike in profits. The war had also brought about an interstate system, making moving easier than ever. The combination of these two things caused many new moving companies to enter the market. During this time, the moving industry briefly reverted to transporting goods via rail car. This was due to shortages of vehicles, tires, and fuel that were diverted to the war effort.
As the moving industry grew, so did the storage industry. The first do-it-yourself storage facility in the U.S. opened in Texas in the mid-1960s. From there, the concept spread to the west coast, and then throughout the country.
The trucking industry was deregulated by Congress in 1980. Soon after this occurred, the number of moving carriers in the country increased from a few hundred to over twenty thousand. Price and service level options grew widely, as did the number of unfamiliar companies to hire.
However, not all of these companies were legitimate, and not all of those that were practiced good business. The Better Business Bureau saw an abundance of complaints, ranking the moving industry the sixth most frequently checked out business in 2001. That year, the BBB saw 274,388 inquiries into the moving industry. By 2006, that number had continued to grow, and the BBB saw 1,109,342 inquiries, and movers became the fourth most checked out industry.
The U.S. General Accounting Office advised Congress “the primary responsibility for consumer protection lies with consumers to select a reputable household goods carrier, ensure that they understand the terms and conditions of the contract, and understand and pursue the remedies that are available to them when problems arise,” in a report titled Federal Actions are Needed to Improve Oversight of the Household Goods Moving Industry.
There are, however, regulations in place to protect the integrity of the moving business. All movers are required to have both BIPD ($750,000 minimum), and Cargo insurance filed with the FMCSA, and to acquire the proper licensure with the DOT. It is argued that the two issues that have had the greatest impact on the moving industry over the past 100 years are rates and regulations. More specifically, the greatest issues for the industry are the manner in which it establishes rates and the extent of government regulation that the industry faces. The government has struggled with how to develop rates in the motor carrier industry, and more specifically within the moving and storage industry, since the 1930s. Before this point, these industries were only subject to state regulations, and had no federal regulation on them at all.
Thomas Gale Moore, a senior fellow at the Hoover Institution, wrote an article titled “Unfinished Business in the Motor Carrier Deregulation.” The article discussed the influence that the railroad industry had over state regulations. The article states, “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 so that they would become “unfriendly” to motor carriers.
At this same time, the country was going through the Great Depression. Many economists felt that it was important for the government to control free market enterprise by regulating competitive practices as part of President Roosevelt’s “New Deal” to restore the economy. This was based on the belief was that cut-throat competition had hurt many businesses, which had caused deflation in the United States. They believed it was this deflation that was keeping the economy from recovering. This led to Congress passing the National Industrial Recovery Act to promote “codes of fair competition.” Each carrier in the motor carrier industry became required to file a schedule of minimum rates and tariffs with the motor carrier rate bureaus. Thus began federal regulation in the moving and storage industry. NIRA was later thrown out by the United States Supreme Court as being unconstitutional.
Congress then passed The Motor Carrier Act of 1935, in order to continue the objective of promoting “fair competition” in the motor carrier industry. This act stabilized pricing and placed the motor carrier industry under federal regulation in order to protect it from the railroad. It also prevented larger companies from offering volume discounts, so that smaller companies could survive the competition. Under this act, the Interstate Commerce Commission was given the authority to regulate the moving industry, as well as all motor carriers that were engaged in interstate commerce. The Interstate Commerce Commission required that each carrier provide reasonable minimum and maximum rates for their services. In 1948, the Reed-Bullwinkle Act was passed by Congress. This act allowed bureaus that were operating under agreements that were approved by the Interstate Commerce Commission to establish collective rates, and to have full immunity from antitrust laws. This caused the industry to grow stronger and more prosperous over the next several years.
In the 1980s, the Motor Carrier Act repealed the regulations on interstate motor carriers, in order to promote competition. The household goods moving industry, as well as other transportation related industries, were given the right to establish a collective benchmark tariff. This antitrust immunity was made to create a level playing field and to make it easier for those looking at moving services to compare prices. The moving companies could discount rates in the published tariff in order to compete for business. These discounts started with high-volume contracts, but later spread to the private market. The Household Goods Carrier Bureau would meet periodically to determine the base tariff level. They would then recommend modifications to the tariff based on market conditions. Carriers that participated in the tariff were then free to discount from the tariff rates however they saw necessary to compete. This caused a cycle of tariff modifications followed by increased discounts as moving companies tried to balance business costs with the necessity to stay competitive in the industry. As a result, profit margins in the industry have shrunk over the last 30 years, despite the fact that the cost of labor, fuel, equipment, real estate, and insurance continue to go up.
The industry was deregulated even further in 1995, when the ICC Termination Act wiped out the Interstate Commerce Commission. The moving and storage industry was then put under the authority of the Federal Highway Administration, within the Department of Transportation. This got rid of the last of the regulations that had been established in 1935, again in the spirit of fostering competition. The act also established the Surface Transportation Board, which was now required to review motor carrier bureau agreements every five years. In 2007, the Surface Transportation Board announced an end to collective ratemaking. This meant that individual carriers now had to publish their own separate tariffs, effective in 2008.
Despite having the ability to develop their tariffs independently and having new-found rate and pricing freedom, most individual carriers chose to structure their new tariffs in a manner that is similar to the original industry-wide tariff from 2007. Some companies also chose to offer a flat-rate, all inclusive option, which is based on weight and distance (also known as single-factor rate pricing). Although this can be seen as an improvement because it’s so much simpler than the traditional pricing model, this method is still based on a discounted tariff. This system allows corporate customers to easily compare pricing differences between different vendors of household goods moving services. While there is logic behind this system, it also seems like innovative companies and corporate clients should be able to move beyond these traditional pricing methods. The new deregulated environment presents opportunities for tariff simplification, discount elimination, and newer pricing formats with greater cost predictability, which at this point nobody is taking advantage of.
The current moving industry is quite divided, with movers either performing short-distance or long-distance moves. There are very few movers who do both.
History of Moving Industry – RELO Roundtable
Crossroads in the Moving & Storage Industry – Mobility Magazine