The all-in-one solution can be appealing in multifamily. There are fewer vendors to deal with, fewer contracts to oversee, fewer phone calls to make, and (ideally) fewer problems to handle. Waste management, package management, pest control, and offsite storage; all those services and only one number to call. Maybe they throw in a few resident-centric services, like laundry pickup and delivery, for you to add to your marketing mix.
For owners, operators, and on-site teams who may already be stretched thin, the appeal of this avenue is undeniable. In practice, however, the reality is never as good as the dream.
When a vendor ventures beyond its core specialty, the quality of all its services can decline. This is not because of bad intentions, but because expertise is finite. An attempt to simplify efficiencies can actually have the opposite effect.
The Service Creep Problem is Nothing New
The risks of overextension and diversification are well-documented, and a company can encounter various problems. In all of these examples, the organizations took their eye off the ball at the expense of customers, employees and investors:
Unmanageable Expansion: An energy powerhouse since the late 1800s, Westinghouse Electric Co. went way off the path by purchasing the Seven-Up Bottling Co. and the Longines-Wittnauer Watch Co., which itself had an odd diversification into mail-order records. The company also pursued investments in broadcasting and cable television, financial services, office furniture and residential real estate. The behemoth eventually collapsed, and only its nuclear energy division remains today.
Ignoring Consumer Evolution: Borders Books expanded its brick-and-mortar store footprint and moved beyond books to sell CDs, DVDs, calendars and other non-book items at a time when consumers were shifting to online purchases. Borders filed for bankruptcy in 2011 after 40 years in business, and thousands lost their jobs.
Dismissing Superior Competition: While these companies survived, their diversification attempts failed because they didn’t account for existing, more successful players in the sector. This includes Coca-Cola’s attempt to sell wine in the late 70s, Kodak’s brief foray into the pharmaceutical business for about six years, and Dyson’s ill-fated attempt in the EV market in 2017, which it abandoned in less than two years.
While these examples don’t translate directly to rental housing, the eyebrow raise, “what were they thinking?” does have similar ramifications in multifamily.
Why Expertise is Important to Multifamily
When a company’s business and success are built on a solid operational model, service can suffer as it pursues new ventures. Rapid expansion into too many different services may mean that none of them receive full attention. Multiple services require understanding the evolving renter demands for each one, so the risk of failing to meet their needs is higher. Finally, it’s important to expand in a way that ensures the new services fulfill an unmet need. If someone is already successfully offering it, residents may ignore the vendor’s new service, and any slip-up will cause issues.
Offering multiple services also requires a significant capital investment, especially when there’s little to no overlap between the businesses. Different equipment and expertise are needed if a company, for example, is trying to offer waste management and pest control services. Without solid financial backing, the all-in-one vendor is at greater risk of shutting down if services are below par or if scale isn’t meeting expectations.
Overlapping services within a team may seem smart on paper, but in some cases, residents may not be on board with the reality of it. Does anyone want the employee who wrapped up a valet trash shift to then deliver their produce?
The Trash Management Example
Community cleanliness is one of the top three factors for lease renewal, according to a study by the National Apartment Association. Because of this, trash management is a prime example of a service crucial to a community’s success.
Trash compaction, valet programs, enclosure maintenance, and waste leveling require expertise, staffing, and logistics. When waste management companies add services like package delivery, it can disrupt their processes, leading to overflowing dumpsters and unreliable service—issues residents notice immediately. This can lower satisfaction, retention, and reputation. An all-in-one vendor may drop the ball, costing the community. Renters care about service, not vendors.
A dedicated company, focused on its niche, builds credibility through proper training and account management, with no conflicting interests. This results in fewer problems and quicker resolution when issues arise.
Fewer Vendors Should Not Always Be the Goal
This is not to say that all attempts to diversify are failures. IKEA purchased the on-demand TaskRabbit platform in 2017. However, IKEA operates it as a separate business, and the only crossover is that customers can arrange furniture assembly through TaskRabbit. In this case, the company saw a way to complement its main offering by filling a need (furniture assembly frustration, which any IKEA customer will tell you is real) and deployed its diversification in a way that not only protected both businesses but also allowed them to scale more efficiently.
While fewer vendors may be beneficial in some cases, it should not be a steadfast goal for owners and operators. There might be one contract instead of four, but that contract may have more single points of failure than the other ones combined. The simplicity is actually just an illusion. It’s important to see if that vendor can offer the service excellence they claim, or if they’re just trying to capture more of the community’s budget.
Specialized vendors also eliminate the risk that a problem in one service won’t cascade into problems in others. Depth beats breadth when the stakes are operational. These partners typically perform better and hold themselves to higher standards and service levels. Owners, operators and residents get what they were promised—fewer disruptions, not more.