It's a compelling question for an industry defined more by relationships than tangible goods: Can tool and equipment rental transactions be automated over the Internet without obscuring the qualities that differentiate one business from another? Or is commodity the inevitable result?
To some, the very notion of Internet transactions defies the idea of a service business. Rental operations historically have relied on a strong local component, even when the parent company is national. Rentals themselves are often marketed using emotive terminology such as “trust,” “satisfaction” and “peace of mind.”
Does this put the rental business at odds with Internet transactions? Not at all, says Fiona Perrin, group marketing director for U.K.-based HSS Hire Service. HSS, the second-largest tool rental presence in the United Kingdom, once operated the HSS RentX chain in the United States. Now under the ownership of Aurigo Investments in partnership with New York-based Och-Ziff Capital Management, HSS has more than 300 branches in seven countries and approximately £163 million (about U.S. $319.7 million, according to current conversion rates at press time) in revenues (2006).
HSS's online timing is interesting, as is the company's blueprint for the future. In February 2006, under prior ownership, the company launched a secure transactional area on its website hss.com. This shopping-basket capability allows the renter to place a totally automated reservation online and authorize credit/debit card payment. The site gives the customer access to more than 2,000 different tool and equipment items.
At first glance the initiative seems to be an awkward fit with the company's stated strategy, which is to enter into logistical and technical partnerships with key trade customers. HSS's current focus is on establishing facility maintenance relationships such as its current tool rental contract with National Rail. None of that business is conducted over the public website.
However, in the mature U.K. rental market, there is ample room to pursue diverse types of business, and demand stems from multiple sources. The U.K. is estimated to have about 80 percent rental penetration compared to 35 percent in North America, where construction is the overwhelming driver. North American rental demand from do-it-yourselfers and facility operators is still relatively minor.
“We've got this spectrum of customers that goes from blue chip organizations, facility maintenance companies and construction companies right down to consumers who need to hire a sander on the weekend,” says Fiona Perrin, who joined HSS in March 2007. “I think online will probably be the principal way that we communicate with various sectors of our customer base.”
HSS already appears to have the largest share of any online business in its market. Hitwise, a U.S.-based, online competitive intelligence service, reports 59.7 percent share for HSS for a four-week period in November 2007 based on site visits. A-Plant (the U.K. sister of U.S.-based Sunbelt Rentals) and Speedy Hire (HSS's main competitor and the largest U.K. tool rental chain) ranked a distant second and third with single-digit shares. “Even so,” notes Perrin, “many people still don't know that they can transact with us online. So that's the really significant opportunity in front of us.”
Do you want a cable drum with that?
Renting equipment on hss.com is a lot like a visit to amazon.com. You can select your tool or machine, view a photo with features and benefits, and click through to a rate grid, operating instructions and technical specifications. Enter your preferred start date and time (morning or afternoon) for the rental, specify the term, and the off-rent day and time is filled in for you.
At that point, the item is in your shopping basket along with any consumables or other items that the system has enticed you with along the way. The summary screen lets you change dates, delete items, or go back and shop for more.
Before checking out with a credit, debit or trade account card, you indicate pickup or delivery and choose a damage waiver option. When you complete the transaction the system automatically generates an email giving you a reservation number and branch contact, and notifies the HSS Internet support team. Your signature is required on a paper contract when you take receipt of the equipment.
Risk is managed by handing the customer operating instructions and, if necessary, demonstrating the item at the time of rental. Safety and training DVDs are required for more complex equipment. Customers must sign a document confirming receipt of the operating and safety instructions. As a backup resource, downloadable information for most items is available online.
“We know instantaneously if there could be some problem with availability,” Perrin says. “When the system generates an email to the customer, which happens within a few minutes, our call center follows up. Because we have a very good system of moving stock around the country, the chances are excellent that the requested item can be made available quickly.”
Even so, “a very small proportion falls outside of our capabilities, and for that we are looking at bolstering the interface between the web and our stock-management system that operates our branches,” Perrin says. The company also plans to expand customer forums and user-generated content on hss.com. Further integration is planned to support the launch of an Extranet system with customer self-help features and extractable data.
Facility maintenance is one U.K. market sector where Extranets have been the norm for several years now. Extranet technology allows the rental company's system to share data with the customer's system; the customer can then pass that data up the line to its own customers. A parallel trend can be seen in the U.S. construction industry, albeit in its early stages. Some large contractors give preference to rental companies and other suppliers whose information technology can “talk” to project collaboration software and pass along data for greater productivity.
HSS's online numbers would seem to justify the company's development efforts. In 2007, through August 30, the company says its online rental revenues were 140-percent greater than in the same eight months last year. The transaction count increased 160 percent. And while early year-over-year increases are easy to come by in any launch, Perrin has a compelling statistic to share: “The majority is repeat business, as it would be in a traditional branch, but HSS is signing up about 1,500 new online customers each month.”
If the demand exists in the U.K., why is HSS the only major industry player taking online rentals all the way? For one thing, there's the inventory range: tools and small- to mid-sized equipment attract a more homeowner-oriented customer base than plant rental companies like Ashtead's A-Plant. The other large tool hire company, Speedy Hire, offers an inquiry-type email process typical of many American rental companies, and declined to be interviewed for this article.
Compared with large equipment, HSS-type inventory is easier to shift among branches, requires fewer deliveries and pickups, and generally rents for shorter terms with fewer attendant needs such as on-site maintenance. In other words, it could be considered a more straightforward, more “retail-type” transaction.
Customer reluctance
In the U.S. and Canada at least, construction customers seem unlikely to flock to e-rental transactions on even the best-run sites — at least for the foreseeable future. The CIT 2007 Construction Industry Forecast found that “contractors and distributors are less likely to use the web for almost every business task covered in the survey than they were a year ago.”
The study goes on to note that in the prior year, 80 percent of contractors planned to use the web to locate and research suppliers, but “this year the number fell by almost 20 percentage points … [and in a further finding] both contractors and distributors appear less likely to make transactions online in 2007 than they were in 2006.”
While no formal data is available to compare the Internet habits of North American rental customers with overseas markets, adults in the U.K. are generally considered to be receptive users of technology. One Forrester research report estimates that by the year 2011, 32 million U.K. consumers will be shopping online, thus maintaining their position as the second biggest e-spenders in Europe. This projection outpaces its U.S. counterpart on a per capita basis.
In any case, says Perrin, HSS intends to position e-service as just one of several mechanisms given equal strategic weight. “There are four ways you can communicate with us: by text, phone, at a branch or online. If you see something you like in our catalog, text us and we'll phone you back within 15 minutes — that's free for the customer.”
Bricks-and-clicks businesses in all industries are finding that customers have increasingly come to expect a seamless experience in online and offline venues. This trend has coined the term mc-commerce or multi-channel commerce. “The idea is to adapt to customers so that they are able to deal with us in the way that they want,” Perrin notes. “The web will be appropriate to certain people and not to others.”
Pricing for the masses
It's fairly easy to play devil's advocate with the pricing issue on any online rental site. If a professional contractor and Aunt Mary are both routed to the same webpage, with the same rental rates, the commodity issue looms large. HSS's system, for example, will recognize the discount that comes with a trade account but, “at the moment I think trades people are less likely to transact online because they often have a working relationship with somebody at a branch,” concedes Perrin.
“A consumer is more likely to respond to the convenience of an online transaction: collection and delivery, the confidence that it's being taken care of without having to talk to anybody. They are more willing to pay the kind of prices that that convenience attracts.”
HSS offers a £5.00 discount (U.S. $9.80) on every transaction, deducting it from the company's catalog rates. This follows common practice in the U.K., where online shoppers are offered discounts on everything from insurance premiums to designer clothing. The discounts are positioned as a reflection of the lower transactional cost of online purchases — an expectation that has little bearing on cost-of-rental, but must be addressed nonetheless.
Risk and reward
Research by global consulting firm Bain & Company found that “price does not rule the web; trust does. Without the glue of loyalty, even the best-designed e-business model will collapse.” If the issue of trust can be linked to brand on the web, a reputable “bricks” chain is going to have an edge in a “clicks” channel — but by the same token, a service misstep online will be seen as a failing of the company, not the technology.
Service is a tricky thing for a rental business to spread across different channels. When someone transacts with HSS online, there is still a human component to the rental — a face-to-face meeting takes place and equipment changes hands. The company relies on that interaction to cement the customer's service experience. Yet the Internet conditions customers to value convenience over other attributes, and convenience by nature is brand-neutral — a newcomer can gain a fast edge over an established national brand. The great benefit to e-rentals would seem to lie in being first, with differentiation eroding over time.
HSS, for one, believes that time is on the side of its online initiatives. Currently the company's customer base is concentrated in the 25- to 45-year-old bracket, while the largest adult demographic group in the U.K. is aged 35 to 55. “Younger people have a great deal more faith in being able to transact safely and securely online,” notes Perrin. “We hope to benefit from that, like any other sector.”
The degree of that benefit, and the impact on market positioning, is something to watch with interest as it relates to our own industry. Rental has a lot of room to grow in North America, and rental companies can be expected to look for new ways to bring together services, products and information for customers with similar needs as the market matures.
Ahead of our curve, U.K. customers are getting a taste of something new online. Now we'll see if they develop an appetite for it.
Lucy Peterson is president and owner of Balboni Associates Inc. and its press distribution division, IndustryWire. The company is a longstanding U.S. supplier of market communication and consultancy services to rental and related industries. Peterson can be reached at [email protected].
