We hear it repeatedly from executives of the largest RER 100 firms: The competitor they fear most is not United Rentals, HERC or Rental Service Corp. It's Cat.
In the late 1980s, when Caterpillar analyzed its strategy in the wake of the growing customer preference for short-term rentals over purchasing, long-term leasing and rental-purchase options, the Peoria, Ill.-based manufacturer made a clear decision: The future would be in rentals.
It has taken a while to get the program on track, but clearly the future is here. Because Caterpillar dealerships are independent businesses that cannot be forced by the factory to adopt a particular strategy, Cat corporate set out to educate its dealers and convince them that short-term rentals was the way of the future, even if that decision meant alienating rental companies that bought equipment from them. The risk would be worth it, Caterpillar believed, because of the rental market's vast potential.
For many Cat dealers, the transition has not been easy. There is a world of difference between operating a distributorship and a rental company with its emphasis on immediacy and urgency. Even the large physical buildings that house Caterpillar dealerships were oriented to big construction customers that would buy in quantity. Now, however, the target customers include small contractors who operate out of the back of a pickup truck. New buildings and major cultural changes have been necessary.
Cat dealers have long known big earthmoving equipment. Now many are renting lighter construction equipment that Caterpillar is manufacturing, such as mini-excavators, skid-steer loaders and compact wheel loaders as well as generators, pumps and pressure washers. They are even selling abrasive blades, gloves, hard hats and shovels.
Some Cat dealers are just getting started with their rental programs. Others, such as Denver-based Wagner Rents, have been strong rental players for more than a decade. And a few, most notably San Diego-based Hawthorne Rent-It Services, go back much further.
New Caterpillar rental centers - mostly using the Cat Rental Store logo in addition to their locally known names - are springing up weekly. According to Cat corporate, about 220 Caterpillar rental locations currently operate in North America. It projects about 275 by year's end, expanding toward 350 by the end of 2000.
Since the dealerships are all privately owned, not even Caterpillar itself knows exactly the combined rental volume of its rental outlets. But, with 220 locations and tons of large equipment, it doesn't take a rental expert to conclude that if it were one single rental company, Caterpillar would be in the top 5 of the RER 100. Taken together, just the 14 Caterpillar dealers on the RER 100 alone totaled an estimated $334 million in rental revenue from 127 locations in 1998. Once the branches increase to 350 and the dealers accumulate more short-term rental experience, Cat - as a combined entity - could be vying to be Top Dog.
Their competitors may be right.
About the Author
Michael Roth
Editor
Michael Roth has covered the equipment rental industry full time for RER since 1989 and has served as the magazine’s editor in chief since 1994. He has nearly 30 years experience as a professional journalist. Roth has visited hundreds of rental centers and industry manufacturers, written hundreds of feature stories for RER and thousands of news stories for the magazine and its electronic newsletter RER Reports. Roth has interviewed leading executives for most of the industry’s largest rental companies and manufacturers as well as hundreds of smaller independent companies. He has visited with and reported on rental companies and manufacturers in Europe, Central America and Asia as well as Mexico, Canada and the United States. Roth was co-founder of RER Reports, the industry’s first weekly newsletter, which began as a fax newsletter in 1996, and later became an online newsletter. Roth has spoken at conventions sponsored by the American Rental Association, Associated Equipment Distributors, California Rental Association and other industry events and has spoken before industry groups in several countries. He lives and works in Los Angeles when he’s not traveling to cover industry events.