RERMAG

Changing Gears

Consolidation in the equipment rental industry has given birth to challenges for both experienced operators and new companies. Newfound companies have focused their efforts in acquiring additional fleet in hopes of capturing more market share and profit growth. This influx of capital toward the purchase of equipment has changed the profile of the industry in many markets across North America.

With others pursuing the same goal, significant pressures have been put on rental rates. In addition, the return on investment for specific fleet categories has changed significantly. As a result, the industry today is seeing a different pricing, profit and management perspective than it did just three years ago, and both the rental customer and equipment manufacturer feel the impact.

Equipment manufacturers are seeking preferred vendor status with national companies and trying to maintain their status as key suppliers to the regional and local rental companies, which also are trying to remain a viable segment within the industry. National, regional and local equipment rental companies and their customers demand quality and efficient equipment that a variety of manufacturers can deliver.

Those manufacturers that stay ahead of the curve will succeed as key suppliers without becoming rental companies themselves. Likewise, the manufacturers' distributor network will remain vital to fulfilling retail sales, parts needs, warranty repair andservicing the owners of the equipment marketplace. With more emphasis placed on product diversification by the customer, the distributor network is able to fulfill the need for diversification and is able to cultivate other niche markets.

Customers, seeking more specialized fleet and tailored services, are and will remain a top priority. Many will demand 24-hour service, on-site job service and efficient, friendly store service. Currently, many customers are playing the price game from one rental salesman to the next. Over time, as fleet and service components become more diversified and better managed, this will change.

As the industry adjusts from the influx of new companies and shifts its energy toward customer needs, we will, in the short term, see a significant amount of new and used fleet being sold into the marketplace. While fleets are reconciled, the distribution channel will be affected. However, in the long term, with a new pricing environment, fleet age will be scrutinized and operations will need to be streamlined. A well-maintained fleet and efficient operating system will provide excellent returns, so the more sophisticated the industry becomes in evaluating its fleet and service systems, the more stability and profitability it will enjoy.

The economy looks strong in the year 2000. Despite predictions of flat construction spending, current spending levels are historically high. In addition, the growth pattern in many U.S. cities has laid the groundwork for solid construction activity for several years. However, even if a small slowdown in construction activity occurs, we should witness a more rapid rationalization of fleet levels that, in the long run, will help the industry. On the industrial side, penetration of this market by the rental industry remains an opportunity, coupled by strong government spending bolstered by the transportation appropriations bill that rounds out the diversified opportunities for the equipment rental industry.

TAGS: Ar
Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish