It has been just about four years now since United Rentals first made its appearance. It was pretty clear from the beginning that it would be a serious player, although the speed of its growth surprised many.
Without question, the map of the rental industry has been re-drawn dramatically in these four years. Obviously there are more than a few rental companies and manufacturers that wish United and other consolidators had never come on the scene. I'm sure there are a number of independent bookstore owners that wish Borders would just disappear and independent coffee shops that are tired of seeing Starbucks pop up everywhere they look. But while I love to support independent bookstores and try to give them my business, I still enjoy Borders for its wide selection and convenience. And although I like to try small coffee houses, I still go for ‘venti’ cups of caramel macchiato.
I'm not going to make a judgment as to whether consolidation has been good for the rental business. Sure I talk to people who are critical of all of them and they raise legitimate issues. There are pros and cons to consolidation, but the reality is that there are probably more people reading books right now because of Borders, and more people acquiring a taste for espresso because Starbucks came on the scene.
The reality is the rental consolidators are here to stay, just as consolidation has occurred in bookstores and coffee emporiums and video rentals and everything else you can name. There are a lot of smart business people looking for business niches with high margins that they can get into and make a profit. The biggest surprise might be that more companies haven't tried this business.
I talked at length with the founders and top executives of United Rentals. Their commitment to growing United Rentals based on a solid organizational foundation is serious, and they are continually looking for ways to improve. They may make some mistakes, but they have a lot of good people working very diligently to make it right. And, like Starbucks, they are expanding the market in the process.
Still, United executives strongly believe, the smaller independents will continue to do well for the same reasons they always have — because of their relationships with customers. United's president and chief acquisitions officer John Milne, who first hand has visited hundreds of rental companies that United bought and hundreds more that they didn't, probably described it best: “Those owners are always going to be close enough to their business to make the psychological life-style commitment that if they have to [face] a new competitor coming into town, or rising prices on their equipment, whatever it is, they'll survive because they just make it work. They developed relationships that are so deep with their customer base that although they won't be able to have a pricing or service advantage, they'll get a ‘last-look’ advantage with their key customer base.”
Yes, the consolidators are here to stay. But so are the independents.