Consolidation is a force that has changed the equipment rental industry, impacting every aspect of the business - from employees to equipment to earnings. But the whole rental story - as well as its future - includes more than consolidation. There are other major forces of change in the rental industry.
For one, equipment manufacturers, who see rental as the new distribution channel, are getting directly involved in the process, encouraging dealers to set up rental shop, or buying rental companies lock, stock and barrel.
And retailers and mass merchandisers who once frowned on the concept are now embracing it and bringing rental to the consumer level.
Of course, the Internet, with all its real and imagined possibilities, is also changing the way the industry does - and will do - business.
Let me show you what's new.' So how can I relate that to our business? It's to say: 'Thank you, Mr. Contractor, for giving us a call. How can we serve you? And we're not only going to have the machine at 10 o'clock for you, we're going to have it at five minutes before 10 in case you need it ahead of time.' And deliver it early, regardless of the condition of the freeway.
Together, these and other forces of change are combining to create enormous competition and challenges in the North American rental industry. But at the same time, they are creating enormous opportunities. The industry's growth is in itself a force of change.
But it's not easy sailing into a golden sunset. Storms are on the horizon.
Manufacturers' reps, for one, are redefining their role in the rental world. They are taking on more lines, helping promote innovation, and keeping fellow underdogs - independent rental centers - in the game.
Many equipment suppliers are placing less emphasis on their once indispensable "faces in the field," either cutting their commission rates or cutting them out of the picture completely. Still, other manufacturers are leaning on reps even more to get their message out to smaller rental companies who may be off the radar of the big-name manufacturers.
At the top of the rental food chain, many major manufacturers are wooing consolidators behind closed doors, eliminating the rep from the process. On every level, customer relationships are increasingly being forged through the Internet and other direct marketing techniques, brushing aside the door-to-door sales approach only reps can deliver.
But the so-called middleman is not going out without a fight. And in many cases, the rep's biggest ally is the rental center. After the sale, rental companies don't want to be forgotten. They want contact with a person they know, someone who can demonstrate the product, help train their employees, update them on new features, and take their feedback to the manufacturer.
In the DIY arena, the decades-old challenge of marrying rental with consumers is attracting new contestants. Home Depot has 150 rental departments and the three biggest hardware co-ops have schools for their members to learn rental. Now, a British invasion of chains familiar - and successful with the DIY concept - are bringing their time-tested approach to U.S. markets. And while their core market is the homeowner, many of these newcomers have expanded their inventory to include contractor-oriented machines.
For these reasons and others, equipment rental in America is bigger than it has ever been. This growing awareness of the rental concept is the most encouraging force of change, the part of the story no one complains about. On all levels - from the contractor who used to own almost all of his fleet, to the industrial plant that used to manage its equipment, to the consumer who used to buy a new car every few years - the idea of renting is becoming a larger part of the American way.
In the face of all this change, rental companies are taking a closer look at what they do best - all that "boring" day-to-day stuff (which is how the Wall Street Journal described rental to its readers). Of course, it's the "boring stuff" that separates the winners from the losers.
Rental companies are emphasizing service in everything they do. And many dealers who once said they happened to have a rental division are now more likely to describe themselves as full-service rental companies who happen to do sales. What does full-service rental mean today? It means more convenient locations, faster check-in and check-out procedures, faster field response, better customer training.
Many of these services are not new. But more and more, these services are no longer considered an added value or an extra benefit. They are considered part of the basic rental package - an operating necessity in a maturing business and something that must be done to survive.
The quality of equipment fleets is also improving. And so is fleet utilization. According to surveys of contractors, availability of equipment is far and away the most important factor in why they choose a company. Availability is even ahead of price. To serve this demand, companies continue to expand and modernize their fleets while they also implement systems to manage it all more efficiently.
Another trend is toward newer fleets. Companies used to hold equipment for as long as it would hold up - the longer it rented, the better the return on investment. Now all things being equal, the customer wants to rent the latest models. Both large and small companies are reporting fleets with average ages as low as 24 and 36 months.
This trend means companies are unloading lots of used equipment at 2 and 3 years old. Which means, ironically, that rental companies are getting more into sales. It also means the possibility for widespread price-cutting if the economy falls and too much equipment is in the pipeline. The economy has been so good for so long that some people feel it is hiding some aggressive purchasing mistakes and the ugly fallout is yet to be seen.
It has been stated often that in the new rental world, many advantages go to the big guys. They have the capital, the name identity, the purchasing power, the advanced computer systems. But one thing isn't guaranteed sometimes - an edge even the smallest family-owned company might hold - knowledgeable employees. A 20-foot lift is a 20-foot lift. People are what can distinguish rental companies.
In demand are people with management and communication skills, people who understand fundamental rental principles. And as companies expand, the need comes at a time when the labor market is tight - unemployment is its lowest in 30 years.
So companies are using incentives to attract good people and hold on to the ones they already have. They are tying their workers' salaries to performance. By doing this, the hope is for an increased emphasis on profitability over the more traditional volume-based commissions. In the past, a salesman wouldn't hesitate to slash rates to get more business and bigger bonuses. But now, they are more often judged on their profitability.
And these incentives are also often based on the company's overall performance rather than the success of one branch over another. This can help minimize competition between branches and encourage teamwork and sharing of equipment. Many companies are also giving more control to branch managers. They allow managers to control purchasing, hiring and firing, and even rental rates based on the market. This allows branches to react quickly to local conditions.
The Internet and e-commerce are introducing themselves to the brick-and-mortar world of rentals, just as computer software impacted the industry in the past decade. But no matter how complicated the computer network or fancy the Web site, people still need to be at the counter, in the service bay, on the truck throughout the workday. That single reality will still be the single biggest challenge facing the industry as it expands and matures. The cyber-economy can't fix a blown gasket - or a blown reputation, for that matter.
Finally, despite all the sound and fury of consolidation, the industry is still fragmented. Although the top 10 companies have grown rapidly, they still account for only about one out of every four dollars spent in what is estimated to be a $20 billion market. And no one company has more than a 10 percent market share.
In every market, one branch competes against another branch competes against another. And whether a branch is connected to a headquarters a few thousand miles away is not as important as whether a branch is connected to its customers. The customer isn't paying attention to who has stock and who doesn't.
Maybe that is why a majority of rental people feel the keys to their survival are still very much in their hands, that they can do more than survive, they can prosper. To paraphrase, reports of the death of the independent rental company have been greatly exaggerated. Alive and kicking, rental companies are still in control of their destinies.
