The Growing Rental Concept Will Fuel the Industry

This will be another outstanding year for the rental industry and the manufacturers that serve it. Now that I've stuck my neck out and made that prediction, I'll explain why I feel that way.

The first reason, which is not the most important one, is the economy. The majority of reports that I read are predicting another strong year for the economy, and I must agree. Construction is strong and will continue to grow. As you all know from past history, construction dollars seem to lag behind the overall economy by about six months. So even if the economy starts to slow down toward the end of 1999 - and I don't think it will - construction will continue to be good into the year 2000.

The second reason, and probably most important, is the public's embrace of the rental concept. The rental concept and the industry are still in their infancy. There is no way that Wall Street brokerages would embrace the rental industry if they didn't predict substantial growth.

Every time I think about the future of the rental industry, I can't help but think of the Japanese rental industry. Although Japan is roughly the size of California, it's really the size of Connecticut if you pull out the mountains and other uninhabitable areas. There are 3,000 rental locations in Japan. That tells me we will see a lot more locations in the United States and a lot more on a worldwide basis. It looks as if Home Depot alone will have about 800 locations in the not-too-distant future, and if Home Depot is committed, many other national chains will commit themselves as well.

The demand for rental will continue as more and more contractors study their true ownership costs based upon realistic utilization maintenance, storage costs and other factors and then turn toward renting as their most economic and efficient tool. Homeowners will change their mindset drastically about owning small tools as the rental concept swings into full gear. And the industrial markets, still virtually untapped, will increase in their rental activity.

Additional proof of the acceptance of the rental concept is the growth of many manufacturers. In just the past three years, for example, Multiquip's sales have more than doubled. This happened because of many factors, but the demand for rental equipment pushed by the acceptance of the rental concept is probably one of the strongest reasons. And our growth didn't come from acquisition or the addition of more product line; it came from higher demand and increased market share.

As a manufacturer, we see a tremendous future fueled by the rental concept, so we are taking steps to ensure that we not only are able to service the national companies, but just as importantly, we will reorganize to ensure that our company focuses an equal amount of effort on the independents. I believe that the national companies will control around 30 to 40 percent of the market, so we have to invest heavily in the independents as they will account for 60 to 70 percent of the market. Independents will fill many niche markets, and I believe that for every advantage the nationals have, the independents have other advantages such as personal relationships and the ability to be more flexible.

The rental industry is just starting to settle down after the initial surge of acquisitions, but it is evident that there is and always will be room for nationals and independents. As a manufacturer, we can't exist with business from only the nationals, and we can't exist with business from only the independents. We must concentrate on both groups. Nationals and independents want the same things from manufacturers: the best products, fair pricing and the best service possible. Service, parts supply and immediate availability of equipment are paramount to everyone in this business. The initial price is the least important - the most important being the cost over the life of the product.

We are changing with this dynamic market. The rental industry will continue to change because of continued demand by the marketplace. We're going to see more acquisitions and maybe some megamergers, so change will continue. The manufacturers and suppliers to this industry will also change in order to better serve all. We will see many mergers among manufacturers in 1999 and 2000. We will also see the addition of new products to the manufacturers' lines so that each can offer more to each rental company, thus becoming more of an influence and strategic supplier. After almost 40 years in this industry, the changes are making it more exciting now than ever before.

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