It's all the same. Only the names change. Talk to the owner or manager of a smaller rental center, and inevitably you will hear tales about the ugliness of corporate America: how the consolidators have come into town, slashed rates and run the little guy out of town.
“I disagree with cutting rates to get business, it makes you a whore,” says David Shaw, president of All Star Equipment Rentals in Charlotte, N.C., noting since 1996, all the major chains have moved in and now operate multiple outlets in Charlotte. “The economy was strong and there was enough business for everybody. There was no reason to cut prices but they came in, the economy slowed and they cut rates which hurts everyone.”
In many cases, that means the little guy gets put out or bought out of business by the consolidators.
Five years ago, the national chains were practically nonexistent. Today, they account for 20 percent to 25 percent of U.S. rental business, according to industry estimates.
That still leaves a lot of mom-and-pops, which might loathe consolidators but don't let that get in the way of adapting and tailoring their business to stay alive.No dinosaur
Different operators have chosen different paths, and many are realizing new clientele and niche markets that weren't obvious before the consolidators came into town.
Jay Lageschulte, owner of S and M Rentals in Phoenix, has switched equipment, dumping his stock of large backhoes and other heavy equipment in mid-2000 because he couldn't compete with the prices of the larger chains. Now he specializes in air compressor rentals, medium-size tractors and smaller Terramite backhoes, and says his returns are better on those pieces of equipment.
Similarly, Rust Rentals, a Caterpillar dealer in Albuquerque, N.M., has found a niche market for its skid-steer loaders, backhoes and earthmoving equipment, phasing out forklifts, which rented for $2,500 a month five years ago, rental coordinator Steve Carpenter says. Today, with the number of rental centers in Albuquerque having jumped to eight from two only a few years ago, the same forklifts go for $1,500 a month.
Roger Vajgrt, owner of Home Rental Center & Sales in Marshalltown, Iowa, has followed suit. The national chains haven't moved into the town of about 27,000 people, but he says the company feels their influence from about 40 miles away.
“Four years ago, we shifted gears,” he says. “We got away from lifts, backhoes and other large equipment because the consolidators were giving the back iron away. We got into the lawn-and-garden equipment rental products, and we only carry equipment that can be towed with a 1-ton truck.”
Lance Cooper, owner/president at Best Equipment & Repair in Miami, says his firm also has changed its focus in response to the consolidators. He has removed small tools from his inventory, moving to medium-size tools. In addition, the company now sports a commercial garden division, an export division, a repair shop and a sales division with a 1,500-square-foot showroom.
“We're a one-stop shop,” Cooper says. “[The rental industry] is a totally different business now, and we couldn't survive without diversifying.”New services
Other rental centers, when priced out of the market by the alleged discounting of the national chains, search for other alternatives to attract and keep customers.
When the consolidators moved into Fort Dodge, Iowa, Dave's Rental owner David Peck devised a plan on how to stay in business.
“You can't be down and out,” he says. “This is my business and my life. I had to do something.”
The result: a decision to do more repair work, pleasing both contractors and homeowners in the area.
Shaw says the arrival of United Rentals, Neff, Hertz and Rental Service Corp., along with the expansion of Charlotte-based Sunbelt Rentals, made 50 percent rate cuts the norm, not the exception. It forced him to place a greater emphasis on serving clients more effectively.
“We want to get customers in and out of the store as quickly as possible because time is money for them,” he says, adding that the company now offers delivery service not available from other rental centers in the area. “We weren't always great at customer service, so we cross-trained everybody in the shop so they could do all tasks. It also helped lower my labor costs.”Coexisting
While many smaller rental centers have felt the need to diversify their product lines and services, others are just fine with the big guys in town. Rate cutting, the predominant complaint among the nonconsolidators, isn't prevalent in every market.
Matt Kowalski, general manager at U-Rent-Um of America in Cleveland, says his rates have been the same for years and the presence of the national chains hasn't changed the way his firm does business.
Similarly, Mitchell's Rentals in Leavenworth, Kan., has changed only a few of its rates in recent years, and small independents, not the consolidators, are its main competition, partner Cindy Jones says.
Others, such as Ken Anderson, owner of Cedar Mill Lumber & Hardware in Portland, Ore., use the national chains to help determine rental rates and say the chains haven't adversely affected business.
In many areas, particularly where the local economy is strong, large and small rental centers coexist peacefully.
“Rates are on the incline here,” says Mitchell Webb, sales and service manager at A-Aarow Rents & Sales in Oakland, Calif., crediting a citywide redevelopment effort to improve dilapidated suburbs. “Hertz and United are here, but I'm doing well since they arrived. I'm doing better now than I ever did in the past, and it's looking bright for at least the next 10 years.”
“[The rental industry] is a totally different business now, and we couldn't survive without diversifying.”
— Lance Cooper, Best Equipment & Repair
Ken Bledsoe, owner of Kansas City, Mo.-based Bledsoe Rental, says his five stores are doing fine since United Rentals and other consolidators set up shop in the area. Like many owners of smaller centers, he targets the daily rentals of excavators, floor sanders and carpet cleaners while the larger chains go after the weekly and monthly rentals.
“There's nothing wrong with competition. None of the little guys have been hurt here,” he says, adding that the consolidators regularly subrent and buy equipment from his rental center. “I don't have the numbers to prove it, but I would say there are more rental stores [here] now than there used to be.”
Even Shaw, one of the harshest critics of the consolidators, acknowledges having a great relationship with most of those companies, a relationship that includes business referrals and open charge accounts.Client focus
While stories such as Bledsoe's are not uncommon, the increased number of stores could be more the result of clientele shifts than anything else.
Many smaller rental centers have veered away from larger contractors and industrial clients, opting for homeowners and small contractors.
A-1 Rental West is the only independent store remaining in Cedar Rapids, Iowa, after the three other independents were bought by United Rentals and the city's only high-lift company was acquired by RSC. A-1 owner Doug Schumacher says those moves drew him to the smaller contractors because that was business United apparently did not want.
So while many smaller rental center owners fear the day the next consolidator moves into town, slashing rates and forcing them into early retirement, changing business techniques is a viable and often profitable option despite the shortcomings.
“Lowered rates are all a negative, and it's a win-win for the contractors,” says Jeff Johnson, general manager at Midwest Construction Rentals in Bloomington, Ill., adding that he refuses to drop his rates to the consolidators' level. “But the nationals came into town and thought they'd wipe everybody out, but that's not happening.
“In fact, they haven't wiped anybody out [here]. At first, everybody was scared of them, but there's really nothing to be afraid of.”Last Gasp
When business is threatened by consolidators, consider these options to keep your rental center off life support:
- Change product lines.
- Emphasize equipment repair.
- Cross-train staff to perform multiple tasks.
- Target niche markets.
- Switch your client base.