To be successful as a material handling distributor now and in the future, you must be good at the rental business, both short-term and long-term. Fellow distributor Bill Rowan, president of Sunbelt Industrial Trucks in Dallas, Texas, may have said it best: “Profits from rentals and used equipment will drive distributors out of the recession.” The problem is, many distributors don’t know how to do rentals properly because they’ve traditionally focused on new equipment sales.
Last year, Gregory Poole Equipment Company‘s long-term rentals (rentals of at least six months) were up, and that was just one highlight of our 2009 results. Below are some best practices to help develop a rental mentality at your dealership.
Take a Long-Term View
No question, rentals are tough to manage in a down economy. When cash flow becomes an issue, people tend to view things from a short-term standpoint. They see their inventory just sitting around, and they’re willing to rent out machines at ridiculously low rates to generate cash flow. By doing so, however, they put hours on the equipment. A lot of dealers today are not doing any maintenance on their own fleets because they don’t want to incur that cost. When activity does start picking up, they will be stuck with an old fleet with lots of hours on it that will cost a lot to maintain, repair or replace.
Offering low prices sets the precedent for future rates with the customer. It’s difficult to then raise rates to where they need to be for the distributor to make a sustainable profit.
Another mistake dealers make is unloading their rental fleets to get the cash. When business returns to normal, those dealers will not have a quality fleet. It’s important to maintain a good combination of new, used, internal combustion and electric trucks in your fleet. Having a good balance will make your rental fleet more attractive to customers and also gives you a solid fleet of used equipment that you can make good profit on later. There is no time like the present to buy some quality used trucks from other dealers who are offloading their fleets. Their loss is your gain.
Now is a good time to make sure you have good relationships with distributors in adjoining territories. We have established excellent relationships so that we can rent something from a surrounding dealer and then re-rent it to the customer. Going forward, that’s something that dealers will need to do more of to keep customers.
Analyze the Market
Your rental market share should equal your new equipment market share in the different equipment classes. For example, say you have 15 percent market share of Class 4 trucks in your territory. Take the three-year average of Class 4 trucks that have been delivered in your territory and multiply it by 15 percent. Is that the number of Class 4 trucks in your rental fleet? If it isn’t, then you may be missing out on rental opportunities.
Are the markets that you rent to today the same as the markets you will be renting to tomorrow? What changes have taken place? Understand what markets are coming back quicker and get the right equipment to serve them. Look at niche markets in your area, including seasonal businesses. For example, in our territory, farming and agriculture are very busy for four or five months a year. That business will come back seasonally, so we need to be prepared for that.
Look at your customer base and determine what products you could rent to them that you currently aren’t. Maybe you have a customer who uses scissor lifts in their warehouse. Would you want to consider putting a couple of those in your rental fleet? The answer is different for every distributor, but now is the time to consider all the angles.
The last area to look at is your marketing strategy. You must promote rental opportunities to your customers, via Web sites, e-mail newsletters, direct mail or whatever. Train your salespeople, technicians and product support representatives to promote your rental services. Customers today are not looking at the Yellow Pages, so make sure you have other promotional venues.
Too often, distributors get too caught up trying to sell new equipment and end up beating their heads against a wall to give the customer the lowest price. The product then becomes a commodity. Mastering the art of rentals can help avoid this.
|Meet the AuthorRichard Donnelly is executive vice president of Gregory Poole Equipment Company in Raleigh, North Carolina, and on the Web at www.gregorypoole.com.|