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Partner with AED to Integrate the Growing Rental  Sector into Your Successful Future

I remember an AED Executive Forum that I attended back in the late 1990s, where the main issue was the rapid expansion of large, national rental companies throughout the country and the potential threat these new market competitors posed to our traditional equipment dealerships. Hertz had pioneered the business model for these large rental operations in the 1980s. However, in the 1990s, other national rental players, including United Rentals, Nations Rent, RSC and Sunbelt, suddenly appeared on the scene and grew exponentially. In a span of just two or three years in the mid-1990s, national rental houses became prominent in just about every major market in the country. United alone had almost 1,500 locations in less than three years!

The presentations and cocktail discussions at that meeting were full of grim observations about what the rental industry might mean for our businesses. Most equipment manufacturers were already selling factory-direct to the nationals, often at prices below normal dealer net.

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Additionally,questions related to warranty, the impact on new and used equipment sales, and downstream product support channels raised all manner of red flags for AED members. To put icing on the cake, Brad Jacobs, the founder and first CEO of United Rentals, gave a presentation that was extremely unsettling for many of us dealers who were struggling to establish our own rent-to-rent operations. At that time, many of us viewed United, Hertz, RSC and all of the other national rental organizations as one of the most disruptive forces that we had ever experienced in our businesses.

The mood was gloomy when we broke for lunch that day, and I distinctly remember the message that moderator Mike Marks gave us when we reconvened. He opened by saying how “unfair” the situation might seem to all of us who were facing this new form of competition, which put our years of hard work and investment at risk. Most of us certainly had not planned for it. It wasn’t our fault… or was it? Mike paused, grinned, and then told us that we had better get off our complacent butts, roll up our sleeves and learn how to compete in this new market. After all, these national rental companies were satisfying a growing customer demand for additional cost-effective options to meet their construction equipment needs. As dealers, most of our rental activities at that time were limited to rentals with a purchase option (RPO). As a result, even when we did rent short-term, our rental rates were structured for RPOs, usually making our rates a lot higher than the rates of the national rental service companies. The message was clear: we had better learn how to effectively serve this new customer demand or suffer the consequences. Industry disruptions create challenges, but they also create new opportunities for those who can adapt.

Fast-forward twenty years, and the rental channel now places almost half of all new unit

deliveries in North America. While several of the national rental companies have crashed and

burned, United, Herc (formerly Hertz), Sunbelt and others are going strong. But now, most equipment dealers are also in the rental services business and are successfully competing at the local level in this challenging and growing market segment. There is no secret formula, but it does require the dealership to master the financial and utilization metrics of rent-to-rent, develop efficient processes for servicing and delivery, and, most important, develop the best people with the right skills and drive. No longer a disrupter, rental has become an integral part of most dealers’ businesses.

Rental continues to evolve at a rapid pace, driven by new products and by new data-driven technologies. Telemetrics, an explosion of software applications, and online customer-facing portals keep raising the performance bar. Challenging it may be, but the rental business will become an even more integral part of most equipment dealerships in the years ahead. AED offers valuable rental training programs and benchmarking reports to help its members keep up with this rapidly evolving industry. I would urge every member of AED to take advantage of these training opportunities, which are just part of the many benefits of AED membership. Take full advantage of them!

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