I don’t know about you, but I probably go through about 100 emails a day related to the equipment and rental industries. And when driving to and from work I listen to some talk radio shows, some of which focus on business matters. Friends and acquaintances also forward emails and magazine articles dealing with my equipment/rental interests. I try to stay current on industry matters.
On one radio show the host asked “Of the Top 500 US companies in 1955 …how many are still around?”
Interesting question. After listeners called in with a few guesses the host reported that only 10% are still around. 50 out of 500 still doing business. How can that happen, when you consider that these were the Top 500 entities with the resources to do pretty much do what they need to do to remain profitable in their industry.
As the show progressed the conversation continued about how a top US company falls off a cliff, apparently unable to cure their woes before getting into an irreconcilable position they are unable to recover from. My guess on “why” is probably close to the real why……
- Too much debt
- Too many long-term obligations
- Slow to recognize changes in the market.
- Unable to fund the replacement of the current business model with a new one.
But no matter how you look at it a new vendor found a way to disrupt using pricing, product improvements and ways of doing business to cause a major company to shut its doors.
Amazing, is it not. And you continue to hear about these events even more today because they are happening at a quicker pace compared to 1955. And you, as industry leaders need to recognize the disruption in your markets and plan accordingly
YOU MUST ADAPT OR FIND YOURSELF OBSOLETE, and eventually out of business.
Some of the related material I came across recently is as follows:
The Car industry is under siege.
Less cars being sold. Less cars being leased. Drivers finding alternative forms of transportation. Electric cars to take over the market. People keeping cars longer. Frustrated dealer network. OEM’s who may be unable to adapt in time.
Pure rental volume increasing
Less people want the headache of owning something. They don’t want to pay for it, finance it, operate it, maintain it, store it, insure it and then sell it for whatever they can get for it. They want it when they need it and really don’t want to obligate themselves for time, they don’t need it.
United Rentals going into the service business
United Rentals in expanding their business to include customer service and management of customer fleets, training and technology solutions. We all know that the key driver of the equipment business is parts and service and rental. How long to do you think it will take before United Rentals shoes up in the industrial markets to not only sell service but maybe a more flexible rental alternative.
CAT plans to DOUBLE its Parts and Service sales by 2026
10 Year Plan, from $14 to $26 billion, providing digital tools, machine diagnostics to remotely identify problems, create new products, promote aftermarket technology, lower costs, increase uptime, add to residual value. Big numbers. And you must believe they will service all brands. How are competitive dealers to deal with this development?
Remanufacturing replacing New Sales.
Reman or Refurbished unit sales increasing. You can purchase construction equipment and trucks and I am sure there are refurb lift trucks out there for sale. If there are not, there should be. There was a study done that concluded that a price near 60% of what it costs for a new unit is the magic number. If you could get it for 60% of new you would buy a refurb unit…and at more than 60% you may prefer to just buy new. OEM’s I am familiar with are offering a three-year warranty on a refurb sale, and have sources providing 60-month financing. Done right an OEM can make more money on a refurb than they do on a new unit. The same goes for dealers who sell them.
Lithium Battery impact
In the Car under Siege comments above the switch from gas/diesel to electric cars is well under way with the major OEM’s planning to invest $400 billion over the next five years developing electric vehicles. It is a matter of survival, adapt or become obsolete. Switching over from the current business model to the electric model, with the debt and operating cash flow required to run both businesses could be unachievable. Could be the start of another 1955 cycle and on this issue lift truck OEM’s and dealers are right in the middle.
Every industrial truck OEM, every dealer and every industrial truck customer will find themselves involved one way or another with each one of the discussion points highlighted above, which represent actual events taking place that will impact the industry.
Can you see yourself selling a pure rental program to a customer who only pays for what they need when they need it, with pricing substantially below current rates because you are using refurb units with new lithium batteries and technology to remotely monitor the unit. Think that would be a winner!
KEEP SENDING THOSE ARTICLES AND EMAILS. AND SIGN UP FOR OUR SEPTEMBER 19th DEALER CONFERENCE.
Garry Bartecki is a CPA MBA with GB Financial Services LLC. E-mail [email protected] to contact Garry.
