Potential Market Changes
Everything is tied to a cycle…..soft goods, financial assets, hard assets and every other type of sellable asset or service sold in these United States.
Do lift trucks and related services fall into this category? Sure, they do. Anybody that’s been in the business for more than 25 years can tell you what it was like 25 years ago compared to what is available today. And when you add in how customer demands have changed there is zero doubt that cycles impact the material handling industry.
Being involved in the industry as long as I have covering lift trucks, construction equipment and rental companies I can assure you times have changed, demands have changed, financing methods have changed, and products and services have changed. Have we reached the end of the road or are other changes coming down the pike…..What do you think?
There was always conversation about change related to equipment dealers being geared to changes in auto industry. It seems that the auto OEM’s were always a step ahead of the equipment OEM’s in terms of novel new ideas to market and sell product and services. As an example, we can point to how the auto industry has fully adopted on-line selling and buying of both new and use vehicles. I am absolutely amazed at how many people I see working in the on-line department at a dealership. I don’t know about you, but I buy my cars on-line, so I don’t have to waste my time with an obsolete sales process.
Where I am going with this? I am pointing out that the auto industry is in decline as far as new car sales are concerned, and how this may relate to equipment dealers. We hear about what is going on in the auto industry daily. Closing plants. Eliminating a lot of models. Building up inventories of used cars because of units coming off lease. Dealing with the millennial generations that does not seem to have a love for cars. Heck, in the UK LYFT wants to eliminate car ownership and supply driverless cars as Transportation as a Service.
Probably the most important point to make about automobiles is that they are now of higher quality and last a lot longer. So, who needs a new car every three years, or five years, or even seven years? Realistically, not many people, and they are figuring this out. If you are familiar with all the non-dealer used car operations that sell late model used cars for about 50% of original cost when new, you know what I mean. You can buy a high-end car with minimum miles that might be 3 to 5 years old selling at a significant discount compared to the price of a new model. This is an easy way to move up to a BMW or Mercedes if that is what you need to do. I recently bought a ten-year old used 370Z convertible with 17000 miles on it through one of these stores and paid 30% of what a new unit would cost me.
If the auto industry leads the way how does this impact the lift truck industry. Most likely a parallel path if you think about it.
- Higher quality units using telematics to track service issues.
- Longer useful life. Why not have 7-8-year leases.
- Cost reduction changes such as lithium batteries coming into the market.
- Millennium managers no longer interested in ownership or long-term leases.
- More interest in Material Handling as a Service programs to lower costs and increase efficiency.
If I am even close to being right about some of these market changes where does that leave the typical lift truck dealer in terms of keeping and finding customers. Probably in a tough spot if the larger dealers in the market have the financial ability to address these changes and increase market share.
If you read last month’s issue of MHW, especially the article by Eileen Schmidt about the Great Battery Technology Race you know that the lithium battery race is on and that bigger customers are going to want them. A big investment for a typical dealer. But if you don’t supply them someone else will.
From what I can tell Material Handling as a Service is here and about to have an impact on the industry. You can expect requests for longer leases associated with lower annual costs. There go your market share numbers. You can even expect to bear the entire burden of ownership, maintenance and residual value, like an equipment rental company provides. You may even have to provide operators like some rental companies do.
Your options are to maintain the status quo or adapt to the new markets that are sure to invade your industry. Better start thinking about it because it is coming. Think about how fast the car industry is transforming their operations to meet newly formed customer needs. What are your customers thinking? Better find out.
Garry Bartecki is a CPA MBA with GB Financial Services LLC. E-mail firstname.lastname@example.org to contact Garry.