The recent executive forum organized by the Associated Equipment Distributors brought together many of the industry's most influential people for surprisingly frank discussions about a wide range of issues. It was great to see so many topics examined with openness and candor.
United Rentals' Brad Jacobs started off the conference on an optimistic note, proclaiming that the rental industry is here to stay - an irreversible trend as corporate America continues to discover that it is far more economical to rent equipment than it is to purchase it. I'm not certain about his bold prediction that the industry will grow to $50 billion or $100 billion in the next five years. That may be wishful thinking, but I do expect to see the industry continue to grow.
At a recent growth conference in New York, with representatives from more than 1,000 industries, Jacobs reported that the highest growth margins - other than from Internet firms - were experienced by equipment rental companies. This supports the opinion of a number of forum participants that they expect more investors to be attracted to rentals in the coming years. We all know that the Internet industry, although explosive, is certainly a risky one for investors.
The possibility of manufacturers' buying rental companies and playing a major role as direct participants in the rental market was also addressed. The acquisition of Prime by Atlas Copco came as a big surprise two years ago. When Atlas doubled its rental holdings by purchasing Rental Service Corp., again few industry participants expected it. The next time a manufacturer buys a major rental company, it will come as less of a surprise.
The consensus on the future of smaller rental companies was that this is a growing industry with an expanding pie and plenty of room for all sizes of companies.
The changing role of the distributor was repeatedly referred to throughout the two-day event. With more and more manufacturers selling directly to rental companies, the role of the distributor is clearly changing. The potential for distributors to provide product support, service, parts and major repair was repeatedly emphasized.
The possibility that distributors will play a major role in used equipment distribution in the future was also discussed. As national rental companies lower the age of their fleet by purchasing new equipment, a lot of relatively young equipment will be available on the market, presenting another new opportunity for distributors.
Ultimately, the analysis revealed that the future of distributors lies in rentals. Although rental companies and distributors will play complementary, partnering roles in the coming years, they will still be competing for many of the same customers. And the lines between the two will continue to blur.
There is no one, clear answer for every company. You have to do what you do best and what makes sense in your market. But you must be aware of the forces of change all around you. And willingness to change where necessary may be the key to survival.
