[In last month's issue, RER interviewed executives of Meyer International, London, the new parent company of Denver-based RentX Industries. This is part two of a series on the British rental - or hire -industry.]
If it is true that in five or so years the U.S. equipment rental market will look similar to the British market today, then well-run independent businesses with savvy management have a lot to look forward to here. That much became apparent during a recent RER visit to an independent U.K. rental - or hire as they are called in the United Kingdom - company in Southall, Middlesex, England, near London's Heathrow Airport.
Eveready Equipment Hire and its three-man management team bucked the United Kingdom's consolidation trend for the past 20 years. What they have to show for it is a 10-location company with 150 employees and more than $15 million in annual revenue.
After an afternoon with Eveready's Richard Melville and Trevor Goodwin (Tom Pearce, the other principal, wasn't available), comparisons to the independent company's U.S. brethren become strikingly clear. As Melville and Goodwin complain about rate-cutting competitors, increasing government regulations and the tight labor market, one of the few things that makes them stand apart from their U.S. counterparts is their accents.
RER: Much has been made about the level of consolidation that has occurred here in the U.K. Has Eveready been approached?
Trevor Goodwin: Quite a few companies our size have sold to bigger companies. We've been approached by all of the chains, but we're not interested at the moment.
Richard Melville: The three of us started in this business working for a big company, and we learned the trade there. We also learned what we didn't like about working for a big company.
When we started out on our own, there were some nights when Tom [Pearce] used to sleep on the workshop bench. But in those days we also rediscovered why the business was fun. We were just going flat-out to serve the customer. There was no internal company politics, no squabbling.
RER: So it seems you have always enjoyed the independence that comes with being an independent?
Melville: We use our flexibility to stay a step ahead. We don't have shareholders whom we have to ask to get something done. We can react immediately. If we see demand for something, we can do it today. It is one of our great strengths, really.
Goodwin: If you don't try things, you are not evolving. We're not so full of bureaucracy that we won't try things. Sometimes they work, sometimes they don't. We try to get away from the McDonald's approach.
RER: Doesn't that become a bit difficult when there is such demand for talented, well-trained rental employees?
Melville: The big companies have high staff turnover because they really are more like McDonald's. They use a lot of very young people; they get some good people. But they teach them only the basics because it is about the system. Everything in each shop is in the same place and painted the same color.
Many companies like that do not allow career progression. We try very hard to keep people happy doing what they do well. We have people who have been working in the branch 15 years and they like it, and we reward them. What that gives us is an advantage in experience. A lot of big operations have staff with very low levels of experience and high levels of turnover.
RER: That may be true, but don't big outfits offer customers lower rates because of increased buying power?
Melville: At this point, we have sufficient size, making us close to some of the larger companies in that regard. The difference in what we're paying and what some of the larger companies are paying is now down to the last few percent. We've already achieved the big gains where the price drops 20 percent or 30 percent.
The wisdom of retailing says that your whole success is based on how you buy. I am not convinced that that applies to hire. If you can hire something and get the right rate or the right utilization or the right life out of it, whether you paid 5 percent more for it at the beginning is a small factor. So much of where you are making your money is after that. If we were straight retail, it would be a lot different.
RER: How else do you compete with some of these companies that are several times your size?
Goodwin: We have general tool and plant hire equipment in every depot. We also have specialty equipment and experts in that equipment at nearly all of our depots. We have a floor specialty depot. We have a railroad equipment depot. And we have an expert there with the equipment that advises people how to operate the equipment. We could try to have 10 experts at each depot, but we wouldn't really have 10 experts - we'd have 10 people who think they are experts. It is better for us to keep each specialty item along with one expert concentrated in one depot.
The stuff we do is the finicky stuff that you have to have a flair for and a passion for. But the other side of it is that you can expect a fair rate for the equipment. It gives you another form of income that is not dictated by the other companies in the area.
RER: Are you saying that specialty, or niche, equipment is less susceptible to competitive rate pressures?
Goodwin: Yes. Much of the market has been spoiled by low rates. It really is a shame because there is no need to do it, yet it happens much more often than it did six or seven years ago.
RER: Speaking of niches, a lot of U.S. rental companies now sell new equipment and consumable items. Do you sell new equipment?
Melville: We are power tool distributors, but we don't sell a whole lot of new equipment.
One company we bought a few years ago was a garden equipment distributor. Because it had an established customer base, we started selling lawn mowers and lawn tractors. We did it for about a year, and realized the amount of work we put into it just wasn't worth it.
Hire is a different concept. Hire is service. We're about solutions, not pride of ownership. When you sell a lawn mower, the customer wants to look in the mirror and see what he looks like pushing it. They are going to own that piece for 10 years. When you hire a drill, you are not doing it for the satisfaction of owning the tool; you are doing it because you need a hole.
If a contractor could mix the amount of concrete he needs with a shovel, he would. When he can't, we supply the mixer. If he could break the concrete with a sledge hammer with one blow, he would. When he can't, we provide the hammer. We provide the solution. When you start selling products to consumers, it is completely different.
Goodwin: It is a very fine line because it can be a pain to sell equipment. There are some customers who will constantly keep coming back with every little thing that goes wrong with it. You don't have time for that when you are concentrating on renting other items.
RER: Are distributors attracted to the hire business here?
Goodwin: When Caterpillar started up its own hire company here several years ago, they upset hire companies. A lot of them stopped buying Caterpillar products. As soon as Cat distributors got rid of their hire operation, hire companies went right back to buying from Caterpillar.
In this country, the attitude toward distributors has changed dramatically over the last few years. When it comes to buying equipment, it doesn't make too much of a difference to us at the end of the day because we tend to buy directly from manufacturers.
Bucking the Buyout Just how much does increased consolidation in the U.S. rental market threaten medium-sized independents? In the United Kingdom - where consolidation has been occurring for the better part of a decade - strong, well-run independents are surviving and succeeding.
