ONLINE equipment renting is off to a slow start. Part II of "The E in Rental," RER's ongoing coverage of the Internet's impact on the equipment rental industry, examines what it will take to get e-rentals on track.
The e-rental train has been slow to leave the yard. But not for lack of conductors. A new Internet rental site seemed to arrive weekly for most of the year. Rivers, Dots and Oxen. Corners, Towns, Planets. Put an "Iron" or "Rental" in front, a ".com" at the end, and yet another electronic savior had come to lead the equipment rental industry away from its old-school ways and into a brave new digital world.
Heading into 2001, the dot-commers are still promising big things, but the industry is proving a tough recruit. Many rental people see potential benefits in operating online, from reaching new customers and lowering transaction costs to accessing information and managing resources more efficiently. But many also see pitfalls: the emphasis of pricing over intangibles such as service and relationships; the risk of proprietary data falling into the hands of competitors; and the possibility that existing business will be siphoned off.
As a result, most rental companies are hesitant to leap into a virtual marketplace. In their skepticism, they are sending back a real-world message: "Show me the value." And in trying to answer that challenge - to bridge the distance between those bricks and clicks - Internet sites are re-evaluating their approach, if not reinventing themselves.
One thing is clear: The magic wand of technology can't wish e-rentals into reality. Smoke and mirrors and vaporware won't do. There are now signs that fast-buck artists are slipping out the back portal, while the sites that remain will have to dig in for a long haul, proving along the way why they'll be holding tickets when the e-rental train starts rolling.
Who's Driving?
For now, it appears online companies need rental centers more than rental centers believe they need online help. But a third party - the contractor - might sway the one-sided courtship in a new direction. The hectic, deadline-intensive world of the contractor brings scheduling and logistical nightmares - challenges that increasingly have led contractors to the rental option.
Now the Internet is becoming another ally in the contractor world, and much like the cellular phone last decade, it could become an indispensable tool. Though it's not happening overnight - 90 percent of home builders have Web access, but only 10 percent use it to satisfy their equipment needs, according to a recent survey - most say it's a matter of time.
"I've seen the trend starting with big industrial clients and contractors wanting to do more things electronically," says RentOnTheDot president Willie Swisher, who knows rental customers firsthand as a former vice president at Hertz Equipment Rental Corp. "There is nothing that tells us these end-users do not adopt technology. As we simplify the ability for contractors to process orders on computers and Web-enabled devices, the adoption [of online renting] will accelerate. That is just around the corner. It's not five years, it's 12 months."
Indeed, the risk of standing on the sidelines could be dangerous, some suggest. "[Many contractors] are forced by their clients to bid on projects through the Internet," says Victor Sachs, founder of RentalRiver.com. "And more are using the Internet to research and plan their projects. We give them access to the rental industry. ... Those who don't do it are going to be left behind."
And as more contractors, either by necessity or desire, become more comfortable with the online experience, rental centers that count them as customers can't afford to be too far behind either.
A Friend in Need
In the post-consolidation era, many people believe the Internet can even level the playing field for independent rental centers that don't have the marketing budgets of the national chains.
"Independent dealers need tools to compete with big consolidators," says Mike Patel, president of RentalCorner. "The consolidators have e-storefronts [that allow] contractors to review rental prices and specification of their products. Independents [need] the same e-commerce leverage."
Almost all the new Internet sites have expanded their original transaction-based revenue models to include other services to rental companies, including help building their own sites. By helping rental companies get their feet wet at the edge of the online waters, the dot-commers hope they will gain their trust and business as well.
"We think the key is letting the customer tell us what is important rather than cramming an e-commerce solution down their throats," says Steven Paradis, president of Ironmax.com. "We're working with rental houses, distributors and manufacturers to provide them Web-based applications to manage and promote their businesses. They said, `We like the technology - how can we do that for ourselves?'"
To that end, Ironmax is beefing up its information and research product offerings to assist equipment companies in the buying, disposing and lifetime management of their assets, among other areas of operation.
In the battle for their own survival, the dot-commers insist they are listening to rental companies.
"We understand that the industry needs to take baby steps," Sachs says. "A lot of things are not clear, and people need help making the Internet a friend and business partner. We want to help the industry get comfortable to advance to the next level of participation in our network. I encourage rental centers, instead of taking a wait-and-see approach, to sign up with everybody and see who can deliver.
"We would love rental centers to register and tell us what they like and don't like. Our technology team can make our product better based on the input."
Transaction Riddle
No rental Internet site, to date, is reporting significant revenue. Rental companies generally have resisted the idea of paying fees for business they only might do through a site. That could change if sites find a way to improve the way a rental transaction takes place. But for now, the old-fashioned phone call or contract at the counter hasn't been beat.
"You have to ask what solutions are out there for rental e-commerce," Swisher says. "The RFQ (request-for-quote) process has not presented any efficiency to the industry. It's e-mail instead of the phone or fax. That doesn't add much value to the supply chain. That's why there hasn't been a big adoption."
RentOnTheDot is pushing a real-time reservation system that handles much of the paperwork now performed at the counter. "You are able to drive more business through an existing location without adding incremental costs," Swisher says. "It allows people to be more focused on customer service instead of transactions."
Others, including RentalCorner and RentalRiver, believe the rental industry is not ready for online reservations - not yet anyway. "Rental store managers and owners do not want to lose control over who they rent to, or how they rent ... without any input by store managers and employees in the decision-making process," Sachs says.
RentalCorner offers levels of participation, including a customized, scaleable search engine it will lease to rental dealers. RentalRiver also emphasizes flexibility. "If the rental store wants to post their rates and inventory, our technology allows them to do that," Sachs says. "If they want to only describe their services, we can do that. It's up to them, the level of involvement they want. We allow them to participate depending on their readiness." Trust is another matter.
Critical Mass
If you build it, they won't necessarily come. Not on the Internet at least. Attracting "hits" or "eyeballs" is one thing; turning them into customers is another. Critical mass requires money, marketing and muscle. And even that's not enough sometimes.
"You can't just have a Web site and hope people are going to come to it," says Sachs, whose RentalRiver is partnering with a variety of other Web sites to put the rental option in front of consumers at the point of purchase. "Even the most savvy Web users have trouble reaching search engines to find local resources like rental stores. The limited investment that rental stores make into the functionality and marketing of their Web sites leads to suboptimal results.
"The biggest question to ask is where are these sites going to get $60 million to $100 million to market their sites nationally. That's what it would take to market renting, an activity that is not spontaneous, not frequent and thus not necessarily relevant right after someone sees an ad."
It also takes something else - something not normally associated with a winner-take-all mentality: neutrality.
"Both buyers and sellers have to know they are on neutral ground and are not at a competitive disadvantage," says Tim Stojka, co-founder of Commerx PlasticsNet, an e-marketplace serving the plastics industry.
The fact is, few industries - equipment rental being no exception - can support a dozen Internet marketplaces. Above all, the e-commerce winners in the rental arena will succeed because they offer solutions, savings and simplicity.
"We all want to simplify our lives," Swisher says.
"I would be reluctant to give a company my inventory and hope they don't have a hacker get that information. We never have access to the rental companies' inventory except during a request for availability. Our system checks availability and displays proximity, pricing, terms and conditions. We don't require them to download their inventory."
What's Your Angle?
A simple question of differentiation posed to the Internet rental players. Here are three responses.
RentalRiver "We look at ourselves as the rental infrastructure for the Internet (that) allows consumers and small businesses to research what is available for rent from the Web sites they are familiar with. Instead of hoping that every time people need to rent something they'll remember us and go to our Web site, we are developing partnerships with Web sites where the option to rent will be suggested to their users at the opportune moment."
Victor Sachs
RentOnTheDot "We have an 800-call center where trained people with rental and technical experience handle inbound calls from customers if they need help while they're on our [online] system. They are able to communicate live so we can walk them through the process. This is an industry where customers and end-users are accustomed to using the phone to conduct business, so we're providing that mechanism."
Willie Swisher
Ironmax "We are the one-stop shop for asset management, and that means providing services, information and transactional environments that help the customer. This segment is being overserved by understimulating suppliers trying to create a big splash and cash out. Forget about that. Patience is the key. If you've got something that was good in the old world, it can be made better by the Internet."
Steve ParadisDigital Frontlines
by Candy Cuenco
E-commerce appears to have had more luck attracting contractors and small, independent rental companies that don't have the expertise or resources to build and manage their own Web sites.
Paul Nottingham, owner of Action Rental, Kingsport, Tenn., signed up with Masterental in July because his old site, which only listed products, did not attract copious hits. Masterental specialists assisted him in designing a site able to handle online rental reservations.
Since then, Nottingham has gotten up to two online reservations a week and about 15 new customers who translated into approximately $2,500 in revenue. "(Masterental) came over and showed me how to set my site up," he says. "I think in the next four or five years it will be used more. It's like a new phone number - you just have to get your name out there."
Craig Anderson, operations manager for a National Equipment Services branch in San Antonio, says the store has not generated revenue yet based on online rentals. But the branch, listed in Rentmaker's network since February, has received 10 to 15 new responses a month.
"I've seen a lot more bids come to me," Anderson says. "But as far as generating more business, I can see that happening more in the future. I have a feeling it will start picking up at the first of the year."
Joe Geraci, national purchasing manager for LVI Services, says the advantages of using specialized rental portals are twofold. New York-based LVI, one of the largest asbestos abatement contractors in the country, began using Rentmaker about four months ago because it needed to rent skid steers for a project. After heeding a supervisor's advice to post a bid online, Geraci received about six responses in two days. Had he gone through the traditional bidding process, soliciting bids from area rental houses, he says he would have received bids about a week later.
"Saving time is really the biggest benefit," Geraci says. "In the normal bidding process, you really only get local companies within a 50- to 100-mile radius who will respond to you. With (online bidding), companies in remote areas of the country can find you, too. I'm no longer finding them, they're finding me because they're checking out Rentmaker."
While satisfied with online bidding overall, Geraci says the process could have been more efficient had he not received responses from vendors who didn't have the equipment he needed.
"If possible, maybe (portals) can try to weed out vendors who just want to get their foot in the door, who want to maybe try to offer you something else," Geraci says.
Judging From Above
by Candy Cuenco
A major rental player sees little value in the rental portal model.
"Our customers are intelligent enough to understand that business-to-business exchanges, like these sites, are basically broker exchanges," says Bob Miner, vice president of strategic planning at Greenwich, Conn.-based United Rentals, No. 1 on the RER 100. "As a result, they're putting themselves in the transaction without any type of value. Most savvy companies that rent understand that that's an extra person in the chain and they will be paying for it."
Miner also says B2B exchanges might make equipment rental a commodity. These specialized portals targeting renters typically work by transmitting requests for quotes from contractors to a network of rental houses, which often rely on low rates to lure potential customers. But he says equipment renters value long-standing relationships with rental companies, outstanding product support, durable products and timely delivery more than who offers the lowest deal.
"I see the value of a B2B exchange for customers who are not that sophisticated, possibly homeowner types or rental stores that don't have the capability to host their own site," Miner says. "But it probably won't even be beneficial for the do-it-yourselfers because when they need a particular piece of equipment, they go to somebody local. They don't go online. The guy who's (requesting) the bid can get the lowest bid from Joe Blow Rentals, but what if Joe Blow can't support his products? What if the equipment breaks down?"
Realizing that the Internet is a powerful marketing tool, as proved by e-ventures such as eBay and Amazon.com, United launched its own virtual rental company. "There's a tremendous value of the Internet to the industry," Miner says. "It allows customers (access) to a tremendous amount of information, to get online advice, to see their account online and to find out which (rental store) is closer to them. At our site, we give our customers an experience that's similar to going to their own rental store and talking to a rental manager 24/7."
Miner did not divulge United's online rental revenue because "it is not easily calculated" and because most transactions are finalized in United's branches.
