The downturn in residential construction has hit the outdoor power equipment market hard, according to the Outdoor Power Equipment Institute, which forecasts model year 2007 shipments to be down significantly in all product categories. While this is bad news for landscape contractors who may have to put off purchasing new equipment in favor of renting, it may prove lucrative in 2008 and beyond for rental companies who offer outdoor power equipment.
RER interviewed outdoor power equipment manufacturers to learn about the latest trends in equipment and how the segment is reacting to the residential construction downturn.
James Day, general manager, Turf Teq, New Holland, Pa.
Kevin Covert, sales and marketing manager, Rayco
Manufacturing, Wooster, Ohio
Steve Matson, sales manager, MacKissic Inc., Parker Ford, Pa.
RER: What are some of the latest trends in outdoor power equipment?
Day: The trend is increased productivity and doing more with less employee overhead — any product that has the capability to increase the amount of work an operator is able to complete.
Today's commercial landscapers and contractors are looking at products that have a good return on investment and help make them more productive. One of our products is a walk-behind power edger that is self-propelled walking forward. This machine is designed to perform 3 to 4 times as much work as a pull-backward edger and 15 to 20 times as much work as a shovel. The feedback from our customers is that they have the ability to increase the amount of work completed each day with fewer employees, putting more profit in their pocket. That is just good business.
What are some common outdoor power products in the rental segment? Has this changed much in the past couple years?
Day: Some of the most common outdoor power equipment we typically see are roto tillers, dethatchers, aerators, turf renovators and brush mowers. Turf Teq has been in the rental segment for about four years and this has remained relatively consistent during that time.
Covert: I would say loaders, dozers, chippers, log splitters and mini-trackhoes. This really hasn't changed much through the years.
Matson: For MacKissic, they include mid- and rear-tine tillers, one-man post-hole diggers, shredders and chippers, rough-terrain mowers, dethatchers and walk-behind blowers.
How do you expect the downturn in residential construction to affect the outdoor power equipment segment?
Day: Our line of equipment is sold to commercial landscapers, rental yards and institutions such as colleges and hospitals. We would expect to see an increase in sales to rental yards as more landscapers and contractors will choose to rent items rather than purchase new.
Covert: That is really relative to the size of the rental company. The smaller rental chains or stores might not be affected at all because their core customer could be small contractors/homeowners who are not affected by the downturn. These stores might even experience some growth due to the fact that with a tighter economy contractors/homeowners might choose to rent equipment in certain instances where under normal circumstances they would purchase equipment for a specific job. Larger rental chains could be affected due to the large amount of inventory they may have in stock. The residential construction downturn could cause them to sell off inventory and go lighter than normal. It could also force larger rental companies to cut their rates on rentals.
Matson: Sales may be off, but rentals could be up with people improving existing properties instead of buying new.
What's in store for the next generation of outdoor power equipment products? Are ergonomics a big concern?
Day: Any product that makes an operator more productive. Ergonomics will definitely play a key roll in the future of the industry. The easier you make it for the person operating the equipment, the more work they will get done and the happier they will be.
We recently sold two of our self-propelled power edgers to a customer that previously owned eight pull-backward edgers. He was very pleased that his productivity increased, however the secondary benefit he noted was a happier, more productive workforce and less employee turnover, which is critical in a labor-intensive industry such as landscaping.
Covert: New innovations and advancements in technology should open doors to power equipment in areas such as productivity, ease of maintenance and fuel consumption just to name a few. Ergonomics are always a concern for a manufacturer, the more user-friendly and comfortable a machine is made, the more people want to operate the machine.
Matson: The next generation of outdoor power equipment will result from quick development times as a result of the solid modeling software that is now available. It will also be user-friendly equipment. Ergonomics are also a concern because user comfort and safety lead to continued and successful rentals.
If a rental company can only carry a limited range of outdoor power products, what should the top five be? In other words, which products have the best ROI and utilization?
Day: The key pieces of equipment are the items customers will rent the most. That will depend on your specific region of the country and your customer base. Overall I would have to say that a multi-use piece such as a compact skid-steer loader would be a priority. A rental company can purchase one power unit and multiple tools for a variety of customers to maximize rentals. Some other priorities would be a roto tiller, a dethatcher, an aerator, a turf renovator and a brush mower.
Covert: Return on investment is probably the main driving factor for rental stores, especially the family-owned stores. Obviously the more a piece rents the quicker the ROI takes place, however several other key factors should be considered as well — factors like overall initial cost vs. the amount the machine will rent for vs. the length of time it will take to gain the full ROI.
In other words, an item that might have an initial investment cost of $5,000 and will rent for $150 per day and may be out on rent an average of three days a week will take less than three months to gain full ROI. That item would then allow a rental company to make larger purchases that might not rent as often, but are a necessary evil, and incur some of the cost of the larger purchase
I would say that the top five power products would be very similar to the most common power products listed above — skid-steer loader, brush chipper, log splitter, mini-trackhoe and mini-backhoe.
