Dave Christifulli
Vice President
Sales and Product Support Wacker Corp.
Menomenee Falls, Wis.
RER: What changes have you seen in relationships between manufacturers and the distribution channels?
Christifulli: We consider our relationship with the distribution channel a partnership. To maintain a leadership role in this industry, it's vital to work with the channel partner in providing programs, service and support tailored to their needs, so they can be successful. Of course providing premium products is just the beginning. Implementing process improvements such as online ordering and system integration from manufacturer to channel to end user are key to maintaining long-term relationships.
However, the most important aspect in maintaining and strengthening channel relationships is education and training. Manufacturers that can offer superior product, sales and service training are providing the added value that channel partners need to thrive with the changing business practices and technology.
How do you expect those relationships to change in the foreseeable future?
We believe we will see continued consolidation of OEM suppliers on the part of the channel. By reducing the number of suppliers, the channel is expanding its purchases with specific manufacturers and in turn creating more leverage with them. This expanded purchasing power allows the manufacturers to invest more in the value-added support programs, such as training, that the channel relies on to be successful.
Wacker has put a lot of effort into training in recent years. What benefits have you seen from this?
Six years ago, Wacker unveiled a 64,000-square-foot Visitor Training Center and today the classrooms are filled beyond expectations. Now our problem is how to increase our training capacity. It's obvious that the rental channel has recognized the importance of retaining employees and the value-added benefit of employee training and communication.
Talking about the rental channel, what changes do you expect to see?
The growth potential is unbelievable in this industry and future expansion is on its way. There will be continued acquisitions but more selective by market and product line. There will be consolidation among the top 20 rental channels and throughout the different branches of the channel from STAFDA-type houses to independents.
So far we have seen that change has been good for the rental industry and future change will help the rental channel better serve its customers through broader product and services offerings.
Do you expect a lot more expansion from the national chains? Will the smaller independents continue to be viable force?
Yes, national chains continue to have strong presence as necessary. They will continue to expand as necessary to serve the individual market needs. However, on the other hand, they are willing to close underperforming locations. This opens opportunity for some independents. The independents fill that gap between the do-it-yourselfer and mid-sized contractor, and gives them the opportunity to service the niche markets. Hardware chains such as Ace, True Value and HWI are also doing well.
Do you expect the home-improvement-type rental departments to continue to play a growing role in the rental market?
Definitely yes, especially if those companies would improve the promotion of their equipment available for rent. The manufacturers have spent a lot of time and money creating operator manuals and ‘how-to videos’ to help educate the homeowner on the use of their equipment. So everything is in place for the rental channel to increase ROI on those rental departments. They just need to let their customers know how easy and convenient those home-improvement projects have become.
Wacker has put a lot of effort in marketing generators recently. Do you see the generator rental markets as a particularly fast-growing segment and, if so, why?
Well, obviously we see great potential in the generator rental industry. Our investment into this segment of business has been substantial and we believe its potential is far reaching. Residential construction for non-traditional temporary power is new to the market. We are able to offer superior service that many manufacturers can't offer including a 2-year warranty, training and unique regional product specialists. We have strategically placed power specialists across the country to focus all their technical expertise, marketing and technical sales support to this product line.
How can general rental companies that want to play a greater role in the power market do so?
Most rental companies already have a few portable generators in their fleet but in order to grow a power rental business you will need to invest into mobile generators in the 20 to 70 kW range. Do your homework. Call up your local electrical contractors and ask them what size generators they are most likely to need. If you see a contractor using a mobile generator on a jobsite, note the size of unit and the contractor, basically you want to start a mailing list of potential users while you are researching the market and your competition.
And if you are real serious about increasing your power rentals, join the EGSA — the Electrical Generating Systems Association. You will not believe the amount of educational materials and seminars that are available from the different manufacturers and the EGSA.
And there is no better place to start investigating a power rental fleet than at the annual The Rental Show.
It appears we are heading into a strong growth cycle for construction and equipment rental. Do you expect a long-lasting up cycle?
We definitely do expect to see another two, possibly three, years of growth and the growth seems to be coming for all sectors. Excluding major unforeseen circumstances we are expecting continued growth through 2008 and well into 2009.
What should rental companies guard against during this expansive cycle? Are there lessons rental companies should have learned during the last expansion cycle, and what mistakes should be avoided this time around?
During the good times it's easy for dealers to throw money at problems, but often times these fixes don't go deep enough to carry them through tougher times. Now is the time to prepare for the future. Dealers can start with relying on manufacturers' programs such as training, and look at process improvements to streamline their business functions through technology. As a manufacturer, Wacker has made continual process improvements, and these changes in strategy and processes have benefited us greatly during the leaner time.
Are any of these areas of more concern than another:
Inflation, flattening of the housing market, rising interest rates, material shortages and high increase in prices of materials, fuel shortage and price hikes, long lead-times on equipment?
Any one of these items can cripple a rental business if we let them, but over the years those rental businesses with sound business plans and processes to handle the changing market conditions continue to be the market leaders. We cannot control the list of items above, but with a good business plan we can minimize their effects on rental operations.
Any major plans for Wacker in 2006?
2006 will be an exciting year for Wacker. We will launch a field sales automation program. This program will increase efficiencies by improving inventory management and lead times process and allow our field sales force the ability to support the dealer through the immediate availability of critical information.
Equipro, a subsidiary of Wacker Corporation, which was incorporated in March 2003, is successfully addressing the growing service gap in the light construction equipment industry. Dealers who do not have a full-service shop or need an overflow source are using Equipro to increase the uptime of their rental fleet. Currently there are 15 Equipro locations nationwide and we expect to add 18 new locations in 2006.
