Retail rental market ripe with opportunities
Tim Post and his wife Mary entered the retail rental equipment business in 1994, three years after launching T&M Hardware. Post said their objective was to offer customers an alternative to purchasing larger or seldom-used pieces of equipment and to help make their projects easier and more affordable.
T&M Hardware and Rental, a Do it Best member-owner, now has six locations — five in Pennsylvania and one in Ohio. “We began by offering tents, tables and chairs, and inflatable bounces,” he said. Today, in addition to the party and equipment items for rent, T&M stocks over 22,000 hardware items at each location, with access to more than 75,000 items at its Medina, Ohio, distribution center.
He said sales at his rental business have increased every year since 1994, on average of 7% to 11% annually, even growing during the recession years. “We think rental is a great complement to what we do in the hardware business,” he said.
Statistics show the retail rental business is vibrant, with a robust future. The American Rental Association’s current five-year forecast calls for 7.2% growth in 2016, 8% in 2017, 7.9% in 2018 and 6.8% in 2019, reaching $51.3 billion.
What is fueling the market? Some retail executives said the opportunity for growth could be traced to the recession, when scores of hardware stores closed. This created a void in many markets. Post, for example, seized an opportunity by buying out a rental competitor in 2012.
Others are taking advantage as well. Destination True Value runs an expansion and remodel program for members that are interested in entering the rental segment, but did not previously have the room. “We do a very good job of assisting entrepreneurs who are interested in opening a rental store,” said Mike Smollock, national sales manager for True Value. “The rental industry is in a great position today.”
Roger Vajgrt, president of the American Rental Association, said the retail rental market has shown the ability to flourish in good times and bad. “I wouldn’t say it is recession-proof, but when things are good and business is fast and furious, sometimes contractors don’t have the time to buy something new, and they will rent instead. Conversely, in tough times, homeowners may not want to invest in a product they may only use a handful of times and will rent instead.”
According to Post, merely being in the retail rental space does not guarantee success. He said it is crucial to know your audience. For example, the DIY/ homeowner/small contractor segment is much different than the large contractor/ corporate renter. While the DIYer may rent equipment for four hours, or perhaps a day or two, the larger contractor is a long-term renter. Furthermore, today’s rental equipment is trending lighter and constructed of aluminum or plastic as opposed to stainless steel a decade ago. “Some contractors won’t appreciate the plastic; they think it is cheap,” Post said.
“My advice is: Don’t try to do both because you can’t be all things to all people.”
Post focuses on the DIY/homeowner, a market that has changed with the influence of millennials and women entering the market. “The rental industry has done a good job adapting to the changing demographics,” Vajgrt said. He noted there has been a steady rise in women renting equipment, and manufacturers have complied with more user-friendly features, such as electric starts and smaller handgrips.
Smollock said women are driving many of the DIY projects in rental today, and to that end, True Value has focused on creating an environment that is desirable for them. “By that I mean offering smaller, easier-to-use products,” he said. Women in greater numbers are renting products such as electric pressure washers, which offer a cost-effective solution versus gas-powered washers. They are also renting snow throwers, push mowers, and other items for household and seasonal use.
Some women are into compact utility loaders. These popular mini skid steers are small enough to fit through the average fence gate. “Most are walk-behind but a few models have ride-on capability,” Smollock said. “They come equipped with several attachments, such as post hole augers, trenchers, levelers and standard buckets.”
Vajgrt added, “Everybody and their brother have these little mini skid steers for landscaping and other household tasks.” He said the skid steers are easy to operate with joystick controls and are not intimidating. Likewise, mini excavators are being rented for general excavation and site preparation. “Again, it is about ease of use. Pulling a hydraulic level is a lot easier than digging with a shovel,” Vajgrt said.
Millennials are also influencing the market, in large part because these 20-somethings prefer to rent as opposed to buy. “We are seeing an emergence of the millennial customer in rental,” Smollock said. “This customer segment is better informed about their project needs or what products they are interested in renting.” In a nod to millennials, some rental equipment contains QR codes that allow smartphone users to access important information from the jobsite.
New-home sales increased in February
Sales of newly built, single-family homes rose 2% in February from an upwardly revised January reading to a seasonally adjusted annual rate of 512,000 units, according to data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
“While builders contend with industry headwinds such as labor shortages, relatively low mortgage interest rates and solid job growth should keep the housing market moving ahead as we enter the spring buying season,” said NAHB chief economist Robert Dietz.
The inventory of new homes for sale was 240,000 in February, which is a 5.6-month supply at the current sales pace. The median sales price of new houses sold in February was $301,400.
Regionally, new home sales increased 38.5% in the West, while sales dropped 4.1% in the South, 17.9% in the Midwest and 24.2% in the Northeast.
“The February bounce back in sales is in line with our builders’ reports that the housing market continues to recover at a slow but steady pace,” said Ed Brady, chairman of the National Association of Home Builders (NAHB) and home builder and developer from Bloomington, Illinois.