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With the ubiquitous demand for commercial and residential construction projects, the demand for heavy construction equipment is also surging. Valued at $193.10 billion in 2022, the industry is estimated to reach $274.84 billion in 2031. Contributing to the immense growth of the industry is the rental market, where contractors and construction companies are now preferring to rent construction equipment over purchasing. Due to the high-value proposition of rentals, the trajectory of the equipment rental industry is expected to surpass all growth projections.Reasons behind the increased preference for rental equipment:
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- Inflation: The inflation in the prices of construction machinery makes it difficult for contractors to source quality equipment and adopt new technologies for efficient operations.
- Maintenance Costs: In addition to the ownership costs, the maintenance costs of construction equipment are also high. Due to the nature of work, machine breakdowns are imminent, and repair parts cost a fortune.
- Workforce Utilization: Equipment ownership costs include hiring mechanics and service professionals to keep maintenance logs. While they do assist implicitly in increasing productivity, in a sense also lead to poor workforce utilization.
- Tax Savings: In contrast to purchasing heavy equipment, renting equipment is accounted as a business expense and thus is deductible in taxes. Moreover, in rental equipment, businesses don’t have to bear any depreciation and recapture taxes.
» Trends in The Equipment Rental Sector
1. Demand for Advanced Technology
Construction companies seek innovation and technological advancements to bring more efficiency and power to their machinery. Several equipment manufacturers are already emphasizing this regard and making their equipment more efficient than ever. Some technologies that manufacturers are incorporating into their equipment are electric power, hydropower, GPS-enabled telematics, the internet of things (IoT), wireless controls, and data analytics. Additionally, construction companies should prioritize the security of their data by implementing DMARC policy and other measures to protect against email threats.2. Shift Towards Online Platforms
In recent years, there's been a cumulative shift in how equipment rental companies operate their business. The same can be said for incumbents like United Rentals and Sunbelt Rentals, who have dedicated platforms to rent out heavy equipment. Taking inspiration from these incumbents, many nascent businesses and new entrants are investing in online platforms from which customers can directly rent equipment with no manual interaction.3. Increased Preference for Sustainable Equipment
Along with digital advancements, construction companies want equipment that can help them reduce overall emissions and carbon footprints. Similarly, there have been numerous regulations to ensure the use of better fuel options, recyclable materials, and energy-efficient equipment design. In addition, companies are introducing Corporate Social Responsibility (CSR) policies and strictly adhering to the usage of low-emissions equipment.4. Flexible Rental Terms
The demand for flexible usage agreements is on the rise in the equipment rental sector. In these agreements, construction companies are not responsible for equipment maintenance and enjoy a more flexible pricing structure and other related stipulations. To streamline the implementation of these flexible usage agreements in the equipment rental sector, construction companies often rely on advanced inventory management software, which helps track equipment availability and maintenance schedules.» Top Players in the Equipment Rental Industry
As the industry is highly fragmented, it is saturated by both online and offline players, including existing players and new entrants. Another characteristic that dominates the industry is intense competition, where players are striving to provide better services to companies with better pricing strategies and customer support.Some of the top players in the equipment rental industry are:- United Rentals
- Ashtead Group
- Herc Rentals
- Hertz
- Loxam
- Kanamoto
- Ahern Rentals
- Aggreko
- H&E Equipment Rental Services
- WillScot Corp
» Operational Model of Equipment Rental Platform
There are numerous operational models available in the industry. These usually depend on the platform functionality and business preference and can also depend on various factors, such as how many processes are being handled offline and the value proposition you wish to offer. For reference purposes, you can have a look at the following operational model and can also modify it to support your business requirements.-
- Step 1: The admin uploads detailed equipment listings on the platform
- Step 2: Customers visit and browse those listings
- Step 3: To place an order, customers select a listing and enter rental date inputs
- Step 4: After receiving the rental date inputs, the system generates an invoice
- Step 5: To finalize the order, the customer pays the invoice amount and submits a rental security amount
- Step 6: The admin completes the order via the selected fulfillment method
- Step 7: After usage, the customer returns the equipment
- Step 8: On receiving the equipment, the admin inspects it for any damages
- Step 9: In case of any damages, the admin reimburses the same from the customer’s security amount; otherwise, returns the same to the customer
» Possible Revenue Generation Sources
To increase profitability, it is wiser to implement a diverse revenue generation strategy inclusive of numerous streams. This way, the secondary revenue generation streams can help the businesses cover up any shortfalls in primary revenue streams. As per our evaluation, you can include the following revenue streams on your equipment rental platform:-
- Rental Revenue: The primary source of revenue
- Rental subscriptions: For recurring revenue and building brand loyalty
- Rental add-ons: For upselling complimentary items and services, such as machine oil, attachments, and operator services
- Consumable items: A mode of integrating sales revenue on your platform
- Display ads: Revenue generated by showcasing third-party advertisements on your platform
- Affiliate sales: Sales revenue from third-party sales that happen when a visitor clicks an ad on your platform
» Key Features Required on an Equipment Rental Marketplace
Back in the day, when bespoke development used to be the only means to develop a rental website or marketplace, businesses were required to draft complete Software Requirement Specification documents. The drafting itself used to consume time as the feature list used to be long. Today, the process is simplified because of tested and tried ready-made software. We are already aware of the features required to make rental marketplaces highly operational. Note that you may not be able to find all these features in all equipment rental booking systems or software and may be required to do your own research.-
- Rental booking calendar: This will allow contractors to view equipment availability and enter rental date inputs on the platform. It will also prevent double booking and assist in accurate invoicing.
- Document verification: Contractors can directly submit documents for verifying business identity, worksite address, etc., on the platform.
- Product inspection: On receiving the equipment, contractors can inspect them for any damages and report the same. They can either request an exchange, refund, or even simply report the damage and continue with the rental.
- Rental security management: This feature will help you collect a security amount from contractors for damage control purposes. You can use the security amount to reimburse any damages.
- Request for Quote (RFQ): For large orders that are very complex, contractors often expect manually discounted quotes. The RFQ functionality on your platform will allow them to send you their requirements and negotiate pricing as well.
- Agreement management: Enlist your terms and conditions on the platform so that contractors can view and eSign them at the time of order placement.
- Tiered pricing: This option will allow you to set daily, weekly, and monthly pricing for your rental equipment.
- Rental add-ons: Many contractors need other supplies or services with heavy equipment. It is better if you can sell those complimentary supplies along with the heavy equipment.
- Inventory management: These options will allow you to track inventory, including overdue returns and stock levels, in real-time. Additionally, you can view inventory reports and set alerts for low stock levels.
- Late returns management: Equipment rental business incurs lost opportunity costs in case of late returns. These can be easily recovered with late return management features.
- Late cancellations management: Similar to late returns, late cancellations lead to losses in terms of order processing costs. These can be recovered with proper management features.
- Maintenance buffer period: After every rental, the equipment may require inspection and maintenance. The maintenance buffer period will allow you to sync the maintenance time with inventory. Meaning, only after the maintenance period is over, the equipment will be added back to the inventory.
- Product comparison: Many heavy equipment have similar features and attributes. To help contractors find the right equipment as per their requirements, the product comparison feature automatically creates a comparison table of multiple equipment.
» Build The Online Equipment Rental Website or Platform
There are two popular categories of tried and tested readymade solutions that assist business owners in launching a full-fledged equipment rental platform. These categories are self-hosted solutions and SaaS solutions.› Self-Hosted Rental Solutions
Being self-hosted, these solutions provide business owners with the freedom to select a hosting server of their choice, which can either be an on-premise server or a third-party hosting service like Amazon AWS and Bluehost. The best part about opting for a self-hosted solution is that you can select a more secure or faster server that might not be available in SaaS solutions.Benefits of Using Self-Hosted Rental Solutions-
- As you get complete control over the hosting server, there are no restrictions on the number of listings, transactions, admin accounts, and features. This makes your platform highly scalable.
- You can opt for a faster and more secure server.
- Highly cost-effective in the long term as there are no recurring payments. All money invested can be recovered within 12-24 months.
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- You may need to invest in a hosting server separately from the software
› SaaS Rental Solutions
SaaS solutions are hosted on the software provider’s servers and delivered to business owners as a monthly or annually recurring service, thus the term Software-as-a-Service (SaaS). As SaaS solutions are broken down into monthly costs, they appear very cost-effective at first glance. Moreover, SaaS software are widely used and thus are easy to rely on. However, as the service provider gets complete control over the server, there can be some limitations in the number of listings and transactions.Benefits of Using SaaS Rental Solutions-
- Highly preferred for short-term usage
- No need to buy a hosting server/service separately
- No server management involved
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- There are often limitations on the number of listings and transactions. Due to this, it becomes difficult to grow your business
- You don’t get complete control over the software. Thus, any price revisions apply to you as well.
- Very costly in the long term because of never-ending costs.
- Do not provide the required competitive edge, as your competitors can easily migrate to the same platform.
» Conclusion
Stepping into the equipment rental industry to capitalize on the rising opportunities will require proper research and planning. While the software technology and platform will simplify operations, the major contributions in other aspects need to be made by you. These contributions can involve business licensing, competitive analysis, coming up with a pricing strategy, Go-to-Market strategy, and after-sales strategy. You may also need to establish business connections to get your first few clients and then can expect to grow your equipment rental business once your rental platform gains customers’ trust.Author Bio: Saurabh Thakur
Saurabh Thakur is a Digital Marketing Strategist and business consultant who aids entrepreneurs in establishing effective digital touchpoints, boosting sales, and fostering business growth. Leading a team of skilled professionals, Saurabh consistently delivers exceptional results that meet and exceed customer expectations. Connect with him via LinkedIn.
