Rental programs show gains
As hardware stores are looking for ways to distinguish themselves from the competition and increase cash flow, the rental business is coming more into focus as an option. Not surprisingly, major distributors continue to step up their programs.
Memphis-based Orgill started a rental plan in 2005 and now has more than 10 percent of its 6,000-plus customers participating. One of those is Plaza Paint & Hardware in Carteret, N.J., which started rental with a $75,000 investment in July 2007. Owner Paul Mansour said the business nearly paid for itself in 2008, and he hopes to at least break even this year.
Mansour said he rents to homeowners and small contractors, and he’s trying to gain more business by sending out a series of mailers and will feature rental prominently on the store’s Web site, to be launched this year. He believes rental is a key to incremental business in his store. “A customer who comes in to rent an auger to open a sewer line may also buy drain cleaner. Or if someone rents a sander for their floor, they may very well buy stain and polyurethane to complete the job,” he said. “It’s all about add-on sales.”
The Ace Rental Place program, in place since 1993, has been adopted by 525 stores. Ace Rental Place is now an “open program,” meaning all Ace retailers have access to rental vendor programs, in-store marketing materials and the three-day training seminar offered by Ace corporate. Currently, the program features nearly 80 vendors offering hundreds of rental products.
About 12 percent of Do it Best members offer rental equipment to their customers, a number that has remained consistent the last few years, according to rental manager Chris Hill. She describes it as a turnkey program that includes a full range of rental equipment options.
Do it Best members can start a small, DIY-based program with an investment of $50,000, which concentrates on lawn and garden, floor care, airless paint sprayers and sewer machines, and can generate about $50,000 annually. Stores that want to cater more to the small contractor can invest $100,000 to $250,000, bringing in bigger equipment like bobcats, air compressors, man lifts and small back hoes.
Do it Best offers training four times a year at its headquarters in Fort Wayne, Ind., to members looking to get rental up and running. For existing programs, there’s a proprietary Web site that offers training videos for employees, quizzes and answer sheets, insurance tip of the month, a building rental rates guide and other information. “One of the beauties of having a rental program is that it really increases cash flow in a store,” Hill said. “A lot of it depends on how much money you invest.”
True Value, which has been offering the Just Ask Rental niche business to members since 1992, saw 38 stores join the program in 2008 to bring the total to 584. Additionally, True Value has more than 400 rental franchises under the names Taylor Rental, Grand Rental Station and Party Central.
According to Steve O’Neal, national sales manager of True Value’s rental division and Maintenance, Repair and Operations (MRO), consumer awareness is increasing as the number of franchises and stores with Just Ask Rental businesses continues to grow. Yet this phase of the business has not been untouched by the housing slowdown.
“Industry data suggests that growth in the U.S. rental market is moderating, which mirrors the trends we’ve seen in our business as the economy affects segments of the rental business differently,” O’Neal said. “While rental members that are tied closely to the contractor business or in the general tool segment are experiencing some pressure in this economy, we continue to see strength in the party and event segment.”