Packaged or bundled products represent a key opportunity for equipment dealers to grow their rental business.
Bundling in the equipment industry not only is a key way for companies to gain access to technology solutions but also provides a means for dealers to grow, Jim Henderson, executive partner at equipment industry advisory firm Exemplary Group, said this week during a session at the 2024 Association of Equipment Distributors Summit in Las Vegas.
“Package solutions are where instead of selling a piece of equipment we’re going to have a predefined package, ideally for specific use cases, that then I could sell either as a subscription or long-term rental,” he said, noting that the goal is to have customers “sign up for services for five to 10 years.”
By bundling equipment, software, services and training into customized packages, dealers cultivate longer customer relationships and increase revenue opportunities, he said.
Dealers can also sell additional products and services – insurance, extended warranties, maintenance plans – to customers as part of the rental package rather than trying to attach them to traditional financing.
Still, securing financing remains a key component for dealers wanting to enter the long-term rental and subscription market, Henderson said.
“Long-term rental is a proven financial model that has been around a long time, but financing becomes a critical question because now [dealers] have to make sure [they’ve] got the right plan,” he said. “It’s a much bigger investment up front to start this.”
Equipment dealers’ primary barrier to entry to the rental space continues to be developing a customer base, which depends on securing financing, Henderson said.
Rent-to-rent versus rent-to-sell
For dealers with an established rental base, the issue is balancing between renting equipment to sell it at the end or renting it purely for rental purposes, Henderson said.
“In construction equipment, rental is really a used equipment business,” he said. As a result, dealers often look at used equipment rentals and sales interchangeably in the rent-to-sell model, “but rent-to-rent is always more profitable.”
While rent-to-rent is more profitable, many organizations still use rent-to-sell models, Henderson said. Rent-to-sell also comes with opportunities for dealers, such as extended warranties.
“If you’re a rent-to-sell organization, always attach [an] extended warranty or service contract to the units you rent,” he said.
Salespeople can approach warranties and other additional service products like retail stores approach technology sales during the checkout process, Henderson said.
Registration is now available for Equipment Finance Connect. The dealer-centric equipment lending and leasing event of the year offers opportunities for dealers to learn new strategies, foster valuable partnerships and emerge with ideas to immediately apply to their businesses. Learn about Free Dealer Registration at EquipmentFinanceConnect.com.