The elephant in the rental room

Offshore made equipment is an elephant in the room. It is a very touchy subject in any industry, including the rental industry, where the mere mention of the topic is enough to spark heated debates across the continent.

Canadian business owners recognize the importance of “Buying North American” in order to help stop the bleeding of jobs and bankruptcies. Although this is the exception more than the rule, as many of the major manufacturers of rental products are based around the world particularly in Europe and Japan.

Seeking the best in quality, price and service in a global economy, owners often lean to the ABC purchasing strategy, Anything But Chinese. However, rental operators resist for as long as they can but often find the temptation of low price, ample supply and improving quality difficult to ignore. This is especially true if a competitor down the road has added offshore products to their fleet.

The big question is if you can’t beat them, do you join them? In a previous issue Canadian Rental Service magazine interviewed a handful of rental operators from across the country about the state of the economy. Here is what they had to say about offshore equipment.

“The business of small hand tools has gone by the wayside,” says John Dutton of Coquitlam, B.C.-based Austin Tool Rentals. “I can basically get rid of all that. Why would someone spend $16 a day for a reciprocating saw? I can go to Princess Auto and buy a new one for $29. So that business is gone. Customers will rent anything to do with concrete such as jackhammers or concrete drilling. They just aren’t going to go buy a jackhammer for $1,000 and use it once or twice.”

“I’ve tried some offshore equipment and so far I’ve been pretty lucky. I haven’t tried anything big, mostly smaller things.” Dutton continues “I bought 15 of their knock-off engines. I used to pay about $475 for a five-horse Honda engine; now I can buy a 6.5-horse Chinese engine for $96. If you go to an original equipment Honda dealer for a muffler for that equipment, it is going to cost you $118 for just the muffler. Gas tanks are $140. People say ‘offshore equipment doesn’t last as long,’ who cares, I can buy five to one and I can throw them away!”

A lot of guys aren’t buying the real expensive saws and stuff anymore either, so many of them get stolen. They are buying the middle of the road, the offshore stuff.”

“We’ve tried some of the offshore pumps and a few other little things,” says Rob Clark of Moose Jaw, Saskatchewan’s Clark’s Supply & Service Ltd. “We haven’t had any of the big stuff, but it seems alright. We haven’t had any negative feedback from our customers. Everybody thinks that because it’s made it China it will be junk but it’s no different than 20 years ago when everything was made in Japan and everybody thought it was junk.”

Terry Morin of Able Rental & Supply from Sudbury, Ont., has resisted offshore equipment: “We haven’t had a lot of products from China. We’ve tried some of the cheaper salable merchandise, but not a lot.”

Roland Amirault of Kingston, Nova Scotia’s Greenwood Rent-All Inc sees another side. “Offshore products are inexpensive. You talk to any rental house and we’re all doing it, we’re buying these aftermarket motors for a fraction of the price that we’re used to paying, and I’ve had good luck with them. I tell my customers after the fact, when they get back, and they will tell me that they didn’t notice a difference.”

Ed Dwyer, general manager of C&T Rentals in Winnipeg, Man., doesn’t purchase offshore equipment but has noticed a ripple effect caused by the increased availability of this equipment in the Canadian market. “We don’t buy the knock-offs. However, they have made everything else cheaper. Which is good for purchasing new products, but when we go to sell used equipment now, it’s a problem. Our used equipment is worth less. We can buy new machines now for less than the equipment we bought three or four years ago is worth.”

From a party rental perspective, Dave Higgins, vice-president of Higgins Event Rentals of Toronto and Oakville, Ont., shares his experience, “We’ve seen price increases from China; however, the quality is still suspect. It’s not perfect but it certainly has improved in the last five years.”

Jay Williams of St-Eustache, Que.-based Location Deux-Montagnes Inc., has reluctantly yet successfully experimented with offshore products; however, he remains unimpressed. “I have bought some goods from China, but not that much, maybe two to four per cent. I’m not talking about tractors or scissor lifts, mostly small engines. I replaced about 20 small engines with a Chinese model as well as some other small equipment. I needed to buy the equipment quickly but the supplier was backordered and I was able to buy the Chinese engines right away. Am I going to switch? No, but they are there in case of emergencies,” he says.

“I try to buy based on service and parts. Most of the offshore stuff is cheap. When you look at a piece of equipment that normally sells for $2,000 and it’s $600, you can almost see the difference in quality by eye. If you buy it and it doesn’t work, you throw it away. I’m not into disposable equipment.”

Williams remains open minded. He has seen a lot of rental operators purchasing offshore equipment, however, he remains loyal to the original manufacturers, “Most of my big hammers are Bosch or Wacker and my plates are all Weber and Mikasa, which I would never buy from China. I did buy some small half inch drills but there isn’t that much demand for them. It’s not my big market; it’s mostly to cover me.”

Whether your company purchases Chinese equipment or not, one thing is for certain, offshore products are making inroads in the Canadian rental industry and savvy operators need to recognize their low price and improved quality as either an opportunity or a threat, or a hybrid of the two.

It may be as simple as managing risk by supplementing your current offerings with a small sample of low end test products or as complicated as revamping your marketing strategy to address new markets or segments that aren’t affected by offshore products, yet. Either way, in a competitive market an elephant in the room should never be ignored.

Rich Porayko is a professional write and founding partner of Construction Creative, a marketing and communications company located in Metro Vancouver, B.C. richp@constructioncreative.com.