Tool rent or not tool rent

DEOPLE are born thinking retail.

I Ask the average man on the street where he'd go to buy a drill, and he'll readily reveal his favorite retailer. But ask him where he'd go to rent a drill, and he'll probably give you a blank stare.

With that untapped potential, tool rental programs may offer independent dealers a profitable niche to grasp at in the shadows of their big box competitors.

But you'd better hurry. Contractors Warehouse operates a successful company-run store rental program. HomeBase partners with a Southern California rental company at two of its locations. Two years ago, Home Depot launched a four-store rental pilot program in Nashville, Tn.

Wickes Lumber has rental departments in about l0 of its 100 building centers, and will include them in all new stores. According to Bob Sherlock, "Over the next few years, we expect to add them to better than half of our stores," along the lines of the prototype department at its new Pascagoula, Ms., location.

But it is independents who have invested the quickest in rental. The largest hardware co-ops' rental programs, all started in the 1990s, all enjoyed double-digit percentage growth in membership last year. Still, caution the experts, tool rentals are not for everyone.

Since 1993, 404 Just Ask rental sections have been added in True Value stores, without a failure. The key to success, says Don Neely, training and in-store rental manager for TruServ, is "to forget everything you know about retail. Rental and retail are like peanut butter and jelly. They mix well to make a great sandwictrfor the customer. But they never will blend; they're still two separate entities."

A common mistake is thinking rental is just another department, instead of a separate business. "I always hear, 'I want to add a tool rental department.' But it's totally different," Neely says. "It's not like a sporting goods department or an automotive departrnent, where you check the item in, put a price on it, and sell it through the same computer system. With rental, you buy it, you own it, you rent it out, they bring it back. You're selling time not merchandise.

We don't turn inventory, we rurn dollars."

For members interested in tool rentals, TruServ first conducts a retail survey to discover: (a) Is there a market for rentals? (b) Is there sufficient space in the store? (c) Does the owner/manager have the proper mindset?

"With rental, price isn't the issue," Neely explains. "(Dealers) think if the store down the street is renting something for $10 day, they can rent it for $7 a day and undercut them. Never leave money on the table. Stay with the competition. The customer's there to do a project, not to shop."

Here's one possible scenario: Your customer shows up with a Home Depot circular advertising a Milwaukee 3/4" hole shooter for $133. Your co-op's retail list price is $147. You can meet the price and leave it at that, but then your customer still goes away thinking there are better values at Home Depot. If you suggest renting the drill for $12, you've won on service and price, and kept your customer.

But isn't there less profit in renting a tool than selling one? Tim Miller, Hardware Wholesalers Inc.. Fort Wayne, In., disagrees: "They're two different markets. The tool that someone would rent wouldn't be the same tool that someone would buy. If you curme in for a drill, you'd rent the $250 Bosch and buy the $30 Black & Decker. If you have to mix some concrete for a project, you're not going to buy a concrete mixer."

Rental can also lead to more retail sales. "If someone buys a drill, the cashier can suggest drill bits, but the customer will usually say he has plenty at home," Neely suggests. "But if he rents a drill, give him a package of bits and say you'll credit back to him what he doesn't use. If he rents sanding tools, he'll need sandpaper, and once he's done with that, stain or varnish. For airless paint sprayers, gallons and gallons of paint. The list is endless."

Story at a Glance

Should you add a tool rental department? thinking rentalvs. retail.

Co-ops, such as Ace Hardware with its Rental Place and Servistar with its Renter Center and pioneering Grand Rental Station, have been able to devise a list of tools that lend themselves well to rental.

HWI has organized its four-yearold Do-it Best Tool Rental progmm at three different levels. Level I requires about 700 sq. ft. of in-store floor space and a $25,000 investment in tools. Level 2 needs a 1,500-to2,000 sq. ft. department within the store and a $70,000 to $90,000 investment. Level 3. with a minimum tool investment of $125,000, uses a standalone building, usually 3,000 to 4,000 sq. ft. Some retailers construct their rental store in their home center's parking lot, others open them 30 miles away. They range from 1,500 to 6,000 sq. ft.

The higher levels provide tools in greater quantity, more departments, different sizes, various capacities, with more accessories, greater wattage, and higher BTUs. They are often from vendors who produce more specialized or heavier duty tools.

"We have a five-day training school that is required of everyone signing up (for the program)," says HWI's Miller. "We have a backhoe, an air compressor, all the basic equipment on site. About half is operational, how to write contracts, develop an ad campaign. The other half covers things like operating the tools and performing preventive maintenance on them."

HWI assists with store layout, design, signage, fixtures, and other facets of starting a new business. Renowned rental consultant Bruce Campbell also spends a day with each store.

Now, with the co-ops' success in rental, regional wholesalers are following suit, promising a flexibility a national conglomerate cannot provide. At its spring market in January, Handy Hardware, Houston, Tx., unveiled its rental program, and already has 66 members signed up.

"We're doing things a little differently," says Charlie Hearne. "We're not telling them what or how much to buy. Some jump in at $50,000 to $60,000, others less."

Handy Hardware's eight territory salesmen, known as retail district managers and well versed in rental, help retailers set up the program. The company furnishes those who joined the program with a big "Rental Department" banner, schedule of daily and hourly rates, 100 contracts, 50 "Rent Me" and 50 "Reserve Me" tags, and a catalog which lists the 300 products available.

Their list will continue to evolve. "We are learning, and we'll be revising it every three months, adding new items that members request and finding out which areas like which products."

Orgill, Inc., Memphis, Tn., introduced its "Rental Connection" storewithin-a-store about a year ago. The company furnishes p-o-p signage that attaches to the machinery, sample advertising, brochures, stuffers, contracts, recordkeeping, and a complete training package.

"Unlike others, we have no preset equipment," says Jeff Thomas, retail programs manager. "It's all local market focused. Dealers look at the strengths and weaknesses of their particular market. Some add full blown departments, others rent just, say, paint or construction products."

The wholesaler's approach is always "very market specific," Thomas explains. "Whether it's professional power tool sales, janitorial or tool rentals, we stress research first. Obtain demographics, conduct other studies, find out how the customer perceives the store, then adjust your services and find your niches. Don't just dive into rentals. Everything we do at Orgill is micro-marketing."

He cautions: "Too many people dive in without doing the research necessary. They get discouraged, have a failure and want to know why. That's why."

TruServ's Neely has turned down more than one retailer who wasn't well suited to rentals. "We have denied some, and they're happy about it, once they understand why, because a mistake in rental can be a devastating mistake in retail. In rental, there's no such thing as trial and error."

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A sample inventory list might include:

ConcrctdNlasonry bull float diamond blade r cement mixer concretesaw

Construction/Contraclor builders level compressor g€nerator

Floor Care

.:carpet dryer fan : :,. dium sander t carpet extractor tile scraper o seam tollei

. knee kicket lliholettrn:roller .:tile,cutter seaming iron weVdry vacuum floor edger

Hand Tools water heater socket

Lawn & Garden

.astator :' .pOst,hole,,di00er hedgelrirnmel spiead€t1 : :::: push mower tiller post driver wheelbanow

I catE:puller

Material Handling/l,loving ,irrtr.., rjmk r drillsflake

Hufibing::,,I:,: :: n,eloset:auger

. hand snake waler pump drain sewer machine

PainUDecorating

.:heat gun , , i pressure washer paint sprayer wall paper steamer

Porver Tools dry,\rall screw gun sandens o grinder circular saw ihammer,dritl,, .reclprocaling:,saw

. rotary and bits tant. Every company should have an individual in charge of ensuring year 2000 system compliance. Since many dealers and distributors do not have data processing staff or MIS managers, this task may fall to the company controller or system administrator.