How to Protect your Equipment Rental Business During the Inflation Crisis

The world has entered into another recession due to pandemic, inflation and the Russia-Ukraine crisis. As a result, all major industries of the world are witnessing a setback and the repercussions replicate in the rental industry as well. The consumer mindset, even in B2B domains has drastically shifted towards preservation, resulting in low demand and high stock levels. While renting is a cost-friendly alternative to purchasing, consumers are now speculated to be more reluctant to rent equipment.

However, as the ongoing inflation crisis is temporary, there are several measures that equipment rental businesses can take to keep themselves afloat. In this article, we will go through them all but first, it is important to understand the changes in consumer behavior which have led to these demand fluctuations. 

Changing Consumer Patterns Affecting the Rental Industry

The inflation problem is already under consideration by the majority of B2B consumers and they have already found their ways to tackle it. Below are some key changes in global consuming patterns that have led to the economic uncertainty for equipment rental business:

1. Consumers are Delaying Monetary Decisions

Construction companies, miners, contractors, etc. are delaying purchase decisions due to risk-aversion. In a study conducted by Boston Consulting Group, 54% of respondents claimed to have delayed hardware upgrades and 60% responded on pausing technological deployments. Consumers are cautiously postponing purchase decisions, only making exceptions for big budget projects. Due to this, project delivery timelines are extending and rental businesses are seeing more delays and in some cases, even order cancellations.

2. Holding More Cash Reserves

As per Mckinsey, consumers have an estimated $3.7 trillion in savings, which is almost double of what they had at the end of 2019. Consumers are building their cash reserves as it eliminates the need to take short-term loans at high interest rates and provides the financial backing to be independent and make sudden important payments. This goes the same for the rental industry audience, which becomes difficult to target with a savings-focused mindset. 

3. Downgrading Order Value

Another option to tackle the upcoming economic downturn is to switch to cheaper brands and technology. Consumers in the rental industry are decreasing their rental durations and opting for cheaper equipment for short-term usage. This makes the overall rental contract more affordable and is also feasible for many construction companies. Nevertheless, at the same time, this behavior decreases the average order value for an equipment rental business.

Solution to the Inflation Crises in Equipment Rental Industry

While the aforementioned behavioral changes are very real and going to stay for a while, there’s still scope to bud in and overcome the downturn. To begin with, equipment rental business owners are required to make the following adjustments in their marketing approach:

1. Build an Online Presence to Increase Your Market Size

Targeting and reaching out to a broader audience is a conventional and effective way to overcome situations like recession, inflation and demand drops. With a multi-channel approach, equipment rental businesses can create a digital presence and be found by more and more customers. 

For example, FAINDaMaq is Mexico’s first-ever online equipment rental marketplace, which was launched during the pandemic. Just by taking the digital route, it became accessible by thousands of consumers. On its website, not only consumers can find rental equipment they require but also rent it directly from the platform. 

Furthermore, with online presence, you can use search engine advertisements to appear at the top of search results and gain some leverage over competitors.

2. Opt for Automation

A direct approach to expand profit margins is to lower operational costs with automation. Being an imperative suggestion for entrepreneurs for many years, automation can help equipment rental businesses eliminate manual tasks and processes like invoicing, inventory, internal communication, client communication, sales & marketing, data analysis and customer support. The savings on operational costs will not only assist in retrieving profit margins and loss minimization but can also be utilized as ad budget as well.

3. Redirect your Value Proposition

At the time of adversities, consumers only deal in brands that stay highly relevant to their situation. For example, launching a new flagship service or product at a higher or even at your regular price does not resonate with what customers require. Instead, they want to go with the rental business that can provide them security, quality and affordability in this situation. Rental businesses need to redirect their value proposition to match these elements and empathize with consumers.

4. Enhance Transparency and Communication 

Due to the inflation crises, consumers have too many doubts and queries in their mind before making a decision. Rental businesses that provide no means to clear those queries risk isolation from consumers. This usually happens when proper transparency and communication are lacking between brands and consumers, resulting in poor customer experience. 

To improve transparency and communication, equipment rental businesses need proper channels of communication, which can either be their website, social media handles, email accounts, or even chat. Apart from these, they are also advised to provide complete terms and conditions, upload detailed listings and even rental agreements on their website itself.

5. Optimize Discounts and Markdown Strategy

Following a data-driven discount strategy can help equipment rental businesses maintain profitability even after giving the discounts. In general, the discount strategy needs optimization on 4 fronts:

• Do not offer too steep nor too shallow discounts. Rental businesses need to maintain a balance between the two based on consumer demand.
• Only put low-to-mid performing equipment on discount. Providing a discount on a top performing product is an unnecessary proposition.
• Make the discounted equipment highly visible. It can be promoted in banner images or set as featured products.
• Experiment with discount duration. You may need to switch discounted products so it’s best recommended to plan limited discount periods.

How Yo!Rent can help?

Yo!Rent is a next-gen online rental software with most practical and helpful features for your equipment rental business. It has been developed after considering each and every use-case and possible challenges of the rental industry. Yo!Rent can help your equipment rental business in the inflation crises by optimizing customer experience, streamlining markdown strategy and bringing transparency.

1. Digital Transformation for Automation and Increasing Your Business Presence

For reducing the overall operational costs, Yo!Rent automates various processes like invoicing, inventory, taxes, notifications and reminders, etc. It also eliminates the need for internal communication. The admin and sub-admin accounts can find all updates on the admin dashboard. Furthermore, with its industry-specific design and capabilities, Yo!Rent builts an online store that has clear and concise branding with overall looks and feel a step ahead than the existing industry standards.

2. Tiered Pricing for Accommodating the New Rental Behaviour

As described earlier, consumers are opting for cheaper rental equipment and shorter rental durations. Those who rented equipment for months, are now renting equipment for weeks and in some cases, even days. Yo!Rent allows you to set tiered weekly and monthly pricing for accommodating customers changing behavior. While in the inflation period, the weekly pricing model would be more helpful, it can be reverted back to the monthly period once the crisis ends.

3. Price Negotiation with RFQ Module for Securing Large Orders

To evade inflation, consumers prefer negotiating the invoice, which is possible with Yo!Rent. On Yo!Rent powered rental marketplaces, business owners can set three types of deals: rent, buy and RFQ. With the help of its RFQ option, customers can request quotations for multiple equipment and even send counter offers. Once the amount is finalized, the transaction can be made and recorded on the system directly. 

4. Different Types of Discounts for an Optimized Markdown Strategy

Providing discounts and ad campaigning are the two strategies that the majority of industries are focusing on to clear their stockpiles. While the approach works, there is huge scope for optimization, which will further help in increasing profits and loss minimization. Yo!Rent provides rental businesses with different types of discount features such as bulk volume discount, rental duration discounts, fixed value discounts, percentage discounts, coupon code discounts, reward points and more. All these discounts can be used to improve and get better value from the markdown strategy.

5. Data Analysis and Reports for Data-Driven Planning

Navigating through economic crises requires businesses to make data-driven decisions. Yo!Rent generates automated sales reports that are indicative of overall business performance. These reports also include stats such as top performing equipment, top performing categories, most refunded equipment, tax reports, advertisers report, discount coupons report, etc.

6. Featured Products for Regulating Demand

Balancing demand for diverse equipment encourages cross-selling and upselling, which are important to overcome economic recessions. With data-driven analysis, rental business owners can use Yo!Rent’s featured product options to promote and highlight certain specific products and regulate their demand. The same also simplifies navigation as low demand products on an online platform often turn out to be those that appear at the end of search results or are difficult to navigate to.

7. Multilingual and Multi-Currency to Reach Diverse Audiences

In modern economies where immigrants and non-native English speakers are a big part of consumer markets, it has become important to create an equal and satisfying customer experience for everyone. During inflation, the need to create an inclusive atmosphere is even more important. Yo!Rent comes with multilingual and multi-currency support to help equipment rental owners reach diverse audiences and provide seamless renting experience to both native and non-native English speakers.

The Takeaway

The upcoming time is surely going to be unpredictable for the rental industry, but it is going to be the same for all businesses. In between, there may be some positive consumer behavior changes as well but for a strong impact, monitoring the situation, making the necessary adjustments and relying on data-driven decisions will bring the desired results. Moreover, it is these uncertain times of high inflation and low demand that leave competitors vulnerable and leave scope for you to move ahead.