U-Haul expanding its rentals beyond vans
| Phoenix, Ariz.
U-Haul's bright orange trucks, emblazoned with the ``Adventure in Moving'' slogan, are as much a part of highway Americana as Burma-Shave signs ever were. But nowadays U-Haul is providing adventures close to home, too. The king of one-way truck rentals has diversified into general equipment rentals. Just this week the company has launched a $6 million television advertising campaign promoting the new business line, which includes lawn and garden machinery, recreational equipment, party goods, do-it-yourself equipment, and even videocassettes.
Others in the rental equipment industry, which consists largely of small operators, don't seem to be really worried about the entrance of a giant into the field. Rather they seem pleased at the prospect of a rental company big enough to do some serious advertising.
U-Haul's venture into general rentals has its roots in the oil shocks of the 1970s, explains Dr. Sam Shoen, president of U-Haul International and son of the company's founder, Leonard S. Shoen (who remains chairman and chief executive). ``We'd been renting trailers through gas stations. But during the 1970s lots of gas stations closed down, and lots more became self-service operations, with no one there to run a rental operation.''
There are still gas station operators who serve as U-Haul outlets, but over the past several years the privately held U-Haul has focused on the development of its 1,275 rental centers, all company-owned in central business districts of their communities. Once pushed into the development of this (expensive) retail network, however, the company has aimed to make the the most of it by offering as many goods and services as possible. Hence the diversifications.
Dr. Sam, as his clip-on plastic name badge identifies him, walks a visiting reporter around a rental center in central Phoenix. Giving a quick tour of a deluxe self-contained motor home, he notes:
``You can rent one of these in the summer for about $1,000 a week. If you buy one, it costs around $40,000, and then you have to figure out where to park it.''
One business begets another. The recreational vehicle rental business, for example, has led to a lucrative business ($40 million in sales last year) of selling RV spare parts, which must be kept on hand anyway, to people who buy or rent their RVs elsewhere.
U-Haul also has a lot of ``moving accessories'': heavy-duty moving boxes and sacks of those plastic peanuts used to pack fragile items. U-Haul also does a fair business in items like padlocks. ``We find people pack their locks up when they move, so it helps if we have some on hand.''
You can even rent an office from U-Haul -- albeit one measured in cubic inches rather than square feet. U-Haul provides mailboxes for rent to people in transit. But the service is also available to local residents -- small-business people who run businesses out of their homes but want to receive mail at an address that sounds more businesslike than ``Hidden Valley Drive'' or whatever. Such people can rent a box; transform it, on their letterhead, at least, into a ``suite'' -- and get the prestige of a downtown address.
For all this, the rental industry seems unconcerned that the jolly orange giant will revolutionize the business.
The last few decades have seen an accelerating trend in service industries toward national networking, standardization of services, and heavy marketing of corporate names.
For services as diverse as hairdressing and income tax preparation, real estate and waste removal, people are increasingly turning to names that are familiar from advertising rather than personal experience, to companies whose standardized outlets in one part of the country are interchangeable with those in another.
But this approach hasn't worked well in the general equipment rental business. ``We don't have a hamburger or a special sauce,'' says Jane Way, president of United Rent-All Inc., in Woodland Hills, Calif. ``The business is very local to the community -- we can't rent snow skis here, and you couldn't rent surfboards in Boston.''
And as C. A. Siegfried, executive director of the American Rental Association (ARA), notes, ``It's hard to franchise'' in the rental business. Because the rental market varies so much from one place to another, franchisers have had difficulty selling their franchisees a standard package of equipment to rent.
Franchisees in the rental business also demonstrate a tendency to go their own way after a few years. Says Mrs. Way, ``There are very many successful individuals in the rental business who decide to leave the United system because they feel they no longer need it, or want to go out on their own.''
United Rent-All, which with 40-plus outlets today is but a tenth of the size it was a few years back, has set up what it calls the ``Third Alternative,'' a package of services to help launch would-be rental operators who are hesitant to go it alone but who don't want to be tied down to a franchise agreement, either.
For many kinds of retailers, locating numerous outlets within a single television or newspaper market to get the most bang for the advertising buck is an important part of marketing strategy. But most equipment rental companies are too small to get such advertising efficiencies, and so they tend not to advertise much.
One major rental chain is understood to have dropped a multimillion-dollar ad blitz when its franchisees balked at paying for it, on grounds it would benefit competition.
This reluctance to advertise is ironic, given that rental operators say their top priority is to expand consciousness of renting.
``The awareness of renting as an alternative to buying is very low,'' says Joseph Kinkead of Taylor Rental Corporation, the largest general equipment rental company and a unit of Stanley Works Inc. of New Britain, Conn. He sees today's smaller homes with less storage space as a help to the industry, which he says ``is in its embryonic stages.'' Others say people are less concerned about owning things than with having the services of those things when they need them. Mr. Kinkead adds, ``There's a great opportunity to market the rental concept.''
An observer says the ARA, which spends about $100,000 a year on small ads in specialty publications, has ``really fallen down on the job'' by not pushing its members harder to support a campaign to promote the rental alternative as a generic concept. ``They say if they support ads it will give business to competitors who aren't ARA members, but that's myopic,'' he says.
Tim Novoselski, publisher of the Rental Equipment Register, in Los Angeles, estimates the general equipment rental industry (which excludes car rentals, and also rentals of furniture and appliances) at $10 billion a year. He cites a finding by the Gallup polling organization that two-thirds of the public had never rented any general equipment before. He sees this as a sign of room for growth -- which was 20 percent last year over 1983, he says.
``It's an industry that can go as far and as high as we want to take it,'' says Mrs. Way.
One industry observer worries that U-Haul may be getting in over its head with this rather sudden expansion into general equipment rental and wonders aloud about cash flow and the company's ability to support all that equipment with service.
But everyone seems pleased with U-Haul's ad push.
``It takes someone with the kind of dollars U-Haul has'' to do that kind of advertising, says Mr. Siegfried.
``U-Haul is to be commended for its efforts,'' says Mrs. Way.