Equipment rentals in the platform economy: A rising trend

By Lucy Barnard24 May 2023

Multibillion dollar online platforms such as Uber, Lyft and Airbnb have already disrupted the hotel, car hire and taxi industries among others. Lucy Barnard finds out how with the rise of the platform economy, equipment rental firms hope to make hiring an excavator as easy as ordering a pizza on your phone.

Vincent Ranaivoson, chief transformation officer at Kiloutou, hardly stops for breath as he outlines the company's vision to bring the sort of sharing economy business model used by digital giants such as Uber and Airbnb to equipment rental.

Ranaivoson, a management consultant by training, whose diverse CV includes a stint running a beekeeping business in Madagascar and an on-demand gas bottle delivery service in the Ivory Coast, is in the process of launching an app which, he hopes, will enable contractors to lease bulldozers, and excavators to others as easily as they could order fast food on their phones.

Kiloutou, although a traditional rental company, is joining the growing number of companies seeking to use digital technology to modernise an industry where many rental firms still rely on phone calls and paper bookings forms to do business.

Multibillion dollar online platforms such as Uber, Lyft and Airbnb have already been a disruptive force in many industries.

They tend to use a business model where, rather than providing a direct service to customers, businesses create an online meeting place where customers can then rent or borrow goods from each other.

Kiloutou's plan, outlined by Ranaivoson, is to borrow ideas from increasingly popular car-sharing platforms.

These portals, which include the likes of Share-now, Evo, Zipcar, Gig, Turo, Modo and Hiyacar, enable registered customers to find out via an app where the nearest available car is currently located and then unlock it using their smartphones.

Payment is completed online, and the car is photographed before and after the share takes place, so any damage is noted.

And, like Airbnb, many of the platforms are not just open to traditional rental fleets but allow car owners, or in some case manufacturers, to make an income renting out their cars too when they are not in use, increasing the size of their potential portfolios dramatically while keeping risk low.

Ranaivoson's vision is based around an app called YOUSE, which Kiloutou has built in-house alongside French fleet management and telematics specialist Sharemat.

The plan is for main contractors to be able to use the app and register any heavy equipment – either machines rented through Kiloutou or directly owned by the contractor – which they would like to share with their subcontractors working on the same construction site.

Subcontractors working on a site can also download the app and register and check the availability of equipment and book it through the platform "as easily as one would book a meeting room."

For Ranaivoson, it all started when visited clients’ construction sites.

"These sites were filled with multiple equivalent pieces of equipment from different providers," he says. "There is the main contractor doing the organizsng of the worksite but there are also plenty of subcontractors – plumbers, air conditioning, everybody organised by the main contractor, and they all rent equipment through different rental companies. They very often rent the exact same equipment."

"No rental company has yet offered a scalable solution for its clients to actually share their access or earthmoving equipment with other contractors on the same worksite. For our customers it doesn't make sense - and for the environment it's nonsense.

"It means you have three times the same equipment used at different times on one worksite. That makes several deliveries; that makes more accidents; more costs for the worksite; and more CO2 emissions and it all doesn't make any sense."

Ranaivoson says the innovation would also formalise a sometimes-existing practise of having "free equipment" on site where site managers could not control who was using the machines or when they were used or check whether operators had the regulatory driving licenses and were properly insured.

So far, the company has said little about whether and how contractors would then charge subcontractors for the use of the machinery under this system, but Ranaivoson says that Kiloutou completed site visits and conducted a workshop with a motivated customer at the end of 2022.

By the start of 2023, Kiloutou had developed a prototype ready for on-site tests and the partners are currently testing the concept in the field.

German-based Zeppelin Rental is attempting to take the model a step further.

In June 2022, the company announced that it was launching its own "Rental+" app. Zeppelin's strategy is to liaise with its customers working on major construction projects to decide what equipment they are likely to need to hire.

Zeppelin Rental then stations a small fleet of these machines either directly on the construction site or on a defined area close by. Customers can search for available machines on their smartphones and book them online.

Once a machine has been rented, the customer can then unlock it using a smartphone. The physical key is located in a key safe in the machine and the code is provided in the app.

Zeppelin started a pilot project for the app at the Nordbahnhof project in Vienna's Second District at the start of 2022. A second pilot project is also taking place at a large site in Bavaria.

Sascha Garsztka, head of rental and sales at Zeppelin Rental Austria says that so far, the app has proved to be particularly popular with customers renting excavators and wheel loaders.

"Machines that would have taken a long time to order were now available within minutes – without any delivery costs," Garsztka says. "These are particularly significant if you only want to rent for a few hours or days."

He says that by using the app, Zeppelin has been able to reduce the number of machines on site by up to 20%, cutting congestion on site and reducing the amount of carbon wasted on deliveries.

Zeppelin Rental has yet to release information on pricing for the concept and says it is awaiting the results of its pilot projects before deciding whether to roll the format out further.

Both the Zeppelin and Kiloutou cases are examples of rental companies offering digital tools to contractor customers. They are doing so in the face of a growing number of companies offering digital platforms for rental.

One example is German tech company UMT, which launcghed in November last year an online rental marketplace called Smart Rental, based on a mobile phone app which the company said would eventually be expanded to cover Germany, Austria, and Switzerland.

UMT said the company was looking to partner with "experienced partners in construction equipment rental" and that the first approaches to suitable partners were already underway.

Juergen Schulz, spokesman of the board of management at UMT, said; "With our new smart rental technology, which functions according to the now established and proven Car2Go concept [now part of Share Now], we are significantly expanding our value chain."

And, as online platforms become easier and quicker to build, more and more businesses are looking to join the party, either through a sharing model where anyone with spare machinery has the opportunity to rent it out quickly and easily, through online aggregators which trawl through the offerings of many different vendors to help customers choose the most appropriate for their needs, or via procurement marketplaces or e-procurement platforms where customers are able to rent equipment in the same online space where they order building supplies.

"Amazon-level expectations are driving forward B2B experiences for rental customers and providing competitive differentiation for large rental companies which offer digital booking options," says Kyle Clements, CEO of US tech company Quipli, which is one of the many new startup companies providing SME rental firms with an online rental platform which embeds directly into an existing company website.

"With the rise of platform-based rental services, such as BigRentz and others, traditional equipment rental companies are facing increased competition. These platforms allow individuals and small businesses to rent out their own equipment, which can be a more cost-effective option for some customers."

"Platform-based rental services can offer greater flexibility for customers, such as the ability to rent equipment for shorter periods of time. This can be particularly appealing for small businesses or individuals who may only need equipment for a specific project," he adds.

"They often offer a more seamless and user-friendly rental experience, with features such as online booking, real-time availability, and digital payments. This can help to attract and retain customers who value convenience and ease of use.

"The model may also lead to new business models for equipment rental companies. Some companies may choose to partner with platforms to reach a broader audience or offer their own rental services on a platform," Clements says.

"And all this can provide valuable data insights that can help equipment rental companies make better business decisions.

"By tracking customer behaviour and rental trends, companies can identify opportunities for growth and optimize their pricing and marketing strategies."

In the USA, brothers William and Jabbok Schlacks established rental and technology firm EquipmentShare back in 2014 with the idea of selling telematics-enabled machines to contractors which it would then add to its online rental portal.

This model created a fleet of around 1,500 machines owned by contractors but available to rent on EquipmentShare's own platform, although in recent years the company has followed a strategy of speeding up growth by buying the equipment themselves and establishing bricks and mortar rental outlets.

The company currently employs more than 4,000 staff and has more than 160 locations around the US and a partner in New Zealand.

Flexcavo, a German-based rental and technology firm based along the same lines had added around 15,000 machines to its operating system before the company was acquired by Danish telematics and data company Trackunit in January 2023.

Numerous aggregator marketplaces are already popular in the equipment rental space which, like hotel aggregator booking.com or DIY aggregator checkatrade, bring together offers from different vendors.

These include Zeppelin Rental's own aggregator site Klickrent as well as Klarx in Germany, BigRentz in the USA, Tracktor in France, EasyHire in various European countries, Rentmas in Italy, and the UK's GetMyEquipment.

Elsewhere companies like Rentaga provide similar services through a franchising model where they act as an intermediary, putting customers in contact with rental firms and taking a percentage of the rental fee directly from the supplier and offering real time stock availability booking and a payment system.

Separately, rental firms are also attempting to integrate equipment rental services with procurement platforms so that contractors can reserve machines and construction equipment alongside their orders of building materials, either by including a rental offering on online construction procurement marketplaces, or by integrating rental services in the procurement software packages.

In June 2022, EquipmentShare led a US$19 million funding round for Felux, an online B2B marketplace and supply chain platform for steel and other materials.

The platform allows customers to buy and sell steel in bulk online and has recently expanded into aluminium. Its future plans include adding other markets onto the platform including copper, stainless steel and scrap metal in order to eventually provide a one stop shop for contractors’ procurement needs.

German headquartered construction logistics platform Sequello.com works along similar lines. The platform, which was launched in 2021 by Austrian contractor Porr and Austrian conglomerate Umdasch Group Ventures, currently offers procurement for concrete, gravel, sand and crushed stone.

In 2022, German OEM Wacker Neuson became a partner in the Sequello digital platform, adding that there were plans to add procurement options to rent and buy construction equipment through the platform.

Related to this idea, a number of rental firms are attempting to integrate their offerings into the giant software platforms such as SAP Ariba and Onventis which are increasingly relied on by big firms to provide enterprise resource planning (ERP), including e-procurement, accounting, and invoicing.

Currently SAP Ariba alone boasts that more than 5.3 million companies use the Ariba network to transact US$3.75 trillion worth of business each year – more than Amazon, Alibaba and eBay combined.

In 2018, United Rentals, the world's largest equipment rental company, become the first rental company in the world to integrate its rental catalogue with SAP programmes by creating its UR One Adaptor, which it says allows customers to order, manage and pay for construction equipment with the same ease as internally owned assets.

Zeppelin Rental has also been working with some of its key accounts to offer rental on e-procurement packages for some of its key account holders since 2021, offering three options: a static customer-specific catalogue file which contains product information and customer-specific price information which can be made available for customers to import directly into their procurement system; a dynamic catalogue which pops up as an icon in the customer's e-procurement interface; and a Request for Quotation (RFQ) function which enables a procurement agent to digitally request a quote from a supplier. Zeppelin Rental is currently working with 80-90 large customers to integrate its applications into their procurement systems.

However, despite the clear advantages, Benjamin Höck, head of division, digital business and partnering at Zeppelin Rental, says that adapting traditional equipment rental businesses to operate in the platform economy is proving more difficult in practice.

He says that although Zeppelin Rental's online business is increasing rapidly, it currently only accounts for a small amount of overall company revenue – and the majority of that business comes from the company's own website rather than any external source.

"Everyone knows from the automotive industry or from other consumer platforms how this model works.

But when it comes to implementation this is a very different service-oriented industry. One can hardly copy paste digital solutions from one industry to another," he says.

"There are new platforms setting up all the time but also disappearing too," he says. "When we look at them, none of them is outperforming the market like booking.com did in the hotel industry ten or 15 years ago.

"Even when you look to other industries these days, companies are pursuing a strategy of putting their own website first.

For example, Lufthansa has changed its strategy and now says that it will always ensure that its flights are cheaper on Lufthansa.com than you can find on an aggregator."

Höck says, in order to enable customers to really compare rental services via online aggregators or digital marketplaces, the industry itself must work to standardise the services it offers.

"You can only compare the comparable. It is really a 4-tonne excavator or is it a 4.5-tonne excavator? What about the engine? What about the amount of emissions it produces?" he asks. "If you rent a car at Sixt or Hertz for two days and you decide to extend it to five days, depending on the contract, you would probably have to pay a penalty.

"They might even charge you double. In the construction sector we do not have those standards at the moment. Perhaps we should try to follow them, but I think this should be a common approach from all the rental companies."

Another major problem facing rental companies attempting to integrate their software with customers’ e-procurement systems is that the solutions have not been designed with equipment rental in mind, making it harder to get the vendor's apps to talk to the software because the rules governing how they interact or APIs (application programming interfaces) have not been fully worked out. Zeppelin is one of the companies calling on software companies to come up with a set of standard APIs for the rental industry.

"This is where the construction industry is realising it's not e-procurement like buying products from Amazon and other portals where you have standard APIs on both sides from the seller and the buyer," Höck says. "Our experience and that of our key accounts, is that for rental, things like interfaces are not as well defined yet as they are used to from portals where they buy products like construction materials.

"Usually, this is a quite standardised process so when they buy insulation for example, they just order it through the portal of a company that specialises in building insulation.

"But it's not the standard they can follow on to make a reservation or to order an excavator to rent. So, whenever we have the API integration or the API is set, our customers are realising that they need to have a customised process concerning the rental order. "

And, as the number of digital channels available to rental companies continues to increase, Höck says that job of rental companies should be to harness as many of them as possible in order to improve customer experience.

"No matter which channel the customer follows, in the end he will always be serviced by Zeppelin Rental. We follow customer needs and try to optimise all our channels constantly," Höck says. "Over time, we will create even more ways to get into contact with us – some of them are owned by the rental company itself, some are owned by maybe a consortia of rental companies or a platform which is maybe moving from one industry to another. I think the portfolio will just increase. In the end the customer will decide on where the volume goes."