June 16, 2008 - Briggs Equipment interview and input from Tony Rooney, Sales and Marketing Director for Briggs Equipment UK Ltd.
1) How do you see the UK market performing this year in terms of unit sales and any shifts within the various truck groups, i.e. more or less sales for reach trucks, declines in diesel counterbalanced, and have you any view on how you see 2009 performing?
In our experience, the big players in retail and distribution, organizations with large warehouse and national distribution centres, are the first to experience the effects of an economic slowdown. Their performance has a big impact on the performance of the materials handling sector. This can impact heavily on sales of products like reach trucks. Nevertheless we are continuing to see a preference for warehouse equipment in the UK market, the share and sales of our Cat ® warehouse products increased year on year.
The UK is a mature market and fairly static in terms of growth. Nevertheless we have seen some growth this year in the heavy lifting equipment, 16t and above. This kit goes into industries that are fairly recession proof such as transport infrastructure and oil and gas. We are ideally placed to capitalize on this at Briggs; through strategic partnerships we can offer specialized handling products, such as SMV Lift Trucks, and maximize our service coverage.
In looking forward to 2009 we need to consider what was happening five years ago. 2004 was a big year for investment in contract rental fleets, so in normal circumstances we would expect 2009 to be a year of strong demand as customers renew their fleets. However, the economy may bite into this. The adverse euro exchange rate, coupled with an increase in the cost of borrowing will mean that it could be up to 30% more expensive to renew a fleet of trucks in 2009 than it was five years ago. What we expect to see next year is a trend towards contract extensions rather than investment in new fleets. In this secondary rental market there is less new business up for grabs, because customers are consolidating their existing business and extending contracts with their existing suppliers. Whilst this is great news for a service provider such as Briggs Equipment, it is a concern for the manufacturers as the market for new products will be down.
2) If you see the overall market outlook deteriorating in Britain how do you think suppliers should respond to maintain their market share?
The economy is working against European-produced product. So I see the big threat next year being from cheap imports from the Far East, particularly China. This is a cause for concern because the UK materials handling market could prove rich pickings for China next year. Suppliers will need to work hard on retaining business through increasing the value added nature of their service provision and being innovative and flexible in meeting customer needs. Service and support needs to add value and be recognized and valued by customers; this is a mix of educating the market and also being more intelligent in our approach to selling service in this sector.
3) Does the rental/lease market still account for about 70% of total UK sales, but as far as the small fleet operators go, i.e. less than 10 trucks, is there still an overwhelming preference to buy rather than rent/lease?
Actually long term rental is upwards of 80% of UK sales. And the smaller fleet operators have a general preference to rent or lease their equipment because of the benefits this presents in terms of tax and release of capital expenditure.
4) In terms of clinching sales, what do you think are the most important factors on a scale of 1 to 10, with 10 as the most important?
• I would say that price is critical. This is worrying for the UK market; as an industry we offer the lowest prices on hourly rates for service yet deliver more than any other industry. This is simply not sustainable; it is the road to ruin for our industry. Would your local car dealership ever come out to your house or work place with a mobile van and a highly trained engineer and fix your car there and then? Another example, we recently had to arrange a service repair to a steam cleaner – the going rate is £110 per hour for this £3,000 piece of machinery, yet our industry regularly charges less than £75 to service a £12,000 fork lift truck.
• Service is a critical consideration in the buying decision and this covers responsiveness, reliability and knowledge and efficiency of service staff.
• The brand also remains strong in our industry – a well known brand is a proven entity and reputation matters.
• We are also seeing operators becoming increasingly influential in the buying process. Many companies have processes where operators give feedback and input into the decision. Ergonomic and ease of handling are important factors.
• Two other key factors that influence the buying decision are contract flexibility, including the ability to provide KPI reporting and service level agreements, and the quality of relationships. At the end of the day this is still a people business. When it comes to customer retention in particular, the relationship that the supplier has with the customer through its people (at all levels) is crucial in building trust and long term business.
5) Over the last 5 years or so, would you say that the initiative for short/long term rental/leases has moved in favour of the forklift operators? Are, for example, one-year break clauses common in 5-year rental deals?
The balance of power is certainly with the buyer in this market. Customers demand contract flexibility; this means that a supplier can flex the fleet provision to meet the business climate and needs of the customer. At Briggs this means that we can flex the contract, and replace or remove trucks according to customer needs. As a service organization that sells materials handling equipment, our business model is not geared around volume sales of trucks. We are more about asset management and this means helping our customers to ride out the rough times and stay financially healthy so that are ready to reap the rewards when the economy turns back.
6) Have you noticed any trends towards add-ons that improve safety, like driver keypads, impact sensors, vision aids for high lifts?
We see two distinct market segments: those industries with higher profit margins who will pay for customized technology and add-ons, and those who have tighter margins who simply want the basic product. Impact sensors, logging systems, weighing systems and the like all help to improve safety but they also add cost, which many fleet operators don’t want. We firmly believe that safety begins and ends with good management practices. It can end up working against a company if technology is used as a short term solution to weak systems and processes internally. Safety is a cultural issue.
However, many of our Cat ® trucks have in-built features to help manage safety. For example the NRN Reach truck has a Poweramic mast design which increases visibility through the mast. The progressive steering technology on these trucks slows down the steering wheel reaction at faster speeds, making the truck more stable. The safety curve feature also slows down the truck when the driver turns into a very sharp curve, thereby preventing unstable situations and overturning. The technology automatically reduces the truck’s speed when working at height and when carrying heavy loads on the forks.
7) How is the global take up proceeding on hydrogen fuel cell forklifts? ( I have heard that the running costs are high).
We see much of the innovation and research into new fuel technology coming out of the US. Whilst we keep a close eye on this, the technology is still in its infancy and needs more development to be truly practical in the context of materials handling.
8) Would you say it is still true that over a forklift’s lifetime 70% of its running costs are for labour?
It is true that the majority of the trucks lifetime running costs are labour. However the increase use of sophisticated electronics has probably shifted this balance to 65% labour costs and 35% cost of parts. For example when a PC board goes down, it has to be replaced rather than repaired and this is more expensive.
9) If you see any other major factor likely to influence the forklift market in future, be it UK or global, please feel free to comment.
A major factor is the threat of cheap imports. This is being driven at a fundamental level, for example we recently did a tender for a large blue chip organization which required us to prove that no less than 20% of our product cost was from low cost countries (LCC). We also had to prove that we minimized our product offering from high cost countries (i.e. our established brands). This kind of policy opens the door to a threat that we have successfully kept at bay in the UK.
- Ends -
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