This past seven days, many folks I spoke to in the Industrial OEM space have settled down into the new normal. I am glad to share that there is a greater sense of resilience & a determination to fight this out now than what I noticed a few weeks back. Of course, job cuts & furloughs have happened as anticipated. On the positive, I also saw organizations increasingly “looking outside the ordinary” or “thinking outside the box” and that sometimes meant looking back. One such trend that kept popping up in customer conversations is the inevitable return of the “used equipment” market.
Can the 2008 recession be a predictor?
For some of us who were in the OEM business during the Great Recession of 2008, the memory of used equipment flooding the market amidst depressing demand and pricing is still fresh in our minds. There are parallels between what happened and what’s unfolding now. Countless businesses were going under or liquidated, causing untold hardship to the owners and employees of businesses. While the driver of this recession is different from 2008, the impact and results will be the same, if not worse, on the OEM market.
An overlooked consequence of business failures and the resulting liquidation was the sudden availability of used equipment. The used equipment showed up through auctions or even sale by owners as they tried to generate cash for their businesses. This rapid growth of the used equipment market naturally had a significant impact on new equipment pricing and sales.
“Fortune favors the prepared mind.”
– Louis Pasteur
So what is an OEM to do?
We spoke to some of our customers who have been through this experience before. Here’s what they absolutely recommend:
- Embrace the new market: While it may cannibalize your new equipment sales in the near term, on the positive side, this is your new installed base. You may gain a whole new set of customers who will be targets for aftermarket parts and services, upgrades, and replacement purchases. You may end up acquiring customers who were out of bounds earlier.
- Create a Pre-Owned certification program: A program that certifies your equipment also puts you in the driver’s seat. This program can comprise equipment health checks, preventive maintenance, and refurbishment. The program could be offered as a service to buyers of used equipment and as a program to channel partners. The program may very well be released to a CPO if the OEM decides to buy used equipment and get into this market as well.
- Re-warranty your equipment: This could be part of the pre-owned certification process, or better yet, done for a fee. Audit the equipment that was purchased, and based on your audit, offer a warranty (a new Service contract) to the buyer. The warranty protects them, protects you, and provides a net new source of revenue.
- Target these customers for Aftermarket Services: The odds are high that many of the used equipment buyers are “new to you.” Which means they probably aren’t familiar with your products or managing and maintaining them. Teach them how to get the most out of their assets. This is your opportunity to gain their confidence, and also their aftermarket business.
Note: A version of this article was first published by Vivek Joshi at industrynext.ai
These were just a few suggestions we gathered. Have any more? Go to industrynext.ai and share your ideas with your peers.