April 17, 2000 First, I have confirmed what was one of the rumors at the NAELB Conference ( and I was sitting both with Chuck Brazier and Gordon Roberts at lunch ): Imperial Business Credit, Inc. has closed it's doors as of Friday, the 14th of April. A leader in the small ticket industry. There are a lot of good people now looking for work. This is a preview of Bob Rodi's Workshop to be held at the UAEL San Francisco Conference May 4-7, 2000. For those who will not be attending, his key thoughts are said here. For those interesting in learning more, Bob's workshop will be "standing room only:" Kit, As you know this is a topic that is also near and dear to my heart. I am actively involved with internet marketing and have been since our first "sight" went live on the original Prodidy Service 10 year ago. That was before most of the current leasing industry "gurus" ever heard of the internet and while a lot of the younger people were still worried about graduating from high school. The following is a short synopsis of one of by seminars at the SEC in SF called "Will the internet kill the App only market" For those that cannot attend I believe we will be video taping the session. I'm sure the tape will be worth ordering. I agree with Rob Yohe. The internet is not going to sweep in and change commercial small ticket that drastically in the short run. Most small business people are going to be reluctant to make decisions involving tens of thousands of dollars without personal contact with the lessor. Equipment Leasing has always been a "hands on" business. Those that feel that the internet will completely take over small ticket are assuming that everything will be done as a "loan". I simply do not subscribe to this philosophy. Even the small ticket lease is a fairly complicated financial transaction that requires contact with the lessee to close. In my humble opinion I do not yet see that any internet based lessor has a huge advantage over a non-internet based lessor. I feel somewhat qualified to comment in this area a I am currently on both sides of the fence. Rob is right in his assumption that the only "end users" logging on and looking for internet leasing are those that are using the "throw enough_ _ _ _ against the wall and something is bound to stick" approach. In over 4 years of marketing on the current version of the internet and several years of marketing on the predecessor to the modern internet (we had site on Prodigy, Compuserve and Genie back in those days) the bulk of end users are "shopping" or they might be other venture backed dot.com companies, or they are the desperate type that figure if they apply in enough places in the same day that maybe they'll slip through. At any rate the leasing industry has not been particularly partial to any of those customer profiles. This is not to say that our web site hasn't been extremely useful, producing a good return. It absolutely has but that has been primarily the result of our sales staff and affiliate group driving traffic to the site. Hardly a "rush" of business because the sight is sitting out there waiting for customers to log on and do Millions in business. The surge in internet based leasing will come from leasing companies "partnering" with other lenders who are in unrelated but complimentary areas. This will however be a major marketing effort that will involve cross selling and trading of customer lists. I fundamentally believe that the future of small ticket lies in this direction but customer lists are closely guarded now and I shutter to think of the ramifications to a company like Lending Tree if it got circulated on the internet that they were selling customer data to other lenders. Not that it doesn't happen but the internet secrecy weeks would have a field day with them. This might ultimately affect their stock price. I just don't believe that is going to happen any time soon. There are also the lenders who are currently excited about the flurry of activity surrounding the so called "financial portal" sites. How long does anybody think that these are going to be popular if the bulk of the business starts going to one, or a few dominant bidders? Once that becomes apparent lenders and customers will have the same level of interest in these sites as they have in left over meat loaf. Besides that, go and take a look. The same lenders are available on all the portals. That being the case what proprietary advantage will one portal offer over another to give the customer a reason to log on and use its services. I don't see that there is a significant price advantage as yet and most of these sites are offering less of a time advantage at the currently than the customer can get by picking up the phone and calling a leasing company directly. Unless there is huge price advantage, or some other proprietary advantage, why would I give my transaction over to some portal site who will shop it for me and let me know in 24 or 48 hours that they have 4 companies who like the deal? Now that I have found that out I still have to go negotiate with each to get my best deal. In this scenario what did I gain by doing it "on line"? What has the portal done to promote its own brand equity? What have any of the participating lenders done to advance their brand equity? Nothing that I can see. Let us not forget the vendor in this equation. Until the internet totally circumvents the customer/vendor relationship vendors will be the ultimate source of deal flow. I would guess that even a customer with an approval from a financial portal would be swayed away if the vendor had a leasing option that could match or come close to the portal offer. How long will the lenders, subscribing to the portal sites, maintain interest if this is the case? Besides that, on small ticket leases,(the size that might actually get done en masse over the internet which I peg at $25K and below)the difference in dollar significant between a 12.5% yield and a 14% yield are not significant enough to sway the customer away from a trust relationship that they might have with the vendor. Last but not least the "app only on the internet model" assumes that our customers (the eventual lessee) wakes up in the morning and says to himself "I think I'll log on to the internet and lease something today". Leasing has traditionally been a product that has been "sold" to customers. Unlike bank financing or other types of lending it has not been viewed as a "necessity". Leasing has always been supplementary. Look at our own industry literature where we call leasing an "alternate source of funding",use leasing to "supplement your bank lines",or "preserve your capital". The customer may want to "lease equipment to free up capital for other more productive purposes" We hardly train our customers to think of equipment leasing as a "can't do without" mainstream finance product. I will close by saying that the bulk of the small ticket customers have not yet reached the level of technological sophistication or trust that will promote huge growth in "end user" internet leasing. Those that think traditional marketing methods will be completely replaced are grossly overestimating the short term potential of the internet. There will be a long transition period where customers will obviously try new methods of securing financing. Small business people will be cautious because that is their nature. Most of the Small business people I know have too much to lose by being reckless. The small segment that will embrace the internet with reckless abandon will probably get some great deals because all of the portals sites and their subscribers will need these types of success stories to prove they were right. I would advise anyone wondering about how to handle this situation to do the following: make sure they are current with, and knowledgeable about technological advancements, put together a web site that enhances your company image (in the short term a nice web site will be equated with "image and credibility"), don't write "checks" on your web site that you cannot cash with your actual capability. Most importantly convey to your customers that you are a "Hi Tech/Hi Touch" company. You will use technology to improve and deliver better service but also convey that the internet is one component of your CRM (customer relationship management)strategy but your primary concern is the needs of your lessee. Make your customer the beneficiary of technological by using it to address their agenda. Don't make your customer a "victim" of technological because you feel that you have to justify some investment you've made to be and internet leasing company. Bob Rodi www.leasingnews.org |
