fbpx

Setting Up A Trade-In Program

Setting Up A Trade-In Program

Written by Diane M. Calabrese | Published July 2024

Trade-In Recycling Stock Image

Self-checkout lines at stores. Chatbots instead of humans answering health questions online. Church service via video and so on… There’s no need to list the detached experiences that define the world in 2024. What the absence of direct ties means, however, is opportunity for those who want to reestablish them.

And there’s no better way to forge a connection in the real world than by offering to talk to a prospective customer about a service he or she needs. The first time we caught up with Frank A. Rostine, president of Windy City Cleaning Equipment in West Chicago, IL, he had just returned from picking up a trade-in.

“When somebody calls and wants a new unit, we try to evaluate the customer’s needs,” says Rostine. The assessment goes beyond the type of machine to how the machine fits on the roster.

If the new machine is slated to be an upgrade and replacement, the customer may want to put the old machine in the hands of a distributor that will ensure the unit realizes its full life of service. On the flip side of the incoming trade are prospective customers who may be looking for a used machine.

A customer may want a backup unit, for instance, says Rostine. The cost of a new machine could be prohibitive for the particular buyer. In that case, a used machine makes an excellent choice.

Not every trade-in can be refurbished and sold, but the goodwill earned by taking the trade can be significant. There’s also the sale the trade facilitates.

“The reason we do trade-ins is to sell a customer a new unit, to move a new unit,” explains Rostine. And in the process the customer and the distributor gain.

After the sale the customer is likely to need chemicals, wands, hoses, etc. and is very likely to return. That’s a gain for the distributor.

To the extent possible, Rostine’s company refurbishes the trades it takes in and readies them to sell used. (Sometimes a trade-in cannot be made whole.)

Not many of the trades Rostine’s company takes in are cold water, but it takes any make or manufacturer.

The short of it is that many customers appreciate the ability to trade in equipment. The logistics of operating a trade-in program are all doable.

FACTORS TO WEIGH CAREFULLY INCLUDE LOCATION—WHETHER TECHNICIANS CAN BE HIRED TO SERVICE INCOMING TRADES; STATE RULES—ANY REGULATIONS CONCERNING THE SALE OF USED EQUIPMENT (IN SOME STATES A LIMITED WARRANTY MUST BE GIVEN); SPACE FOR STORAGE; LOGISTICS— HANDLING/MANAGEMENT OF SHELFSITTING USED MACHINES; AND THE TIME COMMITMENT REQUIRED.

“There’s really no challenge in it,” says Rostine. It’s a matter of meeting with the customer, assessing, and putting together a quote. It’s all part of serving clients.

MANUFACTURER’S PERSPECTIVE

Distributors for manufacturers that operate a trade-in program may have an easier time setting up their own programs. And we get some perspective from a manufacturer that has a program.

“We offer a program to customers to trade in their existing equipment,” says Dan Weaver, vice president of aftersales at Kärcher North America Inc. in Aurora, CO. The program takes in the manufacturer’s own equipment as well as other brands.

In return for the trade, a customer receives a credit, explains Weaver. The credit can be used “towards a new piece of equipment, spare parts and accessories, a refurbished unit, or service repairs.”

Wondering what the most challenging aspect of a trade-in program is, we made some guesses. Is it determining usage of trades, determining value of trades, storage of trades, too many trades at one time, or something else?

“The most challenging portion is logistics, preparing the equipment for transport and recovering it to bring it back to our facility in New Jersey,” says Weaver. “We normally utilize one of our field technicians or regional sales managers to check the equipment, and then our technician assists in preparing the unit for shipping.”

Is there a market for used equipment? “Yes, the used/refurbished equipment market is quite large, whether the customer is a small business that doesn’t have the budget yet for a new piece of equipment, or a larger company that potentially needs a piece of equipment to close the gaps between contracts or for something outside the original scope of their contract,” says Weaver.

A trade-in program bolsters sales. “Our goal is to get the customer a piece of our company’s equipment, preferably a new machine, but at least a refurbished machine,” says Weaver.

In the ever-more environmentally conscious sphere of buyers, a trade-in program meshes well. Many customers want to do all they can to extend the service of old equipment (from pressure washers to cars) even if they require a replacement. They are particularly keen on working with companies that offer them the opportunity to do that.

Thus, the advantages of a trade-in program are many. “It allows our customers to get some value out of their existing equipment, and we are able to repair the machines to sell refurbished or place them into our rental fleet,” says Weaver. “It also prevents the equipment from ending up as waste, and we can repurpose the equipment with another customer.”

To Take Under Consideration

When seeking comment for this story, we talked on background to one distributor who reluctantly abandoned a trade-in program. The reason will be familiar to readers. Not enough employees could be found, and one segment of the business had to be jettisoned.

We also talked on background to a distributor who considered issues of liability for any problem with used equipment too great and so decided against trade-ins.

The employee pool and liability issues will vary somewhat by state. But they must be considered before launching a trade-in program.

“Neither Dirt Killer Pressure Washers nor Atlantic Pressure Washers has a ‘trade-in’ program,” says Josh Lee, “the original Josh,” who serves in industrial sales and more for the paired companies in Linthicum, MD. “I’ve been here since 2006; in that time we have never had a trade-in program or taken back used equipment for resale.”

Lee, however, says there was some history with exchanging machines under the previous owner. The results of the program were not satisfactory— customers were unhappy about value put on used equipment and expected refurbished machines to function as new, for example. So, it was abandoned.

“The most difficult aspect of specifically selling used pressure washers is predicting the existing condition of the equipment,” says Lee. “As pressure washers can be so easily damaged by freezing, being run dry, or being cavitated, damage can easily be concealed within the pump.

“This damage can be found by doing an inspection,” continues Lee. “However, that adds cost to the seller that can be cost prohibitive.”

Hidden concerns don’t end with the pump. “Additionally, engine issues pertaining to the carburetor can be hard to detect without thoroughly running the equipment,” says Lee. “This also would add cost to the dealer of the equipment.”

Prospective buyers have homes inspected and used cars evaluated to the fullest extent possible before buying. A lot can be concealed by an unblemished exterior. It’s the same with pressure washers.

“Unfortunately, simple assumptions regarding the condition of equipment cannot be relied upon for used machinery,” says Lee. “Consequently, we find it impossible to guarantee the level of quality that we’re known for on used equipment.” Hence, no trade-in program.

Many things will weigh on a company’s decision to take trades or not. Overall, an exchange program of any sort must coincide with the business structure.

Another factor in the decision of Lee’s company to stay away from trade-ins stems from the wide reach of its service department. “We will service most pressure washer brands,” he explains. “Companies that only service the equipment that they sell, and focus on one specific brand, have a better ability to guarantee the condition of the used equipment they sell.”

Cautions aside, Lee acknowledges opportunities for those who set up programs. “There is certainly a market for used equipment in the peer-to-peer (P2P) private market,” he says. “However, it’s important for contractors to realize there might be significant repairs needed for the equipment to be reliable.”

Contractors buying P2P go without a warranty or guarantee that comes with a new purchase. Yet the fact that there are so many contractors in search of used machines and negotiating private deals speaks to the size of the used marketplace.

A company could capture some of the private exchange market by adding trade-ins to its repertoire. Given that P2P buyers ought to get some evaluation of their used purchases, a dealer could make the case that buying used from a dealer saves a step—i.e. the machine has already been evaluated and refurbished.

“For single-brand dealers, trade-in programs could be advantageous for the purpose of retaining a customer base,” says Lee. “This makes the most sense for manufacturers like Hotsy or Hydro Tek.”

Assess carefully. Some dealers could do well with the addition of a trade-in program.

Factors to weigh carefully include location—whether technicians can be hired to service incoming trades; state rules—any regulations concerning the sale of used equipment (in some states a limited warranty must be given); space for storage; logistics—handling/ management of shelf-sitting used machines; and the time commitment required.

Current Digital Issue

Click to read.

Past Digital Issues

Click to read.

Archives

May 2024
April 2024
March 2024
February 2024
January 2024