The most expensive chairs are the cheapest!

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Rental owners have more choice than ever before when buying chairs. From the industry-standard vinyl folding stackers to more upmarket products there are more manufacturers and more product lines than ever. And with more and more manufacturers choosing to make their products off shore the customer can benefit with lower prices.

So how are rental storeowners making these decisions? Does it make economic sense to always buy the cheapest chair and plan to replace often, or is a longer-term view more cost effective? We set out to look at the issues important to rental owners in this buying season and the results may surprise.

For some, buying from US manufacturers is important because of perceived quality and in some cases, philosophy. Gloria Parsons of Rental World, PA says, "On principal we do not buy from manufacturers who use low cost labour in Asia because we want to support National industry and we just can't afford to have low quality product in our inventory".

For others lower cost products make sense. One rental store owner's response, "If I can get a chair from China for seven dollars that does the same job as one I pay fourteen dollars for it means I can buy twice as many chairs and that makes sense to me".

Most will agree that a key attribute wanted in any rental product is long life because a longer rentable life translates to more dollars before replacement. And most will agree that a product with a longer life is going to have a price premium, but just how much of a premium makes economic sense? It may be higher than you think.

There are also other factors to consider. When we talk about a product with a longer rentable life we mean a product with higher quality. Longer rentable life means it is less prone to failure, more resistant to general wear-and-tear, requires less maintenance, stays looking good for longer, and fetches a higher price when sold down. These attributes are also useful when looking at the other side of the ledger -risk management, or protection against liability caused by failures.

But if I can buy twice as many of a cheaper brand chair and plan to replace more often does the longer life argument really stack up?

Tom Mantyla of Baker Party Rentals in Cost Mesa doesn't think so. "Last year I replaced my entire four thousand chair inventory with a higher quality product which cost more, but will give me long term gains. Selling chairs down is a time consuming exercise and costs money, and I want to do it as infrequently as possible. The product I bought is rust free, low maintenance and will last two to three times longer in business than a cheap import."

It is hard to assess the economic pros and cons of buying quality but it can be done. If I buy a chair for $7 and replace it every two years, selling it for $2, after six years I will have spent $21, and recouped $6from selling down, a total of $15 plus my costs involved in the exercise of selling down.

If I buy a quality chair for $14 and sell it down after six years for $3 that's a total of $11 so I'm $4 better off.

There are many folding chair brands on the market, a vast number look very similar and are manufactured in China. Excel Furniture has a patented catch on their chair that they say improves safety. Charles McCourt is the largest manufacturer of chairs in the US and maintains a small price premium for USA made quality. His chairs are among the most popular in the industry and he stands by his decision to continue manufacture in the US. "I think we're seeing a trend back to buying quality," says McCourt, "many of our customers tried the cheap chairs when they came onto the market and some got their fingers burned - it's early days yet for these products and we'll see how they stack up over time."

Alloyfold New Zealand (www.alloyfold.com) manufactures the only Aluminium folding chair on the market and claim it has the longest rental life in the industry. However the product does have a price premium they concede, due to its material. Alloyfold have obviously had to grapple with the quality versus price arguments so do something a little different. They provide their customers with a "Benefit Calculator" which allows buyers to put their own numbers into a spreadsheet to calculate the supposed savings that can be made over time by buying their product. For example they say that over 4years on a purchase of 3000 chairs my earnings from their product could be $177,000 more than their competitors based on certain assumptions.

Sales Manager Antony Brett says, "We find that many of our customers are people who take a long term view on their purchases. We've learned that customers buying solely on price seldom choose our chair, but we believe that the long term view is the only one that makes economic sense."

This sentiment would seem to be echoed by many old hands in the industry including hall of famer Keith Klarin who for many years has espoused buying quality chairs over low priced chairs and has been a past champion of both the McCourt and Alloyfold brands.

Our conclusion is that it pays to buy quality and we think most rental owners believe this. The premium that buyers should pay varies and needs to be carefully considered and some companies will help buyers calculate this.

But the challenge to rental owners at this time is the difficulty of taking a long term view in the face of the need to limit capital expenditure in the less buoyant economic times that some face, and that is not easy.