Interview: Tom Shorten on the ‘new dawn’ at HSS ProService Marketplace

IRN: Can you explain the significance of the Speedy deal you have completed?
Tom Shorten: We have been growing the rehire business for some time, which is what a marketplace is. And what we’ve done is we’ve taken around £50 million of what used to be with our sister company, The Hire Services Group, which we’ve now divested, and given Speedy an offer of first refusal over that. So they’re no more than 25% of our supply. The other £150 million is what we do through the other 399 suppliers across a total breadth of hire products that Speedy don’t offer.

The agreement talks about a defined range of equipment with Speedy. Can you detail that?
That’s powered access up to a working height to circa 10m, so not the high stuff – for that we go to the specialists - and what we traditionally call small tools – it’s effectively that. There’s some small KVA generators in there as well, but effectively it’s what I suppose was the heartland of what HSS was known for, that Speedy has picked up, allowing our other suppliers to give us the full breadth of the proposition that we offer to customers.

Tom Shorten, CEO, HSS ProService Marketplace.

In rental, service response is key. How will it work in practice with the Speedy agreement?
We always speak to the customers. The customer would never speak to [our supplier partner]. When someone orders on our platform, they have no idea who the supplier is. We are their supplier. We have specialist live chat teams, depending on what products you are looking at. So, we effectively control that customer experience and making sure the product matches.

And with Speedy, we’re fully integrated. What that means is, as the customer is searching, we are doing a stock lookup to understand what’s available. If the customer wants to do that transaction, there’s a hundred percent acceptance rate on the front end of our product. So customers always get a yes. There’s not a ‘to be confirmed’ or ‘we’ll phone you back’. They get confirmation.

The system then will go straight in and create a contract and put it on the delivery screen for Speedy’s drivers to take it out and deliver it. They’ll upload the proof of delivery [POD] into the system that we can see, which keeps our data clean and complete. And then the customer can see the POD as well.

For a given product sector – power, aerials - do you go for exclusive partners or you have multiple partners?
We have multiple partners, 100%. You want multiple partners to give our customers flexibility around innovation, but also last mile distance from site. It’s really important to us. We don’t want to drag a piece of kit down the M6 motorway and around the M25 to get to Kent when there’s a great supplier in Kent.

You’re still going to use The Hire Service Company for certain powered access assets in the South of the UK
In their operating area, which is in the south, southeast, they’ve got a carved out zone in there as part of the transaction. We’ve given them some powered access under a right of first refusal (ROFR) for a period of time, as part of the carve out transaction we did with Endless [the new private equity owner of The Hire Service Co, the former HSS physical hire shops].

Earlier this year ProService reported that 27% of its revenues were generated by non-hire activities. I guess the plan is to expand that non-rental part of the marketplace?
Ultimately a hundred percent. I mean, our legacy is hire. We ran a marketplace, an analogue marketplace business for 10 years and digitalized it recently. We had a business called OneCall.

Our aim is to grow our fuel revenues, because we think fuel’s highly accretive for us and really good. And it works very well in the platform for us as a marketplace product. Building materials is another one - because it makes sense to have a single source for customers to order through – and equipment sales and training.

So, all those are growing verticals. If you had spoken to me five years ago, they were something on the side. They now have specific leadership, specific vertical control, specific front-end people who are looking at the interface on the platform to make that experience really good for those different products and supply chains. We really are moving away from HSS Hire into the ProService model.

The ProService App allows customers to source equipment from 400 suppliers.

Which of these verticals offer the biggest opportunity?
The building’s materials market, by TAM [total addressable market] is obviously the biggest by a mile. It’s also the most complex. So that is the one that we are treading sensibly and growing into. Fuel is much more immediate. It is a commodity which you trade based on price and service. So that one’s an opportunity.

And equipment sales has got such a broad church behind it. We’ve kind of got the small tools equipment sales, which we run hard through hss.com and on the marketplace, but then the wider equipment sales are something we’re growing.

To answer your question, there’s opportunities in all of them, because at the moment we are very small, so we can see market share growth in all of them. And we see that monthly now as we start to move forward. And also we’re working really hard to not try and make an ex-hire specialist a fuel specialist, because they are very different languages and people - the buyers speak in a different way. So, we are building those teams out with grassroots knowledge of those verticals and then pairing them up with our digital business to move that proposition forward.

The common objection to marketplaces in the rental sector is that they commoditize the products and it leads to lower pricing. How would you respond to that view?
I understand why people say that. And I always say, you know, the people who say that are all supplying the marketplace, so I take it with a pinch of salt. The four biggest players in the market [in the UK] are all suppliers to the marketplace. I hear what they’re saying, but I think actions are more important.

But importantly, I think from a buyer point of view, the customer in this context, the market is big enough and has a broad enough appeal that it can have different routes to market for different people. If you look at me, I’m a 55-year-old man who is pretty digitally savvy, but I’m not digitally native. So, I’ll have a set of buying behaviors.

If you speak to a youngish person working on a big site in London, they’re digitally native. So, it totally makes sense for them to log onto the platform, be able to go on there and pick their products, have the purchase order loaded, see what’s on hire, off hire, order bits and pieces, all digitally, just like they’d go onto Amazon at home.

Do you have demographics on your customers?
When people sign up, we don’t ask them how old they are. But I know from when I go out and meet customers and I sit in a room, because we have fun conversations where we’ve got the chief procurement officer, who’s a similar age to me, and then you’ve got some buyers around the table who are younger. And the conversation goes from, we’ve always done it this way, to, yes, but this is so much quicker, we can just do this and this, and that means we can focus our time on that.

What about national rental agreements that many contractors will have with suppliers? How do you incorporate that?
If they have those deals in place, those deals stand. And when those deals come up for renewal, obviously we as a team put our best foot forward and tell customers there’s nothing that you can get directly from one supplier that we haven’t got on the platform.

So you’re competing with some of your biggest suppliers?
A hundred percent, yes. We are. [Our suppliers] understand that dynamic. The hire industry, as we all know, is a utilization/margin game, right? They are the two variables you trade in all the time. So, if you can get incremental utilization - because you’re really at 50% though you’re telling everyone you’re at 60% - that 1% increase in utilization drops straight through to your bottom line, apart from your variable cost of delivery. All your fixed costs are bedded in.

So effectively that’s why they will say one thing, but they will clearly come to the platform, because If we can give them 3% extra utilization, that’s really meaningful to them.

An HSS ProService employee. The marketplace offers customers a live chat function.

IRN: Who are your key customers? Who is your platform going to appeal to most - is it small, medium sized companies, or the bigger contractors?
Tom Shorten: The whole range. Our what we call our non-account cash and professional cash, obviously go on hss.com, which is a more of a B2C and a small B2B play. On our actual marketplace platform, we’ve got everything from two brothers who run three gyms all the way through to Heathrow Airport Group, Tesco, Marks & Spencer.

The biggest players are attracted because of this concept of control at scale. One of the biggest issues large contractors have is control at scale. I see it everywhere. As they get bigger, they have more sites, they have more people, they have a higher churn of people on the sites. They lose control of the assets they’re hiring, and therefore their cost starts to go. Hire starts off as a very small percentage of the budget, but ends up being one where they have a lot of increased costs.

And then you go right down to the other side, it’s about knowledge and information. You’ve got a problem on the roof, and the contractor says to you, I need a cherry picker, and they can go on here and they can ask through live chat or by just researching our platform, which cherry picker to get. So we really have a broad church.

Which customer segments are growing fastest?
Our fastest growing at the moment, I would say facilities management and gateways, which is airports and things like that.

How do you make sure that your hundreds of suppliers meet certain quality and safety standards?
I mean, we’ve been doing it for 10 years. So we’ve been working with a lot of our suppliers for 10 years. We audit them. When someone joins the platform, depending on what the product group is - there’s some very risky products, and some less risky products like fencing for example - but anything which moves, vibrates, is used hand-to-hand, and clearly working at height, are very risky. We audit those suppliers.

We have a supply chain team which goes out and onboards them. We have to see all their insurances, we have to see their protocols. We take references on those suppliers. And then what we do is we effectively run them up on volume slowly through the system. Initially they might get very few jobs and we’ll score those jobs in terms of quality of the kit, turning up, breakdown percentages, call out charges and all the things that you’d associate with something not going well.

If in doubt, we switch them off. And we are very open with our suppliers because our job is to protect our customer and treat our suppliers fairly. And as an ecosystem, we can’t have poor supply or dangerous supply in the marketplace.

Can you influence your suppliers in what they’re buying?
There’s a massive data asymmetry in what data we have and the rest of the market has. So, at the postcode level on the map, I can see by product what the average hire rates are. I also know what the buying price for all the machines are. I also know what transport rates are. I know the cost of diesel, insurance.

So, I can give a proxy for real ROI. When suppliers say we are thinking about what we should spend money on next year, our supply chain team, when we’re doing supplier reviews, can sit down and say, look, if you operate in this area, and these are the machines you operate in, these are the hire yields we see. This is where our demand is and this is where your pricing would need to be in order for you to pick up volume.

We can absolutely do that and we love doing that, because if you are a small regional supplier, we can give you insight, which helps you make really good investments to help you build your business. And we ultimately want to build those businesses with them.

So, with a mature ProService business, say in another 10 years, what is going to be the mix of hire and other product lines, the other verticals?
I could see hire being somewhere between 20 and 25% of what we do. And everything else will have grown really materially. I think more and more buyers who start working with us are amalgamating different buying desks and effectively having using the platform in different ways. It just gives them much better control and it also gives them a single supplier that they have to pay. So rather than having 40 supplies, they’ve got one. I think that’s really meaningful in terms of efficiency.

And I also think, you know, there are other verticals that we are intrigued by, like temporary labour and some other safety and specialist safety things, especially waste, that we will move into over time as well.

When will you add labour and waste management?

HSS ProService staff at the company’s head office. (Image: HSS ProService)

It will not be in financial year 2027. I don’t want to go wide and thin; I want to go deep into the verticals we’re currently running and really make sure we understand them. And then we’ll start looking. That doesn’t mean we won’t be doing background work on them, but we won’t be launching them.

The change in the business mix implies a significant increase in the scale of the business over the next five years.
I see no reason why we shouldn’t be in strong double digit growth. Not at all.

The UK rental market is difficult right now. Any signs of positivity?
No, no. I think the market has been difficult for probably two years, in reality…There’s an oversupply of kit in the market, which puts pressure on price. I think the market stays subdued - is the polite way of saying it - for probably next year. I say to my team, and I say to myself, it’s a huge market, there’s plenty of market share to take. But it’s challenging.

How does it feel now that you have completed the corporate reorganization, with the divestment of the physical hire shops and the deal with Speedy?
It felt really, really good, but now’s the new dawn. It was really good to get the deal done and get it out in the open and be able to reset the agenda with my team, to be really clear where we are a separate entity and really being pure play. Now it feels like there is a huge desire to get after it really, really quickly. That’s how I describe it.

Should the traditional rental companies, the tool hirers, be scared of you as a marketplace?
I’ve been in the industry over 10 years now. I know a lot of them. They shouldn’t be scared. They shouldn’t see us a threat. They should see us as a really valuable partner.

We can help them grow their business. We can introduce them to customers they wouldn’t have, we can help them supply their customers products that they can’t supply today.

With some of your suppliers, I guess a significant portion of their revenues are through you? How high does it get with some of them?
With some of the suppliers it’s 25, 30% of their revenue.

Some of our suppliers have actively said, look we’re going to be like an Amazon ‘power seller’. We’re going to focus on supplying you at the platform. We don’t need 12 or 15 salespeople running around in vans. We want to supply you. And we respect that decision.

And it means they don’t have to come up with an e-commerce site, for example.
They don’t have to have an e-commerce site. I was talking to one supplier the other day over lunch. He said, ‘I’m now like a dark restaurant.’ And that’s the best way of describing it.