Disrupting the disruptors: How Austrian rental site Digando is taking on tech platform startups

Alexander Höss, chief executive of Austrian platform Digando, has a difficult brief – to build an online marketplace which protects the market share of traditional rental businesses in the country.

A subsidiary of Austrian plant hire company Huppenkothen, Digando was founded the same year that Munich-based tech startup Klarx entered the Austrian market and says its purpose is to take on the disruptors at their own game.

“The story is that the rental companies were afraid that these platforms would gain market share and that would damage customer relations for existing rental companies,” says Höss, a former industrial software developer, specializing in, among other things, supervisory systems for wind farms. “With these platforms, customers don’t know which supplier they are dealing with. For customers, it’s a problem not to have a second or third source in order not to be dependent on one supplier and to ensure better prices.”

Alexander Höss, chief executive of Digando. Photo: Digando

Providing a real time digital-only portal for customers to rent construction machines from both Huppenkothen and its rivals in Austria and Germany, Digando says it works along the lines of hotels portal booking.com connecting customers with plant hire firms.

To do this it is taking on not only Klarx, but also Klickrent, an asset-free rental site owned by German giant Zeppelin.

“Rental companies tell us all the availability information for their machines and we show this to our customers so they can book them directly on Digando and the rental customer receives the booking with all the customer data and price information and so on in under one second into their systems,” he says. “Then the rental company takes care of the rest.”

Rental firms pay a commission to Digando per commission as well as an upfront fee for signing up to the platform and having the necessary software installed.

Currently the platform boasts access to 18,000 machines from 170 rental stations in Austria and Germany. By comparison, Klarx, which was founded in 2015 in Germany by three young entrepreneurs and which is backed by venture capital, boasts access to more than 500,000 construction machines and partner stations in 5,000 locations.

Moreover, according to independent web traffic tracker Similarweb, while Digando had around 18,000 visits to its site between October and December 2023, Klarx had more than 100,000 visits.

Höss admits that Digando’s business is “not growing as fast as we expected,” – an issue exacerbated by the Covid lockdown being imposed just months after the company’s foundation - but argues that in his region especially, the important thing for all equipment rental platforms is to be in a position to grow when the market really starts to take off.

Low digital take up but high potential for growth

“These platforms in the rental industry started a little bit too early in my opinion,” says Höss. “In Germany and Austria, the market share of the digital business is really low – just 2%-3% of the market. We have a high potential to grow but it takes time. Currently we are seeing the early adopters using them but not the majority of companies.”

“Most construction companies have a strong partnership with their suppliers. They make a short phone call to a good friend and book their machines this way. But we are starting to see a transformation. The younger generations are doing all their stuff on their smartphones. They’re afraid of calling someone. They want to have an app to do everything.”

Yet, with the German construction industry hit hard by hikes in interest rates and spiraling inflation, the outlook for construction equipment rental in the region for 2024 looks gloomy.

“The biggest pain for construction companies currently is not the rental process,” says Höss. “Currently they have other pains and before that there were covid problems. It’s all about the right time for this solution. You can’t push such a solution into the market. You have to wait until a construction company wants to talk to you.”

Höss says that nonetheless he expects to expand the business into Switzerland in the second quarter of 2024 while the company is also weighing up exploiting existing partnerships in both Spain and Denmark to expand into those markets when the time is right.

For the short term, he points out that, unlike many digital startups, Digando has a strong financial backer in the form of Huppenkothen, which is itself part of Austrian building, property and construction equipment conglomerate I+R Gruppe.

Image: Digando

Moreover, Digando has sold small stakes of around 3% in the business to rival Austrian plant hire companies Felbermayr and Kuhn Baumaschinen.

“Because of the situation that a construction company and a rental company own Digando and some of our competitors wanted to be in this project too, we added two additional shareholders. And we’re talking to other strategic partners in Germany to have more shareholders there because it should be a project of the branches for the branches.”

And, with the economic outlook in the sector looking gloomy, Höss predicts that Digando’s strategy of keeping headcount low and only transacting online will act as a differentiator.

“The platforms have a different model to us,” says Höss. He points out that Digando employs just seven staff in Austria and a handful of software developers in Moldavia with no call centre or sales team.

“For us this is a project for tomorrow,” he says. “The money is not the most important thing to us. We have a strong financial background but it’s really about sitting together and discussing the future of rental processes in different branches and different sectors.”