“ We think that (consolidation) trend is only going to accelerate in the future,” says John Schmeiser
How much are you being asked to give up so your dealer can be more profitable?
hings have changed down at the local farm machinery dealership. It’s impossible not to notice. If the dealership is still there, everything from the building on the outside to the services and the range of products being sold on the inside is much different now than a couple decades ago.
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So are the people. Odds are that your local dealership is now one of a chain of outlets under a corporate structure. The mom-and-pop, one-store dealership with the owner behind the counter is rapidly becoming a thing of the past.
The transition to multiple-store dealer networks in the retail farm machinery sector is gaining momentum, and that isn’t likely to change. “We think that trend is only going to accelerate in the future,” says John Schmeiser, executive vice-president and CEO of the Canada West Equipment Dealers’ Association (CWEDA). “The reason is, our dealerships are becoming more professional because our customers are becoming more professional.”
Because machinery is getting so complex, full-line farm machinery manufacturers now employ “product specialists” to market individual machine types, and dealers are finding they need to adopt the same strategy to retail the equipment to producers.
In today’s dealership, one salesperson can’t properly represent all of a manufacturer’s lineup any more than one mechanic can be an expert on all the different designs.
“Technology has come into farming in a big way,” says Brian Taschuk, chief operations officer for the Rocky Mountain Dealerships network based in Calgary. “In the past a dealership owner could go out and educate a farmer on how to use the equipment. Now, we have separate GPS, harvesting and application experts. You need the scale to have all these extra resources.”
Scale is something Rocky Mountain has in spades. The publicly traded company now operates 25 outlets across the Prairies, making it a giant in Canadian farm machinery retailing. Its growth has been breathtaking, doubling its number of outlets in just two years.
But can dealership chains, especially those as large as Rocky Mountain, continue to grow? How big is too big?
Farmers themselves will decide those questions. After all, the most important job for any local outlet is still to make farmers want to drive onto the lot.
How they’ll get you in their doors
“I think the farmer wants to be able to walk into the dealership and have somebody there that can make a decision,” says Taschuk. It’s an expectation any dealer network must meet, he feels, or it will risk losing its customer base.
Farmers will also make their choices based on the shop. And while some dealer chains have cut back on the services provided at a few of their small-volume locations, Taschuk thinks the most successful networks will be those that maintain full-service outlets.
It’s all about establishing the proper relationship with producers. In fact, “relationships” is a word that comes up in nearly every conversation with anyone who retails farm machinery. “Dealerships need to be able to show to customers the value they add in a relationship,” says Dennis Hann, New Holland’s regional sales director for the mid-states region. That challenge applies to all dealers, no matter what size they are.
“A multi-location dealership that has found a way to maintain a close relationship with customers is very successful,” says Hann. “But what we see is at times they run the risk of losing touch with the grassroots — to know the farmers’ first names. We see that personal relationship as still critical.”
Taschuk says Rocky Mountain has ensured that won’t happen in its supersized dealer network. To avoid the problem, they established semi-autonomous regional management teams. Managers of individual stores or of small groups of stores are free to exercise broad control over their own operations as long as they work within overall guidelines.
Photo credit: Sharpeshots
That’s designed to ensure they can deal personally with customers and so they can adjust their focus to cope with local problems and opportunities, which helps give their outlets the feel of locally owned establishments.
At times, fear of losing local autonomy has fostered some resentment among producers faced with the takeover of a local business by a dealership chain. In practice, though, networks are being called the best hope for the survival of many local franchises, particularly those in small markets that cannot compete as a single outlet.
“Consolidation is the only thing that will keep stores in the smaller locations,” says Gordon Pries, managing partner of Maple Farm Equipment, a seven-store chain based in Yorkton, Sask.
“Customers might think consolidation will cause them to lose their location in small towns,” Pries says. “But it’s exactly the opposite. It’s what is going to keep it there. All the infrastructure needed to run that place can be spread over a much larger base.”
In fact, by tapping into economies of scale, many small dealerships may return to profitability.
Another fear is that multi-store outlets limit competition and farmers’ choices, but Pries doesn’t buy that either. Access to the Internet and numerous advertising publications give potential buyers an unprecedented amount of information on where to find machines. It also allows them to compare prices, although they may burn a little more fuel in the process of checking out potential purchases.
The focus on choice
Additionally, Pries says, producers are being offered better service from multi-outlet dealers. His dealership network now employs more service people than the combined number that worked for the original franchises, and their total inventory of parts and equipment is bigger too.
According to Schmeiser, CWEDA’s dealer members report that most producers have now adapted to the new retail environment. “Customers have gotten over their concerns about multi-store operations,” he says. That may be an acknowledgement on the part of producers that chains do, in fact, provide a good service.
A key element in providing that service is getting the right people behind the counter, and Pries is confident that the quality of employees his firm has been able to attract is now better than ever. As in other sectors, he explains, potential employees who have the best skills and motivation see advantages in working for larger companies.
With the intense technological demands being placed on dealers, that expertise comes at just the right time.
“It was an unexpected benefit (of growth),” Pries says. It also pays dividends for customers. They receive better
sup-y
port and additional expertise in expanded that stand-alone dealers often couldn’t get into such as financing.
“Our biggest asset is our staff. It’s the key to expansion,” Pries continues. Without the right people, the multi-store concept wouldn’t work, he says.
There’s more to it than farmers might see, he adds. As chains grow in size, hiring experts from outside agriculture becomes necessary. Dealerships have turned into medium-sized corporations with a need for diversified professionals in everything from human resources to information technology.
Keeping a multi-store dealership functioning has become a completely different job than running a single outlet. “Our dads didn’t teach us to run a corporation with 180 employees,” Pries says. Maple, he points out, started out as a family-owned, single dealership. But he is quick to recognize it is the same problem today’s professional farmers face, whose operations have turned into multi-million dollar businesses.
What does all this mean for the future of farm machinery retailing? “We could really get to the point where one company would own all the dealerships in a province (for a single brand),” says Schmeiser. And Hann points out the retail construction equipment sector reached that stage years ago.
So if big dealer networks are the most viable, will manufacturers consider taking them under the company umbrella and eliminate independent retailers altogether? Not likely.
“We believe we’re good at manufacturing equipment,” says Hann. But independent dealers make for better relationships with customers when it comes to selling it.
How big is too big?
Pries is unequivocal. “We’re committed to expansion,” he says. But achieving the ideal size means chasing a moving target. “What I thought was a critical size four years ago has grown exponentially.”
Does that mean the multi-store strategy is the only viable one for farm machinery dealers? “In a cash crop (large grain farm) market, it is a very proven model,” says Hann. “The concept is irreversible. It won’t change. But in a more suburban market, when dealing with owners of five to 10-acre estates, we don’t see the multiple-location (dealership) being as effective right now.”
That means hobby farmers are more likely that commerical producers to deal with one-store retailers in the foreseeable future.
O’Neil’s Farm Equipment of Binbrook, Ont., is one of a declining number of singlestore dealerships that cater to agricultural producers. Craig Smith, the general manager, acknowledges it poses challenges for the company’s management. “There are more disadvantages than advantages.”
Smith says however that his dealership still successfully caters to local customers. Many of them like the concept of a singlestore business. “They still want the feel of being able to walk in and talk to the owner if they have a problem,” he says. “Business is about building relationships, and I think that’s very important in our industry.”
There is that relationship word yet again, and in Smith’s view, it can be a big plus for the one-store business model.
But, Smith concedes, even when managing a single-store franchise, growth is still an important consideration. Like any dealer, he is focused on increasing his sales and raising his market share, but he believes he can achieve those goals by giving customers the kind of service they want without adding new locations.
“As long as you’re proactive and grow your business to meet customers’ needs, you’ll survive,” Smith says.
Schmeiser agrees: “A dealership is going to survive as long as it’s (financially) viable.” Manufacturers are likely to continue to support any profitable operation. In some provinces, they are obliged to by legislation that protects dealers from having their franchises cancelled without good cause.
According to Hann, New Holland will stand behind any dealer that does a good job, regardless of the number of outlets they operate — although, he adds, the economies of scale that benefit the large dealers also benefit their suppliers. Larger-scale dealers are easier for a manufacturer to work with.
In the end, Smith acknowledges, economics may eventually force him and other one-outlet dealers to expand. “We may have to,” he says.
Increased profitability and the complexities of customers’ needs will continue to fuel the drive to ever-larger, multi-store operations. But there is another factor driving that trend as well: the cost of maintaining high-value new and used equipment inventories is getting out of reach for small dealerships.
“We could never go back to smaller operations,” says Pries. “We just couldn’t afford it.” CG
port and additional expertise in expanded that stand-alone dealers often couldn’t get into such as financing.
“Our biggest asset is our staff. It’s the key to expansion,” Pries continues. Without the right people, the multi-store concept wouldn’t work, he says.
There’s more to it than farmers might see, he adds. As chains grow in size, hiring experts from outside agriculture becomes necessary. Dealerships have turned into medium-sized corporations with a need for diversified professionals in everything from human resources to information technology.
Keeping a multi-store dealership functioning has become a completely different job than running a single outlet. “Our dads didn’t teach us to run a corporation with 180 employees,” Pries says. Maple, he points out, started out as a family-owned, single dealership. But he is quick to recognize it is the same problem today’s professional farmers face, whose operations have turned into multi-million dollar businesses.
What does all this mean for the future of farm machinery retailing? “We could really get to the point where one company would own all the dealerships in a province (for a single brand),” says Schmeiser. And Hann points out the retail construction equipment sector reached that stage years ago.
So if big dealer networks are the most viable, will manufacturers consider taking them under the company umbrella and eliminate independent retailers altogether? Not likely.
“We believe we’re good at manufacturing equipment,” says Hann. But independent dealers make for better relationships with customers when it comes to selling it.
How big is too big?
Pries is unequivocal. “We’re committed to expansion,” he says. But achieving the ideal size means chasing a moving target. “What I thought was a critical size four years ago has grown exponentially.”
Does that mean the multi-store strategy is the only viable one for farm machinery dealers? “In a cash crop (large grain farm) market, it is a very proven model,” says Hann. “The concept is irreversible. It won’t change. But in a more suburban market, when dealing with owners of five to 10-acre estates, we don’t see the multiple-location (dealership) being as effective right now.”
That means hobby farmers are more likely that commerical producers to deal with one-store retailers in the foreseeable future.
O’Neil’s Farm Equipment of Binbrook, Ont., is one of a declining number of singlestore dealerships that cater to agricultural producers. Craig Smith, the general manager, acknowledges it poses challenges for the company’s management. “There are more disadvantages than advantages.”
Smith says however that his dealership still successfully caters to local customers. Many of them like the concept of a singlestore business. “They still want the feel of being able to walk in and talk to the owner if they have a problem,” he says. “Business is about building relationships, and I think that’s very important in our industry.”
There is that relationship word yet again, and in Smith’s view, it can be a big plus for the one-store business model.
But, Smith concedes, even when managing a single-store franchise, growth is still an important consideration. Like any dealer, he is focused on increasing his sales and raising his market share, but he believes he can achieve those goals by giving customers the kind of service they want without adding new locations.
“As long as you’re proactive and grow your business to meet customers’ needs, you’ll survive,” Smith says.
Schmeiser agrees: “A dealership is going to survive as long as it’s (financially) viable.” Manufacturers are likely to continue to support any profitable operation. In some provinces, they are obliged to by legislation that protects dealers from having their franchises cancelled without good cause.
According to Hann, New Holland will stand behind any dealer that does a good job, regardless of the number of outlets they operate — although, he adds, the economies of scale that benefit the large dealers also benefit their suppliers. Larger-scale dealers are easier for a manufacturer to work with.
In the end, Smith acknowledges, economics may eventually force him and other one-outlet dealers to expand. “We may have to,” he says.
Increased profitability and the complexities of customers’ needs will continue to fuel the drive to ever-larger, multi-store operations. But there is another factor driving that trend as well: the cost of maintaining high-value new and used equipment inventories is getting out of reach for small dealerships.
“We could never go back to smaller operations,” says Pries. “We just couldn’t afford it.” CG
