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This report aims to track ownership changes and consolidation trends of North American farm equipment dealers.
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  IN THIS ISSUE                            APRIL/MAY 2014 

Alternative Distribution:
How Many Options Really Exist?

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Consultants and manufacturers weigh in on 7 options that are bandied about, and whether equipment dealers could see new or evolving models popping up around them.

Case IH’s announcement in February about brand purity at its dealer meeting and the specific mention of 7 lines they didn’t want to see competing with red equipment on dealers’ lots, got the attention of both dealers and manufacturers. The topic presents a conundrum for both manufacturers seeking distribution and the equipment dealer who has built a strong business on specialty products and can’t afford to yield the wholegoods and parts business of its shortlines to someone else.

As a result, for this year’s long scheduled focus on “Alternative Equipment Distribution Models,” it was time to review some of the different models that we hear about. Some seriously discussed, others simply barroom chatter.

So Farm Equipment went to several consultants and specialty equipment manufacturers to analyze various alternative equipment selling concepts. What you’ll find in the following pages are more “cons” than “pros” once practical reality is factored in. But then, in an industry with the longevity of farm equipment, many ideas that truly hold water have already been tried, with some adapted, and others discarded.

But like everything else, those attempts were in a different time and place and with different people, so you can’t count them out entirely. At any rate, whatever changes come to the dealership world of tomorrow, it will almost assuredly be the dealers themselves who blow up the structure.

Given a choice, it’s clear that specialty equipment manufacturers prefer to work with traditional farm equipment dealers. But with the ongoing trend of dealer consolidation, coupled with the major OEMs push for dealer purity, the shrinking pool of conventional retailers available to carry their products is limited. As a result, they are examining a range of alternative distribution strategies to determine which ones may make sense for them.

As Tony Bakker of Monosem summed up, “There are quite a few options for distributing our equipment. But I want to emphasize that the preferred method of selling capital-intensive equipment is through mainline equipment dealers.”

Interviewed for this report were George Russell, Currie Management Consultants; Charles Glass, Glass Management Group; Tony Bakker, Monosem; Jim Boak, Salford Group; Tom Evans, Great Plains Mfg., Rusty Fowler, Krone North America; and Ward McConnell, Art’s Way Mfg.

Final Analysis

For equipment dealers, there don’t appear to be any threats on the horizon. The company stores that have gone up recently are last resorts that a manufacturer would gladly abandon to get a “real dealer” working on their behalf.

“There’s not a lot out there from the current options that show much possibility,” says Glass. “The next model we’ll see that’s most likely to work will be a combination of the direct guy calling on end users with leads generated through the web.”

But the one thing dealers can count on is change. “The farm equipment business is getting to be like many others with the impact of the Internet, consolidation, globalization and increased pace of technological change,” says Russell, adding that he expects greater innovations to be released from manufacturers now that Tier 4 is under way. “Regardless of what end of the business you touch, and on what side of some of the issues like purity you’re on, you still must adapt to change. The business will be mostly traditional dealerships but traditional can’t be static. There’s always someone willing to try something new.”

Fowler of Krone North America believes that as the opportunity expands, the industry will see more very capable shortline-only dealers. “But we’ll need to wait until consolidation settles down. Once it does, the major line dealers will be more open to the shortliners. They’re really in a tough position now if you think about what they must decide to do. But that will change as this thing goes forward. Then there’ll be more opportunities for the shortliners. We’re just in a period where that has happened in the past and will probably happen again in the future, but it’s not the end of the world for the shortliners. There’s still plenty of opportunity out there.”

Glass echoes the sentiment that few things in the business last forever, recalling that it wasn’t all that long ago that John Deere was petrified of a dealer owning more than one store. “The single-store John Deere dealer was their cash cow. Now, with the multi-store trend, Deere has soaked up all those owners’ cash and they have to do what Deere says.”

Regardless of how things shake out, Bakker says above all else, there’s one thing that the industry needs to do — keep focused on the customer.

“In this whole discussion about distribution, all the stake holders — manufacturers and dealers — need to stay focused on what is in the best interest of the farmer, not what’s the best for the manufacturer. Farmers must have a choice on what equipment is best for him,” says Bakker. “In other words, some of the majors are talking about what they would like to see and what they feel is best for them. But what we really need to do is to stay focused on what is best for our farmer customer.”

Dealer Takeaways: Manufacturer Weighs Pros & Cons

COMMENTS: 2
alternative marketing ideas
Posted from: ssjackson, 4/18/14 at 9:08 AM CDT
During the late 90's these and other marketing channels were discussed and studied by leading manufacturers. after spending money and manpower, the final analysis was that there are other ways to market farm equipment...but none is better than through a solid dealer organization. ss j.
Statement about IH company stores is incorrect
Posted from: Jim Irwin, 4/17/14 at 2:05 PM CDT
In the discussion of “Manufacturer-Owned Company Stores” consultant Charles Glass states that ‘International Harvester (IH) had a bunch of company stores in the 1960s and 1970s and not one was profitable.’ This is incorrect. I know from my own personal experience that my store was profitable the entire 2.5 years I managed it, and IH had a number of profitable company stores that were purchased by the store manager. Like any other dealership, some made money, even good money, and others didn’t. Several of those stores who weren’t profitable were located in good markets where we couldn’t find a dealer, and as start-ups faced difficulty due to low IH machine populations. But to make a flat statement that no IH stores made money is not true.”
--Jim Irwin, Scottsdale, Ariz., retired Case IH vice president of North American Ag Business

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