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  IN THIS ISSUE               JANUARY 2013 SHOWCASE

Industry Q&A

Question:

What impact does pressure for 'dealer purity' have on your business plans and opportunities for growth?

Answers (Leave your own thoughts in the comments section below):

The manufacturer’s demands for dealer purity have gone past reasonable and now border on the ridiculous. Many dealers, whether they’re single stores or part of multiple store groups, find themselves severely impacted by the restrictions, particularly when a product line is demanded to be dropped from their mix when, due to their particular geographic location and demographics, they need more market share than their major supplier can give them even if they met the metrics their manufacturer says they have. The industry needs to take a page out of the car dealership book and many other retailer models — the customer wants a ‘super-market,’ but our industry is forcing us a totally different way. Go figure.”

— John Fleet,
Fleet Brothers Inc., Hartfield, Va.

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While I’ve heard this complaint or issue from many dealers, and I know there are some issues, now as a John Deere dealer I can see the value of aligning yourself with the brand and being able to solidly represent your position to the customer as a strong single line dealer and not confusing the customers about why you carry competing product lines. It also reduces the time needed to entertain multiple sales people, do multiple purchase orders, carry multiple inventories, etc. Of course, if you are not representing the leader in the industry you might need multiple lines to pres- ent a good offering to the customers.”

— George Keen,
New Virginia Tractor, Charlottesville, Va.

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We only stay ‘pure’ if the OEM product is competitive. Often, it’s not. They private-label attachments and accessories and there’s often not an advantage for us or our customers (price, quality or warranty). We would rather go straight to the source and make a better margin.”

— Tim Berman,
Big Red’s Equipment Sales and Rental, Granbury, Texas

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The concept behind dealer purity may be to promote the brand and leverage that strength to color the countryside. OEM’s have proven they cannot master every product category due to market-size, geography, technology and support among others. If competitive shortline products are barred from the lot, they will end up on another dealer’s lot and that wholegoods business is gone forever, nevermind the parts and service. From a free-market perspective, less competition inflates prices, breeds complacency and suffocates innovation. Tell me, how that is good for anyone?”

— Jason Miller,
Miller Equipment, Moosomin, Saskatchewan

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We are penalized a certain per cent of volume rebate by not being ‘brand pure.’ We can put each manufacturer’s machine against another and the machine stands on its own to perform and sell itself against the competition. If the manufacturer is afraid of the competition, it should make a better machine. We like to sell machines that when the customer gets off of the demo unit, it’s with a big smile on his/her face. We ask our manufacturers to help us do it. They penalize us for giving customers a choice. We never downplay anyone’s machine, just try to point out the selling points of the machines customers come to see. Our business plan is to ‘sell machines.’ Let us do it and don’t try to micro-manage our business.”

— Greg Simpson,
Simpson Farm Enterprises Inc., Ransom, Kan.

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We have various shortlines that we market in the absence of a similar product from John Deere. Whenever John Deere has the needed products, they clearly expect us to promote them and rightfully so. The key is to help the customer be profitable. As we all know the customer votes with his pocketbook, and it is also the major OEM’s opportunity and responsibility to create products that get their vote. Sometimes it takes more than one supplier to do this.”

— Don Van Houweling,
Van Wall Equipment, Perry, Iowa

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For me, the mainlines ‘quest’ for dealer purity is a tremendous opportunity. As shortlines get kicked to the curb, they have to find someone else to sell their products. That is part of the reason why I started my business a couple of years ago. For shortlines themselves, they are going to have to realize that the ‘business as usual’ days of getting big orders and having them paid for immediately are over. The mainline dealers that continue to handle shortlines will have to use their capital to keep the majors happy. Shortlines are going to have to go back to the days where they had to work to recruit dealers and help them to be successful with their products with either terms or putting equipment on a lot on a consignment basis. As I have become more established over the past year or so, I am starting to see more shortline reps wanting to talk to me about selling their products because the mainline dealers are refusing to place orders.”

— Darren Boyle,
Darren Boyle Sales, Pierre, S.D.

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The only thing dealers need to do is get used to it.”

— Francis Kane,
Beard Equipment Co., Pensacola, Fla.

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I think it limits a dealer’s ability to diversify their offerings to customers and limits their customer base only to what the major offers. With that said, it could become a hindrance to growth. Our dealership has taken the approach that we will offer what is best for our long-term survival and will allow us to grow to serve all of our customers better.”

— Brice Terry,
Terry Implement Co., Gallatin, Mo.

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As an AGCO dealer, we probably have been less affected than other major line dealers, but there are subtle changes that have been happening. We haven’t experienced any direct consequences as of yet. When we are subjected to the pressure that John Deere dealers are subjected to, I’ll quit!”

— Donald Lund,
Lund Implement Co., Madison, Minn.

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I feel like the ‘dealer purity’ discussion from our main line supplier has been reduced over the last few years. I think they are starting to figure out that when they do not have a product to offer or the right product in some niche markets, we are better served (reduced risk of losing a customer) having a solution rather than letting the customer go to a competitive brand dealer to fill his/her needs. I think this is due to a more true ‘partnership’ between our main line supplier and us as a dealer. With that said, it is frustrating when our main line supplier does have a product to offer, but it does not fit our market or terrain. They do get a little pushy on selling their product, even when it is not in the customer or our best interest. We find that with our severe hills and terraces, that this is sometimes the case. I figure this is part of being a mainline dealer and something we can live with, rather than just being a shortline dealer. You take the good with the bad.”

— Jeremy Ostrander,
A&M Green Power, Red Oak, Iowa

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Presure from our majors has not been much of an issue in the past two or three years. Maybe shortage issues and long lead times have reduced that. Without their products to sell, they recognize we have to sell something to stay in business. As soon as supply catches up with demand (and we may be closer than we think), I’m sure that will become an issue again.”

— Donny Sanders,
Martin Truck & Tractor, Columbus, Miss.

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While the majors do put pressures on dealers to only carry their lines, most of us find we have to carry other lines to meet our customers’ expectations. I try to choose the best option for our dealership and our customers. The determination is made by whether or not a piece of equipment best solves an issue for the customer — is it well supported by the manufacturer, is it competitive and provide value to the customer, and is it profitable and marketable for the dealership? If the major is the best solution, then there is no issue. I feel that pressure is not necessary if the equipment provides the best value for all concerned.”

— Kyle Wilson,
Agro Equipment, Uvalde, Texas

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We use to be a Case IH and New Holland dealer. Now we are a New Holland dealer only. CIH wanted the same amount of sales as we were doing for NH. Plus stock as much. We just couldn’t justify doing this because it was the same equipment just a different color. What these people need to do is color it the same, name it the same and sell it the same.
If you buy a company like NH, make it all one company with CIH. One tractor, one color, one brand; none of this two company stuff. You will be more stream lined, lower cost and a better company in the long run.”

— Bob Pravecek,
Hersruds of Sturgis, Sturgis, S.D.

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“It has more of an effect on the shortline manufacturers than it does on us. The ones that are aligned with the OEM are benefitting and the others are not. We have adjusted to stocking more products that we are able to finance with the OEM product. As far as growth is concerned, probably not much difference.”

— Mike Converse,
Garton Tractor Inc., Modesto, Calif.

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“I think that the major manufacturers are pushing purity, some more than others. They certainly do not want competing brands interfering with their volume and market share in a dealership that hangs their (manufacturer’s) sign front and center. The majors have the most leverage when a dealer is expanding or involved in succession planning. Manufacturers can trade demands for expansion and succession requests. If the major has a complete product line, purity is not all that bad. Case IH has not been very hard to work with. The demands have been few and easily attainable. I think it actually narrows the focus of the dealership and will increase profits. We don’t want to be a ‘jack of all trades and a master of none!’ Too many products in a dealership can be hard to manage. The impact that purity has on our dealership and future expansion plans will be minimal. We will try to retain several of our most profitable shortline products, while the shortlines that are not profitable or offer no flooring terms will likely be dropped.”

— Douglas Lynn,
Dillon Tractor & Implement Co. Inc., Dillon, S.C.

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“Concerning ‘dealer purity,’ I believe this issue is mainly with JD and their dealers. JD, being the industry leader, is in a position to exert this type of pressure on its dealers. The other majors probably don’t approve of carrying shortlines, but as long as the dealer is getting adequate market share, they will generally leave the dealer alone. In our own operation, we choose to not represent very many shortlines in order to focus on doing a good job with the few lines that we do handle. Handling numerous shortlines, especially duplicating products, creates a ton of inefficiencies. We’d rather spend that extra time golfing.”

Leo Johnson,
Johnson Tractor, Janesville, Wis.

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“It will happen. The majors are wanting to get away from the mom & pop dealerships, which will help them shore up product brand and pricing structures. Titan Machinery, as an example, will now have over 102 dealerships nationwide. Price competiveness just won’t happen there. Deere dealerships are doing the same thing, and I really don’t know where this will put the shortliners, other than one day being bought up by a major as AGCO has done, then do away with most of it. In a few more years, I think you will begin to see another exodus of dealers that were family owned give way to the conglomerate dealers. There is no way to stop this from happening as the majors are forcing it by changing company policies to oust the smaller dealerships.”

— Larry Brannon,
B&G Equipment, Hokinsville, Ky.

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“New Holland does reward its dealers with a volume bonus program on many (not all) of its product lines to entice dealers to stock and sell more of their product. At this point in time, I don’t feel like New Holland is pressuring dealers for ‘purity.’ I know that Deere dealers really complain about the pressure by Deere to order and stock only their products. Their ordering plans have rewards and penalties related to purity and competitive brands. As the majors strive for more market share and demand more business from fewer dealers, they will all figure out ways to push dealers buttons to either demand or entice purity.”

— Name withheld by request

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“We carry all shortlines. The way the big companies treat dealers, I wouldn’t want to sell or do business with them.”

— Bob Rodgers,
Rodgers & Sons Inc., Cherry Creek, N.Y.

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“We don’t really have any pressure coming from any of our majors.”

— Ivan Moss,
Moss Bros. Inc., Dallas Center, Iowa

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“We are not currently receiving any major dealer purity pressure from New Holland and Kubota. But if we did, it would greatly affect the volume and profits from our two largest shortline vendors — Bush Hog and Befco — to the amount of approximately $30,000 in gross profits.”

— Craig Hines,
Hines Equipment Co., Rocky Mount, N.C.

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“I believe it is different here in Canada from the U.S. We face some pressure from John Deere, but as long as we are not trying to sell products that Deere manufactures, we are generally left alone to do our own thing. As you may or may not know, we reside in the shortline capital of the world as there are a large number of manufacturers right in our backyard here in Ontario.”

— David Shaw,
Premier Equipment Ltd., Alliston, Ontario

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“Honestly, we simply do not feel this pressure from our major line, that being New Holland. However with that said, I have noticed over the past few years the big names, mostly Mother Deere, that force companies to either expand or sell and at the same time insist on the company staying pure and loyal to the color of the major tractor line. This seems to happen more in areas where there is a possible outlet for the manufacturer to put another dealer in place. In my neck of the woods, the options are very limited for someone else to step in and take the NH dealership should NH ever choose to push us on that end, and as I said they are not pushing us at all. As a matter of fact, our dealership now carries several other tractor and equipment lines to help shore up our business where we have found NH lacking — be it competitive pricing or simply lack in a product area. We now also carry Kioti, TYM, Snapper, Snapper Pro, ASV and many many shortlines. Now again in regard to our area possibly being the reason that NH has not pushed us, we have a local JD dealership that is on its last legs with Deere (COD on any and all orders type of last legs)… but mother Deere has not pushed them out yet simply due to the fact there is no one else in the area to take the dealership over for them. That is my two cents for what its worth.”

— Mark Blackmore,
Miller Equipment, Anderson, Calif.

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“I do not have a major line. Yes the shortlines are very important to me. I do think the majors are forcing farmers out of business. Only John Deere will be here in 2020.”

— Ralph Klatt,
Klatt Farm Equipment Inc., Shawano, Wis.

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“Great topic for me. As a very small dealership, that has been here for over 65 years, I have felt the crunch of the ‘big boys,’ if you will. I bought this business last year, with the idea I would keep the current lines. The dealership had been a long-standing White tractor and New Idea dealer. The previous owner, who retired after 47 years here, chose not to bring on another tractor line when White was phased out, but kept the parts contract and New Idea. Over the years, we sold many White tractors, a good number of which are still operating on local dairy farms. After the ink dried in January 2012, I was informed by AGCO, that they would not transfer the parts or New Idea contracts, as they did not want to be in the ‘small dealership market,’ as they put it. I tried a couple of times to bring a new line here with AGCO, such as Massey compact and hay, but the dealer development people requested a $1,000,000 asset line before I could even apply. Yes, I said $1 million. They where very frank that they only want large dealer groups, and really were not concerned about their previous customers.”

— Name withheld by request

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“This has not been a huge issue for us with Case IH, but we try not to have competing lines, unless their (CIH) product does not perform well or they don’t have the right configuration. We have actually tried to stay away from shortlines because of warranty and support issues. It could also dilute your market share if it is any type of major unit. We feel there will be some carrots or sticks involved as we move further into the CIH Pinnacle program. That will be one way to control it, and it can also be controlled when new dealer contracts are done. We are not terribly concerned at our location.”

— Boyd Mitchell,
Mitchell Equipment Inc., Atkinson, Neb.

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“We’ve been slowly getting accustomed to the purity issue. It does make sense from a simplification standpoint to deal with a minimal number of vendors IF they can properly support the product. Where we have the biggest concern is ‘putting all of our eggs into one basket!’ If supply issues develop due to labor or material concerns, then we have effectively cut our own throat when it comes availability. If we completely cut out shortlines, we will have no place to turn if availability becomes an issue with the majors. However, the pressure isn’t going away. It seems to be subtler with the use of higher bogies for freight incentives, discount structures, variety of product, floor plans, etc. In the end, they leave a dealer little choice but to jump on board.”

— Jim Boyers,
Middletown Tractor Sales, Fairmont, W. Va.

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“I believe dealer purity is the primary driver for growth right now. Majors want market share and incent a dealer who is performing with their entire product lineup and performing with large volume figures. Purity is directly tied to larger and larger dealership groups. There has been some relaxation from our major the past few years within certain product portfolios in which they recognize their weakness, this has lead to some opportunities for more shortlines.”

— Nathan Gamble,
Greensouth Equipment Inc., Cairo, Ga.

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“We are a full line Bobcat and construction supply dealer. I believe that by offering as many of the Bobcat products that we can has helped us stay focused on what we do best. We have always tried to promote and sell Bobcat first. This attitude is different than most, and we believe that this attitude has made it easier for us to get preferred treatment from Bobcat during the difficult times that we have faced the last few years. We have shown them that we are loyal, and it paid off when equipment was in short supply. Bobcat is number one in the compact equipment industry because they have a great product that has always come with great support from the factory. It is an attitude that works for us and we try to teach our customers the same!”

— David Shephard,
Bobcat of Lima Inc., Lima, Ohio

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“We don’t have this problem. Our main line is Kubota and they don’t dictate. We carry a number of shortlines and they don’t tell us what to do. The shortliners are the worst — they will sell the same product to several dealers in the same town and will not go with one exclusive dealer.”

— Ed Talaga,
Armstrong Implement Ltd., Swift Current, Saskatchewan

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“I am a Case IH dealer in Colorado that also sells a fair amount of Kubota and Krone equipment as well as some other shortlines. Of my non-Case IH lines, Case really only seems to care about those products that directly compete with their products and for me that is Kubota. Kubota is a pain in the rear for Case IH. Many Case IH dealers took on Kubota when Case IH either didn’t offer compact tractors or chose not to take that segment of the market seriously. Case has taken the position with me that as long as we ‘represent’ their products (under 100 horsepower) that directly compete with Kubota they are alright, for now. At this time, their definition of ‘represent’ is stocking at least one of their products in the most popular configurations so that we can offer the Case IH choice even if the customer comes to us to buy a Kubota. This applies to only under 100 horsepower tractors. Over 100 horsepower, they want me to stock as many Case IH units as I do Kubotas. Under 100 horsepower, I will stock 10 Kubotas for every one Case IH. I could stock more Case IH compact units, but I’m convinced that I wouldn’t sell any more if I did. P.S. They don’t like this but they have verbally agreed to accept it as reality.”

— Howard Wickham,
Wickham Tractor Co., Sterling, Colo.

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“This situation has not been much of an issue. Our philosophy is to concentrate on our major line. The cost of inventory, parts, warranty, advertising and education for these items is great. We feel it is wise business to concentrate on our core line and, if needed, pick products within our line we are not selling that can be promoted and sold. We do have a few shortlines, but only those that enhance our major offering. Most majors now offer outsourced products that fill holes in our line and work in our business systems, which is a plus.”

— E.V. Pudge Kohel,
Tractor Central LLC, Chippewa Falls, Wis.

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“No effect whatsoever. So far it has been extremely easy to meet the requirements.”

— Edgar Kuhlenschmidt,
Vincennes Tractor Inc., Vincennes, Ind.

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“If your manufacturer is full line (not just major line) you may be OK as you can survive selling the complete line like boxes, lawnmowers — other than just the ag line when milk prices drop. If you do not have a complete line, you miss being in on some of the deals and then buyers can invite other deals to the party. Once the other deals are invited, they are always invited. This leaves dealers short and standing on the sidelines. It limits your ability to grow as a dealer by not offering the complete systems package. It also limits your profit. You cannot supply your customer with all of their equipment needs. Additional lines can be beneficial to a major line in that they bring in customers who are not just looking at the major line but may see something that interests them or decide to upgrade to the major line’s product. The more a dealer has to offer customers, the more traffic and opportunity to sell for all lines. Dealers have more opportunities to build relationships with customers by offering a complete line of products and the relationships benefit all lines handled by the dealer.”

— Brad Schecklman,
Chili Implement Co. Inc., Chili, Wis.

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“We have not experienced very much pressure on this subject. However, the manufacturers do not like us to sell other product lines. If our major line has inferior products or does not have equipment to do the job, we sell what works best, but give the major first chance to perform.”

— Jerry Heim,
Hoxie Implement Co. Inc., Hoxie, Kan.

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“Our Major line is John Deere, and yes they are putting pressure on our dealer group to sell only their products. The shortlines that we sell are primarily lines that cover items that JD does not make and our customers want. But those items that do compete with what JD manufactures create issues with our territory people from JD. We need to be able to supply the equipment that our customers want to purchase and not force our customers to purchase our major’s equipment, and many times JD’s products are higher priced. Example, JD’s new vertical tillage tool is much more expensive than the other shortline units that we stock.”

— J.R. Riegel,
Unruh Foster Inc., Sublette, Kan.

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“We at S&H carry up to 100 shortlines in order to meet the needs of our customers, which works very well to give them some options. We usually get their business one way or the other. We have become known as a kind of Wal-Mart in the farm equipment business with four locations about an hour apart that help people when something is broken down and they need something in a hurry, either parts or wholegoods.”

— Ron Ely,
S&H Farm Supply Inc., Lockwood, Mo.

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“I have long been aware of this trend and feel that it may actually be a downfall of the ‘big’ manufacturers. I, as a dealer with numerous competing franchises, push for ‘total farm’ customer care, both in service of all brands and varying types of equipment, from their combine to manure spreader to their heavy trucks as well as light trucks and lawn and garden and welding and fabricating, i.e; total local good service, sort of a ‘one-stop-shop.’ By carrying multiple lines, I feel that I have more options to provide to my customers with a greater chance of customer satisfaction and consequently begin to corner market share in my region. One must remember that this industry began at the dealer level. The dealer is the local representative of your product and customers do desire good, local service from whence it all originated! It also seems to me that the manufacturers might be shielding poor engineering, high purchase price or lack of options by this philosophy. Long term, they may lose some customer loyalty. Hypothetical scenario: customer purchases Brand X, green brand, skid loader and at a later date finds Brand C, red brand, to be either lower price or better performing or both, what do you think will be the future reaction? Are you really that naive to think that you are absolutely the best and that there is no competition? Perhaps I’m too naive and don’t think large enough myself, but I’m comfortable in my skin!”

— Arnie Knoener,
Maple-Lawn Equipment LLC, Elkhart Lake, Wis.

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“We often forget that all of the manufacturers are led by people just like us. With the various majors that we represent, we find that the organizations with strong and consistent cultures work with those dealers that reflect what they see as important. When the dealer does not reflect that, then we see strains and breaks in the relationship. The frustrations that I hear from our team and other dealerships is when one of the majors that is not particularly strong begins to demand ‘purity’ when they do not have a strong culture, base and/or complete product line. We usually deal with each other best at the ‘highest level of relationship,’ meaning the stronger the relationship, then the greater likelihood both parties work through the strains and the weaker the relationship the less cooperation occurs. We generally see the tactic of ‘purity’ as a corporate culture and not usually a stated plan. Is that by accident or design?”

— Doug Rinker,
Winchester Equipment Co. Inc., Winchester, Va.

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“We are a John Deere dealer with product lines that can conflict with John Deere products. I understand any manufacturer’s position that if we, the dealer, do not adequately represent them in our market, they do not have another option. That makes it important for us dealers to fully commit to promote and sell their product. I don’t think that John Deere recognizes that John Deere dealers would always prefer to sell a John Deere product when possible. John Deere has the best after market support for their products, and we are most familiar with their processes from ordering to settling, to looking up parts and filing warranties. We do not want to deal with other brands, but we do to meet our customers’ needs. In Okanogan, many of our orchardists have a need for a narrow and low four-wheel drive tractor that John Deere does not build. Currently, JD accepts us having the Antonio Carraro line of tractors. Three years ago, when JD was importing the Goldoni line of tractors from Europe for our orchardists, they said we would need to phase out of the Carraro tractors within two years. I am sure glad we did not do that as John Deere then decided that their importing relationship with Goldoni wasn’t working for them and quit importing them. You can imagine what position that would have left us with our customers who rely on us to provide them with the equipment they need to be successful. I understand Deere’s decision to drop Goldoni because it didn’t make economic sense to continue. I just hope they will remember that dealers need to be able to make decisions based on economic sense as well, and we can’t pickup and drop other product lines on a moment’s notice. We build customer trust over years and decades by taking care of their needs, which sometimes means selling an additional product line.”

— R. Greg Hamilton,
Washington Tractor, Okanogan, Wash.

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“We have evolved over the years to less dependence on a single manufacturer, New Holland ag and construction, as the cornerstone of our business. We have cultivated relationships with top brands serving the medium construction, commercial landscape and municipal sales. Kubota construction, Brush Bandit chippers, Alamo mowers, Toro mowers and Toro Dingo loaders, Finn Hydro seeders and Mahindra tractors are our primary lines, and while we refer to ourselves as a New Holland Dealer, the revenues are spread across the various lines. New Holland would like us to be pure, but as long as they do not offer competitive products, then they can only wish.”

— Thom Drescher,
Security Equipment Co., Baltimore, Md.

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“My customers are who I listen to and serve markets where I can feel and touch and decide what is needed. For a major to tell me to only handle their products would probably result in a big ‘No.’”

— Larry Moore,
B B Sales Co., Guymon, Okla.

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“We are a New Holland dealer and pressure about dealer purity will not be an issue for us because the first time it is brought up by our territory manager he will be shown the door.”

Tom Burmeister,
Bennett Farm Equipment Inc., Bennett, Iowa

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“I have been the owner of a family John Deere Dealership with two locations for 46 years. We are at a crossroad. We had to drop JCB light industrial line if we wanted their worksite contract. We dropped the line, but within a year we lost the worksite contract at one location so they could give the contract to their industrial dealer. For the fist time in my dealership life, I do not know if we will be their dealer in the next year. I am one of the dummies that did not want to consolidate. I have five children in the business. They are John Deere raised and know how to run a dealership. I would hate to see state legislation protect a business. We are planning on running our business until the day John Deere tells us we no longer need you. I believe a dealer should sell whatever they need to take care of their customers’ needs. Competition is the best way to go. You asked for my opinion. I want to run my dealership; it is my money that is on the line. If I need some product to fill a need, I should be able to carry this line without being reprimanded by my main supplier, or worst yet, be threatened to take away their product. I do believe I should get the market share for the main supplier, as long as I can earn a reasonable margin.”

— John Schaff,
Foley Implement Co., Foley, Ala.

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“We are an AGCO dealer (MF now) and really don’t have much problem with the ‘PUSH’ just yet. We are somewhat loyal, and if it’s offered we will try to sell it. Our major doesn’t offer most of our shortline equipment. We don’t have a Frontier line like the green guys. A major part of that equipment is sub standard, but people buy it because it’s green. Afterwards most regret it.”

— Jeff Suchomski,
Suchomski Equipment Inc., Pickneyville, Ill.

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“There is always pressure on independent dealers to sell their major line’s equipment only. As a dealer you have to balance this pressure out as to what seems the right way for your dealership to proceed in today’s market. It seems some of the majors feel that having a dealer carry only their products or at least no other competing products makes the dealer more loyal to the manufacturer, controls competition among dealerships, controls inventory costs, controls dealer margins, and the list goes on. From the dealership perspective, it makes sense for us to keep the manufacturer more competitive by diversifying our product offerings and it makes the manufacturer more responsive to a dealer’s needs, if they expect to get more of the dealerships floor space and inventory dollars. At the least, it is a balancing act for independent dealers, as it seems this is where the margins are the slimmest and the competition the fiercest. The question remains how much longer can the dealer remain loyal to the manufacturer and how much longer will the manufacturer be loyal to the dealer. My gut feeling is if service and repairs were not so important in this industry, all manufacturers would sell direct with limited storefronts and Internet sales would be the motivating factors. Who knows what the future holds in the ag equipment dealerships. There is no incentive for an individual to open a new dealership; the margins are too thin. Thanks for letting me vent!”

— Brient Stilley,
Snow Tractor and Equipment Co. Inc., Ayden, N.C.

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“In our business, good shortline product manufacturers can help ‘fill-in-the-gaps’ where our major equipment manufacturer either cannot meet the price point or do not manufacture an applicable product. In either situation, if we are unable to use shortline products, the sale is lost. The dollar amount of loss is difficult to determine.

“Shortline products also allow dealerships to reach a customer group they might not otherwise reach if they only offer the major equipment manufacturer’s products. Given the cost of land, equipment, buildings and the decreasing total number of ‘traditional agricultural customers,’ it is important that dealerships offer a larger variety of product lines, thus increasing the number of people they serve. If we become a ‘pure dealer,’ chances for growth will continue to diminish. Since the number of our traditional agricultural customers is decreasing, we must be able to provide products to serve non-traditional products. Shortline companies seem to be able to do this faster and more effectively than major equipment manufacturers.

“Perhaps the greatest influence to our business plan is how dependent a dealer becomes on one manufacturer. Although we are not a Kubota dealer, I am sure it must have been difficult for ‘pure’ Kubota dealers to keep their dealerships open during the natural disaster in Japan a couple of years ago. Being able to offer shortline products does not necessarily lessen this loss, but does allow a dealership to dilute its dependence on one manufacturer.”

— Mark Grimes,
Wright Implement, Owensboro, Ky.

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“Columbia Tractor is a Case IH, Kubota, Kinze dealer in eastern New York. We also sell Kuhn Knight, Bush Hog, Brillion, Landoll and many other ‘shortlines.’ We are only an hour or so from Massachusetts and Connecticut, where we do quite a bit of ag business. Our major selling line for the past five to 10 years has been Kubota. We actually have not had any ‘purity’ pressure from any of our major vendors. Our market has changed dramatically over the past 10 years, with the consolidation of the remaining farms resulting in a lot less farm accounts. We also have a large number of wealthy customers who either buy equipment from us or hire us to maintain their properties. We have tried to be loyal to Case IH as much as possible, but they have been off again on again with their compact and utility tractor lines. I was chairman of the Case IH low horsepower tractor advisory board back in the ’80s and the national sales manager commented at one of our meetings that they were going to get out of the tractor market in the under 70 horsepower range. That was when Columbia Tractor and many other Case IH dealers contracted with Kubota. Subsequently, we have been very successful with the Kubota line; product availability from them is very good. If we don’t have what we need in stock, we can most often pick it up from another dealer within a 100 mile radius or get it shipped from one of their stocking warehouse — this is not true with Case IH.”

— Stu Kinne,
Columbia Tractor Inc., Claverack, N.Y.


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COMMENTS: 1
Dealer Purity
Posted from: D.Foster, 1/9/13 at 10:34 PM CST
Dealer purity has not been as big a deal in the last couple years but did used to get pretty militant about it. The largest problem now is the majors pushing consolidations or multi store operations refusing to let current dealers grow their business because their not one of the chosen winners few winners. Who will be hurt the most in the majors path to consolidation will be the customer in the long run. We have 3 locations and I visit with and personally thank nearly every customer and it means alot to them. There are several multi store dealers close to us and we hear from customers that shop those large multi store operations and say their customer skills are horrible and can't get helped or waited on and would never be lucky enough to be introduced or helped by the owners. So we are able to pick up several unhappy customers. This will be the downfall of atleast farm equipment dealers who have 6,7, or 10+ locations.

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