Concept: This model has been little more than barroom chatter to date, but does get enough attention to warrant examination. It's most often discussed by larger shortline manufacturers concerned with getting locked out of areas through brand purity efforts of the majors or dealers' own product rationalization during mergers or acquisitions. The concept differs from the company store model in that the risk, and any dealership profits, would be shared among several shortline manufacturing partners.
Appeal: "It creates an opportunity to sell products where you can't find a dealer," says Glass, noting it looks good on paper. "But just breaking even would be considered a big success."
While Russell says the prospects are limited, it's plausible for the right mix of partners to study and test it. "Culture is what will get in the way - you can't have one partner who's all about the bottom line, another who's driven by a customer focus and another driven by managing risk."
A more likely prospect than shortline equipment manufacturers joining up and opening a dealership could be the manufacturer forced into opening company stores allowing a partner in. "It's more likely to have an alpha dog that would consider partnering with a complementary line," Russell says. A forage harvester manufacturer with a company store, for instance, could take on a partner with a dump wagon or some other complementary line.
He adds this approach could be intriguing to a new market entrant who realizes the challenges of working through a mainline dealership, yet has the resources and patience to go in with an established manufacturer.
While shortline equipment manufacturers like the concept, says Glass, the conversation hasn't gone further once the money needs are brought up.
Bakker agrees this distribution model is particularly attractive to the shortline equipment manufacturers who are facing the growing challenge of finding independent dealers. "There have been discussions at Farm Equipment Manufacturers Assn. about certain shortline manufacturers going together and using the same space and the same people as long as they are compatible products that don't compete. So far, there has only been discussions about combining forces and working out alliances, but nothing has emerged from that. But I think that's a very good possibility. Some people are seriously talking about it and others are very intrigued with the idea, but when it comes to the money part, it becomes quite a bit more difficult."
Bakker says if there were 3 or 4 companies involved, it wouldn't take a huge investment. The bigger cost would be with personnel and financing.
Limitations: This model is worse than a company store model, says Glass. "The shortline manufacturers are very independent-minded by nature. They like to make the decisions. If you get four manufacturers running a dealership, you'd get the same problem that International had with its company stores, arguing about this and that."
That's why Glass says a single manufacturer would have a better shot than joining with others, but the odds would still be low. "Most are not willing to put that kind of money into one location."
Despite the fact that a dealership owned by multiple manufacturers would be strategic and different from a true distribution objective, Glass doesn't think manufacturers can get over the fact that if they're putting in say 25%, they'll deserve 25% of the effort on their line.
The market would also limit the pool of candidates, says Glass. If a market area is predominantly smaller tractors, the number of manufacturers who could cooperate would be limited, and there wouldn't be enough to draw the resources of manufacturer that was more production farming oriented.
And if got that far, finding the people to run it would be huge hurdle. "No one outside of the retail model has ever had a good track record running dealerships," says Glass, again pointing to the failed company store model. Russell adds that "the best dealers are very adept about 'managing' their manufacturers, and there's leadership in knowing how to do that."
While there are other issues (including rate of returns, definition of value proposition, shared objectives), Russell agrees that choice of partner is the major obstacle with this concept, though not unlike any other merger. "There are the complexities of self-interest and egos. All want the organization to be theirs and not shared with others."
That self-interest must be balanced and subordinated to the overall good of the company, Russell says. "It can't be about whether any particular unit was not given attention," he says. This isn't easy when one gets into such an arrangement in attempt to get representation in the first place. Expectations and how it would be governed would need to be very clear, he says.
Another issue is existing dealer agreements, which would limit candidates to manufacturers with little or no presence in an area. "There's always inertia when you have existing distribution agreements," Russell says. "By nature, you'd be pulling some distribution away from existing dealers; and be forced between two chairs for a while."
To some extent, Evans agrees. "I still think there's a lot of potential with this concept, but there are also an awful lot of egos and philosophies that would have to be meshed together. There would be a lot of hurdles there."
Conclusion: Neither Russell or Glass see high prospects for this model. Both agree that a probability would exist with fewer owners, perhaps two who were very motivated.
Fowler says Krone North America would take a "close" look at this type of scenario. "The idea of forming some type of alliance to offer a broad line of equipment is not unique. It would be an opportunity we would need to study."
Boak says the idea of some of the larger manufacturers getting together to form shortline "superstores" has been the topic of a lot of conversations. "We kind of describe it as a cooperative agreement between non-competing brands where we strategically locate stores that offers full service. In fact, it's gone so far as to suggest we could get into offering inputs (seed, fertilizer, agronomy, etc.) as well as machinery." (See below for additional discussion about this model.)
Despite all of the pitfalls, Evans still likes the potential of this model. "There are a lot of companies with unlike products where it could be hammered out."
Exclusively online extra:
- Alternative Distribution: How Many Options Really Exist?
- Independent (No Mainline Tractor or Combine) Servicing Equipment Dealers
- Traditional Dealerships Setting Up Separate Entities to Sell Shortline Equipment
- Manufacturer-Owned Company Stores
- Joint-Venture Dealerships Owned by Several Shortline Manufacturers
- Co-Ops Adding Farm Equipment to Their Offering
- Direct to Farmer Sales; Subdealer Model for Service