A few weeks ago, I drove out to see Leo Johnson, Johnson Tractor (2012 Farm Equipment Dealership of the Year), to hear how his 4-stores were responding to the used equipment pileup. Meeting in his newly renovated dealership in Janesville, Wis., (and later in his truck), we covered a lot of ground that afternoon.
Amidst a review of potential actions were his insights on the speed of reaction, which he says tends to be in stark contrast to the size of the business. “The small guys react quicker,” he says, citing the successes of operations even smaller than his own.
In the small dealership, he explains, the dealer-principal tends to be eyeball to eyeball with the farmer, reviewing every deal, and aware of how long each unit has been on the lot. On the other hand, the capacity of the leadership in larger groups is often consumed by the sales managers, essentially another management layer further away from the trenches. When the faucet shuts off, he believes, the reps at the bigger operations don’t get word fast enough to change — or stop — what was so successful only a year or two earlier.
Maybe, just maybe, the greatest lessons to be learned on the subject are from names you won’t see in our annual “Big Dealer” List. That’s why this year’s report on the used machinery challenge focuses on the actions taken by the smaller contingent of our Farm Equipment Dealership of the Year Alumni Group.
Now that the problem with late model tractors and combines is well known, Johnson sees three types of dealers: those willing to change and take their hits now before the problem worsens (at press time, Johnson was about to hold an auction); those choosing not to take the hit yet and hoping to spread the losses across more trades; and those doing nothing as they don’t want to, or can’t afford to, take the hit.
The latter, he says, “may report to shareholders and don’t want to give them bad news, or are so upside-down they risk insolvency if selling at today’s pricing.”
If you know Johnson, his candor is familiar. Adamant against machinery rolls, he says it’s mind-boggling to see the practice repeated when last year’s trade is still on the lot. “The dealers must be afraid they’ll lose that customer, but that’s one they can afford to lose.”
He admits he OK’d some dumb trades at the tail end of 2014. But if he hadn’t, there would’ve been more new machines out front. “So pick your poison,” he says.
At least those sales show up in the volume bonus, which he says will be the sole source of profitability for many dealers this year. Attitudes toward late-model trades will be different in 2016 as the risks necessary to earn market-share based bonus checks look daunting.
After 35 years, Johnson isn’t easily rattled nor stuck in glass-half-empty thinking. He and his crew intend to sell their way through whatever the market forces onto them.
The Johnsons are still trading (“there are values to be had on the buy side”), and they’ve found that good people are coming available (“this is a time you can trade up”). He also believes their role in distribution is being strengthened as the majors move more responsibility and activity into the dealers’ camps. He also adds that dealers even smaller than his operation could grab a piece of the expansion conversation as the larger consolidators already have their hands full.
One of the things 24 years of capital goods reporting has taught me is that closing sales in a down market requires you to change the conversation — and offer a truly unique product/service. This SHOWCASE includes a summary of product introductions to watch for 2016. Wishing you, your companies and your families all the best in the new year!