Dealer consolidation has long been a mainstay of the farm equipment industry, and the recently released 2022 Big Dealer Report suggests consolidation is continuing its rapid pace.
This year’s result show both the total number of big dealers increasing along with the total number of ag stores owned by big dealers. For 2022, the number of big dealers rose to 214 — the highest number of big dealers since we started the report in 2011 — from 197 in 2021, an 8.6% increase. Big dealers now own 38% of total ag stores in North America vs. 35% in 2021.
If this month’s Dealers on the Move section is any indication, the consolidation trend is likely to continue in 2022.
During a webinar reviewing the 2021 Cost of Doing Business Study late last year while discussing average equity per location, former dealer and WEDA trainer Gord Thompson noted that some consolidations that had been planned for 2020 didn’t happen.
“Even when you wanted to do your fixed asset additions, sometimes there’s limitations on availability of what you could do. When things are a little uncertain, and COVID-19 caused a lot of uncertainty, people tend to avoid making big decisions, which I think is reflected here.”
Curt Kleoppel, WEDA’s CFO and president of Equipment Dealer Consulting, added, “The increase in treasury stocks tell me there’s quite a few shareholders that were being bought out in this category of dealerships, which decreases equity and increases notes payable to the bank, in order to finance the buyout.”
“With the pandemic and the age of some of our dealership owners, they probably thought now was the time to get bought out. But these dealerships are still making money, and I wouldn’t be surprised if this percentage goes back up to 25-26% next year,” he says.
There’s been a notable increase in Kubota “big dealers” (those who operate 5 or more ag locations). While speaking with George Russell, who we collaborate with on the Big Dealer Report, he noted the notable push by Kubota for Kubota-only branded stores and for dealership groups with scale.
Kubota big dealers saw the biggest changes year-over-year, totaling 33 in 2022, up from 19 in 2021. Nearly all of Kubota’s big dealers fall in the 5-9 store range, with 30 big dealers. The other 3 Kubota big dealers fall into the 10-14 store group.
Like the number of big dealers, Kubota’s total ag stores also grew to 225 in 2012 vs. 108 in 2021. “Kubota is in with a lot of other brands’ dealers, but they are really pushing to have Kubota-only stores. What you’re seeing here is a lot of that. The effect of that emphasis is Kubota-only stores,” explains Russell.
Whether or not dealer consolidation is a good thing always depends on who you ask. Consolidation certainly offers dealers the scale to provide enhanced services to both their customers and their employees. However, that’s not to say there aren’t some very strong 1-4 store dealerships out there that are providing excellent customer service and are good employers.
And, without fail we get comments on the website from customers who are unhappy when their local dealer is acquired by a larger organization. Those complaints often come before the new owners are able to prove that the quality of service will remain.
The 2022 Big Dealer Report was sent out to Ag Equipment Intelligence VIP members in May. To purchase the report, visit AgEquipmentIntelligence.com/Products