As it adjusts to consolidation and other changes in agriculture, the farm equipment industry must not only cope with tightening competition but also anticipate needs of a more diverse clientele, one, two, or maybe three years ahead of sales.
Jeffery Huckings, president of Woodland Tractor and Equipment Co., Woodland, Calif., says that will be a way of life, since competing brands of wheeled tractors and even combines have become commodities sold “like Maytag washing machines.”
In response to their retail customers, “dealers want a new tractor now, and they expect manufacturers to deliver, almost in real time, on the day it's ordered,” said Huckings, a panelist during the recent 12th Italian Farm Machinery Convention at Monterey.
The event, held by the Italian Trade Commission, was attended by representatives of nearly two dozen Italian manufacturers and more than 40 North American distributors.
Huckings, who is president of the Far West Equipment Dealers Association with members in seven western states and is also a farmer, said clients expect service and parts availability from anywhere in the world in 24 hours or less.
Distributors and manufacturers, he said, have to work closely with dealers to be prepared to furnish equipment, parts, and service as needed so dealers can reduce “flooring” of inventory and carrying costs.
And this must be done against a backdrop of other pressures on the industry, one example being users keeping equipment longer, which has caused declining trade-in values that make acquisition of new units more expensive.
With the proliferation of “weekend farms” and “ranchettes,” dealers must often sell to a changing customer base of non-ag professionals, both men and women. Sales personnel used to selling to only farmers need to be trained become proficient in dealing with this new type of customer.
As one reflection of this trend, in 2003 more than 50 percent of all tractor units were in the less-than-40-horsepower range, and that, he added, is where the sales growth is anticipated.
Dealers have reached the point where their cost increases are challenging limits that consumers will accept, Huckings warned. “California is a good example. Our personnel costs are higher than anywhere in the country, so we've had to look at high-profit products.”
Dealers are also looking for ways to reduce their unit and parts inventories and can no longer order equipment and have it sit for months before a buyer is found. Instead, they are asking distributors and manufacturers to deliver on demand.
As a result of the new sales climate, for his company an order for $40,000 of specialty grape or orchard equipment offers greater profit margin than a $150,000 tractor, he said.
Complaints of malfunctions must be handled quickly and when customers are not at fault, costs of repairs need to be borne by manufacturers and distributors.
“Dealers cannot be burdened with re-design or repair of machinery at a lesser rate when they need to have mechanics for customer work out in the field on emergency repairs,” Huckings said.
Field demonstrations and training of marketing and sales personnel must be priced appropriately for the functions they perform. “Either it saves money for users over other available methods, or it won't be sold. Prices to dealers have to give them enough margin to support the product with service personnel.”
Less stock inventory
Huckings predicted dealers of tomorrow will sell with less stock inventory, less transactional cost per sale, greater service support, and greater turn over of inventory and will rely, expect and demand that their manufacturing and distributing partners do their part.
According to another panelist, Kenny Dozier, sales manager of Pringle Tractor Co., Salinas, three prominent changes are driving the industry are governmental and environmental regulations, consolidation of farming operations, and the new intensive farming innovations that are evolving his Central Coast service area.
Growers, he said, face a new regulation, whether air pollution or water run-off, practically every month and this is changing the types of equipment they need.
Consolidation of the farming, he said, has improved his business because of the uniformity that is becoming more common. Where once the Salinas Valley had some 600 viable farmer-customers, each with his own idea of what cultivator he wanted, today the several dozen remaining corporate operations want standardization of equipment, with parts readily available for use. Dealers have had to adjust with improved inventory of parts, and they need to serve fewer contacts to make to sell for the same amount of acreage.
“But that also increased the level of expertise required of the salesman, who now looks to the distributor or manufacturer for help in improving his skills.”
Customary cultural practices in the Salinas Valley for many years required equipment first for two, 40-inch beds and later for four, 40-inch beds in a single pass. “But just in the past few years three, 80-inch beds have come into play and that's proved to be an opportunity for us.”
David Rankin, president of Rankin Equipment Co., Yakima, Wash., said the past 25 years has brought dramatic changes with markedly fewer growers and dealerships.
“The markets the dealers serve have changed too. The typical dealer is now serving not only the farm market but also weekend farming, municipal, and landscape and turf markets. Many have become involved in consumer products with rentals, ATVs, and even snowmobiles. We have to take these changes into account and adapt to changing times in the products we build, sell, and service.”
Douglas Edney, vice president of Edney Distributing Co., Lakeville, Minn., said bigger and fewer farms in his area have been an opportunity for his company to diversify product lines.
“A few years ago our business was l00 percent farm equipment, but now it's about 60 percent farming equipment, and the rest is lumber industry equipment or compact consumer products like rototillers and ATVs.
“It's been a bit of a challenge to get manufacturers to realize this, but they are starting to recognize it, and we are beginning to focus our marketing more.”
As dealers become larger, he said, they prefer to deal with fewer suppliers, who, in turn, are expected to offer more options for basic farm equipment items.