Results tagged “New equipment” from Scotts EQuip
According to a report in a reputable European magazine, Germany-based farm equipment manufacturer Claas is preparing to open a network of 14 company-owned dealerships in the northern part of its home country. The stores are said to open sometime in 2014. Apparently, the brand is discontinuing its relationship with the 19-outlet dealership chain that had been selling into that market area.
One of the main planks in Claas' marketing strategy is its emphasis on service. And while it isn't clear why the company is dumping its present dealer—or if it's dumping Claas—the manufacturer clearly feels company employees working at corporate outlets are the way to go to meet the level of service it wants to offer customers.
Assuming the report is true and Claas does move ahead as reported (I couldn't find any press releases on the brand's website confirming this), having its own corporate dealerships will make that company pretty unique in the farm machinery marketplace.
Back in the late 1980s, Massey Combines Corp, which was splintered off from Massey Ferguson during its severe financial crisis, toyed with the concept of company-owned dealerships, opening one near Wichita, Kansas, and it had plans for another before collapsing into bankruptcy. But there really aren't any other recent examples to cite—at least that I'm aware of.
So, is the move by Claas the cutting edge of a new trend? Will other companies look more seriously at this option based on whether or not that brand makes a success of their stores?
With the new breed of independent dealership chains showing excellent profits, it poses this question: why wouldn't brands want to generate additional revenue by retailing their own machines?
Four of five years ago I put that question to an executive at New Holland. His response at the time was manufacturing and retailing are two entirely different businesses, and NH—then—wasn't interested in doing both.
Now, however, the relationship between some manufacturers and their dealers may be changing with the growth in size of retail chains. Very large dealers now have more leverage in the manufacturer-dealer relationship. Will brands that have allowed the creation of very large dealer chains remain content with this new arrangement in the future, particularly if dealers continue to grow in size and influence?
But the Claas situation might be better described as an example of a brand having to make a repair to its dealer network rather than trying to restructure it (in the absence of public details on the Claas situation, I'm speculating here). And if that is the case, in today's world of multi-chain outlets the company's options are limited. Setting up corporate stores may be one of the few choices it has. Here's why.
A few decades ago when machinery retailing was done primarily through single-store dealerships, the unexpected closure of one wasn't nearly as great a disruption as it would be in today's world of chains, like the 19-store one ending its relationship with Claas. The unexpected or sudden termination of a dealer network would now affect a very large region and a lot of customers. The potential loss in sales and reputation for the brand could be pretty significant.
Dealerships can fail, even in good times, for any number of reasons, and business arrangements in any industry don't always go as planned. If the worst happens, how does a brand compensate for losing a chain the size of the one Claas is losing? The capital and effort required for an outside firm to establish, staff and begin operations in a territory that large would be enormous, making it unlikely the manufacturer could find a suitable replacement in the short term. Claas may have had little choice but to move in on its own and establish corporate dealerships to salvage the situation and protect its market share in the region. The stores could always be sold later.
As time goes by, it seems almost inevitable that other brands will face a situation like this as well. And their options will likely be just a limited. It will be interesting to see how others deal with similar problems when they occur—as they no doubt will.
Scott
A couple of weeks ago Canada's largest farm equipment retail chain, Rocky Mountain Dealerships Inc., announced it had undergone yet another expansion and acquired two Manitoba ag equipment stores. These businesses had been operating under the name Murray's Farm Supplies and are reported to have had revenues of about $15 million annually. The deal is expected to be finalized on February 1st.
This latest acquisition brings the number of dealerships in the Rocky network, which are primarily Case IH outlets, to an impressive 39. Its chain of stores now stretchs from the Peace region of Alberta to Southern Manitoba.
Rocky’s CEO, Matt Campbell, commented on this acquisition by saying, “Rocky continues to ensure that we have the products and services our agriculture customers need. By acquiring these stores, Rocky is expanding the availability of key product lines to our customers, and complementing the existing Case IH dealers we operate in the region. We look forward to offering these products and services to new and existing customers.”
In an interview I had with Garrett Ganden, Rocky's COO, late last year, he said the company was also working on standardizing the look of its stores and upgrading existing facilities. It is also ending its past practice of allowing some of the stores it purchased to continue trading under their previous business names. Very soon all of Rocky's outlets with have a standard marquee above the door. (For more on that interview see the November, 2012, issue of Country Guide.)
Rocky hopes to have all its outlets sport a standard look in the future.
It seems consolidation and growth are key factors in every aspect of North American agriculture these days. In the Canadian ag machinery retail sector, Rocky has taken growth much farther than any other chain, and its rate of growth has been rapid, to say the least.
But even with 39 stores across the west, it's far from the largest equipment retailer in North America. That title belongs to North Dakota-based Titan, whose U.S. outlets now number an astonishing 104. And Titan recently announced it has branched into Eastern Europe. It now operates 12 other stores in Bulgaria and Romania.
Ganden said Rocky has no immediate plans to look at dealership acquisitions in other countries. But he didn't rule out the possibility of eventually looking farther east across this country.
The face of farm machinery retailers in North America is much different than it was a couple of decades ago. It will be interesting to see what it will look like two decades into the future.
Scott
As the calendar is about to flip over to December, Christmas music is now playing everywhere and people are starting to think about the upcoming holiday and year end. Along with that comes the annual look back on the year that is quickly passing into history. For executives at the major farm equipment manufacturers, there'll likely be smiles at the head office Christmas parties as they down egg nog and talk about 2012 sales figures.
While countries all around the globe face economies that are limping along caused in large part by unemployment and low consumer demand for goods. Agriculture is one of the few sectors that has soldiered on with barely bump on its economic road, and the Big Three ag equipment manufacturers are among those reaping the benefits of that.
In its third-quarter financial statement released on October 31, AGCO claimed things in its accounting department were looking pretty rosy. Overall sales for that part of the year amounted to $2.3 billio