The Rumble In The Equipment Jungle A long time ago almost all major brands had separate dealer networks for each of their product categories: construction, agriculture, landscaping and consumer products. The agriculture industry was one of the first to see a shake up as the industry hit rock bottom in the early 1980’s and the market started to shrink. This was accelerated as major brands were being bought, sold and merged. Many dealers were struggling to survive and took on the Tier II and Tier III manufacturers who previously had weak dealer networks. On the construction side, the disturbance came from the birth of the national rental chains and big box stores. Many of the best dealers and owners retired or were forced to spend a few year away from the industry as part of their non-compete agreement with the national rental chain they sold to. The dealers that were left struggled to understand the growth of rental, rental fleet utilization and rental ROI. Although many dealers offered rental already, it was done more as a convenience for their customers and was a small part of their business. Today these companies receive a good portion of their revenue from rental and many have either separate sales people for rental or separate divisions dedicated toward rental. Another side effect was that manufacturers started tripping over each other to get into the national rental chains and big box stores – in the process offering deep discounts. This only upset the dealer network more as the traditional dealers struggled to compete with people who knew little about the industry and equipment, but had better pricing. Today, unrest in the equipment dealer network is stronger than ever. As both the traditional construction and agricultural dealers struggle to remain profitable, they are expanding into new markets. Unfortunately, these new markets often overlap with other dealers in the area who already offer these products. Agricultural dealers have been the hardest hit and are going to cause the biggest problem as they expand into construction and lawn and garden equipment to survive. They are going to step on the toes of construction equipment dealers, lawn and garden dealers and the rental companies. We are currently in the calm just before the storm and things will get worse before they get better. Manufacturers need to examine how they go to market, who their customers segments are, understand which dealers are best to reach these groups in the long run and not just look at the short term profits. The first manufacturer who is able to establish a dealer network that can serve the construction, agriculture and rental markets simultaneously has the best chance of long-term survival. As the word of strong dealer programs and excellent manufacturer support spreads, manufacturers will be able to obtain and maintain the best dealers in the industry, resulting in better margins and higher profits. |
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