The Dealer’s Choice

Facing a third consecutive year of declining sales, contracting net income and a weak intermediate-term demand outlook, North American ag equipment dealers must transform in order to improve returns on invested capital.

picture of red tractor

While the leading players have already reduced inventory levels and consolidated stores, and are emphasizing ancillary services, growth remains challenging, given negative farmer cash flows. While consolidation remains a viable option to improve profitability, Rabobank sees product extension as a better way to capture value as the next phase of technology and mechanisation take hold on North American farms.

  • Given the sector dynamics, stagnation is a risky strategy, especially as farmers are increasingly becoming cost-conscious. Options for dealers to consider are:
    Adding greater parts and repair service capabilities, given the longer work lives of field equipment in circulation. This leverages the capabilities of mechanical staff already employed in dealership service departments.
  • Selling small and medium-sized equipment geared towards sectors beyond row crop farming (hay, forage, dairy, livestock), as well as industrial equipment (wheel loaders, skid steers) and residential consumer products (lawnmowers).
  • Selling and servicing new emerging high-tech equipment (e.g. autonomous tractors, robots, drones and other unmanned aerial vehicles).
  • Providing value-added fee-based agronomic extension advisory services to the dealers' existing customer base.
  • Cross-selling data and precision farming services in partnership with AgTechnology firms and possibly selling various types of other inputs (seed, chemicals, fuel and fertilizer) on a one-stop-shopping basis, like a ‘Home Depot’ of farm inputs.
According to Kenneth S. Zuckerberg, Senior Analyst Farm Inputs at Rabobank: “Equipment dealerships continue to face growth challenges as customers adjust to a new reality of lower commodity prices and income. There are opportunities for forward-thinking dealership groups, but courage and conviction will be key during the current period of financial stress and farmer anxiety.” Which strategic options to pursue is, strictly speaking, the Dealer's Choice.