The Dealer’s Choice
October 2016
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.
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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.
