In a changing region, a long-time farm equipment dealership embraces the rural lifestyle.
Just north of the Missouri city of Springfield on Highway 13, a billboard tells travelers they're in "S&H Country." Part of a comprehensive marketing campaign, the slogan has helped make S&H Farm Supply's store near the state's third largest city more visible among large property owners, commercial cutters and hobby farmers.
The typical customer at S&H Farm Supply's dealership, a few miles east of Springfield, is changing as farms are converted into subdivisions or broken up into smaller parcels and sold to urbanites who want a piece of the country. "The Rogersville location has been significantly challenged over the last several years by the same pressures that have faced the farm equipment industry in general," says Eric Schnelle, president of S&H Farm Supply. "We've experienced a declining sales base for large equipment. However, we see a tremendous opportunity with the rural lifestyle customer as well as the commercial landscaper."
To meet this changing demand, S&H has shifted resources in manpower, inventory and advertising (it's buying television and radio spots in addition to the billboards) to ensure the dealership's place in the emerging rural lifestyle market is as strong as it has been among farmers.
The move is paying off with increased floor traffic and sales. Current year-to-date sales figures and projections for 2011 are showing significant improvement over prior years. Although it's weathered the down economy well, business has been impacted overall by the recession as well as its changing customer base. The dealership is in the middle of transitioning from selling high-dollar farm equipment to small units purchased by rural consumers and professional landscapers.
Located along a busy commuter highway between Rogersville and Springfield, the 2011 Rural Lifestyle Dealer Dealership of the Year winner is one of four S&H Farm Supply stores in southern Missouri.
S&H Farm Supply was founded (and is still headquartered) in Lockwood, Mo., in 1969 by Eric's father and company CEO Wayne Schnelle. Well-established among farmers in the Lockwood area, S&H first expanded its regional footprint in 2003 when it took over a struggling New Holland dealership in Springfield. Realizing location was just one of the dealership's problems, S&H moved the operation to a brand-new building designed by Eric (see Farm Equipment's March 2007 issue for more about this new location). More recently, S&H added a third and fourth location in Mountain Grove and Joplin (see the Summer 2011 issue of Rural Lifestyle Dealer for more about the Joplin store).
Getting the Word Out
Consumers will typically shop around before making a purchase. S&H ensures they have the information they need when they get home, including price.
The new location helped boost sales, but with S&H's traditional ag customer selling off cropland and more people using their acreage for recreation, Schnelle realized the Rogersville store still had a problem: the "general consumers had no clue who we were."
Members of the management team attended several advertising seminars in Springfield, which helped them understand how the consumer thinks. "The presenters talked a lot about top-of-mind awareness," says Schnelle. "If you're going to buy a big-screen TV, you won't visit 100 stores before making the purchase. You're going to quickly narrow the search to 3 or 5. You'll determine which ones are on that short list because they have the best deal, the brand you want, they're closer or other factors."
For Eric Schnelle, the No. 1 take-away was, "You'd better be in at least the top 5 or you're out."
"That's what we're working to achieve in Rogersville. In our television and radio ads, we decided to build on our reputation with farmers; we talk about service and how long S&H has been in business. We also make sure the rural lifestyler knows they'll pay the same price for the same products here as at a big box store. The difference with S&H is they'll get service after the sale, and there's a family behind the business."
When considering the marketing campaign on billboards and television, the Schnelles had to make a choice: focus on the equipment lines they sell or the dealership itself?
"We've got some good brands," says Eric Schnelle. "I'm proud of the equipment we carry, but we're S&H. We decided to promote our business first and our brands second. I think that's what a lot of dealers have to do in order to set their business apart."
S&H promotes all four of its locations in the spots, because its TV advertising touches customers within driving distance of all four locations. Oftentimes, stores under the same ownership will be treated as separate dealerships with unique advertising budgets and sales procedures.
The television spots match the billboards. Footage shows some of the iron for sale, and then Wayne or Eric Schnelle tell the camera, "family owned and operated for 40 years."
"For us, TV advertising works," says Eric. "We found that the news right before 'The Today Show' is best, as in this area a lot of people turn on the morning news."
No hired models are employed in the commercials. By using actual staffers, customers who visit the dealership may feel they already know that salesperson. They're recognized around town, too.
Advertising helps get customers to drive out to the dealership, but it's their experience at the store that makes the sale. S&H is continuously investing in new business technologies while searching for more profitable ways to operate. Part of the goal of continuous improvement means keeping a close eye on its competitors, whether that's a mass merchandiser or another outdoor power equipment dealer, for opportunities to increase market share. For S&H that has meant adding new products to an already extensive offering.
Recently, S&H added the Scag line of zero-turn mowers that has been popular with the commercial landscaper, as well as Bad Boy zero-turn mowers and UTVs, which sales manager Kenny Bergmann says has been surprisingly popular with rural lifestylers due to its attractive price point. Bad Boy's unique marketing approach — using celebrity spokespeople and models who sign posters of themselves at various power equipment shows — also seems to be resonating with the rural lifestyler.
"Some dealers don't realize if they're having trouble selling equipment in a particular category, it might be they don't have the brands people want," says Schnelle. "That's the thing Dad's always been good at. He says, 'If you have a segment that's losing sales, you'd better find a different brand.' And it would be great if you can get a new line before someone else in your region does."
The Rogersville store has also increased its stock levels of smaller farm equipment, such as manure spreaders and round balers. It's hired staff to support the lawn and garden business, especially in the service department. The dealership recently hired Scott Crowder as a full-time lawn and garden parts sales representative, and it has 5 full-time techs who specialize in smaller equipment. The sales staff is ready to sell S&H's diverse line of brands, from a 100 horsepower tractor to a lawn mower.
The equipment on the S&H lot in Rogersville is much different from when Wayne Schnelle started as a dealer. "At the time, we zeroed in on big Versatile tractors and wide planters. Now, when you look out there at the lot you see UTVs, ATVs and lawn mowers. It proves you can't keep doing the same old thing.
"I think the 'We've always done it that way' mentality has ruined a lot of dealers. I remember going to retail meetings and asking good dealers, 'How many compacts are you selling?' It turns out most didn't stock them, as they didn't see a market. You've got to be able to move in this economy. It changes so fast."
Wayne Schnelle says he saw the resistance to stocking compact tractors finally changing for most ag dealers around 5 years ago.
Farmers have known S&H for years. But with the region becoming more rural consumer-oriented, it had to become more visible to a whole new group.
But, as Bergmann says, "I don't know if we ever separated our customers that much. We've always sold compact tractors. But the light really came on for me during our manager's meeting in the Winter of 2010, when we looked at our numbers for the past year. It was intriguing that we sold more dollars worth of lawn mowers that year then we did round balers. At one time, we were New Holland's biggest round baler dealer.
"From that point on, there was no doubt that the rural lifestyler was a critical segment of our business and it was one that needed to be managed in order to grow."
Before S&H picked up the Mountain Grove and Joplin stores it had a couple lines of lawn and garden equipment and sold around 30 lawn mowers a year. "I thought we were doing alright," remembers Eric Schnelle. "We added two more lines shortly after the expansion and found we were selling more than 600 lawn mowers a year, corporate wide."
Buying on Service
As the typical Rogersville clientele have become rural consumers and professional landscapers, store manager Mike Wiles says, "The rural consumer usually has already done the research, and we don't even have to push the product. Once, when we took on a brand that was also sold at a nearby chain store, we'd have people stop in and ask, 'What's your price?' We have the same pricing as the box stores. Then they'll want to know if we do the service here, which we do. Many of them understand the value of buying from a servicing dealer, and that's often what makes the sale."
For S&H, service can mean a lot of things. "We sold a brand new tractor and a new baler to a fellow who had inherited the family farm but had another business in town. It was 100 degrees out when he called the service manager and said, 'My baler's not putting any twine on the bale.'"
The Rogersville service manager tried to work through the problem on the phone, but the caller admitted he wouldn't know what he was looking at anyway. So, while the caller waited it out in the tractor's air-conditioned cab, a technician was dispatched.
"He quickly discovered the baler had run out of string," says Wiles. "I think things like this are going to happen more and more. People may love to farm, but they don't have a clue. We can't ignore them, though. They have money to spend on good equipment."
One of Eric Schnelle's goals for the Rogersville store is to work harder at benchmarking its used and new equipment turns. "We've always promoted that we have a lot of parts on the shelf, and that's difficult to do when you're trying to turn parts quickly," says Eric Schnelle. "Through the years, Dad's done an excellent job of having a lot of parts on the shelf. In Lockwood, people will drive two hours and pass a lot of other dealerships to get parts from us. They know we will have it on the shelf, whether it's a new mower part or an older Ford tractor part. That's been a huge sales driver. But now that we've grown to this size, we know we need to continue that but we also need to operate smarter. Increasing our parts turns has been a big push lately."
This year, S&H controller Linda Fix and Eric Schnelle developed a budget based on each store's average growth in a 3-year period. They have a monthly target for new and used equipment sales as well as parts and service sales.
"Having the budget in place is encouraging us to pay more attention to turns," says Wiles. "Before, I never looked at benchmarks. In sales, you want to get every deal. We're starting to watch those numbers and it leads to a little friendly in-store competition."
Having a concrete goal is helping everyone stay focused on moving equipment and parts, says Fix. "Everybody's buying into it because they're talking amongst themselves — 'Did you see we hit 100% of our goal this month?' So it's more tangible, it's getting out to all the people to see.
"There are certain benchmarks out there that we look at and sometimes looking at our product mix we just have to say this might work for a traditional New Holland dealership, but it's not for us," says Fix. "As long as our numbers fall within an acceptable range, then that's what works for us. Our banker has been very good at understanding our business. When we meet with him I explain why we're in certain ranges, so they've been very accommodating when our business looks like it's a little off from a typical dealership. Our banker looks more at our trends, rather then all of the financial ratios you would look at for a traditional farm equipment dealership."
Diverse Product Range
For S&H, the challenge in comparing its benchmarks with other dealerships comes in the diversity of its product range. "One of the things we struggle with is when you look at the benchmarks for profitability on new equipment, you'll see New Holland's is from 3-11%. Those dealers look at sales per person and they're selling $300,000 combines or $15 million worth of equipment with 20 people in the dealership.
"That can't be our business model, because we sell 600 lawn mowers at $2,000 to $5,000 a pop, and we have balers that are service hogs. The good news is we sell a lot of parts and service. Granted they're not $10,000 repairs on a combine, but there's lots of pieces on the shelves to support all that."
S&H has 10% of the market share for Kioti tractors and for New Holland tractors under 100 horsepower its share is close to 20%, while hay tools are in the 30-40% range. "Lawn and garden is anybody's guess, but I would think our market share is decent for a one-store complex," says Eric Schnelle. "In the Rogersville market, there are so many people dividing up the pie that nobody gets a big percentage, but I would say with the lines that we carry, we get our fair share."
The economy around Rogersville is diverse, and that's helped support S&H's product line. Between the cities of Joplin and Springfield, there are a number of large firms that provide off-farm income. The farms are a mix of hay, cattle and poultry operations.
"When one sector might not be doing well, you have another sector that may pick it up," says Wayne Schnelle. "If it's a bad season for grain over in Kansas, then everybody's doing bad. You don't have the off-the-farm income there to the extent we have in Rogersville, which really boosts our business. That gives us a greater opportunity for diversifying our market, allowing us to pull in customers who are looking to buy different kinds of equipment at different times."
In addition to putting goals in place, the Schnelles say they've made huge strides over the past year when it comes to expense control. "Monitoring overtime has probably been our biggest — because that's about the only expense that has a lot of variation," says Eric Schnelle. "Utilities and insurance are fairly set. Those costs you don't swing a lot. When you're looking at costs, you must monitor overtime and staffing needs."
A "Car-Buying" Experience
If there's one thing that differentiates the rural lifestyle customer from the farmer, it's their frame of reference. "That takes a little time to get beyond," says Wiles. "Equipment dealers are often viewed as a car dealership because that's the consumer's only frame of reference."
A technician preps a new electric UTV purchased by the regional airport in Springfield, Mo. The airport will use it for transportation inside the terminal.
When the ag guys come in, they know how farm equipment dealerships operate. When lawn mower customers come in, they think the salesperson will attempt to increase the price with all sorts of add-ons, like they do with rustproofing in the automobile world.
That's not the approach S&H is interested in taking. They're not going for the high-pressue sale. "Once the consumer realizes we're going to be fair and take care of them, they relax," says Bergmann.
However, there are ways to work with that car dealership background, such as in stocking the yard. "Dad's thing is you can't sell from an empty basket. We've seen the direct correlation with compacts and skid steers," says Eric. "If you've got a row of them, I'm talking 10-plus, people see you're in the business of selling and servicing them.
"On the other hand, if you've got only one machine on your lot, your sales are directly proportional. You would drive past a Toyota dealership if it had only two cars sitting on the lot. Customers would think they must not sell cars because they're not stocking them."
Eric Schnelle says the key is having a supplier that is able to keep your inventory up to where you look like you're focused on selling the line, something that can be a challenge with today's with shorter terms.
When companies have a replenishment program or offer fast delivery from the factory, Eric says it's a win-win because he can keep the store fully stocked. "If you have to order twice a year, it's going to be feast or famine and you won't always look like you're in the business.
"Inventory control keeps me up at night. With this equipment and the rural consumer, we're talking about impulse buys. You don't think about all those attachments for compact tractors as being a impulse items, but the rural lifestyler doesn't want to place an order and then wait a week to take delivery. They want to use it this weekend. They're shopping on Saturday morning so they can use it Sunday."