With box stores spreading like wildfire, many dealers are managing to overcome the mega-store onslaught — even benefiting from it.
A by-product of the rise in people gobbling up swaths of rural acreage and spending on their hobby farms is the explosion of the big-box chains that now cater to this segment. These box stores are big, ravenous and hungry for as many of your customers as they can get to pass through their super-sized doors.
This phenomenon, however, doesn’t mark the death-knell for the farm equipment dealership as a major resource for the rural lifestyle market. To the contrary, this merchant battle for the rural lifestyle customer actually marks an opportunity for dealers.
While it’s true that box stores are hurting traditional dealers in some areas, numerous farm equipment dealerships are successfully dealing with the competitive threat of the big box stores — and cashing in big time. These dealers note that for every problem a box store causes, newer opportunities can arise.
The Enemy Lives Next Door
Many box stores chains follow the auto dealership model of opening locations within a close proximity to their competitors. Mid-States Equipment, a John Deere dealer in Watertown, Wis., was operating a successful dealership in a captive market when Tractor Supply Co. decided it wanted a piece of the action. The national chain placed Mid-States’ Watertown location squarely in its crosshairs and opened a store directly across the highway. While initially a cause for concern, Mid-States stayed true to its business model and actually began to notice an actual increase in sales.
“To be honest, Tractor Supply’s opening a store across the highway from our dealership was a blessing in disguise,” says Ken Mehringer, service manager at Mid-States Equipment. “It brings more traffic our way. We make sure to display our rural lifestyle equipment in front of the store so that it’s visible from the highway.
“If a customer at Tractor Supply sees us across the street, the first thing he’ll notice is our line of rural lifestyle equipment displayed in front of the store. He’s then more apt to say, ‘Hey, let’s check that place out.’
“Once inside our dealership, he’ll notice a world of difference in the quality of equipment between the stores. From there, our sales team must do a good job communicating the differences in price, service and warranties.”
Mark Dietz, owner, Dietz Tractor Co., Seguin, Texas, says he’d love for a Tractor Supply to open up across the street. “They spend so much money on advertising that they’d draw serious traffic into my store,” he says. “A Home Depot recently opened up a few blocks away and that’s made a significant difference in my traffic flow.”
Sales Knowledge Advantage
One area where farm equipment dealers have a clear advantage over box stores is product knowledge. Box stores employ hourly-wage workers who have little incentive to learn more about the masses of products they carry.
“Lack of knowledge at the box store frustrates customers and leads them to us,” says Mike Meth, store manager, Colorado Equipment, Greeley, Colo. “The professional salesperson qualifies the customer’s needs, gets them the right product and emphasizes service after the sale.
“More times than not, we upgrade the customer to better equipment and a larger purchase than he would’ve made at the box store. This is important for rural lifestyle customers who think they can mow their acreage with a cheap box store mower and expect it to last 20 years.
“We spend thousands of dollars each year to train our sales staff on products and new equipment developments, and it pays off. A knowledgeable salesperson that knows what he’s talking about makes a big difference to the rural lifestyler. Especially after they’ve been to a box store and experienced exceptionally poor service.”
Mehringer says his dealership can’t compete with a $400 compact attachment. “But I can explain our 5-year warranties versus a box store’s 1-year warranty,” he says. “Your sales staff is critical in getting this message across.”
The Great Pricing Myth
Some customers shop only in search of the lowest-priced sticker. In rural lifestyle equipment sales, this can be difficult to overcome — particularly for the customer who doesn’t understand the value of quality.
“We train our sales staff to inform customers that if they’re simply looking for the cheapest prices, then they’re in the wrong store,” say Tim Call, president, Empire Tractor, Batavia, N.Y. “We’re going after the customer who cares about quality, will pay more for a long-lasting piece of equipment and wants a good service package.”
When it comes to comparable products, Dietz says that the notion of cheap prices at box stores can be a myth. “You walk into a big box store to buy one item, say a chainsaw, then fill your cart with a whole bunch of other, smaller stuff,” he says. “By the time you leave, you’ve spent a ton of money and you discover that the chainsaw you purchased wasn’t really that much cheaper than what you could’ve purchased at a dealership.”
Plays Key Role
Matched against a box store, the farm equipment dealer will always lose the battle of advertising exposure. There’s virtually no responsible way a dealers can out-spend a national chain on advertising. This doesn’t mean that you throw in the towel. The battle for the rural lifestyler can be done smartly, efficiently and creatively — with better results.
“We’ve stepped up our targeted advertising to compete with Lowes and Home Depot. We use newspaper advertising, direct mailers and radio ads to compete with the box store chains,” says Meth. “We’ll do 5 to 7 big direct-mail campaigns each year.
“We’re also the sponsor of a local radio program called the ‘Colorado Equipment Farm Show’ every Saturday morning. This really pays off in the spring and on special occasions such as Father’s Day, as it brings tons of traffic into our dealership.”
Some dealers find the Internet to be a cost-efficient method for marketing to the rural lifestyle market. “The rural lifestyler likes to research products online,” says Call. “With that in mind, we’ve made a concerted effort to develop our Web site. We’ve hired a part-time person who does nothing but work on our Web site and update it on a daily or weekly basis.
“Now, whenever New Holland, Kubota or Case IH comes out with a new special promo, we immediately post it on our Web site.”
Meth takes it a step further and works in tandem with the local box stores to get his message out. “We have an after-sale servicing agreement with both Home Depot and Lowes that allows us to place signage in their stores and attach set-up stickers on all their Deere equipment.
“As soon as they sell a mower, we make a follow-up call to the customer about our dealership, and we try to sell them winter or spring tune-up packages. This has increased our traffic and service department revenue substantially.”
Use of direct mail, with a focused, streamlined approach, is an effective way of targeting the rural lifestyle customer. “We work with a media agency on direct-mail campaigns that are aimed specifically to our target customers,” says Call.
“We’ll put together a postcard or flyer and rent a mailing list that goes to 10,000 of our target-market rural lifestyle demographic, such as single-family households with an income of over $75,000 with 5 or more acres.”
According to Call, these targeted efforts pay huge dividends. “When New Holland came out with 0% financing for 60 months this year, we really promoted that in our direct-mail campaign,” he says. “As a result, we saw a substantial increase in New Holland compact tractor sales.”
“The message of all our marketing focuses on the fact that we have more products, better products and a great service department. The catchy tag line we always plug in our marketing is, ‘Service After the Sale,’” says Meth.
There are some built-in advantages that box stores will always have, such as store hours. Dealers can’t reasonably keep their stores open until 9 p.m. on weeknights and weekends. Some dealers have made minor, yet significantly helpful, adjustments to their store hours.
“If you want a piece of that rural lifestyle market, you need to be available when they are. Rural lifestyle people work full-time jobs and usually get off at 5 p.m. We’ve changed our store hours to stay open until 6 p.m. on weeknights and Saturdays,” says Mehringer. “The extra hour on weeknights is especially significant, as many customers prefer to stop in on their way home from work.”
Box stores, once thought to be a lethal threat to equipment retailers, has become less of an issue as dealers stay focused on what they do well. This has enabled the dealer to remain a strong player in the rural lifestyle market.
“We saw the shift coming 4 years ago and opted to give up certain lawn and garden lines,” says Call. “Before we made the switch, it took four full-time employees to handle that line — a parts guy, a sales guy, a service guy and an office person — to do a half a million dollars in sales. And we only made a 10% margin bottom line when you got done with all that.
“After the switch, we now sell compact tractors, skid steers, 3-point hitch attachments, wood-handling equipment and more from companies that aren’t in the box stores. So now, we’re doing over $2 million in sales, with the same four people, the same overhead and the same 10% margin. Anyone with a calculator can figure out that this is a better way to do business.
“We’re always looking at transaction prices as a way to improve our bottom line and successfully battle the box stores. We started carrying Dixie Chopper, Exmark and Kubota mowers and we’ve seen happier customers, fewer headaches and a higher average transaction price.”
“We were no different than a lot of dealers when the box stores came onto the scene,” says Meth. “We fought, resisted and did everything we could to make them go away for the first 3 or 4 years. Once we came to grips with the fact that they were here to stay, we embraced it and changed some of our approaches , expanded our follow-up with customers and studied how we advertised.”
And once a box-store customer doesn’t mean always a box-store customer. “You’re starting to see a serious shift in the mindset of the rural lifestyle consumer. Over the past 5-10 years, these customers purchased equipment from a box store at one time or another,” says Dietz. “And they’ve had a horrible experience either with the quality of the product or with trying to get the equipment serviced.”
As this continues, equipment dealers say competing with box stores is an apples-to-oranges comparison. “Box stores have a completely different business model than equipment dealers,” he says. “With box stores, it’s all about numbers and moving mass quantities. Here, it’s about good margins, service packages and forming long-lasting relationships with repeat, loyal-for-life customers.
“People are realizing they’re better off buying superior equipment and getting the full-service packages that a dealership offers. And this type of thinking is only going to increase as more people have similar experiences. The word is getting out.”
Originally published in the Fall 2007 issue