Some dealers are finding success selling niche equipment to light contractors, such as the Toro Dingo compact utility loader. The TX1000 model was released in late summer.
Forecasts are showing the construction recovery is on solid footing. A recent report from the U.S. Department of Commerce shows overall construction spending through the summer was up 9.3% compared with the same timeframe in 2014. Residential construction was up more than 13% this summer compared with last year.
Besides new construction, light construction contractors are busy remodeling homes and facilities, installing landscape features, pouring driveways, installing pools and supporting major construction projects.
“Light construction accounts for about 30-35% of our overall business and it’s the strongest growth segment that we have,” says Dave Heck of Jacobi Sales, which has 7 locations in Kentucky and Indiana. Sales in his area are influenced now by a major bridge project. Other areas of the country are also seeing similar growth related to large construction projects, increased homebuilding and other projects.
Dealers say you can sell more equipment to light construction contractors by viewing your dealership as an extension of their crew — helping them get more work done in less time.
Focusing Sales Efforts
White’s Farm Supply’s light construction sales have been increasing because a major new manufacturing facility is under construction nearby, increasing demand for local contractors. The dealership recently focused its sales efforts on the construction market. “This year it’s just exploding for us. By the end of February, we sold as many excavators as all of last year. By May 1, we sold as many of one model as we did all of last year,” says Art White, who is one of the owners of White’s Farm Supply. The dealership has 4 locations in New York and carries Case IH, New Holland, Kubota, Krone, Gehl, Manitou, Ferris, Cub Cadet, Stihl and other lines.
Cole Young is president of Bobcat of Dallas, which has 4 locations in Texas. The light construction market is growing in the Dallas area mainly because of increased homebuilding.
Photo Courtesy of Bobcat of Dallas
White says there are several challenges when selling to this market. For instance, it may be difficult for some new contractors to get the low financing rates because of the requirement to provide 3 years of financial history. And, he says established contractors may be hesitant to switch to a new dealership. “Whether it’s a good relationship or not with their current dealer, they might be content to stay with them, rather than start a new relationship. I have to make it comfortable enough that they are willing to switch,” he says.
White says add-on sales of the Kubota 6-in-1 hydraulic blade have been strong when customers are purchasing the Kubota compact excavator. “With financing of zero down and zero interest for 60 months, it can cost just a couple of bucks a day to have that blade and customers can use it to earn that back tenfold. One customer came in a month after he bought one and said, ‘I paid for that blade today,’” White says, referring to the added jobs that can be taken on.
Some of his other excavator customers are farmers who are familiar with the Gehl brand and seek out that company’s models.
Selling Your Strengths
German-Bliss, a New Holland and Kubota dealer with 3 locations in Illinois, also has concentrated sales efforts on the light construction market. The dealership also carries Polaris, Exmark, Gehl, Toro, Land Pride, Bush Hog, Stihl and other equipment lines.
“In the last 5 years, we’ve been trending up because we are putting more resources to it. We have 3 stores and each store has someone concentrating on the market. Our traditional business has been to be a tractor dealer, but Kubota has expanded its offerings and we took on Gehl several years ago and now we have complementary products to our tractor lines,” says Greg German, general manager. “Kubota’s new skid steers will be a big boost for our light construction sales.”
He says his light contractors will generally run equipment to 1,500-2,500 hours before seeking a trade. Good financing is encouraging new purchases over used equipment, even though Tier 4 technology has increased costs. German says contractors aren’t pleased about the added costs, but they’re dealing with it. He says the technology does have a benefit for dealers. “The complexity of the new technology is good for us in the long term because they need us for service. For the customer, it can be aggravating in the short term,” he says.
That’s why service is so important to retaining customers. “For a lot of these guys, they don’t have 4 or 5 of these machines in the shed. When their machines go down, we offer a loaner or a rental, depending on where they are in their warranty,” German says. “You need to decide in your dealership whether you are a ‘rent-to-rent’ business like Sunbelt or Hertz or whether you are a ‘rent-to-sell’ business. We’re trying to get customers into the machine to turn them into a long-term purchaser.”
Watch Homebuilding Trends
The National Assn. of Homebuilders compiles a leading market index to rank the economic health of metropolitan areas using three factors: single-family building permits, home prices and employment. For the second quarter of 2015, here’s how large and small communities ranked. Make sure you’re increasing your outreach to light contractors if your area ranks in these top 10 lists of large and small metropolitan statistical areas (MSAs). Large MSAs have populations greater than or equal to 500,000. Small MSAs have populations less than 500,000.
Large Metropolitan Statistical Areas
1. Baton Rouge, La.
2. Austin-Round Rock, Texas
3. Urban Honolulu, Hawaii
4. Houston-The Woodlands-Sugar Land, Texas
5. Oklahoma City, Okla.
6. San Jose-Sunnyvale-Santa Clara, Calif.
7. Los Angeles-Long Beach-Anaheim, Calif.
8. Charleston-North Charleston, S.C.
9. Salt Lake City, Utah
10. Nashville-Davidson Murfreesboro-Franklin, Tenn.
Small Metropolitan Statistical Areas
1. Midland, Texas
2. Odessa, Texas
3. Manhattan, Kan.
4. Grand Forks, N.D.
5. Casper, Wyo.
6. Bismarck, N.D.
7. Abilene, Texas
8. Corpus Christi, Texas
9. Walla Walla, Wash.
10. Florence-Muscle Shoals, Ala.
The light construction market in the Dallas-Fort Worth area has been expanding for decades. “Homebuilding is driving our market right now. We had guys who started out with one or two machines and now they’ve added on and become fleet owners of 5-7 machines and have added crews,” says Cole Young, president of Bobcat of Dallas. The dealership also carries Multiquip and concrete supplies.
“A big change we’re seeing right now are contractors moving from rubber tire skid steers to a track undercarriage. The added production they can get is outweighing the added cost and our lease program has helped sales. Cashflow has become more important than having assets on a balance sheet,” Young says.
Joystick operation vs. levers has been another recent change in track loaders and almost half of the track machines they sell now have joysticks. That’s up from about 10% from just a few years ago. “Track machines are heavier and the manual linkage can be fatiguing, so many are choosing joysticks. It does take a while to make the transition and some of the long-time operators are sticking with the manual,” Young says.
Young says his skid steer customers are choosing a model based first on operating capacity, followed by horsepower and then features, such as cabs or joysticks.
The dealership has increased revenue by offering rental machines. “We rent most of what we sell and we rent a lot of attachments. Sometimes, a contractor just needs an attachment here and there. It’s easier for them to let us handle 30 or 40 attachments and just rent something for the week,” he says.
Art White says sales of Kubota compact excavators and the 6-in-1 blade have been strong this past year. White’s Farm Supply, which has 4 locations in New York, has recently focused sales efforts on the light construction market.
Photo Courtesy of White's Farm Supply
Tier 4 technology has increased the cost of skid steers and other machines, but Young says it really hasn’t affected sales for the dealership. “I thought it might, but most of the contractors are running diesel trucks and they came through the period when they switched over. Most of our customers are either immune to it or willing to live with it,” he says.
Bobcat of Dallas uses territory sales representatives to meet with customers in the field and has found direct mail and email campaigns to be effective, along with trade shows. “When you’re selling compact equipment, you have to build good relationships and we have the parts and service they need. These machines have a hard life,” Young says.
Offering Rent to Own
Heck of Jacobi Sales is the rental manager for the dealership’s Sellersburg, Ind., location. Jacobi carries Case, Kubota, Cub Cadet, Great Plains, Kawasaki, Land Pride and Multiquip.
“Our market is having a mini-boom because of a $2.1 billion bridge project. This has taken a lot of equipment from town, which has sent some people our way to locate equipment and we’ve been able to retain them as customers,” Heck says.
“It’s all about saving labor...”
The dealership rents most of what it sells and has been offering rent-to-purchase arrangements since 2008, with 6- or 12-month options. Heck says equipment availability wins customers. “Rental comes down to availability and we’ve loaded up heavy the last few years. It’s very competitive here — contractors have 15 options for rental houses,” he says.
Heck says Kubota’s rubber track loader is its most popular rental item, followed by the Kubota mini-excavator and then tractors (35-125 horsepower) and implements. They also rent contractor equipment, such as water pumps, generators and light towers through their Multiquip line, concrete saws from Husqvarna and Woods implements.
Heck says fast and reliable service keeps customers. “I equate this business to the restaurant business. You’ve got to ‘turn tables.’ If we don’t have good service, we can’t get people in the seats,” he says.
The current bridge project has brought in new business, but the dealership is staying focused on its local customers. “We cater more to our local customers, rather than out-of-town contractors. We realize they are going to be here for years to come,” Heck says.
Finding Your Niche
Billy Thompson owned his own logging company and worked for a general contractor before opening Topline Equipment 5 years ago in Centreville, Ala.
Dealers say many light construction contractors are choosing tracks instead of rubber tires for skid steers to gain productivity. Shown is the Kubota SVL 90-2 model.
Photo Courtesy of Kubota
Topline carries Toro Site Works, Bush Hog, Husqvarna and Scag and is a servicing dealer for TYM tractors. He relies on his own construction experience when working with light construction contractors, which amount to about half of his revenues. “I understand what they are dealing with, especially the issues of maintenance and just the pure costs involved with operating equipment. That’s why I don’t try to sell them something, but focus on matching what works best for them,” Thompson says. “I don’t want to sell them one piece of equipment. I want to sell them from now on.”
He says the economy and the light construction market are good in his area. The area is also continuing to rebuild after the devastating tornado that hit nearby Tuscaloosa and Birmingham in 2011.
Thompson says a niche product, the Toro Dingo compact utility loader, is generating sales to the light construction market. “We’re starting to see more landscape contractors upgrading and adding machines. For years, we did mostly repairs,” he says.
He expects there to be a lot of interest in the Toro Dingo TX 1000 model, released in August. “Our customers have been wanting a unit that can handle more weight as well as the ability to ride on the machine. It has a larger lift capacity, higher lift range and gets the operator off the ground,” Thompson says. “It’s all about saving labor. These machines are very efficient. A contractor can drop a five-man crew down to two or three.”
Thompson has found landscaping trade shows to be effective along with staying connected with area landscape associations.
He says his dealership’s niche is carrying a few premium lines. “I think there’s a danger of carrying too many lines. The fewer the lines, the better inventory of units and parts I can carry,” Thompson says.