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.