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Dealers are preparing for expected demand by making sure they have the right equipment in their showrooms and on their lots. About 46% expect to add utility vehicles to their product lineups in 2016. They’ll also expand their inventory of tractors under 40 horsepower (35% of dealers) and zero-turn mowers (25%). This aligns with the top categories for growth potential.
It’s an interesting mix regarding the other products that make up the top 5 list for products being added. Nearly 24% will add skid steer loaders and about 19% will add tractors in the 40-100 horsepower range, ATVs and snow removal equipment. Perhaps some dealers are looking to expand the range of equipment they offer. (Jump down to "Product Lines Dealers are Likely to Add in 2016".)
Snow removal equipment continues to move up regarding importance to dealers, making the top 10 list last year. Some dealers also are positive about ATVs and adding them to their lineups, while others think the product has a lower potential for sales.
Dealers remain mostly consistent with the rural equipment they added in 2015. The top 5 list last year for products being added included tractors under 40 horsepower, tractors 40-100 horsepower, skid steer loaders and utility vehicles.
Only a small percentage of dealers are adding inventory for products that are lesser in demand, but still round out a dealership’s offering. For instance, nearly 4% of dealers are adding scrapers/graders, fertilizer spreaders and feed. About 3% are adding seeders/drills and fencing.
Dealers are taking advantage of the strong market by investing back into their businesses and improving how they sell to and serve their rural lifestyle customers.
Dealer optimism about aftermarket revenue has encouraged many to commit dollars to that part of their businesses this year. Nearly 73% of dealers plan to make improvements to their shop and service departments. That’s up from last year when 70% of dealers planned to make similar investments.
Bob Clements, consultant and Rural Lifestyle Dealer columnist, shares this about the importance of a professional service department: “The service department is an important part of the customer experience with the dealership and can help capture customers who have previously purchased through the mass merchants. While both parts and sales are important, no department has more impact on both current and future customers than a service department.”
More dealers this year than last year are planning to make improvements to their retail spaces as well. Nearly 59% of dealers plan to modernize their retail presence, compared with about 46% of dealers who planned to do so in 2015.
Investments in administrative systems are also up this year. More than 47% of dealers plan to invest in their business information systems, up from about 37% of dealers who were making that investment in 2015.
Protecting Your Reputation
Another less tangible, but equally important investment is your dealership’s reputation. According to a study by the World Economic Forum, on average more than 25% of a company’s market value is directly attributable to its reputation.
Your dealership’s reputation is linked to the manufacturers you carry and many brands are resonating with rural lifestyle customers. Dealers say that for more than 55% of visits, customers have a brand in mind most of the time or almost always. (See the chart "Percent of Customer Visits in Which Specific Brand/Unit is Requested".) That holds steady from last year when dealers noted similar findings for customer visits.
The following information was provided by dealers who participated in Rural Lifestyle Dealer’s 2016 Dealer Business Trends & Outlook survey. It is compiled to provide our readers and other interested parties basic demographic data on the rural equipment dealers who are serving the small acreage farm, hobby farm, large property owner, light contractor and lawn and landscape segment. (Percentages = Dealer Responses)
Several manufacturers are trying new ways to raise brand awareness, such as through promotional partnerships with music celebrities, support for military veterans and college sports affiliations.
For instance, Kubota sponsored the 2015 tour of country music star Alan Jackson. Kioti is supporting the Wounded Warrior Project through a promotional partnership with another country music star, Trace Adkins. Mahindra also has a military and first responders appreciation program. Kioti and Mahindra also both initiated college sports promotions in 2015.
Dealers are capitalizing on brand recognition by adding their expertise. Dealers say more than 82% of the time, customers accept their recommendations either most of the time or almost always. This level of respect and trust is even higher than last year when dealers said 77% of the time customers accepted their recommendations most or all of the time. (Jump to the chart "Percent of Dealer Suggested Product Recommendations Accepted".)
In addition to expertise, customers also seek dealer support in affording the equipment they need — and want. Like many of today’s expensive purchases, the monthly payment dictates the level of purchase.
About 57% of dealers say that customers seek financing at least half of the time. This is down from last year’s survey, when about 65% of dealers said customers sought their financing help at least half of the time. (Jump to the chart "Percent of Purchases Where Financing is Requested".)
Dealers have mentioned that the industry could benefit from additional financing options, similar to the extensive network the auto industry can tap.
Rural equipment dealers are making the most of the strong market, but keeping a close watch on the issues.
Again this year, finding good employees is the top issue that dealers are concerned about. About 54% of dealers say they are most concerned about this issue, compared with about 56% of dealers who were most concerned about this issue in the 2015 survey. (Jump to the chart "Rural Lifestyle Dealers' Most Pressing Concerns for 2016".)
In other years, competition from the oil and gas industry played a role, but that competition has subsided. Many dealers addressed this concern when we asked them the question, “What is holding you back from moving to the next level with your dealership?” Lack of vocational training in their areas and the lack of interest in seeking careers at dealerships were some of the reasons cited. (See the full story here.)
The number two and number three issues that concern dealers the most are also ongoing from last year’s survey — low sales margins and healthcare programs and costs. Many dealers are hoping to make up for the lower revenues from wholegoods with higher margins in the parts and service departments.
Healthcare programs and costs are another issue that dealers may feel they have little control over. The costs U.S. dealers dreaded when the Affordable Care Act was being introduced are now a reality. It’s a tough balancing act to offer programs you can afford, while also making sure to take care of your employees.
One issue that dealers are significantly less concerned about are equipment shortages from mainline suppliers. About 8% of dealers said this is the issue they are most concerned about compared with nearly 19% who said so last year. Perhaps dealers are improving on their inventory planning processes. Manufacturers also seem to be taking note of the issue as many have recently opened new assembly and distribution centers.
Rural Lifestyle Dealer has been tracking trends in the rural lifestyle market since its initial survey in 2008. Since then, categories such as zero-turn mowers and utility vehicles, are now dominating new product introductions at the industry’s major trade show, GIE+Expo. The trend this year was to enhance the zero-turn experience with suspension seats and more ergonomic designs. UTV enhancements this year centered on adjustable bed and seating configurations and racks and accessories.
Cost-savings were also promoted with more EFI engines as well as a wider array of battery-powered commercial equipment. And, more new models of tractors on either end of the horsepower spectrum continue to hit the market.
All in all, the economy is good and the number of rural lifestyle customers continues to expand. Manufacturers are working to stock your lots and showrooms and introduce enhancements to give you new ways to sell. You may, at times, feel overloaded in trying to keep up with sales and technician training, but it’s still a good problem to have. Your decision to pursue the rural lifestyle market was a smart one.