Rural Lifestyle Dealer launched a new series this year, called “Dealers Sound Off.” In this series, dealers discuss a wide range of topics and our goal is to generate ideas from other dealers who may be facing the same issues.
We recently caught up with Doug Nord of Nord Outdoor Power Equipment, Bloomington, Ill., and Tim Berman of Big Red’s Equipment, Granbury, Texas. Both serve on RLD’s editorial advisory board. They share thoughts on issues, challenges and opportunities they are facing. Here is an excerpt of a feature from our winter issue.
On the topic of manufacturers selling in Big Box stores and through independent dealers:
Doug Nord: Here is one instance that I think was a mistake. Echo creates a battery-powered line that goes into Home Depot and Amazon and not through the dealer. There is confusion now in the marketplace. For instance, people can purchase an SRM225 trimmer at Home Depot, but the battery power unit is not nearly the grade of what the dealer sells. Manufacturers are creating those channel specific units, like Toro’s Lawn-Boy brand sold through Amazon or Home Depot, and it builds brand awareness, but not necessarily in a good way.
Tim Berman: I have mixed feelings on the mass merchant model. There are some manufacturers selling through mass merchants and they don’t protect their pricing. They let the mass merchants devalue the product, especially if the stores order too much inventory and do a “blow out” sale and sell well below dealer pricing. But, I have seen others, like Bad Boy, where they have done a good job of protecting the pricing and so it has built brand awareness.
Now, in the case of Caterpillar and its new home and outdoor product line, Cat already has brand awareness, so maybe selling through mass merchants is not necessary for them, where Bad Boy needed that. Just a few years ago, nobody had heard of Bad Boy even though the company has been around since the 1990s. Now, because they are in a mass merchant, people tend to look at them as more of a household name.
Nord Outdoor Power Equipment, Bloomington, Ill., carries Stihl, Echo, Toro, Kubota, Land Pride, Billy Goat, Bear Cat, Ryan, Shindaiwa, Timberwolf, Smokin Brothers Grills, Big Green Egg grills, Phoenix grills and VAL6 heaters.
Maybe Cat needs to sell through mass merchants to get economies of scale. From a service standpoint — I’m approaching it more from service than I am from sales — it is going to put units out there that I get to work on.
Nord: When I served on the Echo Dealer Council, I said, “Why don’t you make us the service center for the units coming out of Home Depot? They said, ‘You mean you would do that?’ I said I would be an idiot not to do that. As soon as they see my store, customers will think, “These guys have the knowledge and expertise. This is where I’m going to buy my power equipment.”
Dealers are their own worst enemies. We don’t make enough margin on wholegoods for the volume that we move. I make better margins on service. However, because I stock some of the units, my concern becomes when the mass merchant goes, “You know what? It’s July. We’re not going to sell any generators, so let’s blow them out at 40% off just to get them off the floor.” Then your customer is like, “Well, I can go buy it over there so much cheaper.”
On the topic of not making money on warranty work:
Nord: How many dealers are charging below what you can do the repair for on their labor hours? I have heard dealers say they can’t charge more than $55 an hour. They are too afraid to price what the market should bear and they hurt the market because of that. They don’t understand their true costs. It’s about what the market can bear; what your technicians are worth; and what you need to pay your techs so you don’t lose them to an auto dealer or somebody else as you get them more educated.
Berman: There are many dealers in that position, though they may not be open about a deficiency in the shop. Who likes airing their dirty laundry? I have talked to high volume dealers and one told me that service can’t be profitable. Bob Clements (of Bob Clements International and RLD columnist) talks about selling a volume of service or wholegoods, but rarely both. John Spader (of the Spader Group) says the reason is that dealers usually are either one extreme or the other. There is the servicing dealer who does the best service and makes great margins and doesn’t have a lot of rework. They just do great, quality service, but they are not good at moving wholegoods. Spader says the reason is that the two businesses require two polar opposite personality types.
Big Red’s Equipment, Granbury, Texas, carries Branson, Cub Cadet, Land Master, ODES, Bad Boy, Exmark, Hustler, Echo, Raven, Cross Trailers, Big Bee attachments, Muratori, Terra Force, Woods Equipment and Titan attachments.