Farm machinery dealers: How they’re changing and why
The relationship you have with your machinery dealer is a bit like the one you have with your doctor. You want someone who is not too far away, listens to what you are telling him and is really good in an emergency.
In fact dealers play a vital part in the success of the agricultural sector, which is why farmers are all too aware that the landscape of the dealer network has changed a lot over the past two decades.
See also: High-tech dealers offer more than spare parts
Like everything these days – from cars to televisions to waist measurements – things keep getting bigger. Farm machinery has become super-sized too, and so have many of the companies that sell and service it.
Hard statistics are difficult to come by, but there seems to be a distinct decline in the number of smaller independent dealers, with business increasingly being consolidated into the hands of a number of multi-depot players.
Some of this is because traditional one-man bands and smaller family firms have either closed, been bought out or merged with bigger players.
In some cases, this can mean the end of business and personal relationship between a farming family and dealer that stretches back across the generations.
But why has this happened and what does it mean for farmers now and in the future?
Fewer farmers, fewer dealers
In some ways it shouldn’t be a surprise. There are fewer farmers in the UK, so it’s inevitable that there will be fewer dealers.
The machinery supply business is also becoming more complicated and less predictable, thanks to accelerating technology, more market volatility and rising customer expectations.
Dealer facts
- Claas is the only manufacturer to own any dealerships
- Some of the biggest UK dealers’ turnovers exceed £100m
- Margins on new machinery sales are single digit only, but margins on parts are higher
- John Deere, Case New Holland and Agco accounted for 80% of all new tractor sales in 2013
According to Bagma, the trade association for dealers, the number of outlets in the UK selling tractors now stands at about 700, with another 500 dealers selling equipment only on top of that.
Yet it says that while there has been some consolidation over the past three or four years – reducing the number of companies in the market to about 550 – the number of outlets farmers have to choose from is remaining fairly steady.
The future
Frustrating as change can be, more of it is on the way. Talk to the major manufacturers and they all say that the way that dealers are working is likely to develop further.
All paint a picture of dealerships offering a much wider range of services, which will see manufacturers, dealers and farmers working much closer together.
Examples include offering long-term maintenance packages, machine optimisation advice and the provision of data services, all of which have the potential to add money to the bottom line.
The future, it seems, is for farmers to talk to their dealers, rather more often than they do their doctors.
Manufacturer view
John Deere
Deere, which sells more tractors in the UK than anyone else, unveiled its controversial Dealer of Tomorrow strategy in 2011.
This envisaged what it saw as the establishment of a network of world-class dealerships which would significantly grow in scale and specialisation.
What this meant in practice, said the company, was that it wanted to work with dealerships that had a turnover of £25m or more.
This, it told its dealers, could be achieved through investment or by merging with other players in the market.
Antony Scott, managing director of John Deere in the UK and Ireland, says that while the strategy has been to create larger dealer businesses, this has had no impact on the number of outlets open to farmers.
There are about 120 John Deere outlets in the UK – the same number there have been for a few decades.
The thinking behind the move, he says, is that that bigger dealerships can offer a better experience to customers.
Staff, for instance, can work across a number of outlets doing the same sort of work every day. That helps them develop their expertise.
“We are aiming to offer a distinctive customer experience so people are happy to invest in John Deere products and services. We’re doing it because it is good for customers.”
Agco
Over the past decade Agco has also gone through a rationalisation process, which has seen its dealer numbers shrink by 40%.
It has moved some Fendt and Valtra franchises from single-brand businesses to larger dealerships who already sell other brands from the Agco range.
Mark Casement, Agco’s country manager and director of sales for UK and Ireland, says the move reflects market realities.
It has given a greater level of penetration for all the company’s brands and helped to ensure the long-term viability of the businesses they work with.
“The strategy is about making sure we can see they will have a sustainable business and a viable territory.
The financial and capital requirements of operating as a dealer are getting more and more demanding.”
Mr Casement says that of the 73 companies with an Agco franchise, two-thirds are single franchise and the remaining third have two or more brands.
There are 140 outlets in total and five dealers now carry the full Agco product range, which includes Massey Ferguson and Challenger.
New Holland
For New Holland, the shake-up has been less dramatic. But the fundamental message is the same.
Richard Spencer, dealer business development manager, says New Holland’s strategy has been about making changes that ensure its dealers remain profitable.
It deals with about 40 UK companies, with an average of two
or three outlets per business.
“We have a small number of companies with a large number of branches and then some small, family-run single-branch dealers.
“We are not worried about setting a turnover of £x – we look at whether that dealer is doing a good job in that territory and getting the right share of the market.”
Mr Spencer says the challenge for dealerships is that they require a high level of capital investment, the margins are relatively small and they also need to invest more in training than many other industries do.
“The offering that the dealer has to provide to their farmer customer is also getting increasingly complex.”
Farmer view
It is easy to harrumph over the rise of big business, but many massive dealerships are doing a great job for their farmer customers.
Economies of scale can be good thing. The more tractors a dealer orders, the greater the discount offered by the manufacturer, which in theory means better deals on offer. If your local branch doesn’t have a certain part, there is a good chance another depot within the group will.
But some farmers point to an increasing lack of choice and competition in the market, particularly as franchises have shifted around.
The personal service offered by smaller dealers, who are often prepared to turn up out of hours, is worth a lot to farmers. Smaller farmers worry they don’t get the same attention from a big company that they might from a smaller one.
“Bigger dealers sometimes give the impression that unless you are big farmer buying lots of new tackle they are not interested,” says James Wilks who farms 52ha near Sheffield and chooses to buy his kit from a family-run Deutz-Fahr dealership.
There is also cynicism among farmers about the power the big manufacturers increasingly have over their dealers. No one complains publicly about the demands of being a franchisee, but systems and procedures handed down from on high are an irritation.
In addition, there is a deep-rooted sympathy among many farmers for any dealers who have lost their franchise along the way.
As one industry insider puts it: “From a farmer’s point of view they have sometimes been left feeling they can’t get the tractor they want, from the place they know, from the person they have known for years.”
Former Farmers Weekly Farmer of the Year Robert Law, who farms on the Hertfordshire/Cambridgeshire border certainly agrees. He says he was left “very annoyed” when his local Fendt dealership lost its franchise and was moved to a Massey agent.
He has chosen to stick with the company, which has since taken on another franchise but still services and sells second-hand Fendts. “I’d dealt with the company since 1983 and it was one of the original dealerships. As it happens I have just bought my 31st Fendt from them – an ex-hire tractor.”
Dealer view
Graham Parker, Sales director, Ernest Doe head office, Ulting, Essex
Graham Parker
How long have you been in business?
We’ve been running since 1898, when Ernest Doe took up the lease on a blacksmith’s shop at Ulting near Maldon in Essex.
How many farmers do you have on your books?
We have 10,000 farmer account customers. That’s almost twice the number we had in 1990.
Do you see your farmer customers more often now, or less?
More often. Mobile phones and emails have speeded up communication, but individual sales representatives are spending more time with each customer.
As machinery becomes more sophisticated, more time is needed to discuss the options.
How much has that changed over the years?
We now often see two or three tractors being traded in against a much larger one – for example, two 100hp tractors being replaced by one 180hp unit. More farmers have a planned replacement cycle too.
How has your relationship with your main supplier changed?
We spend more time together planning activities, looking for opportunities and providing feedback. Plus, of course, there’s a focus on training – from the top to the bottom of our organisation.
What annoys you most about your farmer customers?
A lack of longer-term planning by some customers. Sophisticated products can’t always be instantly available.
Tim Hughes, Managing director, Smithfield Tractors, Builth Wells, Powys
Tim Hughes
How long have you been in business?
My father started the company in 1961. I left school in 1978 and worked there all my life. I took over full responsibility of running the business 15 years ago.
How many farmers do you have on your books?
About 1,800.
Do you see your farmer customers more often than in the past or less?
I have definitely got more phone calls since the arrival of the mobile phone.
How many staff do you have now compared to 20 years ago?
It is about the same.
Where does your main income come from?
New kit and the servicing. We don’t seem to get as many breakdowns these days as the new equipment is that much more reliable.
How much is now sold on finance?
Ninety percent of high-priced items use finance.
How has your relationship with your main supplier changed?
There are more sales targets and dealer standards to maintain.
How hard is it to get good staff?
It is difficult – especially now, as the technicians have to have a wide range of skills, including computers.
Bryan Hoggarth, Bryan Hoggarth Ltd, Carnforth, Lancashire
Bryan Hoggarth
How long have you been in business?
I started off as a man in a van in 1976. My first tractor franchise was with Leyland in the 1980s, then I moved to New Holland in 1994 before moving to McCormick from the start of 2014.
Why did you choose to move franchise last year?
I took the decision after seeing the new range of tractors in Italy. It made me realise they were up to date, reliable and as good as any on the market.
How has moving impacted on your customer base?
I would say about 80% of customers have stayed with us. We have lost one or two who followed the New Holland brand, but many others have stuck with us.
How many staff do you have?
Nineteen.
What percentage of tractors are traded in when customers buy a new one?
Ninety percent of people trade in when they buy. Some are now starting to trade in two tractors to pay for one. They seem to be doing the job with fewer tractors to cut costs and top up with contractors as necessary.
What is the biggest change you have seen over the years?
Customers have realised what is important about buying a tractor. It isn’t their favorite make, or colour it is about how they are going to be looked after once they have made the investment.
How hard is it to get good staff?
Not easy. We make sure we bring on young ones ourselves and send them on appropriate apprenticeship schemes.
What annoys you most about your farmer customers?
When you spend hundreds of pounds sending out a demo machine and then find out later on that the customer has bought a tractor from someone else without even having a demo.
