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August 29, 2017

Dealership Dynamics

By Alan Kirsten

The industry recently recorded the best tractor sales since 1985 at 11,729 units – great news in a changing dealership landscape.

There are currently 660 machinery dealers in Australia, with 365 of these being group business outlets, controlled by 98 groups. This is a big shift in just a few short decades, from a time when there were more like 2000 dealers, the majority being single, stand-alone operations.

The trend to consolidation follows a pattern seen in many sectors: many businesses had to become part of a larger group to deal with changing business practices and remain competitive. It’s worth noting, though, that many of these group business outlets are still family-owned.

But if the shift to a more consolidated, corporate structure has been to the benefit of dealers, what has it delivered for customers, and what does that mean for dealers?

Building and maintaining close client relations can be more challenging when there’s not a dealership in every town, and a lot of farmers are not as brand loyal as they once were. This changing relationship is not all bad news.

There’s a huge opportunity to change the dynamic between the dealer and client. Farmers (themselves more sophisticated and more likely to be running bigger operations) are less driven by mate-y connections and more interested in a dealer relationship that is about value. Product value, service value and support value. What a bigger dealer operation loses in closeness to the customer it can gain in broader offerings.

This doesn’t signal the end of the single outlet, as they still have an important place in the distribution channel, but it does represent challenges for them to remain viable and competitive.

As the industry heads off into another record year, it’s an exciting place to be.