When a traditional mainline dealership becomes "separated" from its main line, generally through a contract termination but occasionally by the dealership’s own choosing, oftentimes a new shortline-only dealer is formed.

As the name implies, the dealer retains its shortlines. Along with that, the dealership will often operate a smaller parts/service business and pick up an independent tractor line.

Appeal

George Russell with Currie Management Consultants says, “There’s a place where this model can exist,” specifically citing grain handling and tillage equipment as examples. While not a popular model, the right kind of entrepreneur can make it work. He says the model could see greater use when brand purity changes are compounded by the need for distribution by foreign-based manufacturers coming here from Europe, South America and Southeast Asia.

“A really sharp independent dealer can achieve half the sales of a mainline dealer at only 10% of the overhead,” says Charles Glass with Glass Management Group, who authored a whitepaper on the evolution of brand purity that can be downloaded for free here. “A good one, with good support of the jockeys who’ll move the used equipment, can make good money.”

Tom Evans with Great Plains Mfg. estimates that 20% of the company’s 1,000-plus dealers are shortline only. He believes that many of these types of dealers succeed because they believe in the products they carry. They also understand that the profit margins offered by shortline products are very attractive. “The truth is, even those who carry one of the major brands tell us we're often second in volume, but in percentage of profit we’re number one.”

Success in Shortline Machinery is a feature in E-Watch, our bi-weekly e-newsletter. It is brought to you by Versatile.

More from this series

Versatile, celebrating 50 years of 4WD production, is a full-line equipment manufacturer known for building products that are simple, reliable and easy to service and maintain. Versatile is seeking independent-minded dealers capable of selling and servicing equipment for large scale farming operations. If you want to add more horsepower to your bottom line, contact Alan Graff at agraff@versatile-ag.com or (920) 819-9039.

According to Art's Way's Ward McConnell, for niche-type products like those produced by Art’s Way (sugar beet harvesters, grinder mixers, etc.), “We have done pretty well with shortline dealers. In fact, our two biggest dealers are shortline dealers. They do the best job for us because they concentrate more on our product. They are extremely good servicing dealers. My thinking is we, as manufacturers of specialty equipment, don’t think enough of these types of dealers. It seems we like the bright lights and the green and red paint. But when you get these kinds of guys, they’re terrific. They need you and you need them. They’ve been very, very good to us.”

Limitations

Russell sees several problems holding it back. Besides the need for the hard-driving entrepreneur that’s necessary to make this model work, he cited the technical side of service/repair that farmers increasingly expect from their equipment partners. “With today’s advanced engines, a big barrier to an independent dealer is the ability to handle the engines — that’s the dividing line,” he says, a point reinforced by Evans.

“Shortline dealers are more accepted in diversified ag areas and far less in monocultures like Western Nebraska and Illinois,” says Russell. “To make this model work, there needs to be enough annual volume to sustain the business.”

Like Russell, Glass doesn’t see a growth model, despite his own predictions for growth in a 2003 white paper. “When mainline dealers were forced out, I expected maybe half would stay in as an independent. But very few did; most didn’t have the family to turn it over to so they retired.” Those who could’ve stayed in couldn’t bring themselves to cut the people, he says, even when they didn’t have the volume to support the overhead.

Plus when shortline equipment dealers are successful, Glass adds, they’ll soon be offered a contract by someone, citing that both Massey Ferguson and Kubota had good results attracting dealers who would’ve been classified as independent 10 years ago.

Conclusion

Both Russell and Glass anticipated more interest, but it represents a segment of the industry, and could see additional application and more eager equipment partners as lines are rationalized from mainline dealerships. “People do business where business is getting done,” says Glass. “If a dealer gets product moving, all the other reps will be showing up as well.”

McConnell says, “I do think we have to get away from the big guys, the big brand dealerships. Obviously, shortline-only dealers have been working for us. I believe more shortline dealers are coming alive, and our future really is with this type of dealer. I think there’s going to be more of them because there’s a need emerging.”

Originally published in 2014

Success in Shortline Machinery is a regular feature in E-Watch, our bi-weekly e-newsletter. It is brought to you by Versatile.

Versatile, celebrating 50 years of 4WD production, is a full-line equipment manufacturer known for building products that are simple, reliable and easy to service and maintain. Versatile is seeking independent-minded dealers capable of selling and servicing equipment for large scale farming operations. If you want to add more horsepower to your bottom line, contact Alan Graff at agraff@versatile-ag.com or (920) 819-9039.