Concept: A mainline dealer whose shortline business is critical to success sets up a separate location to quiet the major about the competitive attention at the primary location. The idea has also been talked about as a hedge move to protect a dealership whose contract or future transition of that contract could be questionable.
Appeal: “This model utilizes the synergies of capital and multi-store experience many dealers understand,” says George Russell with Currie Management Consultants. “It’s logical to have a separate legal entity for other lines. That’s another reason to have an operating business entity separate from a dealer’s real estate legal entity.”
If operated at a separate location, this route gives a dealer a defensible argument that nothing is happening at the mainline store that in any way ‘disturbs’ the image of the main brand.
In discussing the possibility, Charlie Glass with Glass Management Group shared how auto dealers have evolved with separate outbuildings for various brands. “The separate stores idea could present an option for dealers if they have the fortitude to do it,” he says.
Glass added a practical advantage of having an offsite store for shortlines. “It won’t be as visible to the territory manager, or his boss, each time they drive onto the dealer’s lot.”
Success in Shortline Machinery is a new 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.
Jim Boak of the Salford Group says he’s seen this approach evolving for a while and notes several instances where mainline dealers in North Carolina, Saskatchewan and Ontario established shortline locations to thwart mainline pressure. In most cases, Boak says the locations handling the shortline brands are doing very well.
Tom Evans with Great Plains Mfg. sees some potential for this model. In many cases, as multi-store dealers expand through acquisition, they inevitably close some stores and service farmers from their other locations. “So there are empty dealer facilities all over the place,” he says.
“It wouldn’t be difficult for those under pressure from their majors and that are well capitalized to turn those existing facilities into shortline-only stores. They could put a shingle on the door and with 2 or 3 people there handle parts and sales for their shortlines. I think they could afford to have a couple of locations dedicated to shortlines, especially if the dealership covers a big area,” Evans says.
Limitations: “You’d have to gain enough volume to justify the expense of staffing another dealership with managers, sales, parts and service techs,” says Glass. But while the costs for land, building and personnel are significant, the major drawback to the idea, according to both Glass and Russell, is management oversight. “If you’re operating the shortlines from a separate location, you’re now an absentee manager over that dealership,” says Glass.
And of course, despite what the majors say, this route may still draw their ire, even when it is in compliance with their current demands.
Conclusion: “If it had a real possibility, we would have already begun to have seen it,” says Glass. “We just haven’t seen a lot who have established separate locations to selling shortlines. It’ll be very difficult for John Deere dealers as they don’t want anything competitive going on. The dealers representing the other majors may have a better shot.”
Evans adds that the onus to develop this model is really with the dealers. “The dealers need to strongly consider what they want to do with their shortline business, whether they believe in it and the innovation they bring to the marketplace, and the niche markets that they fill for their customers. They either need to fight to keep us or they need to find us a place where they can sell our line and not make their major mad. I don’t mean to be throwing that back on their shoulders, but in a sense it really is on their shoulders.”
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Success in Shortline Machinery is a new 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.
Originally published in 2014
- Alternative Distribution: How Many Options Really Exist?
- Independent (No Mainline Tractor or Combine) Servicing Equipment Dealers
- Traditional Dealerships Setting Up Separate Entities to Sell Shortline Equipment
- Manufacturer-Owned Company Stores
- Joint-Venture Dealerships Owned by Several Shortline Manufacturers
- Co-Ops Adding Farm Equipment to Their Offering
- Direct to Farmer Sales; Subdealer Model for Service
- Farmer/Dealers
