Question: 

On-going supply chain disruptions continue to limit the amount of wholegoods inventory available for dealers. This, combined with other issues like rising interest rates have changed the sales environment for farm equipment dealers. How have you adapted the way you pre-sell and other sales models to account for these changes?

Answers:

“The supply chain disruptions are still very real. Retail dealers and manufacturers like the quick to cash model of pre-sold orders. This built-in delivery delay is being accepted by customers for a couple of reasons. The products they are getting are ‘fresh,’ not rusty or shop worn. Large ag has been committed to this strategy since the 1980s. Combines, planters and large tractors have been year-long projects. This also gives dealers a lengthened chance to pre-sell the used products. Currently, new orders do get accepted and eventually delivered to the customer. Communication is the best method, making sure our customers understand the delay and buy ahead of their needs. Also working with a large dealer group, we can share new and used products, allowing us to take a trade that might not interest our local customers but appeals to the large trade area.

“The challenge of limited amounts of wholegoods inventory continues to hurt dealers. Customers are frustrated and are changing brands to acquire products in a timely manner. These customers will be hard to get back as they enjoy the new products and make relationships with other dealers. We try to move the customer to an available product, like a higher horsepower tractor or products with features they haven’t considered. Also we are brokering equipment, buying good used at other competitive dealers and selling it to our customers. We also sell excess customer products when available. We are starting to hear about order allocation, only being able to get an allocation of units available to sell. This would be difficult. This will put a lid on sales. 

“The challenge of rising interest rates is the most difficult. The manufacturers are still offering lower rates on new products, but used products are feeling the pain, especially lease returns. Many of our customers lease to own. They start off with a 3-year lease, then purchase the machine at the end of the term. These customers are having to adjust to the high interest rates. Usually, the customer has built in equity if he buys his lease. Currently, we are offering longer payment options to keep the cashflow of ownership affordable. But this is pushing the cost of ownership higher.”

­­– David Boring,
Ag-Pro Companies, Bloomingdale, Ohio 

“In the past we took down payments and waited for the units to arrive, when they did not come in we refunded the payments. Currently, we keep a list of all customers who are looking for ‘on order machines.’ When they arrive, we contact everyone on the list giving some preferential treatment to local customers who will return additional margins through parts and service.”

– Brian Bruggink,
Bruggink’s Trailers & Construction
Equipment, Sheboygan, Wis.

“To answer your question, it’s kind of like you stated, we have been proactive with our vendors in knowing what lead times are, when the price increases may occur, how to lock pricing, etc. We have really just tried to pre-sell as much as we can. We stock way less due to availability, so getting retail orders is a must. We leverage price increase dates so customers know that if they wait too long they are looking at a price increase. If they are proactive, we can save them some money. Interest rates have not killed us yet, most farmers have seen high rates in the past and aren’t too worried yet. However, we have seen lease rates rise over 2% of what they were 2 years ago, which really increases the payment. We have seen a slight slow down in new purchases, but I feel like we expected that at some point.”

– Chris Eis,
Eis Implement Inc., Two Rivers, Wis.

“Pre-sell may now have an extra usage fee or hourly cost beyond the trade expectation if deliveries are delayed and trades effected. We offer more “you sell-or-we take” trade options on used trades to allow customers to sell their own trades if they want. New prices may not be guaranteed and finance may not be guaranteed. Pre-sell advertisement is being pulled forward to sell trades even earlier. We are still trying to reduce trade costs as much as possible.”

– Eric Nordschow,
Windridge Implements, Elkader, Iowa.

“I’ve got more questions than answers about your topic. However in our limited supply challenges we have taken larger than prior down payments to make sure it is sold after a delayed ETA. We have needed to switch units with an alternate engine or other attachments, we rented out a used unit in another case. We were also fortunate to be offered a 2nd line that had better supply, which helped out and surprised us.”

– Nate Gingerich,
G/A Repair & Machinery Sales Inc.,
Wellesley, Ont.