St. Louis, Mo. – A new report from the Rabobank Food & Agribusiness Research and Advisory group finds that because North American ag equipment dealers are facing a third consecutive year of declining sales, contracting net income and a weak intermediate-term demand outlook, these dealers must transform in order to improve returns on invested capital.
The report, “The Dealer’s Choice: Options for Equipment Sellers to Reinvent Themselves,” finds that the industry’s leading players have already reduced inventory levels and consolidated stores, and are emphasizing ancillary services; growth remains challenging, given negative farmer cash flows. While consolidation remains a viable option to improve profitability, Rabobank sees product extension as a better way to capture value as the next phase of technology and mechanization take hold on North American farms.
“Dealerships must reinvent themselves for the future and will have to pursue product extension strategies, including partnerships with Ag Technology companies, to thrive and survive,” notes report author Kenneth S. Zuckerberg, Senior Analyst Farm Inputs at Rabobank.
Given the sector dynamics, stagnation is a risky strategy, especially as farmers are becoming increasingly cost-conscious. The report explores options dealers can, and are exploring, including service capabilities, increasing the sectors served, selling/servicing high-tech equipment, expanding insight and increasing the variety of products sold.
“These dealerships will continue to face growth challenges as customers adjust to a new reality of lower commodity prices and income. There are opportunities for forward-thinking dealership groups, but courage and conviction will be key during the current period of financial stress and farmer anxiety,” says Zuckerberg.