It doesn’t seem that long ago that we were on the edge of a used equipment cliff.
Or maybe it was the last one? Or the one before that? Or the one – see where I am going with this?
The greatest challenge is finding and retaining good people; our most significant risk is used equipment inventory. It can also be our most important opportunity but isn’t our greatest strength. It is usually our greatest weakness.
Let’s go back to my opening comment regarding the used equipment cliff we faced in the late 2010s. Manufacturers were pushing for market share, which wasn’t anything new. What was new this time was the large capacity increases most manufacturers had added between 2008 and 2014.
This added availability was a major catalyst that helped start the mainline range war that was the 2010s. The size of machines and the volume of production both saw giant leaps. We saw the 2-for-1 trade becoming a thing. Multiple smaller machines being traded on fewer large machines was more and more common. And selling the same amount of new generated more used than it had in the past.
The perfect storm was about to make landfall when an unlikely hero came to save the day: the COVID-19 pandemic. Supply chains were interrupted, and new equipment was extremely limited, if available at all. Delivery dates became moving targets, component shortages had yards full, and factories were filled with machines that were not complete. But do you know what was available? 5- or 6-years’ worth of overstocked used equipment.
Customers started warming up to buying one and two-year-old used machines that had been piling up. Dealers got creative in how to sell them, and without the pressure from manufacturers to order and sell new equipment, they could get their used equipment houses in order. Inventory levels began getting back in line. We were washing out deals that, in some cases, started years before. Used equipment to sales ratios was improving, as were wholegoods margins and profitability. Now, fast forward to 2024.
The factories are firing on all cylinders again. The pandemic blip is in our rearview mirror, and new equipment is flying off the shelves. The lots we cleaned up only four short years ago are beginning to fill up again. What is the difference this time? Used machines today are more expensive than the new ones were pre-pandemic. The gap between a new buyer and a traditional used buyer is getting wider and late model used is challenged to bridge the gap. We will soon to be on the edge of another used equipment cliff, and I hope we don’t get rescued by a worldwide lockdown this time.
Why do we keep doing it? It reminds me of the morning after a night out that you may have overindulged. You look skyward and state, “I will never do that again as long as I live!” Once enough time has passed, you forget the pain, and you end up doing it again. Used equipment is the same thing. We forget the pain and do it again. It doesn’t have to be that way.
We need to remind ourselves who runs our businesses. Is it you and your team, or is it your supplier? One group wants you to be successful, and the other wants you to order and sell more new equipment whether you make any money from it or not. I think you all know which is which.
Just because you can sell more new products doesn’t necessarily mean you should. By no means am I saying new equipment sales are bad. New equipment sales are the lifeblood of growing our businesses. We just need to know when to adjust our sales to put ourselves in the best position for success. Keeping an eye on two or three KPIs can help you see the train coming before it runs you over. Each one alone isn’t necessarily a definitive marker, but when monitored in conjunction with each other, you will see it coming.
One of the most important components is knowing your trade area.
• How much used equipment can my trade area absorb?
• What is the buying cycle of the customers in my trade area?
• Do I have a home for each trade I am buying?
Selling new equipment is a tool to generate the used equipment your customers want or need. Knowing how many used machines you can sell each year should be a driver in how many new machines you should order or sell. If you sell 25 used combines a year, it doesn’t make much sense to sell 50 new combines, buying 50 trades. Only take on trade what you can washout of within 12 months. If you buy twice as much used equipment as you can sell every year, it doesn’t take long to be in big trouble.
It is critical for your sales team to know their territories or customer lists inside out and backward. They need to know their customers’ needs, where they are in the buying cycle, and what variables will drive their decisions. Understanding that makes sure you have the right solutions at the right time. You can target customers with trades you can sell and then go get them.
ARTHUR WARD is a trainer with NAEDA’s Dealer Institute. Prior to joining DI as a wholegoods and sales specialist and trainer, Arthur held leadership roles within Pattison Agriculture and its legacy dealerships in Canada, and he is currently the Chief Integration Officer for Aberhart Group. He looks forward to helping dealers succeed by improving whole goods and sales operations.
