Atlantic Tractor Combats Margin Leakage to Improve Used Margins 20%

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Executive Summary

Josh Martin, used equipment manager for Atlantic Tractor, has improved Atlantic Tractor’s repricing process for used farm and lawn equipment, optimizing Atlantics’ entire used inventory for a 20% increase in profit margins  after the adoption of Tractor Zoom’s Inventory tool within Iron Comps.

The Challenge of Phantom Margin Leakage

When times are tough it is easy to spot the cracks in a business. In a strong, upward market, it is easy for those cracks to be overlooked with a profitable year-end report. Yet, those cracks still leak and have been referred by some as Phantom Margin Leakage. Josh realized the strong prices in 2021 and 2022 may have been glossing over an opportunity for improvement.

Atlantic Tractor’s historic process of reviewing used equipment prices every 180 or 360 days was, and still is, a norm in the industry. With the centralization of this process often falling on a small department of individuals (sometimes just one person), the workload was too burdensome to review and reprice all the dealer groups’ equipment sufficiently. Especially when the markets are as dynamic as they have been.

This workload and frequency of repricing, coupled with a fast moving upward market, meant that either the price was set too high and reduced potential turns, or set too low and not fully maximizing the margin.  It was challenging enough to get to all the high-value equipment, much less all the compact and turf equipment whose values can be even more dynamic.

Why Josh and Atlantic Tractor Choose Tractor Zoom.

Atlantic’s methods of placing values on used equipment were similar to most others in the industry. A combination of surfing multiple auction sites for reputable sales, and inputting equipment specifications into historic calculators for an estimated valuation.  Not only was this old method time-consuming, it had to be replicated every time equipment needed to be repriced, and was difficult to document. With such a cumbersome process, only the oldest models reaching 180, or sometimes 360 days, were being reviewed for price adjustments at Atlantic. Josh initially partnered with Tractor Zoom in August of 2020 to improve this valuation process.

Atlantic’s Improved Repricing Strategy

Three significant actions enabled Atlantic to improve their repricing strategy and achieve better results. First, when Atlantic Tractor initially partnered with Tractor Zoom, they were able to streamline their valuation process mentioned earlier. Since the Iron Comps covers approximately 85% of the entire US farm auction market, and 65% of the entire used farm equipment market, Atlantics’ leadership team could have confidence, and therefore speed of decision-making, in the results. Furthermore, all of Josh’s comparable searches provided the equipment details and images he needed to verify the answers he was finding. This transparency, communicated in reporting functions, helped to build trust that is essential for communication within an organization.

Atlantic and Tractor Zoom’s partnership did not stop here. While Iron Comps improved Josh’s valuation process, Tractor Zoom simultaneously was able to aid in Atlantic’s sales and marketing efforts.  In the fall of 2021, Tractor Zoom expanded the reach of the dealerships’ online presence through free listings on TractorZoom.com. Atlantic Tractor leveraged this offering to get their equipment in front of thousands of daily active users in less than a week. No coding, maintenance, or extra work required.

The final strategy is a convergence of the two earlier initiatives. By listing Atlantic Tractor’s used equipment inventory on TractorZoom.com, and pairing that data up against comparable sales in Iron Comps, Josh is now able to see, in real-time, how his listed equipment compares with current market values and age of equipment. Not last year, or even last month’s market. Within Iron Comps’ Inventory tool Josh can see the value, day’s listed, comparable market value, and comparable day’s listed for every listed piece of equipment Atlantic owns. This Inventory platform allows him to quickly make the equipment decisions required when it’s most important. 

“I couldn’t make my list shorter. Never really got anywhere. I Would knock out 10 one day, then open it up, and there would be 10 more the next day. With this new system, I can bang down the important work because I use the Iron Comps differential to find what equipment is out of bounds regarding price or days listed.”

The Results

Josh and Atlantic Tractor adopted Iron Comp’s Inventory platform midway through the summer of 2022. A time that was still seeing rising equipment values, although not quite at the rate of growth seen over the previous 6-12 months.  As one of the early adopters, Josh quickly became familiar with the new tool and molded it into a process that fit Atlantic Tractor’s business model.

Improved Workflow

Prior to utilizing the Inventory tool, Josh often needed an hour just to figure out where he left off in his previous workflow. It also used to be difficult to gauge the progress as he was working. Now, Josh opens the application and with one click can see his equipment that is deviating the most from current market norms. He addresses those pieces of equipment, then proceeds to any in his work que. Josh’s innovative nature led him to use Iron Comp’s notifications features to alert him when he wants to review a piece’s performance. In this way he is optimizing equipment where there is more margin to capture in an upward market, lowering the price to move it quickly in a falling market, or having his team make marketing adjustments.  Also, since his workflow completed action on his equipment, those pieces he has already decided on are moved out of his work queue, allowing him to focus on the next job. This way he can be assured that all equipment has been reviewed and optimized. With Josh’s workflow, he now frequently reprice equipment in a fraction of the time and move on to other important aspects of his job.

“I’ll make a small price adjustment to ensure I have the right pricing going into the end of the year. Before I was typically writing a bunch of stuff down. Now I’m doing small, $2,000 adjustments, then I’ll pause it for just 30 or 60 days so at that time I can reevaluate to see how it’s doing. It’s wonderful for what we do.”

Measurable Results

While the process and time-savings improvements were immediate to Atlantic Tractor, the sales metrics obviously required time for those improved sales to take place. A full analysis of the margin improvement will be a continual study, yet the preliminary sales data looks promising. All actual sales data were provided by Atlantic Tractor.  With the adoption of Iron Comps’ Inventory tool taking place mid-June 2022, the following margin analysis graphs split the results into a ‘Before’ and ‘After’ categories for sales on all equipment based on that date. 

The above graph is based on the average margins on Atlantic’s equipment sales before and after the adoption date in June. There may be seasonality at play that won’t be fully understood until year over year analysis can be completed. The average margin is also important to understand and is displayed below. The Before period includes eight months of prior sales. The After period includes four months of successive sales.

Proactive Repricing Strategy for Your Dealership

The benefits of Tractor Zoom’s suite of products, including Inventory, is that it is dynamic and responsive to the current environment. In much the same way, each of the 50+ dealer groups who utilize Iron Comps leverage the power of Tractor Zoom’s data in unique ways that best suit their business goals and processes.  If you would like to see other examples of how dealer groups are partnering with Tractor Zoom to leverage real-time data in combination with their specific equipment, feel free to reach out to Tyler, our account executive at TLowy@tractorzoom.com

The Story of Atlantic Tractor

Atlantic Tractor was founded in 2004 with the combination of five family-owned John Deere dealerships, from 11 locations in the Mid-Atlantic. They now serve a wide swath of the Northeast, from as far north as Delaware, west through Pennsylvania, and south into Maryland. Covering the agricultural industries of row crop and dairy, they are also heavily involved with lawn, garden and light industrial equipment.  Primarily a John Deere dealership, they also sell new Frontier, Stihl, Honda, Kinze, Kuhn, UM Unverferth, Great Plains, Alamo Industrial, Tiger, FAE Group and Rome Equipment models.

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