Tractor Market Offers Growth Opportunity

HOW WE DID IT

- Recognized opportunity to fill void left by exiting dealership

- Hired talent from the exiting dealership

- Worked with OEM to start slow and proceed with caution

- Mapped-out vision for who target customer would be and how to reach that target customer

- Created financial plan that would allow for necessary investments to support new product line

Toward the end of 2008, the Fletcher family started to notice some warning signs of economic hardship. Rather than batten down the hatches and attempt to ride out the oncoming recession, they decided to take a bit of a risk in order to create another revenue stream and appeal to a new segment of potential customers.

“We approached New Holland,” says Frank Fletcher, the second-generation co-owner of Fletcher’s Sales & Service in Greensburg, PA. “The area New Holland dealership, which was literally two miles from us, had gone out of business in 2006. But in the late-90s they were a full-line New Holland dealer. For whatever reason, New Holland had pulled out of that dealership in 2004.” Within a couple of years, that dealership’s fate was sealed—creating a golden opportunity for Fletcher’s.

Partner with a Leader

In order to expand into ag-related markets, Fletcher says it was important to partner with a leader. John Deere and Kubota already had dealerships in the area. The availability of New Holland, which Fletcher says is the third big name in the industry, made this expansion a real possibility.

Fletcher’s Sales & Service had already hired two employees from the failed New Holland dealership. “We figured that this dealership must have had sold quite a bit of equipment over the years,” Fletcher says, “so there should be this market of people already out there. The next closest dealer was about 45 miles from us, so we’d have some room to grow. So I called New Holland.”

Flooring, Freight and Margins

Fletcher ended up talking on the phone with the person in charge of new dealer development at New Holland, who eventually came out to the dealership to present the New Holland program. Fletcher says there were a lot of differences as compared to the typical lawn and garden equipment program he’d grown accustomed to.

“Everything is put on their flooring,” Fletcher points out. “You’re not dealing with a distributor—you’re dealing direct with the manufacturer. Depending on the product line, or even horsepower for that matter, the product may be shipped in different manners; some models you can buy one at a time, others you have to buy an entire container. And aside from a special sales promotion, there’s freight tied to almost every single machine—unlike some of the programs our mower manufacturers offer where we can buy into a certain bracket and have our freight charge waved.” Fletcher says this is at least partially attributable to the fact that a lot of the equipment is manufactured overseas.

While the freight charges, relatively speaking, are minimal, they do add up—helping to further erode already tight margins. “The margins on this type of equipment really shocked me at first,” Fletcher relates, while adding that they can sometimes dip into the single digits. Still, 9% on a $20,000 tractor puts more money in the bank than 15% on a $10,000 zero-turn. So Fletcher has been, for the most part, pleased.

Pricing and Sales Efforts Something that hasn’t been quite as pleasing—although it’s getting better—is the challenge associated with selling this type of equipment. “Pricing-out all of the different options is a lot of work,” Fletcher says. “For instance, if you buy a 60-hp tractor, it comes standard with certain features. But then you can add an entirely separate book of features.”