While 38% of dealers said equipment sales were down this year, only 20% expect to sell less equipment next year, sparking hope that the industry’s toughest days are behind it.
Roughly 41% of dealers said equipment sales were up this year, while another 21% said sales held steady. Looking ahead to 2011, 38% of dealers anticipate selling more equipment, whereas 41% are forecasting flat sales.
Parts and Service Still Strong
After an unpredictable 2009 where many dealers reported that parts and service business “saved them”, aftermarket sales remained strong this year. More than half of dealers said parts and service revenue was up again this year, whereas fewer than one in five said sales were down. Looking ahead to next year, more than half of dealers anticipate increased parts and service revenue, while only 2% expect to see a decrease.
Roughly 44% of dealers see an opportunity to further increase service department revenue by raising their shop labor rate. Presently, two out of three dealers charge at least $60 per hour; only 5% charge less than $50 per hour.
Margins and Profitability
For an unfortunate 10% of dealers, 2010 is proving to be a profit-less year. On the other hand, a fortunate 10% are enjoying a highly profitable year. The majority of dealers have net profits of no more than 10% .
A shift in revenue toward parts and service has helped dealers maintain profit levels. Roughly 54% of dealers report OEM parts margins in excess of 35%, while 81% say aftermarket parts margins exceed 35%.
Conversely, the days of 35% equipment margins are long gone. In fact, a 16-20% margin is the most likely scenario. However, some dealers are able to earn a margin in excess of 20%, especially in the case of chainsaws and other handheld equipment.
Half of dealers say that they expect to increase overall dealership profits of the next five years.
Dealer Network in Five Years
A mature, aging dealer network is approaching a crossroads over the next several years:
- 23% of dealership owners are over the age of 60, and another 38% are over the age of 50
- 25% of dealers expect “business as usual” over the next five years
- 20% plan to open another location
- 20% expect to sell fewer equipment lines
- 20% expect to sell additional equipment lines
- 30% have a plan to transfer ownership
- 10% plan to close.
Data based on an October 2010 survey of Yard & Garden magazine subscribers.