Today's dealers are more frequently making the decision to carry fewer product lines, focusing on those that provide better earnings. Deciding to drop a less-successful line can be difficult, and actually doing so can be strenuous. A line should only be dropped after thorough deliberation and extensive planning, in order to ensure a smooth execution.
Dealers today typically carry anywhere from four to nine product lines. This is a statistic that often depends on how long an individual has been in business.
After opening, many dealers continuously bring on new lines. Once they have built up a sizeable offering, they may decide to cut one of the underperforming lines. Whatever the deciding factor, whether it be overhead costs, weakened sales or diminished profits, a dealer's decision to drop a line is seldom an easy one.
Many owners of outdoor power equipment dealerships are operating a business that was pioneered by their families many years ago. They grew up walking the showroom floor and have assumed the responsibility to maintain the family business. However, it is the deep-rooted connection to the product lines that can regularly get in the way of businesses succeeding to their full potential.
"Many times dealers hold on to lines that don't have enough demand in the customer base to really contribute to the inventory, training and floor space to make them work, just because of their history," explains George Keene, a member of Currie Management Consultants. "It's because the dealer is emotionally attached to the inventory. It's not a logical decision, it's an emotional attachment."
Connections are often built by dealers beyond their connection with the product line. If a dealer has been carrying a line for as long as they have been in business, friendships with the distributors often develop. A sense of guilt when considering whether or not to give up a line is understandable, but not necessary. While a dealer and distributor may share a friendly rapport, in talking business it should remain professional.
"Dealers need to be honest when dropping a product line," says Keene. "They should explain to the distributor that they have analyzed the line and decided it's not profitable enough to continue to carry. But they should also mention that they appreciate all the years of business had together."
Even further, some dealers have an attachment not only to the line or distributor, but to their loyal customers. If a customer has been choosing the dealership over the competition, returning again and again for service and parts on the same product line, dealers may struggle to drop that line. While the support of that customer can mean a lot to the business, it will not justify carrying a line that isn't performing as well as the others.
REMOVING THE BLINDFOLD
Many dealers do not fully understand the damage that an unsuccessful line can do to their bottom line. An extensive evaluation of the line is required to realize its downfalls. Once the actual harm of an unproductive line is realized, the decision to drop it is made much easier, even when considering the relationships involved.
In evaluating a line's value, a dealer should carefully consider every aspect of maintaining that line. Many facets often get by without deliberation. "In cutting lines, there are a number of things that dealers need to consider," Keene says. "They should look at the time and resources required for each aspect. There is so much additional overhead that goes with it that we don't take into account right away."
Dealers should carefully calculate the costs of maintaining a line including inventory, floor space, processing, technician training, insurance and taxes.