Manufacturers Partner for Profit

John Deere has entered into an alliance with Honda Power Equipment similar to an earlier alliance with Stihl Inc. As John Deere continues to build a buying experience for John Deere customers of carefully selected brands and products, Honda is now able to grow its reach in a market of shrinking dealers. John Deere dealers will have to go through the same qualifying processes as other Honda hopefuls, but there is still some concern among existing Honda dealers.  

Building a buying experience, growing sales

John Deere has developed a sales model for their dealers that creates a controlled sales environment. The company carefully selected Stihl handheld products to supplement their lawn tractor and push mower lines. Now, John Deere has decided to allow dealers to sign up to sell Honda walk-behind mowers, generators, tillers, water pumps and snow blowers, further rounding out the dealer offering.

"After careful consideration, Deere and Honda picked each other," says Maureen McCormack, media relations manager, John Deere Turf Division. "Both companies are known globally for having impeccable reputations, and share a similar culture of quality and concern for customers. And of course, both companies have complementary product offerings."

Deere has also decided to stop offering their walk-behind units in the U.S. after 2012, and allow Honda's equivalent models to sell in their place. "This agreement primarily affects residential walk-behind equipment, but also extends to the 21-inch walk-behind commercial mowers (WE80 and WE85)," McCormack explains.

With the number of dealers available for recruitment limited, this opens up more possibilities for Honda to reach a larger customer base.

"Honda is always looking to grow their national servicing dealer network," says Rock Reed, assistant vice president of the Honda Power Equipment Division. "With John Deere announcing their plan to not make lawnmowers in the future, it was the perfect opportunity for us to expand our sales."

Honda dealer concern vs. trust

With the agreement in place, John Deere dealers can start signing up to sell the Honda equipment in late 2011. They will be asked to go through the same qualifying process as all the dealers before them. This news is receiving mixed reviews among existing Honda dealers.

"All of the John Deere dealers, just like our Honda dealers, are afforded the opportunity to apply—and we want to sell all of our product lines through all of the locations," explains Reed. "The qualification process will be the same for all, regardless of who they are."

The first concern from many Honda dealers is whether a John Deere dealer can offer Honda products regardless of their proximity to an existing Honda dealer.

"We have four John Deere dealers with 25 miles of our store, one is less than six miles away," says Joe Fobes, store manager for Engelhart GreenSmith in Madison, WI. "Besides already competing with two Farm & Fleets and two Home Depot stores, we will now be sharing our market with up to three additional John Deere dealers as well."

This concern from dealers was expected by Honda, but they assure that the differences in their market segments will help dealers to maintain their own customer base in their area.

"Most dealers have a natural concern that there is a retailer in their area. We don’t expect to lose any dealers out of this action," says Reed. "In the power equipment industry, because of the variance in customer types of rental, construction and government, there are no territorial boundaries. The customer base is unique and doesn’t collide as much as you think."

There are, however, existing Honda dealers who trust that Honda will protect them from John Deere dealers setting up right in their area. "John Deere dealers have the opportunity to be a Honda dealer, but they still have to go through Honda qualifications—and part of that is territory," says Roger Smith of Chilton Turf Center with two locations in Tennessee. "There is nothing to worry about except the John Deere dealer across the street. I do trust that Honda will not qualify a dealer if there is a proximity issue."

Another concern among Honda dealers is over the buying process for the larger John Deere dealers with multiple locations. "We sell our products to all dealers with the same opportunity to buy at the same price, regardless of size," says Reed. "Smaller dealers and larger dealers have the opportunity to buy at the same price."

While Honda believes the partnership will offer them more opportunities to get in the face of potential end-users, they also feel it offers dealers an opportunity for more service work.

"Honda puts out millions of products every year and there is so much opportunity for the servicing of those products," explains Reed. "That’s what will continue to grow in the dealer base and also retail. Customers bring their unit in for service, and once a unit is worn it out turns into a retail sale."

Gained partnerships and lost dealers

With the new partnership between John Deere and Honda, it is now a waiting game to see how dealer sales will be affected. Waiting it out and continuing to carry and support the brand as they have is the plan for Chilton Turf Center, where they have doubled their Honda sales each year for the past two years.

"We will continue to carry the Honda line at the same level," says Smith. "I'm not going to change anything that I'm doing. John Deere is basically saying 'we approve' like they did with Stihl."

In an earlier interview with Yard & Garden, Fred Whyte, president of Stihl, stated they only lost two dealers in the transition, and that those who waited it out a year saw no damage done to their sales. Still, there are dealers like Engelhart Greensmith that will remain cautious as they re-assess their partnership with Honda in the coming months.

"This news really leaves us no choice but to think long term about what lines we are heavily invested in and what we need to change going forward," explains Fobes. "We will continue to carry and service Honda Power Equipment and support our past customers, but as this new relationship develops with John Deere, we will closely monitor our sales volume and adjust as needed."

As for future partnerships with other manufacturers, John Deere declined comment. They do however trust strongly in their business model and the potential it promises them and their dealers.

"This move positions John Deere dealers with three of the most frequently purchased brands in the outdoor power equipment industry: John Deere, Honda and Stihl," says McCormack. "This agreement enables John Deere dealers to provide one-stop shopping for all outdoor power equipment needs."

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