Equipment Dealer Business Outlook

Roughly 42% of equipment dealers saw a decrease in equipment sales this year, but only 15% are expecting to see another decrease in 2013, according to a recent reader survey conducted by Yard & Garden magazine.

The historic 2012 drought clearly had an impact on dealer sell-through. Aftermarket business was also affected. Roughly 31% of dealers said parts business was down, while 40% said service business was down.

However, many dealers did see growth this year (see chart 1). Larger dealers with annual sales over $1 million tended to have more success. Roughly half saw increases in both equipment and parts business, compared to just 26-34% of dealers with sales under $1 million.

Looking ahead to next year, dealers remain optimistic. Half expect to see an uptick in equipment sales. Roughly 55% expect to sell more parts, and 64% anticipate an increase in service business. (See graph 1.)

Diverse client base comes in handy

The majority of dealers expect 2013 to be a good year with respect to each of their customer segments. More than half expect an increase in business from homeowners. Roughly one-third expect landscape contractors to spend more. Roughly one in four anticipate more business from municipalities. Conversely, just 8% expect a decrease in homeowner business, 16% expect a decrease in business from landscapers, and 19% expect a decrease from municipalities. (See graph 2.)

Margins becoming an even bigger issue

Wholegood margins continue to be a major concern for most dealers. For instance, 47% of dealers said they earn less than 15% on commercial zero-turn mowers (on average). That figure remains unchanged from a year ago.

The pinch is on in the residential zero-turn market as that business has grown more competitive. Roughly 40% of dealers said they earn less than 15% on average, compared to just 29% of dealers one year ago. Similarly, 41% of dealers said they earn less than 15% on lawn-and-garden tractors, compared to just 33% of dealers one year ago.

Oddly enough, more dealers are seeing an improvement in gross profit on residential walk mowers. Roughly 60% said they’re earning at least 16%, compared to just 46% of dealers one year ago.

Handheld equipment is also a bright spot for most dealers. Roughly 39% said they’re earning at least 20% on trimmers, compared to just 29% of dealers last year. Those figures are similar when it comes to chainsaws.

The parts department remains a strong profit center for dealers. More than half of dealers make at least 36% on OEM parts. When it comes to aftermarket parts, three in four dealers make at least 36%.

Additional lines of business

A varying number of dealers carry a range of equipment shortlines. The most popular are:

  • Tillers – 80%
  • Generators – 66%
  • Chipper-shredders – 59%
  • Snowthrowers – 57%
  • Lawn vacs – 56%

The equipment shortlines dealers are most interested in adding to their stores are:

  • Stump removers – 7% (23% already carry)
  • Compact excavators – 6% (10% already carry)
  • Aerators, detchatchers – 6% (49% already carry)
  • Utility vehicles – 6% (30% already carry)
  • Trailers – 5% (18% already carry)

It doesn’t end with just equipment, though. A narrow segment of the dealer network also looks to other product categories for add-on sales. The most popular products which dealers already carry are:

  • Safety gear – 37%
  • Garden tools – 21%
  • Work clothing, boots, etc. – 8%
  • Fertilizer – 8%
  • Pesticides and/or organic lawn care products – 6%

The most popular add-on products which dealers are looking to carry are:

  • Garden tools – 21%
  • Safety gear – 13%
  • Work clothing, boots, etc. – 12%
  • Fertilizer – 11%
  • Hardscape and/or irrigation supplies – 10%

Staffing

Most dealers maintained staffing levels this year. Only 14% reduced parts and service staff while 9% reduced sales and office staff. Few were adding jobs, though. Roughly 18% added service staff, 9% added parts staff, 5% added sales staff, and 6% added office staff.

Looking ahead to next year, roughly 29% plan to add service staff, 20% plan to hire in the parts department, 14% are looking to hire salespeople, and 5% plan on adding office staff. Only 2-3% of dealers expect to lay anybody off.

Shop rates

There’s been a big increase in the number of dealers that are now charging $61-70 per hour in the service department—from 23% to 37% to be exact. The number that charge more than $70 per hour is holding steady at 24%. (See graph 3.)

When asked if they plan on raising their shop rates in 2013, roughly 53% of dealers said they did, which represents a 6% increase from one year ago. (See graph 4.)

Profitability

More dealers were unable to turn a profit this year; 9% compared to just 5% last year. On the other end of the scale, the number of dealers making at least 11% net profit held steady at 34%. (See graph 5.)

When asked about 2013, 74% of dealers said they expect to be more profitable—up 11% from one year ago. (See graph 6.)

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