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Agricultural Machinery Dealerships - Are Big Chains or Small Specialists the Future?

by Michelle W.

posted in Business

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It's an interesting fact that over the past two decades, the number of agricultural machinery dealerships in our country has declined from about 10,000 to roughly 650.
Not only that but we have seen large numbers of consolidations involving the conversion of what were small individual dealerships into large nationwide chains.
So, what's going on and is this change healthy?
Part of a global process
In terms of the consolidation into big chains, this is hardly new or restricted to the domain of agriculture and related equipment.
All around the world, at least in most established industrialized societies, there has been a tendency over many years now for small retail outlets to become subsumed in one way or another by much larger chains. It doesn't matter whether you are talking about bakeries, shoe shops or tractor suppliers, those tendencies have been observed.
The driver for the most part is, of course, economy. Nobody really doubts that large organisations can benefit from certain economies of scale that smaller individual outlets struggle to achieve. For example, a big nationwide chain is likely to be capable of leveraging a lot more commercial clout with manufacturers or intermediaries than the traditional small local dealership. That can drive prices down.
If that all sounds grand, keep in mind that it assumes that the big company can keep control of its overheads. Once someone decides to build that vast and prestigious corporate headquarters in a chic city centre somewhere then populate it with lots of people in suits, expense accounts and perks then costs start to rise and those economies of scale start to be put at risk.
The downside of the chains
It's interesting to note that in some sectors of our overall economy, there is a significant indication that consumer pressure as well as economics is forcing an increasing re-segmentation of certain of the big-chain businesses.
On the economic side, it's usually to do with the fact that they have failed to keep control of their empire-building costs. On the consumer preference side, the pressures are much more subtle but arguably even more powerful.
That pressure arises because the big chains can find it very difficult to train large numbers of their personnel in a multitude of very varying disciplines. So, that local supplier of tractors and agricultural machinery may have expert-level skills in areas that the big chains simply cannot match.
The trouble for buyers is that once you have purchased your rock-bottom price tractor from one of the big chains, you often expect expert advice and maintenance going forward. If that chain struggles to provide it then the fact you got the tractor from them cheaply in the first place will count for very little with you.
Future watching
Trying to predict the future of our indigenous agricultural machinery retail sector is a dangerous game. Many have tried over the years and failed dismally.
However, it might be possible to take a speculative shot at seeing a future where the specialist individual suppliers of agricultural machinery start to become increasingly commonplace again and in demand by customers. Yes, the big players will always have a role but forecasts that they would drive the small independents out of existence may have been a little pessimistic.
About the Author: Michelle W. is an Author and provider of a wide range of kubota tractors, kubota mowers and kubota second Hand machinery.
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