Consolidation of dealerships strengthens

Dealer consolidation has long been a mainstay of the agricultural equipment industry, and the recently released 2022 Major Dealer Report suggests consolidation is continuing at a rapid pace.

This year’s results show both the increase in the total number of large dealers as well as the total number of agricultural stores owned by large dealers. For 2022, the number of large dealers increased to 214 – the highest number of large dealers since the report began in 2011 – from 197 in 2021, an increase of 8.6%. Large dealers now own 38% of total agricultural stores in North America, up from 35% in 2021.

If this month’s Dealers on the Move section is any indication, the consolidation trend is likely to continue into 2022.

In a webinar reviewing the 2021 Cost of Doing Business study late last year while discussing average equity by location, former dealership and WEDA trainer Gord Thompson noted that some consolidations that had been planned for 2020 did not occur.

“Even when you wanted to do your capital additions, sometimes there were limits to what you could do. When things are a little uncertain and COVID-19 has caused a lot of uncertainty, people tend to avoid making big decisions, which I think is reflected here.

Curt Kleoppel, CFO of WEDA and President of Equipment Dealer Consulting, added, “The increase in cash stocks tells me that there are quite a few shareholders that have been bought out in this dealer category, which is decreasing equity and increases notes payable to the bank, in order to fund the buyout.

“With the pandemic and the age of some of our dealers, they probably thought it was time to get bought out. But these dealers are still making money, and I wouldn’t be surprised if that percentage goes up to 25-26% next year,” he says.

There has been a noticeable increase in the number of Kubota “large dealers” (those who operate 5 or more farm sites). While speaking with George Russell, who we collaborate with on Big Dealer Report, he noted Kubota’s notable push for Kubota-brand-only stores and large-scale dealer groups.

Kubota’s large dealerships saw the biggest year-over-year changes, totaling 33 in 2022, up from 19 in 2021. Almost all of Kubota’s large dealerships are in the 5-9 store range, with 30 large dealers. The other 3 major Kubota dealerships belong to the 10-14 store group.

Like the number of large dealerships, Kubota’s total number of agricultural stores also increased to 225 in 2012 from 108 in 2021. “Kubota is with many dealerships of other brands, but they are really pushing to have Kubota-only stores. What you see here is a lot of that. The effect of this emphasis is Kubota stores only,” says Russell.

Whether or not dealer consolidation is a good thing always depends on who you ask. Consolidation certainly provides dealerships with the scale needed to provide improved services to both their customers and their employees. However, that’s not to say that there aren’t some very strong 1-4 store dealerships who provide excellent customer service and are good employers.

And, without fail, we get feedback on the website from customers who are upset when their local dealer is acquired by a larger organization. These complaints often arrive before the new owners are able to prove that the quality of service will remain.

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