What’s on your mind? What keeps you up at night? What is right or wrong with the rural equipment industry? In this new series, “Dealers Sound Off,” dealers bring up issues related to those questions and our goal is to generate ideas from other dealers who may be facing the same issues.

We caught up with Doug Nord of Nord Outdoor Power Equipment, Bloomington, Ill., and Tim Berman of Big Red’s Equipment, Granbury, Texas, at the 2016 GIE+Expo. Both serve on RLD’s editorial advisory board. They share thoughts on issues, challenges and opportunities they are facing.

On the topic of manufacturers selling in Big Box stores and through independent dealers:

Doug Nord: Here is one instance that I think was a mistake. Echo creates a battery-powered line that goes into Home Depot and Amazon and not through the dealer. There is confusion now in the marketplace. For instance, people can purchase an SRM225 trimmer at Home Depot, but the battery power unit is not nearly the grade of what the dealer sells. Manufacturers are creating those channel specific units, like Toro’s Lawn-Boy brand sold through Amazon or Home Depot, and it builds brand awareness, but not necessarily in a good way.

Tim Berman: I have mixed feelings on the mass merchant model. There are some manufacturers selling through mass merchants and they don’t protect their pricing. They let the mass merchants devalue the product, especially if the stores order too much inventory and do a “blow out” sale and sell well below dealer pricing. But, I have seen others, like Bad Boy, where they have done a good job of protecting the pricing and so it has built brand awareness.

Now, in the case of Caterpillar and its new home and outdoor product line, Cat already has brand awareness, so maybe selling through mass merchants is not necessary for them, where Bad Boy needed that. Just a few years ago, nobody had heard of Bad Boy even though the company has been around since the 1990s. Now, because they are in a mass merchant, people tend to look at them as more of a household name.

Nord Outdoor Power Equipment, Bloomington, Ill., carries Stihl, Echo, Toro, Kubota, Land Pride, Billy Goat, Bear Cat, Ryan, Shindaiwa, Timberwolf, Smokin Brothers Grills, Big Green Egg grills, Phoenix grills and VAL6 heaters.

Maybe Cat needs to sell through mass merchants to get economies of scale. From a service standpoint — I’m approaching it more from service than I am from sales — it is going to put units out there that I get to work on.

Nord: When I served on the Echo Dealer Council, I said, “Why don’t you make us the service center for the units coming out of Home Depot? They said, ‘You mean you would do that?’ I said I would be an idiot not to do that. As soon as they see my store, customers will think, “These guys have the knowledge and expertise. This is where I’m going to buy my power equipment.”

Dealers are their own worst enemies. We don’t make enough margin on wholegoods for the volume that we move. I make better margins on service. However, because I stock some of the units, my concern becomes when the mass merchant goes, “You know what? It’s July. We’re not going to sell any generators, so let’s blow them out at 40% off just to get them off the floor.” Then your customer is like, “Well, I can go buy it over there so much cheaper.”

On the topic of not making money on warranty work:

Nord: How many dealers are charging below what you can do the repair for on their labor hours? I have heard dealers say they can’t charge more than $55 an hour. They are too afraid to price what the market should bear and they hurt the market because of that. They don’t understand their true costs. It’s about what the market can bear; what your technicians are worth; and what you need to pay your techs so you don’t lose them to an auto dealer or somebody else as you get them more educated.

Berman: There are many dealers in that position, though they may not be open about a deficiency in the shop. Who likes airing their dirty laundry? I have talked to high volume dealers and one told me that service can’t be profitable. Bob Clements (of Bob Clements International and RLD columnist) talks about selling a volume of service or wholegoods, but rarely both. John Spader (of the Spader Group) says the reason is that dealers usually are either one extreme or the other. There is the servicing dealer who does the best service and makes great margins and doesn’t have a lot of rework. They just do great, quality service, but they are not good at moving wholegoods. Spader says the reason is that the two businesses require two polar opposite personality types.

Big Red’s Equipment, Granbury, Texas, carries Branson, Cub Cadet, Land Master, ODES, Bad Boy, Exmark, Hustler, Echo, Raven, Cross Trailers, Big Bee attachments, Muratori, Terra Force, Woods Equipment and Titan attachments.

On the topic of making the service department a profit center:

Nord: Service should be the number one profit center; number two, parts; and number three, wholegoods. Wholegoods is the lifeline to the rest of the business. You need to put units out there. Granted, you still want to make money on those units and you should be paid fairly for them.

Berman: Bob Clements says — I feel like I’m like a talking head for him because I quote him all the time at work because he just makes so much sense — when you sell a tractor, if you get to service it for the life of it, you’re going to make eight times the profit you made when you sold it. So on a 35 horsepower tractor — which is our No. 1 best seller — instead of making $3,000 over the life of it, I’m going to make that $3,000 plus $24,000 or $27,000. That is the ideal amount.

The reality is they may decide to do some of their own oil changes or they move or whatever. However, contrast that to the internet guys that are not interested in servicing; they’re just trying to put units out there and they don’t realize what they are missing out on. Or, they just don’t focus on growing the service.

We have not had the strongest parts and service departments. We are that marketing dealer that in the last 2-3 years has been transitioning toward a happy medium between the two extremes. I am still building up my customer base. We are in a county that only has 60-70 new tractors sold each year, but we’re selling tractors by the hundreds because we’re selling a few counties out. These units are starting to come in for repair now.

It is so easy, though, for pennies and dollars to trickle out. The counter staff may order the wrong parts or techs are not staying focused. If you do not manage it well, I can see how you can lose money. Even if you throw bodies at it and bill more, it’s still a losing strategy. It is really about a good division of labor and cost control.

Nord: I would say if you are repairing equipment larger than walk-behind mowers or small economy mowers and you are charging $55 an hour, you’ll never make it. Can’t do it.

Berman: Many states are starting to pass dealer protection laws and Texas has them. I’m getting paid $125 an hour to do warranty work. Now, the flat rates are pretty brutal and some companies are better than others. I raised my labor rate to make up for it. We were at $77.50 for small engine repairs. If I end up getting a job that pays 60 or 70 cents on the dollar for labor, I still come out ahead.

Nord Outdoor Power Equipment is a family operation. Doug Nord is pictured on the far right beside his wife, Deb. Also, shown are his son Seth, his wife, Hollie, and the family dog, Henry, who greets visitors to the dealership.

Nord: The other thing you can do is a reward card program and that type of thing. If customers sign up for our program, and it’s free to sign up, they provide their information and we give them a discount and offer them a package of services.

On the topic of self-guided kiosks in the showroom:

Nord: I have kiosks and nobody pays attention to them. Customers focus on coming into the store and talking to you at the parts counter. They want to talk to a parts person. A few of my guys and myself have shown customers the stations and help get them started watching a video, while we set up their saw. We’re usually in a hurry, though, trying to get that customer taken care of and it’s not in our normal repetition to walk out there and start a video for them.

The team at Big Red’s focuses on building efficiencies in the service department, whether the repairs are warranty work or for equipment they have sold.

The kiosks need to be somewhere other than the parts counter. They need to be self-sufficient, with their own battery so it can run all day. You have to be able to judge a person correctly. For some people, if you ask them to watch a video, they will say, “See ya.”

If you read the book Zero Moment of Truth, which was published in 2011, the author talks about changes in buying habits. Now, people research before they come in and they’re coming into the dealership for a purchase. That’s the issue. You may have a few that use the kiosk, but millennials are generally going to have done research already. When they come into the dealership, you want to develop a relationship with them and you don’t want to hand that relationship to a kiosk. You want to develop it from a human side.

Berman: I see that, too. Those who spend any appreciable amount of time in the showroom, if they’re not buying right away, are waiting on financing or paperwork. While they’re waiting, they would rather use the time to sit on everything in the showroom and handle everything rather than view a screen. Ten years from now, it may be a little bit different. I think it is probably ahead of its time.

Nord: If I were to roll something in, it might be something like a tool for selecting a mower by answering a number of questions. And, that might only be for somebody who doesn’t want to work with a salesperson and it would allow you to offer something to narrow down the options. I don’t think the kiosk concept works for something like product registrations.

On the topic of which manufacturers to watch:

Berman: I’m checking out some products from my own brands that weren’t available at the dealer meetings. TYM has a new model, its 184 subcompact. I don’t think it’s going to be a big seller for us, but I’ll sell a few of them if they’re priced right.

I’m curious, of course, about Spartan, like everybody. We have shifted our focus to Hustler, actually. We have sold a lot more Hustlers and made a heck of a lot more money. I didn’t know if I was going to be able to do that. Bad Boy is one of those lines that some dealers have a hard time selling well because of the nature of the product. You have to market it differently. You have to market it like a tractor with dual pricing. It’s not a product where the 0% interest subsidy is built into the price and passed on to the customer. If I wanted to sell a Bad Boy at 0% for 48 months, there’s going to be a 7.75% difference, if I’m passing all of the cost along. I would rather give the customer a 7.75% cash rebate, so it’s just like a tractor.

A lot of OPE dealers don’t really know how to sell it that way. Unfortunately, Bad Boy hasn’t really done a good job of marketing that and teaching their dealers how to market with dual pricing. It doesn’t matter where you are, even if you pay $500 a unit in freight. You can sell above their MSRP but they advertise at MSRP and they haven’t done a good job of advertising rebates.

If you are a dealer that does well at selling a product like Bad Boy, then you tend to not do well selling a line like Scag or Toro commercial or Exmark, top tier lines like that.

Nord: We are not looking to bring on any new manufacturers. For me, carrying two OPE lines is perfect. It helps me keep the other one honest. We partner with our manufacturers, but I’m here for my customers and I want to give them choices. Dealers need the business sense not to be so brand loyal. If you are overly brand loyal, you will do stupid things.

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