Farm Equipment Distributors
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Industry Overview
The US farm equipment distribution industry includes about 1,400 wholesalers and 5,000 dealers with combined annual revenue of $40 billion. No major companies dominate. The industry is fragmented: the 50 largest distributors hold about 35 percent of the market.
Competitive Landscape
Demand is driven by the health of the farming sector, which is tied to crop prices. The profitability of individual companies depends on good merchandising and efficient operations. Large distributors have few economies of scale but can offer customers a wider range of products. Small distributors can compete successfully by holding exclusive territory rights to popular products. The industry is capital-intensive: average annual sales per employee are about $350,000.
Large manufacturers of farm equipment, like Deere and AGCO, mainly bypass wholesalers and sell directly to networks of local dealers.
Products, Operations & Technology
Major products include farm tractors, lawn mowers, irrigation equipment, and harvesting machinery. Tractors account for about 15 percent of industry revenue; lawn mowers, irrigation equipment, and harvesters for about 8 percent each. Other products include planting and cultivating machinery, spraying equipment, dairy machinery, snowplows, and snow-blowers.
A large number of products are tractor attachments. About 15 percent of industry revenue comes from sales of used equipment. Many dealers also have a large parts and service business. In addition to equipment and machinery, many distributors also sell other farm or garden products and supplies, such as seeds, feed, fertilizers, and pesticides. Dealers typically stock a variety of standard equipment, such as tractors and plows, but large pieces of equipment such as harvesting combines are usually custom-ordered from the manufacturer. Because of the large variety and the bulk of equipment, dealers can carry only a limited stock and therefore depend heavily on wholesalers and manufacturers to provide many products. As a result, orders may not be filled for days or weeks.
Products are bought from about 1,200 manufacturers, including Deere, AGCO, CNH, and Toro. Wholesalers and dealers typically stock products from a variety of manufacturers, but some carry a single product line. Contracts with suppliers usually give dealers exclusive sales rights in a local territory but can be terminated fairly easily. Trade shows are an important source of information about new products.
Distributors use computerized inventory control systems and warehouse operations systems, sometimes including radio frequency identification (RFID) devices. Accurately tracking inventory and sales is especially important for forecasting demand in a highly seasonal business.
