There has been a quiet battle raging in state legislatures for the past several years, the outcome of which could affect landscape contractors. The battle lines are drawn between the manufacturers of agricultural, construction and landscape equipment and their dealers.
The background
Much like the auto industry, equipment manufacturers such as John Deere, IH Case, Kubota and most others primarily sell their equipment through independently owned dealers. The manufacturers have contracts with dealers that describe the nature of their relationship, including how much inventory they must carry, how warranty service will be performed and reimbursed, and a variety of other details about the relationship.
Dealers in the drivers seat
Through the 1980s and 1990s, the outdoor power equipment (OPE) segment of this market grew very rapidly with the growth of the landscape contracting industry. Demand for everything from skid-steers to chainsaws was increasing and manufacturers were desperate for dealers to carry and service their products. Dealers were in the driver’s seat, and it was easy for them to get favorable terms from manufacturers.
But by the early 2000s, manufacturers had pretty much built out their dealer networks. The Outdoor Power Equipment Institute (OPEI), the national association of OPE manufacturers, sponsored an annual tradeshow that had, as one of its objectives, to allow manufacturers to show off their equipment and attract new dealers.
As the manufacturers’ dealer networks were built out, the need for the OPEI’s trade show waned. In 2007, the OPEI is Expo combined with the Green Industry Expo (GIE) produced by PLANET (now NALP) and the Professional Grounds Management Society (PGMS) to form GIE+EXPO.
The balance of power shifts
The financial crisis and recession of 2008 then shifted the power relationship between equipment manufacturers and their dealers markedly toward the manufacturers. With the plunge in housing starts and general economic downturn, many manufacturers found themselves with dealer networks that were too robust for the amount of product moving through that distribution channel. In the competitive growth years during the 80s and 90s, many manufacturers had simply overbuilt their dealer networks.
To make matters worse for dealers, many manufacturers began to distribute equipment once reserved to the dealer network through big box retail chains.
In an attempt to bring their dealer networks into line with what they believed they really needed, many manufacturers began to raise sales quotas for dealers, tighten equipment financing terms and took other steps to weed out weaker dealers. This, combined with growing competition from retail outlets such as Lowe’s and Home Depot, put many dealers in economic peril.
Dealers respond
Equipment dealers responded by taking their case to their state legislatures.
Most states have laws that provide some protection to equipment dealers, but these laws tend not to be as strong as those protecting automobile dealerships, according to Tim Wentz, field director for the Northeast Equipment Dealers Association (NEDA) in Syracuse, N.Y. His association is working to strengthen dealer laws in those states from Pennsylvania north to Maine. Other regional equipment dealers’ associations are working in other parts of the country to achieve similar legislative goals in their state capitals.
As you can imagine, the equipment manufacturers are not taking this lying down. Several have mounted aggressive legislative campaigns of their own to prevent passage of state laws strengthening the hand of dealers.
So far, NEDA has been successful in strengthening the state equipment dealer laws in Vermont, Maine and New Hampshire, although the New Hampshire law has been challenged by manufacturers in court. There are similar legislative initiatives in many states outside of the Northeast.
How will this affect you?
So how does this affect landscape contractors? According to the manufacturers, they are only trying to strengthen their dealer networks to the benefit of their customers. A smaller, but more efficient dealer network can provide better service and training, they argue.
On the other hand, dealers claim that with fewer equipment dealers, customers will have to travel farther to have their equipment serviced. Dealers also point out that with fewer dealers, competition will be reduced and customers will have to pay more for equipment, parts and service.
So who is right? You may want to bring this up with the dealers from which you purchase your equipment and have it serviced. Ask them what they think and how this trend might affect their ability to provide sales and service to your company.
Then find out what is going on in your state. Contact your state landscape contractors’ association. If they don’t have a handle on what is going on in your state legislature, ask them to find out and get involved.
