From a manufacturer perspective, it is the single measurement that comes closest to gauging the performance of a dealership in the area of new equipment sales. The idea being that it is indirectly a measure of parts and service opportunity as well. Market share is also linked to the financial results of the dealer. Looking at it from a dealer perspective, market share provides a partial measure of performance, but certainly not complete by any means. Dealers are also concerned about such measures as used equipment sales and margins, absorption rates, customer loyalty, etc.
Having said that, two issues cause market share to still be a major concern today. One is whether a dealer can keep their contract and the other is, to put it bluntly, money – money in the form of volume bonus payments paid to dealers who reach certain sales goals, which is probably the primary reason it is still such a big issue and concern.
This was brought to light again during our recent NAEDA fall board meeting when a resolution was presented concerning direct sales or national accounts. It is not that dealers are necessarily opposed, and manufacturers do generally pay for setup, delivery and warranty to make it more palatable for a dealer. The bigger question on the table, however, is what about market share – does the dealer get credit for market share?
Everyone who is objective discussing market share will acknowledge that the responsibility for inputting accurate information rests with the dealer. At the same time, if we continue that discussion and objectivity, one must also acknowledge that volume payments based on market share is designed to get people to sell more and influence the purchasing decisions of the dealer. So much so, that in the final analysis, dealers find it necessary to be very watchful of their sales volume and how it is recorded so they won’t lose out on a major payment at the end of the year. So, it is easy to see why dealers would want to insist that any sales that could potentially be taken from them and negotiated by the manufacturer through direct sales/national accounts would be included in their market share. It could mean a lot of money either way it goes!
On top of that, everyone also seems to understand that product availability for certain products has also been an issue the past few years. This exacerbates the situation from a dealer perspective. While there is truth in the statement that “everyone is in the same boat” for a given brand, the fact remains if dealers had more equipment they could sell more in many instances. To be fair, some manufacturers do their best to account for this situation in calculating payments. The argument can still be made, however, that if dealers could sell more it would improve their market share performance and volume bonus potential.
Oh, and by the way, there is also concern regarding a dealer selling into another dealer territory. Some manufacturers will insist the dealer selling into another territory makes restitution, but won’t count that sale towards either dealer’s market share. Again, making the challenge of meeting market share that much greater!
This year, I have traveled extensively across North America visiting with hundreds of dealers. Everywhere I go, without exception, the topic of market share has been part of the discussion. Dealers are very nervous and concerned about all the factors that can and often do influence their numbers/performance based on this metric. I can’t pretend to know all the nuances of market share and the volume bonus plans for each manufacturer, however, I do know that dealers feel a lot of pressure to achieve market share for their territory.
It is certainly no understatement when I say that market share is still a big issue. It is also no small matter to suggest that this is an issue that is getting bigger and will not go away any time soon. We need to have serious discussions – both dealers and manufacturers – about how to resolve some of the issues surrounding market share mentioned in this article. My concern is that merely leaving these matters to resolve themselves is not a viable option. So, let’s revisit our discussions from a few years ago along with our NAEDA Market Share Taskforce recommendations and fix them one by one before the lid comes off the pressure cooker. And that’s the way I see it.
PAUL KINDINGER is president/CEO of the North American Equipment Dealers Association. The association provides educational, legal, legislative, and financial services to approximately 5,500 retail agricultural, construction, large property/rural lifestyle, and outdoor power equipment dealers in the United States and Canada.