I am a tractor enthusiast, but first and foremost, I am a business owner and entrepreneur. I can see exactly what Kioti is doing and as a business owner, in order to be successful, you MUST learn that sometimes the very best thing you can say is NO, for your benefit but even more so, for your customers benefit. I read the attached article in the industry magazine and here is what I gleaned from it.
1. Kioti initially came into the U.S. and took on anyone who could meet their dealership eligibility standards. I have started and owned many successful businesses over the years so I have dealt with a variety of entities. When a new company to the marketplace is trying to gain a foothold, they will accept just about anyone as a dealer that will accept them. That is a huge mistake for a variety of reasons, which Kioti seems to be realizing.
2. Kioti realizes that it costs more to have 500 dealers selling 10,000 tractors each year than it costs 150 dealers to sell 8,000 tractors per year. These numbers are purely for example to make my point. The cost to support marginal volume dealers is much higher than people realize. Why do you think GM and Chrysler gutted their dealership network with the courts authority when given the once in a lifetime chance? The sheer cost of supporting a wide number of dealers can easily be the difference between a corporate profit and a loss at the national level.
Let's say we have two farmers. Both are going to plant 1,000 acres of corn all on land leased. The first, farmer A plants (10) 100 acre fields all within 10 miles of one another. Farmer B, plants (100) 10 acre fields and they are spread over a 20 miles geographic area. Now one could make the argument, unsupported by facts, that by geographically spreading the fields over a larger area, they have less weather risk of a hail storm doing severe damage to a large portion of their crop. That has to be the only advantage farmer B could ever claim with his arrangement.
On the other hand, by having 10x the number of land owners and rental agreements to deal with, Farmer B has a much higher administrative cost to produce the same amount of corn. He has more lease agreements to write, more rent checks to deal with and higher costs because he is driving further between the fields to plant, fertilize, harvest the corn. Now, let's really change this game.
Both farmers irrigate their crops. Now think about the incredible investment Farmer B will have in replicated basic equipment to irrigate 1,000 acres of corn in 100 different fields verses 10 fields of 100 acres. I think perhaps the cost of dealing with lots of small dealers is becoming very apparent. After all, both farmers still get the same price per bushel for their corn. It's the gross production costs which will determine the difference in the farmers net profit at the year end.
Comments were made in the article about how many dealers were reluctant to modernize. They didn't come right out and say so, but instead said, "the days of doing business on a legal pad and scratch paper are gone" or something to that extent. When a dealer is ordering 3 tractors a year and not stocking any parts inventory, the long term relationship between the dealer and the manufacturer is not shared in an equitable investment by the dealer. The dealer sees the manufacturer only as "a source" of potential income. If they sell tractors, great. If they don't, they will sell something else.
Today's consumer is a strange bird. They insist on beating the dealer down as far as possible on price and then they seem mystified when the dealership goes out of business. I would never begrudge any business owner out of their ability to make a profit as I certainly insist on making one in my businesses. A deal where no one profits is truly a bad deal for everyone as your dealer could close and you end up driving 2 hrs to get service.
I expect a return on my capital investment as well as my labor and I expect those I am dealing with hopefully feel the same. The negotiation is on how much profit I will keep or how much I feel is fair for the company selling me the product or service. Be realistic in your assumptions of what you think is reasonable for the "other guy" to make. If what you demand he accept would be unacceptable to you were the tables turned, you are the classic definition of a Hypocrit. If your not sure what the means, please look it up because you really don't want to be one as it makes being happy in life much more difficult.
Today's consumers are their own worst enemy. They insist on paying the absolute minimum for items they buy, but then bitterly complain when American jobs keep shipping overseas. You insist on Snap On Quality tools at the YingYang tool company price. Then you act amazed when the tools don't last.
PRICE, QUALITY, SERVICE. Pick any 2.
Sorry this has turned into a lecture. I hope that those of you considering Kioti tractors continue considering them. Those of you who haven't looked at them before, when given the chance, consider them. They are responding to what you the consumer has demanded. And No, I don't work for Kioti. I don't even own any tractor dealerships at the moment. I am always looking for opportunities so that could change.
