Chipotle, Starbucks, and the Huge Construction Machinery Dealers
Chipotle, Starbucks, and the Huge Construction Machinery Dealers
Guest writer Andy Fanter dives into the cross-industry pool with today’s blog post: “Chipotle, Starbucks, and the Huge Construction Machinery Dealers.”
Starbucks has been struggling. Plenty of national chains and local competitors are offering coffee and related snacks. Chipotle has been growing for years with a simple model. Come make your burrito or bowl and order a high margin drink. We are not cheap, and do not study the calories and sodium too much. Fresh ingredients taste good, and people come to get it for lunch and dinner. Starbucks hired CEO Brian Niccol from Chipotle to fix the problem. His solution: reduce the menu and make stores less chaotic. Sell hot and cold coffee drinks and related snacks—and be faster. The best products….faster.
How does this apply to the construction machinery dealer? I have been in this business 30 years, and around it since the late 1970s. Consolidation has made dealers excessively big; billion dollars in revenue surprises no one anymore. Smaller competitors chip away at market shares—sound familiar, Starbucks. Dealer reaction, flat forecasts to stay big. The US economy and construction are expanding 85% of the time. Why not order more of the best 10 to 15 products expecting to grow those sales by 10% next year?
Here is what I am seeing with flat forecasts. Get into spring and dealer needs more machines—months from manufacturer, standard. Neighboring dealer-takes top management time to negotiate a deal. Buy used equipment for rental fleet and sell from rental fleet. Now the used division is not happy having to add to the rental fleet instead of to customers. Product support starts to get busier and trying to get used machines ready for rental fleet. The rental reps are not happy because good machines are being sold. Finally, the regular field sales force is unhappy because there are not enough of the best machines to go around. A year spent holding, or likely slipping in market share. The sales force does best when they have the best items to offer customers.
The machinery dealer needs to be a mix of Starbucks and Chipotle. Manufacturers and customers insist on a wide range of products, and locations—a little chaotic like Starbucks. Dealers know the hot models that their customers prefer. Have plenty of those, new, and ready to go—Chipotle model.
It is much easier for the reps to get more deals for a variety of products when they do not have to account for long delays on the best products. What happens if you order too much? Dealer trades and adds to the rental fleet.
Just like Starbucks manages through the chaos.