BUSINESS STRATEGY

Photo courtesy of A Plus Outdoor Power Equipment

By Brian Ethridge

dding a new product category can open another revenue stream, but it also raises a bigger question: Does the opportunity fit the dealership?

For some dealers, the opportunity is in products that complement what customers already buy. For others, staying focused on outdoor power equipment is the better business decision.

The right answer depends less on how many products a dealership can carry and more on what its customers need and what the business can realistically support.

Josh Levien, general manager of Carl ' s Mower & Saw in Ferndale, Washington, has chosen to keep his dealership focused on outdoor power equipment rather than build a broad product assortment.

“ We are focused on OPE. So far, it is working for us very well,” Levien said.“ Our customers want to come to experts; people want support and having too many products makes that nearly impossible.”

For Levien, the question is whether adding another category would strengthen the dealership or make it more difficult to maintain the expertise and support customers expect.

That can be an important consideration for dealers with limited showroom space, staffing or inventory dollars. Every new category requires products to stock, employees who understand them and enough demand to keep that inventory moving.

Diversification can create another source of revenue, but it can also dilute the expertise that is one of an independent dealership ' s biggest advantages.

Photo courtesy of A Plus Outdoor Power Equipment

Josh Flynn, CEO of Power Equipment Plus in East Hampton, New York, has taken a more targeted approach to diversification. His dealership carries hand tools from its handheld equipment manufacturers, trailer repair supplies, orchard and arborist ladders, wheelbarrows and other products that complement the work its customers already do.

Arborist equipment has become the largest additional category because many of the dealership ' s customers work in that field.

The expansion wasn ' t based on trying to turn the dealership into a general retailer. It grew from customers asking for products they needed.

“ Our customers routinely would ask for various items like ladders or tree rope, and over time we built up a small selection of items that would sell through every year and provide convenience to our customers,” Flynn said.

That approach also helps Flynn ' s dealership avoid one of the biggest risks of diversification: tying up limited space and capital in products that don ' t sell.

“ We’ ve tried to expand into other items at times but don’ t have a lot of showroom space and can’ t afford things that might collect dust,” Flynn said.

For dealers considering another category, customer demand can provide a useful test. If customers are already asking for a product, the dealership has a better indication that there is a market for it.

Photo courtesy of Carl ' s Mower & Saw

Nate Day, owner of A Plus OPE in Leander, Texas, has seen firsthand how a business outside of OPE can complement a dealership.

His dealership currently isn ' t carrying additional product categories beyond OPE, but the previous owner operated a second business alongside the dealership— one that helped fill in the seasonal gaps.

“ The previous owner operated a propane business concurrently,” Day said.“ Seasonally, it worked well as it was busy when winter and summer were slow. It worked so well he sold off the OPE side to me.” Any future addition needs to do more than add another revenue stream.“ I would like the add-on we end up pursuing to bring in fresh customers who aren ' t yet using our services while also attracting younger customers,” Day said.

For Flynn, the best opportunities for diversification may already be sitting in a dealer ' s customer base.

Rather than guessing which products might sell, he recommends asking the dealership ' s most frequent customers what they need to make their jobs easier.

“ How can we improve their workflow?” Flynn suggests dealers ask.“ How can they limit the number of stops needed in a day to keep crews rolling? What can they offer that limits the number of online purchases?” That can help dealers identify products that customers are already buying elsewhere and determine whether those products make sense to add to the dealership.“ Customers will tell them everything they need to know,” Flynn said. The approach also keeps diversification tied to a specific customer need rather than adding products simply because another dealership carries them.

Photos courtesy of Carl ' s Mower & Saw

The three dealers have taken different approaches, but each has a clear reason for what it does— or doesn ' t— add to the business.

Levien has found value in remaining an OPE specialist. Flynn has added a relatively small number of products that make his customers ' jobs easier. Day is considering a complementary business that could bring in new customers while addressing seasonality and recruiting.

Each approach starts with understanding the dealership ' s customers and its limitations.

Diversification doesn ' t necessarily mean filling every available square foot with another product category. It can mean finding one more thing that makes an existing customer more likely to buy from you, return to you or rely on you for another part of the job.

And sometimes, the smartest diversification strategy may be deciding not to diversify at all.