The team at Ideal and c-Systems software released its annual OPE Trends Report recently; it’s titled “Turf, Tech & Trends.” The group compiles the report after studying data from 100s of dealers across North America. It addresses industry performance over the year, and discusses trends predicted to impact business for OPE dealers in the year ahead.
In our story here, we look at the 28-page report, plus our own data from dealer surveys, industry reporting, discussions with manufacturers, and current economic analysis. Ideal breaks its trend report into three main focus areas. They are Changing Market Conditions, Service Profitability, and Digital Business.
We’re going to focus our story on that first chapter. Click to read Ideal’s complete Turf, Tech & Trends report.
Changing Market Conditions
In this broad category, Ideal looks at dealership inventory, consumer financing, and manufacturer product trends – namely electric equipment. They kickoff this topic by citing their own survey data that shows 71% of the North American dealers they surveyed said their biggest challenge in the year ahead is “decreased consumer spending.”
Which leads to the discussion of inventory. Ideal cites Scott’s Power Equipment, Inc. which said, “Manufacturers and distributors were so short on equipment from Oct 2022 to May 2023. Then they tried to load dealers up. This could lead to rebates and selling at lower margins as dealers will now try and get rid of excess product and product that will be coming due on floorplan.”
In our own OPE Business Q3 Dealer Survey, one dealer said, “We have to go back to selling instead of taking orders. It is going to be a tough 2024 with manufacturers being now overstocked with equipment. We are going to have to stay on top of the rebates and promotions and work every deal.”
Nearly half (47 percent) of dealers we surveyed in Q3 said “inventory is too high.” We’ve talked with a few equipment manufacturers who acknowledge the inventory issue. “As OEMs, we got caught up with so much demand, and we couldn’t get dealers enough product,” said Angela Raddant, Director of Aftermarket for AriensCo. “We all got caught up in that. The market changed so suddenly. At Ariens, we are now doing our best to stand behind our dealers and help them move product.”
Ariens is not alone. We heard the same from Toro when it reported “a sharp and accelerated reduction in homeowner demand for residential and professional segment lawn care products” in its fiscal third quarter financial news. In that same release, Toro CEO Richard Olson added, “We believe the combination of macro dynamics and weather patterns this year has exacerbated the rebalancing of homeowner demand for lawn care solutions in both of our residential and professional segments, which has resulted in elevated dealer field inventories of those products ….”
According to the U.S. Census Bureau, “inventories of manufactured durable goods in October, up three consecutive months, increased $1.5 billion or 0.3 percent to $525.1 billion. This followed a 0.1 percent September increase.” The category called “durable goods” includes products that can be inventoried and that have an average life of at least three years, such as motor vehicles, furniture, and power equipment. Economists track durable goods sales and inventory as one indicator of economic activity.
While overall retail sales in the U.S., for Q3 2023, rose at an 8.4% annual rate, many economists caution that the vigorous spending seen all year is not likely to continue in the coming months. The data also show that U.S. consumers are saving less and using credit cards more often. While the recession that so many people forecast for more than a year has not materialized, we remain in uncertain post-pandemic conditions.
With consumer financing rates at their highest in years, dealers and manufacturers will need to get creative and aggressive. Ideal offers a few ideas “to move inventory without heavy discounting. They include:
- Added Value: Offer free service plans, extended warranties, or training sessions with
- the purchase of whole goods.
- Trade Ins: Allow customers to trade in their old equipment for a discount on the new, slower-moving models. When priced right, used equipment can be a good entry-level option for buyers.
- Loyalty Programs: Reward regular customers and encourage repeat business.
The Ideal Trends report includes a wide range of data about the sales, pricing, and adoption rates of battery powered equipment in North America. It points to a survey of Ideal and c-Systems dealers across North America. When asked what power source equipment dealers foresee becoming more in demand by customers, 54% of dealers said battery, followed by 31% who said gasoline.
According to market research firm TraQline, battery equipment sales already passed gas equipment. “After significant growth, in June 2022, battery-powered (38.3%) overtook gas-powered (34.3%) as the most purchased fuel type,” the company reported. “This trend has continued through June 2023, with battery-powered purchases increasing 1.9 points, and gas-powered purchases decreasing 2.0 percentage points.”
In our own dealer surveys, we hear from dealers who don’t like this trend, others who accept it, and a few who think it’s driven solely by government fiat.
While many power equipment manufacturers say things like “gas isn’t going away,” and “we are a dual fuel equipment provider,” new-product development trends lean toward battery-powered equipment. Stihl Chairman of the Executive Board Michael Traub said, “Our top priority in terms of investment lies in the development and production of innovative and powerful battery-operated products.” The company also announced, as we reported in April of this year, that by 2027, Stihl plans to increase its share of battery-powered tools to at least 35 percent, with a goal of 80 percent for 2035.
Battery power is not the only product trend in outdoor power equipment, but it’s the main one, and the one we are all talking about. Whether pushed by manufacturers, consumer demand, or government regulation, the volume of battery-powered equipment is increasing. We spoke with Bill Estes, General Manager for Anderson Power Products, a manufacturer of power connectors for a number of industries, including outdoor power equipment. And we asked Estes how fast the electric equipment shift is happening. “It’s coming pretty fast,” Estes said. “What you’ll see in the next year’s ahead, is more and more companies coming out, and commercial volumes hitting higher levels in 2024.”
Along with product manufacturers and battery suppliers, Anderson is working to make electric equipment work as consumers need it to. “We’ve gotten more requests from manufacturers to deliver smaller products, faster charging, more signaling, etc.,” he said.
Power equipment dealers and landscape pro users are often part of these development discussions too. We see that with Honda as it develops its new battery-powered autonomous mower. As stated in its Trends Report, Ideal suggests dealers meet this trend by understanding the sustainable practices and many of their customers. Ideal says dealers need to recognize that “a substantial chunk of the market that’s purchasing battery-powered equipment are commercial entities, like landscapers.” The report reminds dealers that battery-powered equipment can be more intricate and “often requires specialized care, leading to potentially higher repair and maintenance costs. Dealers can capitalize on this by offering specialized repair services, thus boosting their revenue streams.”
For more on trends, and to read the OPE Business Q3 Dealer Survey, see our November magazine.