Survival Guide For Small Retailers: Size And Success

When CropLife® magazine sent me an email asking about writing an article about the survival of small and medium retailers, I thought, “What a coincidence this one is.”

Following several years working in the ag retail environment, I am settling into my new role as a retail consultant, and business is booming. And it’s largely because retailers are asking the very same question: how can I ensure the long term sustainability of my business? Is the size of my business a help or a hindrance to reaching my goal?

The truth is, all sizes of ag retailers have their own challenges, and not every business in the same size category has the same challenges and opportunities. But it’s interesting and instructive to find some commonalities among small to medium retailers and large regional and national retailers to identify where these businesses are and where they need to go to be successful and sustainable.

Small, Medium Size Retailers

Closely held medium and small ag retailers excel in many areas. In general, they are able to react to market challenges quickly, and have fewer layers of management to work through. They are generally lean and efficient, and do a great job at operations.

On the other hand, economics of size are a constant challenge. Many times they are able to remain competitive on plant nutrients, if their purchases are timely. But when crop protection and seed technology enter the picture, things become more challenging. With the current trend in programs from crop protection, seed and distribution, it has become increasingly difficult to maximize competitiveness across the entire product line.

Some businesses tend to migrate to business software that provide a very general picture of the operation, and are sometimes limited on part of their business model, such as agronomy. These same limitations challenge the effectiveness of tracking agronomy or sales associate performance. Some software is so limited that it compromises their ability to calculate bottom-line performance.

Decisions on investments in manpower, equipment and facilities must be made judiciously to balance the “right stuff” and a bottom line. Outsourcing is a must for these retailers. Most simply do not have the economics of size to justify their own qualified precision ag staff, environmental and safety compliance staff or IT personnel.

For the larger mid-sized ag retailer, many of the same challenges exist but on a larger scale. There’s a greater need for improved performance as they work to keep up with the large ag retailers.

They have become large enough to justify more investments in precision agriculture, environmental and safety, and IT personnel. That said, many tend to settle for part-time associates who fill double or even triple roles in their business, significantly diminishing the upside of a full-out investment in a labor intensive program such as seed sales.

The multi-tasking manager may have worked in the past, but fast and rapidly changing precision and seed technology will challenge past models. Unless they change, they will find themselves being further outpaced by retailers who already have made this investment.

Good To Be Big?

Large national and regional ag retailers appear to have the upper hand for success today, and in the future, but don’t think the same factors that challenge you do not impact them as well.

Larger retailers do have their own safety and compliance departments that keep them abreast and in line with current and upcoming regulations. While everyone is struggling on how to handle the new mini-bulk rules, the large ag retailer’s compliance department should already have a plan in place.

Economics of size should allow these retailers to bring on a fully staffed precision agriculture department. Today, for a large ag retailer many believe that one technical specialist should be enough. Perhaps it is meeting the business’ needs today, but where this business is heading in the next three to five years may change that model.

Some very efficient large ag retailers have their own IT department. Here you will see two or more highly qualified individuals that just do IT. I am not talking about someone who can load new programs and set up new computers. These folks write their own computer code, make their own patches between different software manufactures, and implement conductivity solutions. They will help these large retailers lead the way as 4G cellular service comes to life, and with it the technology enhancements that will drive ag retail, and your customers.

Large retailers have seed and fertilizer specialists who constantly watch and track these markets.

Large ag retailers may also have an Achilles heel. The economics of size often makes them slower to react and slower to change with additional layers of administrative costs.

Excessive time analyzing a project or direction often slows them down on more than just that project. Layers of administrative personnel sometimes provide input into area that they have no technical expertise in, which can also slow progress. Sometimes the leaders themselves get so far removed from the trenches that they lose connection with what is really going on.

And at times large retailers start to act like a business that has a net profit of 20%, instead of a 2% to 7%.

There are a number of important issues that challenge all of ag retail. For example, I am concerned with marketing programs that product vendors and distributors are taking to ag retailers. Crop protection and seed vendors are two good examples of a segment of our industry whose programs themselves promote mergers and acquisitions in our industry.

Leveling The Field

Plant food manufacturers aren’t keeping their field level, either. An ag retailer may wish to buy product at the lowest price of the year, and even have the funds available, but are unable to do so. Too often, the lowest price product of the year ends up in the distributor’s hands for internal retail sales, or is marketed to a select few strategic wholesalers, brokers or retailers.

As you can see, opportunities and challenges exist for all sizes of ag retail operations. Some will be “mean and lean”, some will “lead with technology”, while “operational excellence” or a combination of these will build a successful business unit.

In my view, technology will be key. While I have been working with precision agriculture since the early ’90s, I believe we are standing on the edge of where technology is just starting to lead us. 4-G networks, combined with GPS and software technology, will revolutionize the way we do business. It will improve our efficiencies, and change how we work as a team with our growers. Planning a course of action for success in technology today will help the success of all sized business units.

Leave a Reply

Management Stories

ManagementMACA 2014: The State Of The Agricultural Industry, And Then Some
October 9, 2014
The trade association’s annual gathering featured speakers from across agriculture and beyond. Read More
StewardshipA Multi-Layered Approach To Water Quality
October 6, 2014
Illinois event highlights research and technology designed to better monitor and improve water quality — and the benefits of cooperative, coordinated effort. Read More
StewardshipMichigan Agriculture Leaders On Toledo Water Ban: We Want To Be Part Of The Conversation
August 8, 2014
Leaders of Michigan agricultural organizations said Thursday that the government should not have a “knee-jerk reaction” based on last weekend’s water ban in Toledo due to fertilizer run-off in Lake Erie. Read More
ManagementRussia Bans U.S. And EU Ag Product Imports In Ukraine Sanctions Battle
August 7, 2014
Russian President Vladimir Putin has banned the import of agricultural goods from countries that have imposed sanctions on Russia. Read More

Trending Articles

InsecticidesNew Research Study Shows The Value Of Neonics
October 29, 2014
The study evaluated seed treatment, soil and foliar uses of neonicotinoid insecticides in the U.S. and Canada. Read More
Crop InputsPlatform Specialty Products To Acquire Arysta LifeScience
October 20, 2014
Once the acquisition is complete, Platform Specialty Products will combine Arysta LifeScience with previously acquired companies Agriphar and Chemtura Crop Solutions. Read More
Seed/BiotechMonsanto Offers New Support For Ferguson, Area Communities
October 8, 2014
Monsanto Co. has committed $1 million in new support for several collaborative efforts in Ferguson, MO, and surrounding communities in North St. Louis County. Read More
Seed/BiotechUnapproved Genetically Modified Wheat Found In Montana
October 3, 2014
USDA reports that one year after discovery of Monsanto's unapproved wheat in a single Oregon field disrupted U.S. wheat export sales, the GMO wheat has again been found in Montana. Read More
Equipment2014 Product Of The Year Voting
September 19, 2014
The deadline to vote for the 2014 CropLife IRON Product of the Year is October 31. Please cast your vote today to help us determine the winner. Read More
FertilizerFall Fertility 2014: Forecasting Fertilizer Use
September 7, 2014
Great crops this year have tapped the soil, and fall work is definitely called for, but how challenging will that get? Read More

Latest News

Seed CareSeed Care Success Stories: Hefty Seed And Monsanto BioA…
November 1, 2014
Growers in the Dakotas have always looked for extra ways to boost crop nutrients to their seeds, with plenty of help from their ag retail partners. Read More
Seed CareThe Growing Importance Of Seed Care
November 1, 2014
Ag retailers continue to value the seed treatment portions of their businesses — as do their grower-customers. Read More
Seed CareGrowing The Future Of Seed Treatment Equipment
November 1, 2014
Seed treatment equipment manufacturers are focusing on flexibility and customer stewardship. Read More
Soybean Field
Seed CareState Of Seed Care Study: Top 8 Key Findings (Infograph…
November 1, 2014
Results from our survey of ag retailers provide valuable insight into the state of the seed care industry. Read More
StewardshipTFI Recognizes Michigan, Maryland Farms For 4R Stewards…
October 31, 2014
As farming practices increasingly attract interest from the general public, two farmers are ensuring they meet public approval. Read More
Eric SfiligojBig Brother Is Already Watching
October 31, 2014
Opponents to UAVs seem to think they could be used to spy on other people. But spying is already taking place, through the Internet. Read More
StewardshipAsmark Institute’s New Training Center Focused On…
October 31, 2014
The newly dedicated Ford B. West Center for Responsible Agriculture will be used as a national training and education center for professionals in the ag input industry. Read More
StewardshipCTIC Tour Dives Deep Into Everglades
October 31, 2014
The most recent Conservation In Action Tour (CTIC) hit South Florida recently to tour the Everglades Agricultural Area. Read More
StewardshipResponsibleAg Begins Auditor Training
October 31, 2014
ResponsibleAg auditor training is now underway at the Ford B. West Center for Responsible Agriculture in Owensboro, KY. Read More
CropLife 100ValueAct Buys Stake In Fertilizer Dealer Agrium
October 30, 2014
ValueAct has bought 8.2 million shares in Calgary, Alberta-based Agrium, making them the second largest investor in the fertilizer dealer. Read More
InsecticidesNew Research Study Shows The Value Of Neonics
October 29, 2014
The study evaluated seed treatment, soil and foliar uses of neonicotinoid insecticides in the U.S. and Canada. Read More
StewardshipUSDA To Provide $4 Million For Honey Bee Habitat
October 29, 2014
Agriculture Secretary Tom Vilsack announced today that more than $4 million in technical and financial assistance will be provided to Read More
Crop InputsValent Launches New Low VOC ProGibb LV Plus Plant Growt…
October 29, 2014
ProGibb LV Plus PGR is a high-potency, liquid gibberellic acid formulation designed to comply with California’s new air quality standards for high volatile organic compound agricultural products. Read More
Crop InputsBayer CropScience Acquires Certain DuPont Crop Protecti…
October 29, 2014
Bayer CropScience and DuPont Crop Protection have signed an agreement for Bayer to purchase certain DuPont Crop Protection Land Management assets in the U.S., Canada, Mexico, Australia and New Zealand. Read More
ManagementWest Central Names New President
October 29, 2014
West Central’s board of directors have announced their unanimous decision to name Milan Kucerak President and CEO-elect following Jeff Stroburg’s retirement at the end of the fiscal year. Read More
InsecticidesValent U.S.A., MGK Form Marketing Agreement
October 24, 2014
Valent has formed an agreement with Minneapolis-based MGK to manage the marketing and sales of MGK’s crop protection line of insect control products within the U.S. beginning April 1, 2015. Read More
StewardshipFlorida’s 4R Advocate Keeps Improving
October 24, 2014
Florida farmer Alan Jones uses the 4R principles of nutrient stewardship as the core of his fertility program, which allows him to maximize production and keep costs in check. Read More
Seed/BiotechMonsanto Named One Of The World’s Best Multinational …
October 23, 2014
Monsanto ranked No. 8 in the world’s largest annual study of workplace excellence that identifies the top 25 best multinational companies in terms of workplace culture. Read More