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

ManagementNew Rabobank Report Calls for Farmer ROI Focus
July 25, 2016
As U.S. row crop farmers brace themselves for a third year of negative margins, Rabobank believes farmers must lower the Read More
ManagementGROWMARK Meeting Visit, Company Takeover Updates, and RNC Invite
July 22, 2016
Editors Paul Schrimpf and Eric Sfiligoj discuss their recent speaking engagement at GROWMARK’s eastern event, crop protection company merger rumors, Read More
ManagementLand O’Lakes Announces SUSTAIN Business Unit, Other Changes
July 20, 2016
Land O’Lakes, Inc. today announced the formal organization of a new business unit, SUSTAIN, and its leadership. SUSTAIN will focus Read More
Corn and ditch
ManagementStudy: Saturated Buffers Reduce Nitrates From Subsurface Field Drainage Systems
July 19, 2016
The Agricultural Drainage Management Coalition (ADMC), Agricultural Drainage Management Systems Task Force and Dr. Dan Jaynes with the National Laboratory Read More
Trending Articles
Heritage Cooperative
Retail FacilitiesKahler Automation Designs State-Of-The-Art Facility For Heritage Cooperative
July 4, 2016
Heritage Cooperative in Marysville, OH, needed an efficient liquid, dry and grain facility to serve the many needs of their Read More
The Andersons Waterloo
ManagementFirst Indiana Facility Certified Under 4R Nutrient Stewardship Certification Program
June 27, 2016
The 4R Nutrient Stewardship Certification Program has announced that The Andersons, Inc.’s Waterloo, IN, facility has been added to its Read More
Food IT
Industry NewsCalifornia Event Will Mix Ag And Tech Professionals To Explore IT Solutions
June 20, 2016
Silicon Valley is hot on agriculture, and an upcoming event in California will bring together the food and tech industries Read More
Monsanto Luling Plant
Eric SfiligojWhat’s Next For Monsanto?
May 31, 2016
For the folks at Monsanto’s headquarters in St. Louis, MO, it has been an eventful few weeks. Back on May Read More
Soybean Plant closeup
Industry NewsMonsanto Rejects Bayer Bid; Open To More Talks
May 25, 2016
Monsanto Co, the world’s largest seed company, turned down Bayer AG’s $62 billion acquisition bid as “incomplete and financially inadequate” Read More
Eric SfiligojPity The Monsanto Haters
May 23, 2016
An old saying goes thus: “Be careful what you wish for. You just might get it.” Given current events, there Read More
Latest News
Illinois Researchers
FertilizerMeasure Of Age In Soil Nitrogen Could Help Precision Ag…
July 26, 2016
What’s good for crops is not always good for the environment. Nitrogen, a key nutrient for plants, can cause problems Read More
Kochia
Crop InputsNufarm Launches New Herbicide for Resistant Kochia
July 25, 2016
Nufarm introduces Scorch herbicide for U.S. farmers and ranchers combating a broad range of troublesome broadleaf weeds. A unique premix Read More
ManagementNew Rabobank Report Calls for Farmer ROI Focus
July 25, 2016
As U.S. row crop farmers brace themselves for a third year of negative margins, Rabobank believes farmers must lower the Read More
Syngenta Sign
Crop InputsBloomberg: Syngenta-Chem China Deal on Track for Regula…
July 25, 2016
Syngenta AG, which has agreed to be taken over by China National Chemical Corp. for $43 billion, said talks with Read More
ManagementGROWMARK Meeting Visit, Company Takeover Updates, and R…
July 22, 2016
Editors Paul Schrimpf and Eric Sfiligoj discuss their recent speaking engagement at GROWMARK’s eastern event, crop protection company merger rumors, Read More
Crop InputsMonsanto: EU Approves Roundup Ready 2 Xtend Imports
July 22, 2016
Monsanto Co. announced today that the European Commission has granted import approval for Roundup Ready 2 Xtend soybeans. This milestone Read More
Syngenta headquarters in Basel, Switzerland
Crop InputsSyngenta Announces Alfalfa Seed Split Off
July 22, 2016
On September 1, 2016, Syngenta will transfer sales and distribution of alfalfa seed to the NEXGROW branded business that is Read More
Dow DuPont
Crop InputsDuPont, Dow Shareholders Approve Merger
July 21, 2016
DuPont and The Dow Chemical Company announced that, at their respective special meetings of stockholders held today, stockholders of both Read More
ManagementLand O’Lakes Announces SUSTAIN Business Unit, Oth…
July 20, 2016
Land O’Lakes, Inc. today announced the formal organization of a new business unit, SUSTAIN, and its leadership. SUSTAIN will focus Read More
Monsanto Luling Plant
Crop InputsReport: Bayer Shareholder Proposes Monsanto ‘Host…
July 20, 2016
One of Bayer AG’s top 20 shareholders said Wednesday it may make sense for the life-science company to launch an Read More
Young Corn Closeup
Industry NewsNew Leaf Symbiotics Snags Former Monsanto Microbials Le…
July 20, 2016
NewLeaf Symbiotics, announced today the appointment of Dr. Janne Kerovuo as Vice President for Research and Discovery.  Dr. Kerovuo comes Read More
Corn and ditch
ManagementStudy: Saturated Buffers Reduce Nitrates From Subsurfac…
July 19, 2016
The Agricultural Drainage Management Coalition (ADMC), Agricultural Drainage Management Systems Task Force and Dr. Dan Jaynes with the National Laboratory Read More
Case sprayer nozzle closeup
EquipmentAgronomists, CCAs, Custom Applicators Invited To FSR Ag…
July 19, 2016
Agronomists, Certified Crop Advisers (CCA) and custom applicators can stay current on agronomy issues on the grounds of the Farm Read More
Soybean Field
LegislationOhio Soybean Association Names Brian Hill Legislator Of…
July 19, 2016
The Ohio Soybean Association (OSA) has announced that State Representative Brian Hill (R-Zanesville) has been named one of two Legislators of Read More
Eric SfiligojThe Latest Monsanto Rumors: A Game Of Tones
July 18, 2016
When companies are engaged in the back-and-forth of the acquisition game, the tone of their various announcements is always important. Read More
Nozzle spray close-up
AdjuvantsWest Central Distribution Introduces New Elite Family O…
July 14, 2016
West Central Distribution recently released a new line of Elite adjuvants to work alongside the new herbicide technologies that combat Read More
Bayer sign
Crop InputsBayer Makes New Offer For Monsanto
July 14, 2016
Bayer AG boosted its takeover offer for Monsanto Co. to about $65 billion in a bid to overcome the U.S. Read More
ManagementAn Update on Water
July 14, 2016
CropLife Editors Eric Sfiligoj and Matthew Grassi discuss agricultural water issues in conjunction with a recent field trip in Ohio. Read More