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
Top 100 Articles
Milan Kucerak, president/CEO, West Central
CropLife 100West Central Cooperative And Its New President Are A Match Made In Deviation
June 29, 2015
To appreciate just how unique West Central Cooperative is in the world of ag retail, an observer need only consider Read More
Winter Wheat
CropLife 100South Dakota Co-op Member Owners Vote No On Unification
June 26, 2015
The Boards of Directors for North Central Farmers Elevator (NCFE) and Wheat Growers (WG) have announced that member-owners have voted Read More
CropLife 100The Andersons Acquires South Dakota Plant Nutrient Manufacturer Kay-Flo
May 20, 2015
The Andersons, Inc., ranked No. 22 on the CropLife 100, has purchased Kay Flo Industries of North Sioux City, SD. “This Read More
CropLife 100AgGateway’s Barcoding Initiative Progressing Nicely
May 8, 2015
According to legend (or Wikipedia), the first step towards modern bar codes came back in 1948, when Bernard Silver, a Read More
CropLife 100Pinnacle Agriculture Acquires Minnesota Retailer
April 14, 2015
Pinnacle Agriculture Holdings, LLC, ranked No. 6 on the CropLife 100,  has successfully acquired Liebl Ag, LLC in Ada, MN.  Read More
CropLife 100CHS, Aurora Cooperative Complete Fertilizer Storage, Grain Shuttle Loading Facility
April 13, 2015
CHS Inc., the nation’s leading cooperative and ranked No. 5 on the CropLife 100, and Aurora Cooperative (ranked No. 21) Read More
Latest News
Agworld Apple Watch Farm Management
EquipmentAussie Data Management Software Company Making Its Mark…
July 4, 2015
Zach Sheely, vice president of sales and operations, says that several large, well-known U.S. cooperatives (Stanislaus Farm Supply, Wilco-Winfield and Read More
Topcon AGI-4 on MF Planter
EquipmentAutosteer: Compatibility, Accuracy Remain Top Of Mind
July 3, 2015
The world of automatic steering solutions in agriculture has evolved rapidly in the last few years. From after-market add-ons that Read More
ManagementUnited Suppliers/Land ‘O Lakes Merger & Crop Update
July 2, 2015
CropLife’s Paul Schrimpf and Eric Sfiligoj talk about the reasons behind the United Suppliers/Land ‘O Lakes merger and USDA’s recent Read More
Industry NewsBioSafe Adds To Sales Force
July 2, 2015
BioSafe Systems has announced the hire of two new members for its service team. David Britt recently joined the team Read More
Chesapeake Bay
ManagementChesapeake Bay Clean-Up Gets Renewed Attention
July 2, 2015
The Chesapeake Bay has been called one of the most biologically productive ecosystems in the world. It’s also one of Read More
Measuring Bulk Tanks
ManagementBulk Pesticide Compliance: Top 10 Areas Of Improvement …
July 1, 2015
  In honor of the 33-year run of David Letterman’s Late Show, the American Agronomic Stewardship Alliance (AASA) is happy Read More
Industry NewsArysta North America Hires Midwest Sales Manager
July 1, 2015
Arysta LifeScience North America recently announced the hiring of Brian Battles as the Senior Technical Sales Manager for the Midwest Read More
Farmer on tablet
Eric SfiligojThe Never-Ending Battle Against Modern Agriculture
July 1, 2015
In the world of comic books, the character of Superman often refers to the fight to save the world as Read More
Retail FacilitiesBuilding Up Ag Retail
July 1, 2015
In the oftentimes unpredictable world we live in, it’s nice to know some things can be reliably countered on to Read More
Retail FacilitiesMaple River Grain And Agronomy Phases In Site Developme…
July 1, 2015
Marcus Construction helped Maple River Grain and Agronomy in Casselton, ND, with the design-build of its dry fertilizer, liquid chemical/seed Read More
Retail FacilitiesA&B Welding Builds A New Liquid Terminal Hub For Br…
July 1, 2015
To build its new hub facility, Briggs Crop Nutrients enlisted the help of A&B Welding. The result, an efficient facility Read More
Edon Farmers Co-op
Retail FacilitiesNew Marcus Facility At Edon Farmers Co-op Provides More…
July 1, 2015
Edon Farmers Co-Op in Edon, OH, needed a new facility to consolidate outdated locations. Marcus Construction was able to design Read More
Retail FacilitiesKinder Morgan Expands Its Storage With A New Dome Barre…
July 1, 2015
Kinder Morgan wanted additional covered storage at its Dakota Bulk Terminal on the Mississippi River in St. Paul, MN. With Read More
Retail FacilitiesHeartland Tank Protects Fertilizer From Extreme Cold At…
July 1, 2015
The Arthur Companies in Harvey, ND, enlisted the help of Heartland Tank Companies to develop a new liquid fertilizer facility Read More
The McGregor Co. fertilizer loadout
Retail FacilitiesThe McGregor Co. Partners With Kahler Automation To Cre…
June 30, 2015
Kahler Automation helped The McGregor Co. expand its Clarkston, WA, operation with unstaffed loadout technology that enables customers to pick Read More
Dry and Liquid Plant
Retail FacilitiesKahler Automation Helps CHS Dakota Ag Cooperative Build…
June 30, 2015
CHS Dakota Ag Cooperative in Mooreton, ND, wanted a liquid/dry blender system that could meet the needs of its customers Read More
Crop InputsLand O’Lakes, United Suppliers To Merge Crop Inpu…
June 29, 2015
Land O’Lakes, Inc. and United Suppliers, Inc. of Ames, IA, today announced their intent to merge their crop inputs businesses. Read More
FungicidesHelena To Distribute Unique Summit Agro Fungicide
June 29, 2015
RANMAN 400 SC fungicide, the only fungicide with a FRAC group 21 designation, is now part of the innovative Summit Read More