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

ManagementOABA Annual Conference Wraps Up In Columbus
February 5, 2016
More than 300 Ohio AgriBusiness Association (OABA) members and industry professionals were on hand to engage in collaborative learning and Read More
Chesapeake Bay
StewardshipKeeping A Watch On Water Issues
February 2, 2016
During a down cycle in the market, it’s difficult to think about investing for the long term. For retail businesses, Read More
FertilizerFort Wayne 4R Farming Event Set For February 12
January 29, 2016
The Nutrient Stewardship Council will host a complimentary “4R Farming 4 Sustainability” educational workshop Feb. 12 in Fort Wayne, IN, Read More
Legvold Farm, Northfield, MN
LegislationASA Notes Progress, Urges EU To Improve Biotech Approval Process
January 29, 2016
The American Soybean Association (ASA) urged the European Commission today to continue its work in addressing delays in the approvals Read More
Top 100 Articles
Elburn Cooperative
CropLife 100Elburn Cooperative Members Vote To Join CHS
December 28, 2015
With 81% of eligible producers voting, 94% cast an affirmative ballot for Elburn Cooperative, a diversified agricultural retailer based out Read More
West Central Cooperative, Jefferson, IA
CropLife 100Farmers Cooperative-West Central Merger Approved
December 21, 2015
The members of Farmers Cooperative Co. (FC), Ames, IA, and West Central Cooperative, Ralston, IA, have both approved the merger Read More
Wheat Growers Innovation Center, Bath, SD
CropLife 100Wheat Growers Opens Innovation Center
December 21, 2015
Wheat Growers’ commitment in providing its farmer-owners with the latest in technological advancements now has a one-of-a-kind focal point, as Read More
CropLife 100ARA Selects The Andersons As 2015 Retailer Of The Year
December 9, 2015
The Agricultural Retailers Association today named Maumee, OH-based The Andersons as its Retailer of the Year for 2015. The award Read More
CPS Washington Court House John Deere Sprayer
CropLife 100Application Equipment Report: It Is Easy Being Green For Top 100 Ag Retailers
December 5, 2015
On The Muppets television show, Kermit the Frog is famous for singing a song about the troubles he encounters in Read More
Fertilizer Bin
CropLife 100Fertilizer Sales: Another Down Year For Top 100 Ag Retailers
December 4, 2015
In pure number terms, the fertilizer category still dominates all crop inputs/services among CropLife 100 ag retailers. In 2015, for Read More
Latest News
Crop InputsBayer Contests EPA’s Decision On Valuable Insecticide F…
February 5, 2016
Crop Science, a division of Bayer, has announced it has refused a request by the Environmental Protection Agency (EPA) to Read More
Wheat Field North Dakota
Seed/BiotechSyngenta Wins Seed Fraud Suit Against South Dakota Grow…
February 5, 2016
Syngenta has obtained a $25,000 settlement from Paul and John Mayclin, Mayclin Farms, Plankinton, SD, in response to their Plant Read More
ManagementOABA Annual Conference Wraps Up In Columbus
February 5, 2016
More than 300 Ohio AgriBusiness Association (OABA) members and industry professionals were on hand to engage in collaborative learning and Read More
Crop InputsBayer To Contest EPA Flubendiamide Decision
February 5, 2016
Crop Science, a division of Bayer, announced today it has refused a request by EPA to voluntarily cancel the uses Read More
Syngenta
Seed/BiotechNot So Fast: ChemChina Syngenta Takeover Could Draw Nat…
February 5, 2016
State-owned China National Chemical Corp. (ChemChina), which plans to buy Swiss seeds and pesticide maker Syngenta, will promptly start preparations Read More
Rendering of Syngenta Seedcare Institute expansion
Seed/BiotechExpansion Of Syngenta’s North America Seedcare In…
February 4, 2016
As demand for seed treatment knowledge and products grows among farmers, retailers and others in the seed industry, Syngenta is Read More
Soybean Field
Industry NewsArysta LifeScience Strengthens Sales Team
February 4, 2016
Arysta LifeScience North America recently announced three new personnel additions: Jake Cook and Peter White are Territory Sales Managers for Read More
Davor Pisk Syngenta COO
Crop InputsSyngenta COO: Why ChemChina Offer Beat Monsanto’s
February 4, 2016
Syngenta Chief Operating Officer Davor Pisk says he is confident the proposed acquisition by ChemChina will ultimately help preserve choice Read More
Young corn plants in soil
Crop InputsKoch Biological Solutions Invests In Pathway Biologic
February 4, 2016
An affiliate of Koch Biological Solutions, LLC has acquired a minority equity position in, and entered into collaboration with, Pathway Read More
Crop InputsABG: China Signs Off On Monsanto’s Roundup Ready …
February 3, 2016
Monsanto Co. on Wednesday announced it plans to launch its Roundup Ready 2 Xtend soybeans in time for the 2016 Read More
Syngenta headquarters in Basel, Switzerland
Crop Inputs6 Things To Know About The ChemChina-Syngenta Deal
February 3, 2016
After months of rumors and speculation, Syngenta has announced that ChemChina has offered to acquire the Swiss-based company. “In making Read More
FertilizerPhosphorus: Is Band Or Broadcast Application The Better…
February 3, 2016
Is band or broadcast application the better method when it comes to phosphorus? The answer to this question depends mostly Read More
Syngenta Sign
Crop InputsChemChina Nearing Deal To Buy Syngenta For Record $43 B…
February 3, 2016
China National Chemical Corp. is nearing an agreement to buy Swiss pesticide-and-seeds-maker Syngenta AG for about 43.7 billion francs ($42.8 Read More
Herbicides2015 ASA Trials Demonstrate Valent Fierce XLT Herbicide…
February 2, 2016
Valent U.S.A. today announced that new Fierce XLT Soybean Herbicide ranks in the top tier among growers for length of Read More
Crop Protection Products in storage
Paul SchrimpfCrop Input Selling: Return Of The Price List
February 2, 2016
It was a good 15 years ago, shortly after I first started writing for this esteemed publication, that it all Read More
Potash storage at Growmark
FertilizerThe Phosphate And Potash Outlook For 2016
February 2, 2016
Like other commodities, prices of the leading plant nutrient products dropped sharply in 2015. At this writing, the price of Read More
Chesapeake Bay
StewardshipKeeping A Watch On Water Issues
February 2, 2016
During a down cycle in the market, it’s difficult to think about investing for the long term. For retail businesses, Read More
Young Corn Plants
FertilizerNutrient Considerations For Low Corn Prices
February 2, 2016
Corn prices are low and many producers are asking tough questions about their nutrient management programs. Here are some suggestions Read More