Fighting Falling Margins - Best Practices
Construction Equipment Distribution magazine is published by the Associated Equipment Distributors, a nonprofit trade association founded in 1919, whose membership is primarily comprised of the leading equipment dealerships and rental companies in the U.S. and Canada. AED membership also includes equipment manufacturers and industry-service firms. CED magazine has been published continuously since 1920. Associated Equipment Distributors
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Fighting Falling Margins

Written By: Mary Sedor

Article Date: 12-01-2005
Copyright(C) 2008 Associated Equipment Distributors. All Rights Reserved.

Team Equipment has found used equipment sales generate highter margins than new.

While used equipment is part of almost every new equipment dealer's business, most dealers don't dedicate a lot of resources to used. But Team Equipment, a new equipment dealer in Warwick, R.I., has found a way to reap more benefits from their used equipment sales.

Team began selling construction equipment in 1998 and is an authorized dealer for Geith, AIM Attachments, Towmaster Trailer and Italdem Breakers. After many customers came to the company requesting alternatives to purchasing new equipment and alternatives to long-term rentals, Team began to place more emphasis on finding and selling quality used equipment to better serve their customers.

After trial and error, Team discovered that they had better luck selling used earthmoving, material-handling and aggregate equipment. The company has been so successful at selling used equipment, it now has customers that come to them specifically for the used equipment it offers.

"Our customers are able to significantly reduce their overall equipment costs," says Sean Raimbeault, president of Team, "by purchasing quality used equipment. They realize true equity and depreciation benefits in
the process."

To get the used equipment the company sells into quality condition, a dedicated staff at the dealership refurbishes the equipment. According to Raimbeault, many dealers use Team to provide scheduled and non-scheduled fleet rebuilding services.

"Many times a dealer's service department is at or near capacity servicing their customers," says Raimbeault. "Purchasing quality used equipment allows them to extend their product offerings without depleting their operating resources.

The Learning Curve

According to Raimbeault, many AED dealers could easily place a greater emphasis on used, because they already have the equipment, the necessary facilities, and the raw materials to develop this segment within their existing markets. But he warns, dealers should be cautious.

"With long lead times on some types of new equipment and, in some cases, product shortages, this may be one of the areas dealers can leverage their market presence and develop a high margin profit center," he says.

Selling both new and used equipment in the same dealership, says Raimbeault, should be separate endeavors. Although used equipment sales look similar to new equipment sales, they are an entirely different species. The sales process, customer profiles and strategies are different. The key, he says, is to carefully and clearly develop a unique business process for used equipment sales.

"Ultimately, the potential cash flow and synergistic benefits can be enormous for the right dealers,"

says Raimbeault. "There is no question that customers are out there, and they are demanding the products. They would much prefer to source them from their trusted OEM dealers."

Used Equipment Sales

Team breaks its used equipment sales into three parts - lead generation, lead conversion and client fulfillment.

When generating leads for used equipment sales, Team's trade area is larger than for their new equipment sales. In other words, their customers come from much farther distances to purchase Team's used

When a customer is looking for used equipment, their focus is more product specific than focused on product specifications and options, says Raimbeault.

The company purchases the used equipment it sells from a variety of sources, and it also includes trade-ins from retail customers. Once the used equipment is obtained, Team's staff inspects the equipment and performs any necessary repairs.

Team's used equipment staff is trained to handle a variety of different brands and types of equipment, and the company invests heavily in training technicians.

"Product knowledge is only part of the equation," says Raimbeault. "Market expertise, forecasting acumen, and fulfillment systems are all pivotal factors in being successful."

Why The Focus On Used?

By tuning in to the used equipment market, Team has been able to continuously document and refine its processes.

"The driver for us is margin," says Raimbeault. "The margins are much higher on our used equipment than on our new equipment, and there is much less competition."

Customers that are choosing between new and used equipment purchases are given a dollar-cost average analysis, and all of Team's used equipment has a competitive warranty.

Raimbeault says, "When a customer balances the costs of owning a new piece vs. a refurbished piece, sometimes the dollars will weigh out in the direction of the used piece. We want to provide that extra level of service to our customers by providing both used and new equipment options."

As with new equipment, one of the keys to being able to sell used equipment is building relationships.

"We take an attentive and careful approach to building relationships with our used equipment prospects," he says. "Choosing the right product partner is paramount to building customer relationships and, ultimately, to having long-term market presence.

"Obviously, whether the equipment is new or used, the customers are not only expecting a support-driven solution, they're demanding one. We're coming to them from the support."

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