I will take a shot at answering your question, but no guarantee it will satisfy.
Historically, there was always greater ROI (return on investment) on the parts as opposed to the new equipment. No surprise there, however, it was also the case that historically models would not change as often and that there was many commonly used parts on the various models and even makes.
People would also keep their lawn mowers longer. There was no such thing as the disposable lawn mower 10 or 15 years ago as you see now. With the flood of Chinese sourced products the replacement part industry has really changed, people replacing the whole recoil rather than the spring, replacing the whole carb rather than rebuilding with a kit, or in some cases replacing the whole mower rather than even getting an estimate on the repair. Let's not even talk what this is doing to the landfills. This is not dissimilar from what happened to the appliance repair guys I guess. How many guys are repairing microwaves any more?
The above is all relevant to the answer because historically dealers could stock common fast moving parts and be assured that they would not be obsoleted quickly and that they would have certain rate of turnover to justify having the stock on hand.
Us personally, we still have a HUGE inventory of parts relative to our colleagues. It is costing us a fortune in space and capital being tied up and sitting on the shelf. What we are noticing in the industry is that many of the other dealers are moving towards drastically reducing their stock of parts on hand and a customer has to order individual parts for a repair or a special order with the corresponding delay.
The reason you may hear other dealers say "they don't make much" may be due to the fact that recently they have been having to eat more write downs on obsolete parts in their inventory. We didn't know how bad it was until we invested in the tracking software that essentially told us we are losing money with respect to some lines once you factor in the cost of the capital and real estate to be able to have stock on hand for the guy that comes in and wants the stuff right away (our landscaper customers
.
The answer is also complicated by the fact that the number of manufacturers and the different rates of return on parts in general depending on the manufacturer. You also have different rates of return on parts by the same manufacturer (sometimes with no reason from our perspective).
In short, on fast moving stuff you can make 30% ROI but once you factor in all of the other costs related only to the parts, I can see why some dealers may say not much.
On new equipment, it really depends as well. You have got MRSL which may provide for 30% return, but I can tell you that no one is getting that up here. Like the car industry, the margins are now razor thin on the big stuff in highly competitive markets like Toronto. This year in Toronto the industry is coming off a winter that never came, so we are in it to make every sale Spring.
The other dynamic it has created is that because the competition is fierce in Toronto, we are seeing a lot more guys driving from 4 hours away to make their big purchases in the big City. I guess that is the power of the Internet at play as well.
Like I said, I probably didn't answer your question, firstly because there really is not one answer and secondly the times are a changin'
Cheers
I've asked dealers what percentage profit they make on new equipment and how much on parts.
Ofcourse they never disclosed that,they only said,..not much.
I wonder if you have the guts to spill the beans:wink:
I ain't holding my breath though:laughing:
I also wonder when i wander in a JD dealership why the walls,shelves and floors are completely covered with toy tractors and such crap, but even simple parts for a tractor or implement needs to be ordered and can take weeks to get and when it does arive it is usually the wrong part:confused2:
Screw the farmer eh
