Above: After its dealership was destroyed by a fire on May 20, 2013, McFarlanes’ acquired a 209,000 square foot facility a few blocks from its original location in Sauk City, Wis., and proceeded to dramatically expand its product offerings
When Chris Carnevale was invited to moderate a roundtable discussion during the February 2013 Dealership Minds Summit sponsored by Farm Equipment, he specifically requested the session dealing with facility modernization. He explained that McFarlanes’, a single-store AGCO dealership in Sauk City, Wis., where he was general manager, was planning to build a new facility to replace its 50-plus year old building. Carnevale wanted to hear first-hand what other dealers had already done or were planning to do to update or build new facilities.
At that point, owners of the dealership hadn’t set a timetable for the new construction. As it turned out, they didn’t have to because 3 months later, on May 20, a fire destroyed the facility.
The fire may or may not have contributed to a sense of urgency for a new facility, but rather than building new, McFarlanes’ ownership decided to purchase an existing 209,000 square foot facility located a block or so from where the old dealership had stood near downtown Sauk City.
Originally built as a manufacturing facility by Fiskars Brands in 1990 and added on to over the years, it had been vacant for about 5 years. According to Tom McFarlane, vice president and co-owner, purchasing the facility and turning it into a giant retail center was more cost effective than building a new store from the ground up. Not only would it give the dealership the space it needed, it would also be key to further expanding and diversifying the company’s retail operations. It would also reinforce McFarlanes’ well established brand in the area.
Growing the Brand
Through much of its company history, McFarlanes’ has been a diversified business. Today, it boasts of four divisions: manufacturing (farm implements), retail (farm equipment, tires, etc.), transport (company hauling) and structural steel (buildings).
Nationally, its manufacturing segment is probably its best known division. Earl McFarlane, grandfather of the current owners, started the Wisconsin Tractor Co. in 1917, when he designed and built the tractor named after his home state. Today, McFarlane Manufacturing Co. is best known for its tillage tools and implements for seedbed preparation.
Locally, the farm equipment dealership, which also housed a True Value Hardware store, is firmly established as a recognized brand in the community that customers simply call “McFarlanes’.” In addition, the company also owns a Bridgestone-Firestone tire store as part of its retail operation.
The company began selling ag equipment in 1947. “We’ve been through a lot of color changes,” says Tom McFarlane. “We started with Oliver and went through all of their color changes. We’ve also had New Holland in here. Today, it’s Massey Ferguson and Kubota. We have customers who have switched brands with us as we’ve changed because they want to be with the McFarlanes’, not necessarily the brand that we sell.”
McFarlanes’ managers believed the move to the huge new facility would allow them to further establish the company’s brand as well as help them diversify their retail efforts.
Selling both ag equipment and hardware out of the old 28,000 square foot facility, there wasn’t much room to maneuver, let alone expand. According to Carnevale, they actually had about 50,000 square feet to work with, which included a separate shop for tractor repair and two warehouses. “It was a very inefficient 50,000 feet,” he says. “We’re using about 175,000 square feet in the new facility.” Most of the rest is currently being leased to another firm.
Carnevale says the “McFarlanes’” brand is well established in the communities the dealership serves. “There’s an Ace Hardware store in town. When people talk about it, they say things like, ‘I’m going to Ace.’ When they talk about our True Value store, they don’t say, ‘I’m going to True Value.’ They say, ‘I’m going to McFarlanes’. The same is true for our equipment business. It’s not Sauk City Massey Ferguson. It’s McFarlanes’.”
With the new facility, he says they are building on the strong brand identity the dealership has already established by expanding — in a big way — its existing retail operations.
Expanding Product Lines
In addition to its full-service Massey Ferguson and Kubota farm equipment dealership and a greatly expanded True Value Hardware operation, the new facility includes a wide range of other merchandise and services. These include home repair and improvement products, Stihl, ag and power equipment, an automotive care center to go along with its tire sales, and a Just Ask Rental business (power tools, party supplies, etc.). Last fall, the company added hunting and fishing gear to its retail operations, and the entire facility is now open 7 days a week.
Carnevale likens McFarlanes’ expanded operation to a Farm & Fleet store, a specialty discount retailer with 36 locations throughout Wisconsin, Illinois and Iowa. But it could also be described as a hybrid of a Tractor Supply store, the country’s largest rural lifestyle retailer, with clothing, animal health products and feed.
The new facility afforded the business with the ability to greatly increase its power equipment offerings. “I believe we have one of the largest walls of Stihl products in the nation,” says McFarlane. “If it’s not, it’s definitely in the top 3. And the area where we have our Simplicity and Ferris mowers is set up like an expo center with iPads and videos for customers to check on products and view them in operation.”
Without a doubt, the expansive product line has grown McFarlanes’ customer base. “Our customer base has to be the most diverse of any farm equipment dealership in the country,” says Carnevale. “We have farmers, hobby farmers, landscapers, construction companies, people who just want a tractor. We’re getting all sorts of contractors and we’re seeing a lot more homeowners.”
He estimates that on a typical day, they will see 400 customers. “Another positive is the increase of female shoppers to the facility. It used to be the husband would come in and his wife would sit in the car. Now they’re both coming in grabbing separate shopping carts, going in different directions and shopping.”
Keeping It Indoors
What their farm customers may like best about the new facility, says John Bachhuber, assistant general manager, is nearly everything is under roof, which is especially advantageous during Wisconsin winters. “I don’t know of many dealership showrooms that can house a Massey Ferguson 8600 series dueled up with a massive hydro-push manure spreader. Plus, we have several other big tractors and R series Kubotas, all indoor, along with all of the mowers and utility vehicles. It’s really something you need to see to appreciate.
“Like most implement dealers, at the old place we had to leave all of the customer’s equipment outside,” Bachhuber adds. “Whether it’s a push mower or high-horsepower tractors, it’s a huge plus for us to physically keep equipment inside for the customer; that means a lot to them.”
Today, McFarlanes’ employs 212 people across all four divisions, with 50 working in the retail segment of the business. According to Carnevale, in many cases, it gives the company the option of moving people around where they’re needed. “If I was the worker, I’d be happy that this option is available. Sometimes we’ve had employees go back and forth between manufacturing and retail. We have a lot of examples of a young person starting in manufacturing and now they’re running a department over here in retail and vice versa as their careers evolve. It’s a good situation for us and the employees.”
Does Diversification Pay Off?
Considering the cyclical nature of agriculture, diversification would seem to be a sound strategy. According to McFarlane, it is in a way.
“It softens the cycles somewhat, but does it even them out, I would say no. It helps cushion the downturns. Our manufacturing segment just had some super years and now they’re in a little bit of a slump, but our retail has had a super year. The profit margins aren’t as good in retail as they are in manufacturing, so it takes a lot higher highs in retail to get that gross margin. I mean you can only get so much for a tire or for a lawnmower. There’s a lot more competition for these type of products.”
Bachhuber points out that while pricing is a huge factor, McFarlanes’ is able to set itself apart from the other retailers with service. “Customers may be able to get some things cheaper at a big box, but they can’t get the kind of service we can provide. And then there are parts. We have them and they don’t. This is something we do a very good job with and we know it makes a difference.”
When you consider that branding is all about making the kind of difference that customers want and sets a business apart, it would appear that McFarlanes’ diversification strategy is a viable one for the long term.