In a down market, dealers face the challenge of slow-moving inventory. Equipment that three or four years ago was flying off the lot can suddenly become a drain on cash flow and resources as demand dips. Holding on to unsold equipment can tie up capital, increase overhead costs, and reduce your ability to invest in other parts of your business.
Over the past year, dealers have worked hard at reducing both new and used equipment to match demand. Many dealers have now paired down the inventory and are having to micromanage and push out what is left. There is a normal cycle to this as sales teams tend to push the easier-to-sell products into the marketplace and dealers are often left with harder-to-sell products. As those harder-to-sell products start to age the sales team sells around them until they become a priority.
Reducing hard-to-move inventory effectively requires a balance between short-term cash flow needs and long-term market strategies. Here are seven creative approaches to moving equipment efficiently without sacrificing profitability.
1. Bundle Equipment with Value-Added Services
In a competitive market, simply lowering the price likely won’t close a deal. Instead, bundle equipment sales with value-added services to make your offer more attractive to competitive buyers. Service contracts, maintenance packages, extended warranties and precision subscriptions can provide additional value without chopping your margins.
How to Implement: Create packages that include extended service contracts, extended warranties, Telematic subscriptions, and creative cash flow incentives to minimize risk for the purchasers. These can be very effective if the customer is not familiar with your dealership or brand of equipment. They can see these options as risk management to give you a try. Many of these value-added solutions add to developing a deeper relationship with the client as it provides multiple touch points during the ownership cycle.
2. Offer Lease-to-Own or Rent-to-Own Programs
Some buyers may be hesitant to commit to large purchases in a down market, particularly when cash flow is tight. Lease-to-own programs offer flexibility by allowing customers to use the equipment immediately while spreading the cost over time. This approach can make your inventory more accessible to cautious buyers. This also allows you to put the harder-to-sell equipment in motion to get a buyer invested in wanting to own it.
How to Implement: Structure lease-to-own programs with flexible payment terms to accommodate different customer needs. For example, offer lower upfront payments with the option to purchase at a fixed price after a certain period. Offer different lease-to-own options based on equipment type, age, or condition. This allows you to move both new and used equipment more effectively, meeting a wider range of customer budgets.
3. Proactively Build Relationships with Other Dealers
Sometimes, equipment that isn't moving at your dealership might be in demand in another market or region. By partnering with other dealers in non-competing areas, you can create inventory trading partners to help push products into the marketplace.
How to Implement: If your manufacturer has a dealer locator try to use it to find units similar to the ones you have that are aged. Contact dealers outside your primary market area to explore potential partnerships. If the unit is interest bearing you may offer to ship it to them if they can sell it. Paying freight may be a great investment to move a unit to another dealer.
4. Target Niche Markets with Customization
In a down market, your traditional buyers may pull back on spending, but niche markets could still have demand for specialized equipment. Offer customization options to target specific industries or unique applications that require modified machinery. You could target these industries and customers specifically with incentives and marketing efforts.
How to implement: Think outside the box on who could use the equipment and non-traditional segments. This likely works with universal equipment versus specialized one-season equipment.
5. Host an Online Auction or Flash Sale
Online auctions or flash sales are an effective way to create urgency and draw in buyers looking for a deal. These events can help clear out excess inventory while generating interest from new and existing customers. Auctions and flash sales can also make your dealership stand out in a crowded market by offering exclusive, time-sensitive opportunities.
How to Implement: Partner with established auction platforms or create your own online auction. Promote these events heavily through email marketing, social media, and your website to drive traffic. Organize a one- or two-day flash sale with special discounts, financing options, or limited-time offers on specific inventory. Use countdown timers and scarcity tactics to encourage quick purchasing decisions.
6. Repurpose or Recondition Used Inventory
Reconditioning used or slightly outdated inventory can turn equipment that has been sitting idle into a more attractive proposition. By restoring equipment to a viable condition, you not only increase its resale value but also attract buyers who may be looking for a deal on reliable equipment. Simple items like torn seats, flat tires, and leaking hydraulic fittings can be the difference in selling a piece of equipment.
How to Implement: For equipment in decent condition, a light refurbishment such as repainting, cosmetic touch-ups, replacing the seat, and fixing small leaks can make it much more appealing to potential buyers.
7. Offer Deferred Payment Options
Cash flow concerns may prevent some buyers from purchasing equipment in a slower market. Offering deferred payment options can help alleviate this concern by allowing customers to take delivery now and begin payments later. Different finance companies offer flexible finance options and skip payment scenarios based on the customer's cash flow seasons.
How to Implement: Work with both your captive and non-traditional lenders. Research what equipment finance companies offer these options. It will take a credit-worthy customer to be able to receive these promotions, but you have to put them in front of the lender to find a solution.
Heavy equipment dealers facing a down market must think creatively and maybe even onboard some risk to reduce inventory and keep cash flow healthy. By offering flexible sales options, targeting niche markets, and exploring partnerships or new territories, dealers can move slow-moving stock while maintaining profitability. The key is to remain adaptable and responsive to market conditions, using a mix of strategies to ensure your inventory continues to generate value, even when times are tough.