Dealer Loyalty

As the age-old philosophical question postulates: "Which came first -the chicken or the egg?" In our industry this axiom applies this way:

"Which comes first, a dealer's loyalty to their manufacturer or does it begin with the latter's loyalty to their dealer?"

Throughout the history of the materials handing industry (at least here in North America) as the performance of the various brands have risen and fallen, the models for success employed by the manufactures through dealer distribution have varied.

After the second world war, there were a number of domestic manufacturers who offered forklifts. From Allis-Chalmers to Automatic, from Baker and Banner to Caterpillar, Clark, from Elwell-Parker and Hyster to Lewis-Shepard from Raymond to White and to Yale - all of these companies as well as some others, vied for the attention and the loyalty of their dealer distributors.

Through the '60's most of the equipment was crude and not terribly sophisticated. Most of these manufacturers were also limited with their designs due to their relatively low volumes. Few could offer much in the way of innovation to attract customers. Because of the limitations of their equipment and also a noted lack of reliability, these OEM's were heavily dependent on the services of their dealers to keep their customers up and running. Most of them - out of necessity because they needed their dealers - were forced to adopt dealer friendly and attractive agreements.

And while the industry was still in its infancy and the markets small by comparison to todays standards, all of these manufacturers were successful and they were all able to survive. The OEM's needed their dealers and the dealers needed their manufacturers. They valued their loyalty to each other and they worked hard to sustain their relationships.

This was the one thing all these factories had in common - the loyalty of their dealers. No matter which brand a dealership carried and no matter where they did business, these dealers were passionaltely loyal to their brands and to their manufacturing partners. They respected and trusted their OEM's and for the most part, those manufacturers responded in kind with mutual respect and trust. The proverbial "things" between most of these manufacturers and their dealers were copacetic and strong.

Then in the late sixties, the market NA was invaded by the Japanese manufacturers. They came east with their compact, light-weight and considerably less expensive but functional trucks. Customers saw that the design qualities of these machines were not nearly a match for the traditional over-engineered U.S. products. But, the fact they could buy "two of them" for the price of one of the American trucks caused many of them to try them out.

Most of the traditional dealers were not inclined to abandon their relationships withy their "partners" and some stayed with them at least for a while. (A few actually stayed loyal too long). These new OEM's - Datsun/Nissan, Komatsu, Mitsubishi, TCM and Toyota - were forced to take on the only dealers they could find which were mostly small "start-up" dealers to promote their brands and support their products.

Most of the American manufacturers refused to see these "tinker toys" as real threats. Only one of them, Yale's corporate parent Eaton Corp, was smart enough to see what was possible and they joined forces with a Japanese partner to form a joint venture aptly named Sumitomo-Yale. The rest of them buried their forks in the sand and one- by-one were forced to compromise, consolidate, sell-off their designs and most of them exited the business. With the notable exception of Crown which was a unknown "niche" player back then, by the late eighties all of these manufacturers were either out of the business or they had been forced into a sale or merger.

Throughout all of these cataclysmic changes, as these former manufacturers had their leadership decisions shifted to the Far East, their marketing departments were challenged with finding ways to convert their former rugged "Made in America" personas to "value added" and "cost effective" solutions. Their dealer development departments were faced with even more difficult challenges.

While there were a few prominent dealers who decided to stand by their word and honor their commitments to their manufacturers, most of the dealers did not. As they saw the impacts of these "cheaper" trucks and listened to their sales people telling them they "could not compete" they found ways to skirt the terms of their marketing agreements and took on competitive lines. By the late '90's the number of manufacturers who were still able to hold onto their dealers with some kind of "exclusive" agreement was a third of what they had been. By the mid 2000's there were only three. The number of Dealers representing two or three competitive brands were now the norm. Many of these dealers could have advertised themselves as "Forklifts Are Us."

Now, as to the loyalty question - there was one manufacturer who recognized this erosion of loyalty on the part of their dealers and decided to do something about it. In the early '90's Yale concluded they were not going to achieve their market share objectives with one hundred and eighteen (118) dealers whose average annual sales were about five ($5m) million a year. They decided to invest in their dealers. They launched a two-part campaign to 1) help their dealers become more profitable and then 2) to encourage their stronger dealers with capability to acquire their less-capable neighbors by sponsoring mutually beneficial mergers and acquisitions. It took the better part of fifteen years but, eventually those capable dealers not only became market leaders, they also became multi-millionaires in the process. These dealers had good reason to remain loyal to their manufacturer. And while this loyalty was tested in some markets, the manufacturer (who had attained its market share goals)felt they had earned the loyalty of their dealers, as well.

While loyalty has to be earned for it to be sustained it also has to be returned. Unfortunately, history shows us that the common mind-set in business (and this goes for manufacturers as well as dealers) is too often characterized with "what have you done for me lately?" In this the age of instant gratification, this tendency has even been accelerated.

Most of the OEM's recognize their dealers with so-called Dealer of Excellence annual awards (many of which are mere manipulations of data designed to make the OEM's "look the part" of being loyal appreciative partners). Interviews with these dealers reveal that many of them have only shallow feelings for their OEM. This lack of authenticity cuts both ways. The representatives of these OEM's - in their candid moments - don't really think much of their dealers either.

Recently, we were told of one prominent multi-time award wining dealer who has enjoyed many years of successful profitable growth sponsored by and with one brand, who covertly met with another manufacturer to explore possibilities with them. Obviously we are not privy as to all of the issues and circumstances which occasioned that meeting however, a lack of loyalty to that OEM appears to be on display. The OEM was "crushed" by this action and while their relationship with this dealer will never be the same they are now stuck with each other.

Some dealers who have felt restricted by the constraints their primary manufacturers have put on them are paying lip-service to their loyalties while they are creating "new" dealerships to go-to-market with these competitive brands. They chalk these explorations and expansions ventures up as simply "good business." Perhaps they are; there are always explanations and reasons behind change and there are stories and accusations on both sides. From the perspective of one who sees loyalty as a key element of integrity - disloyalty, in any form, still does not feel like the right thing.

This blade cuts both ways.