Three Great Years

Sept. 28, 2010


Four of nine regions suggested 2006 would be an excellent year; two of nine actually reported such. Overall, the year was "very good" for distributors with only New England reporting "off."
This year, distributors have backed off a bit, forecasting a "good" 2007. New England continues to struggle, but Southern Plains, Mountain and Pacific are anticipating "very good" business in 2007.
Parts sales, new equipment sales, and service again topped the chart of areas showing "significant" growth in 2006. Compared to the "excellent" 2005, the percentage of distributors was down slightly.
Three solid years have come in now for distributors. Next year, distributors expect a drop to "good," down from the "excellent" recorded in 2005.
Rising interest rates tops the list of concerns for distributors as they look to 2007. Margins are slipping, and concerns are that they will continue to be pressured. Recession continues to move up the list.
Margins were higher for about one-quarter of distributors last year. But some slippage showed, as 31 percent reported margins lower, compared to 22 percent in 2005.

Equipment distributors have enjoyed three solid years, one of which was recorded as "excellent," and met their expectations in 2006. For next year, a slight weakening is forecast, dropping from "very good" to "good."

The Associated Equipment Distributors again partnered with Construction Equipment to allow us to gain valuable insight into the equipment distribution arena this year. AED members responded, and they reported excellent growth in volume. This year, we broke volume changes into increments, asking for increases greater or less than 5 percent, 1 to 3 percent, and zero. Almost half (47 percent) of distributors said sales volume had increased more than 5 percent in 2006. Add the 22 percent who increased 1 to 3 percent, and 69 percent reported increases. Subtract the 21 percent who saw sales decrease and the net is 48 percent. This is down from the 62 percent net in 2005, and 2007 shows a net of 31 percent (54 percent expecting sales increases minus 23 percent expecting decreases).

Significant sales increases for 2006 were reported in parts sales (50 percent of distributors), new-equipment sales (47 percent), service (45 percent), and short-term rentals (41 percent).

Margins also increased for most distributors last year, with 4 percent reporting "much" higher margins and 22 percent reporting "somewhat" higher margins. About 31 percent reported margin slippage in 2006. Poor margins was a listed as a business concern for 57 percent of distributors in 2007.

One in four distributors label competition "intensely" competitive, and another 64 percent call it "very" competitive. Increasing competition is a business concern for half of distributors.

Other concerns include rising interest rates, which was cited by 71 percent of distributors. Last year, half of distributors considered machine shortages a concern; this year only 20 percent. Recession was labeled the single greatest concern for distributors for 2007.