Mike (WA) said: (quoted from post at 23:16:42 06/18/13) I don't agree with the theory that the salesman wants to keep the price high to get a higher commission. He'll make a lot more money fire-saling everything in the place than he will trying to get top dollar for everything, thereby selling more slowly. Volume is the key to big money in sales- if he makes 20% less per sale, but has 3 times the sales, he's a lot better off.
Few anymore want to do any more than they have to to make a buck. Your theory is probably correct. I seldom see it in use in ag or auto dealerships anymore.
Some are, but not all salesmen are on straight commission. Some are actually salaried. Some are salaried, and get bonuses monthly, quarterly, etc., based on performance. Some get a base pay + commission. Some even get a kickback when a piece they got in a trade-in deal is sold for aprofit by another salesman. Some lose their commission and even bear some of the expenses incurred during a repossession. Some have to eat a percentage of loss on a piece of machinery they took in trade that didn't make money for the dealership. There's all kinds of (interesting) pay scheme gimmicks, and it all depends on how the dealership sets it up.
There's alot of up-front expenses other than the equipment that you usually get a return on by simply moving more equipment at less profit. Extra truck/trucker/trucking, insurances, etc. The dealer can also get stuck with a larger lot full of stuff that can loose resale value in a hurry, loose demand in a hurry, and face other issues.
I know of a full-line equipment dealer was a wheelin', dealin', and tradin' bunch in the 70's. They moved new equipment left and right, and were making good money on trade-ins and other used equipment until interest went sky high in the early 80's. Some people thought 25-30% interest was around the corner, and alot of customers that traded every 1-3 years kept their "old stuff" for a while longer to ride it out. Some of their customers went belly-up. Some that bought new before would never buy new again. Major line they represented forced them to place inventory on the lot that wasn't ever going to sell profitably in that economic climate. Used eq. sales dried up, too. Bank started riding the owners hard and interest was eating them (and everyone else) alive. They ended up having an auction to dump most of the (massive amount of) lot inventory that just plain stopped moving. A year or two earlier, probably 90% or more of that same lot inventory would have rotated every 120 days or less. Most of their customers had stopped buying, both new and used, unless they absolutely needed something. They canned the salesmen and one of the owners was pretty much the only salesman after that. They lost several years of equipment sales profit in about 8 hours, and had to get a lean against a considerable amount of farm ground they owned that was totally paid for to unbury the dealership. Regional equipment jockeys made out like bandits. It took them years to fully recover, but they survived. The major line they represented at the time did not. They never had more than about three dozen pieces of used farm equipment and tractors and only a small amount of new equipment on the lot at any given time after that. If you wanted something and had some time, they'd hunt one down for you. In the end, they probably did better with less employees moving less equipment, giving a few bucks less on trade-ins and squeezing a few more bucks out a sale.
Alot of farmers will never forget 15%+ interest rates. Equipment dealers don't either. History often times repeats itself. We shall see.
AG
This post was edited by AG in IN at 17:58:47 06/18/13 2 times.
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