With recent news that 14 independent retailers in Western Canada have joined forces with an Australian entity, and another group of independents forming Winfield United Canada, I’m finding myself wondering what the future of independent ag retailers looks like in Canada. Is there a future? Can someone with one to five outlets make a go of it?
There’s no question the independent ag retailer has had better days in in most of Western Canada. There was a time where they covered the prairies, no different than farm houses and tree lines. But thin margins, heightened competition, mergers and acquisitions have these staples in our communities under threat.
So what has happened?
Based on discussions with independent retailers across Western Canada, here’s what I’ve found out:
- The bundling black box forces sales growth and doesn’t reward value. Suppliers have been rewarding retailers with back-end growth margin. The incentive to drop price in an effort to grow share has created a vicious reality of no margin on sale and a complete reliance on back-end fall programming. In the ugliest situations, even the back-end margin is given to the grower to gain the needed product sale.
- Today’s farmer is more of a shopper. Retailers have been forced to drop prices to increase sales, while farmers — worried about thinner margins — have become more price-conscious in sourcing inputs. As I talk to independent retails or line companies they all share the same sentiment: farmers under 30 price shop much more than their parents did.
- The opportunity to sell has been good business. Crop Production Services, Cargill, Richardsons and Federated Co-operatives have shown no hesitation to buy up market share across western Canada. In fact, some of the best business an independent retailer can get is to sell to another mainstream line company looking to gain share in current or new areas.
So what is the future of the independent retailer? Can we expect new independents to pop up across the prairies?
Here’s my conversation with Univar’s Neil Douglas about the future of the independent ag retailer and what they mean to rural Canada: