Dealers and the chain saw market.

DEALERS and the CHAIN SAW MARKET

A YEAR AGO, I&T was telling farm equipment dealers that the chain saw business was heading back into their hands. From what we've been hearing from some dealers we've called, this is indeed what's happening.

Some background first: How did chain saws and servicing dealers get separated in the first place?

Back before the energy crunch of the 1970s, it was presumed that anyone who needed to use a chain saw with any frequency at all knew that he needed parts and service to go with the product. That meant that such items could not be marketed like an electric toaster, that they required people who could show customers how to use them and could fix them when they went bad.

A lot of farm and outdoor power equipment dealers thus participated in the market. It wasn't something to make a dealer rich, but it made a decent margin, provided traffic and parts and service labor sales volume.

Altered market

Things changed. Home heating costs soared, turning a lot of people toward the idea of wood-burning stoves. Manufacturers came out with small, low-price chain saws for the public at large -- and decided to go for volume. That meant mass merchandising and heavy television advertising.

Dealers tend to get squeezed out when this happens. If a dealer wants the saw franchise and will stock parts and perform service, he is also expected to stock a quantity of complete units for sale. But sometimes he peeks in the paper and finds the local discount house selling the saws in a cardboard box, right off the shelf, at a price he just can't meet.

And that's often been the way that a dealer and chain saw firm parted company.

But the market changed again. The price of heating oil came down. Meanwhile, the price to manufacturers and big retail chains of legal defense services in product liability litigation went up. Back in 1979, the manufacturers of chain saws shipped 2.9 million units to distributors and retailers. Last year, according to the Portable Power Equipment Manufacturers Assn., total estimated shipments were down to 1.35 million units, off 11 percent from 1985.

And then came the voluntary safety standards developed by the American National Standards Institute, with the close observance of the Consumer Product Safety Commission. (See box, Page 8.)

These standards have tended to divide the chain saw market into two levels. One of them is the occasional-use buyer, usually a homeowner, with a small amount of cutting to do and not much knowledge of how to do it safely. The second is the professional, or the experienced semi-pro, such as the farmer. They need long-term performance.

The first of these markets has generally been served by the mass merchandiser. But now that there's a standard in place, though voluntary, it may be deemed unwise by some to rely on checkout clerks to provide the proper precautions. Will product liability concerns eventually take the chain saws out of the chain stores? It remains to be seen.

The servicing dealer has been the mainstay of the other market, the professional user who needs a saw that provides performance over time, along with parts and repair work availability.

Talking to dealers

I&T phoned several farm equipment dealers, some of whom have been selling chain saws for many years and others who are rather new at it. Here's what they told us:

Paul Peoples, Peoples Sales & Service, Oakland Mills, Pa., is a Massey-Ferguson ag tractor dealer and also handles Case utility lines, Kewanee, New Idea, Bush Hog and Gehl. His chain saw line is Pioneer/Partner.

"Our sales are primarily to farmers who have to keep woodlots trimmed. They are service-conscious, of course. But the homeowners we have for saw customers are getting service-conscious, too. In many cases, they're moving up a step when they buy here. They might have bought a small one, found you can't get much life out of them, and not much service if you buy from a mass merchandiser. They learn that they get better performance and better life this way -- more for their money.

"When we sell to a homeowner, we're accustomed to giving instructions about proper use, safety guidance, make sure they have anti-kickback chain. And they are getting more safety conscious."

This dealership sells 30 to 35 chain saws in a typical year. "That's not as many as a lot of mass merchandisers, but we make a decent margin on what we sell and service."

John Tiemann of Cater & Odegard Implement, a Deutz-Allis/ford dealership at St. Cloud, Minn., says that they've been retailing chain saws for around 35 years. "We have one man who does nothing but chain saw service work, and another sometimes joins him when the winter service work gets heavy. We have all the equipment for servicing the bars and sharpening chain, and we sell a lot of chain in 100-foot rolls to customers."

The dealership sells about 100 saws a year, about a quarter of them to full-time professional cutters. "Some of these pros will buy the biggest sizes in our line," says Tiemann, "which can run from $700 to $900. They are using these saws eight or 10 hours a day and so in a couple of years, they're ready to trade.

"If a homeowner or other occasional user bought one of these and he was 35 or 40 years of age, he'd probably never need another one. There's that much difference in use."

Tiemann said his dealership's main chain saw line is Husqvarna. As for chain saw product lines that sometimes turn up for sale in discount houses at lower prices than dealers can get them, he says, "We've run into that with some other lines. We're still a warranty station for one of them, but we'd just as soon not sell their saws."

Chuck Driemeyer of Driemeyer Motor Co., Marthasville, Mo., just got into chain saws and has sold about a dozen of them in his first two years. He agrees that the saw business is swinging more toward the servicing dealer.

"We sell mostly to the sundowner, and most of them really don't know what they've got when we sell them a chain saw, so we have to make sure they understand the operational safety factors."

The dealership sells Deutz-Allis and Kubota as well as the Sachs-Dolmar chain saw line.

John Magnus of Magnus Tractor Sales at Clare, Mich., comments: "People are learning that with a chain saw, your first price isn't everything. If there's one time the saw won't start, and they go back to where they bought it and they find that there's nobody there who can give them service, they get an education in a hurry."

This Ford New Holland dealership is located at a point north of which the Michigan vacation area (i.e., lakes and woods) begins. South of Clare, it's mostly farming.

"Most of our customers are either professionals or homeowners," says Magnus. "There are a lot of people who heat their homes with wood-burning stoves. We make sure that these occasional users buy anti-kickback chain.

"I'm selling a saw line -- Husqvarna -- that is not the cheapest. They're saying at company meetings that mass merchandisers are scared of product liability concerns and are not as inclined to sell the saws as before."

Mark Dittelberger, Mundy's Implement Sales, Ireland, ind.: "We don't try to push our chain saw line to homeowners. We'd rather sell it to farmers who use saws to clean up and clear out areas around the farm. There are some professional loggers around here, too, but mostly we're taking care of our regular customers."

Dittelberger says that in their first two years of carrying the Sachs-Dolmar line, they have sold about three dozen units.

"We haven't been pushed to buy some excessive number of saws or parts," he

remarks. "I also like the inter-interchangeable parts and the sale price, which is something you can live with, make some money and keep the customer happy. We're not asked to go beyond what our normal market can absorb."

Bill Robertson is a Case IH dealer at Winona, Miss., and his dealership, Robertson Farm Equipment, only started selling Pioneer/Partner chain saws last October, but he's been making things happen. When I&T talked to him at the end of April, he reported 66 units sold since then, plus a lot of bar, oil, chain and other parts.

"Right now," he says, "pulpwooders are our heaviest market, but we have homeowner business, too. Our serviceman who has done small engine work on lawn and garden equipment is taking care of servicing the saws."

He adds: "We made sure we got a supplier whose saws you won't find on the shelves at Wal-Mart."

Dave Hardy is a partner at Agri-Home Equipment, an outdoor power equipment dealership at Porterville, Calif. He reports that the business sells about 200 chain saws a year. Main lines are Sachs-Dolmar and Echo.

"About half our customers are farmers and half homeowners," he says. Of these buyers, about 90 percent take saws under the 3.8 cubic inch displacement size designated in the ANSI standard.

It's a tough game to sell saws in competition with the mass merchandisers, but Hardy says, "We aren't missing any meals. Really, service is the only thing we have to offer. We're about the only saw retailer around here that has a shop."

Hardy worked for a saw distributor for many years before opening Agri-Home 10 years ago. He's seen a lot of changes. One American manufacturer, he says, found out that the typical homeowner with a chain saw won't run it 50 hours in 10 years, "so they began making it accordingly."