The news that Lely has terminated three of its Toro dealers in Scotland in favour of going it alone will send shockwaves, not only through the rest of their UK dealer network, but through dealers as a whole.

Here is a major franchise effectively saying “Sorry, boys, we can do a better job”.

Now there are invariably two sides to every story. You could justifiably draw the conclusion that the three dealers involved were, collectively, not doing a good enough job for Toro, and deserved the chop.

Yet Lely’s announcement appears to contradict this. It talks about “Maintaining the excellent customer service provided by these dealers . . .” and “. . our decision in no way reflects the performance of the businesses affected”. Unless this is classic football manager sacking speak!

No, it is made clear that Lely/Toro have decided that they need to cut out the middleman in favour of direct dealing. The ‘middleman’ being long-established, reputable, independent dealers with strong local followings.

There could be several reasons for this. They would obviously prefer their whole portfolio of products, including Tym Tractors and irrigation equipment be supplied from a single source. But competing franchises at their dealers, particular compact tractors, got in the way.

It could be that one of the dealers was underperforming, but they needed a big enough territory to make a Toro-solus operation cost-effective, and so neighbouring dealers were ‘sacrificed’ (It’s happened before).

Whatever the rationale, you also have to believe that Lely/Toro factored in the strength of customer support there could be for the dealers in question – and any negative reaction that might result.

There are precedents of course. Claas bought out a number of their dealers a few years ago when they hit difficult times, but the dealers’ names are still ‘over the door’. Ransomes set up their own branches to cover vacant territories when a couple of dealers defected to a rival franchise, but they were short-lived and soon re-allocated to existing dealers.

Lely themselves have had major issues in Scotland previously. Toro distributor, A M Russell, who covered virtually the whole of the territory north of the border, folded and went into administration in September 2000.   

The week's announcement by Lely is of a different dimension. They are going straight to market. Eliminating the dealer. They talk about “enhancing our brand and channelling resources for growth” (which can mean almost anything).  Of course, Lely is a distributor itself rather than the manufacturer, but confirms that the decision was Toro influenced.

Will customers dealing 'direct' expect lower prices? That could really de-stabilise the rest of the Toro dealer network. 

It is generally accepted by most major suppliers that the most effective, efficient and satisfying route to market is through a network of highly regarded, service-focussed, well resourced, committed local dealers with whom they develop a close and, hopefully, enduring partnership.

It is timely that this announcement by Lely / Toro should come on the eve of our Conference next week in which we know it will be repeated time and time again that successful selling is often less about the product than the trust, reputation and relationship that the customer has with the retailer or dealer.

Only time will tell if Toro can be both manufacturer – and dealer. History tends to be against them.