Market uncertainty is top of mind for everyone these days. Ag retail is especially vulnerable to dynamic markets as inflation rises, labor shortages persist, and supply chains remain unstable. Many successful companies, including Apple and Amazon, have used diversification to increase profitability and protect their businesses against uncertain markets. Here are some ways product diversification can benefit ag retail.
COVID-19 changed the way that every business operates in one way or another. Companies have had to pivot to find innovative ways to reach their customers, and many struggled as manufacturing disruptions made product procurement difficult. Product diversification helped some companies weather uncertainty by providing multiple outlets for securing products. For example, if you rely on one source for securing your fertilizer and there is a supply chain disruption, you may be left in a vulnerable position to meet customer demands.
Diversifying also enables you to mitigate risk by spreading your investments over different market sectors and suppliers to reduce volatility. Spreading your revenue across various categories, including seed, crop protection, fertilizer and custom applications, for example, can offer stability during market uncertainty.
Diversifying your product lineup can help you meet your customers’ demands by offering various options for them to choose from. Product choice is especially critical in uncertain markets because farmers may decide to scale back their standard purchases and may look for more cost-effective alternatives. When you have a portfolio of products at different price points, you can satisfy customer needs more effectively.
The supply chain disruptions ag retail is facing is an excellent example of why product diversification is essential. When you offer a variety of products, you can provide suitable alternatives to keep your customers happy when they can’t get their top choices.
If you have product diversity, you’re able to tap into new markets, which can be especially critical during times of uncertainty. For example, suppose you decide to offer organic-certified fertilizers that are also effective for conventional production. If you’ve typically done business with conventional farmers, you’ve increased your market penetration by enabling business with organic farms with your new product lineup. Stay mindful of ways to expand your product offering to seize untapped opportunities.
The last example is a good illustration of how you might increase profitability potential by diversifying your product lineup. Having products that provide solutions for the various agronomic challenges farmers in your area face helps you grow your business and reach new customers. That’s especially important in uncertain markets when farmers may be buying less.
When markets are uncertain, you want to ensure your competitors stay one step behind you. Diversification in your product offerings can help you stand out and offer solutions that your competition can’t. Farmers often look for convenience and support over the lowest price. If you can provide everything a customer needs in one stop, you’re likely to win over the competition.
When you’re offering more products, you have more flexibility to pivot your business as the markets and industry change. Diversification allows you more freedom to adjust your plans in response to seasonal conditions and customer demands. You’re not pigeon-holed into selling products that may not be practical or relevant based on environmental conditions or dynamic markets. Instead, you can focus your efforts on more profitable opportunities.
By offering a variety of product solutions across different categories, farmers will see you as a progressive industry leader. Product diversification, by its nature, will require you to remain in-tune with what is happening in the industry. You’ll get access to the latest agronomic research, newest products and local farm news, which gives you a competitive edge. Customers will come to count on your business as a supportive partner who can deliver the most economical, practical solutions for their farm.
When markets are uncertain, customer loyalty plays a significant role in your company’s revenue potential. When you offer a diverse product portfolio, chances are, you’re touching more of the farm. That means more farm visits, which gives you the opportunity to learn more about your customers’ operations. It also allows you to develop more genuine, lasting relationships. Product diversification enables you to see a more holistic view of the farm to provide customized recommendations that fit your customers’ production goals.
With a diversified product portfolio, you have more control over what, when and how you offer products. It may also give you leverage power as you choose suppliers and negotiate incentive plans. When you have options, you’re empowered to run your business the way you want to.
Ag retailers continue to struggle to find and keep talented workers, and it’s not a challenge that is easily overcome. Remote locations and long hours aren’t attractive to many job seekers, but product diversification may make the deal sweeter for potential employees. By offering more variety in day-to-day responsibilities, workers will likely be more engaged and excited to come to work. If workers know that there are opportunities for growth, development and learning, they’re more likely to sign on the dotted line.
Market uncertainty can make navigating the ag retail industry a challenge. Fortunately, well-diversified businesses are in an excellent position to weather the ups and downs and remain profitable. Take an objective look at how balanced your ag retail location’s product portfolio is, and explore ways to increase diversification. Whether adding a new product lineup, offering more package sizes or expanding into a new market, you and your customers will benefit.
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