Archive for August, 2010

Fred Fox: Aftermarket Upturn Has Started

August 22, 2010

MADISON, Wis — The U.S. powersports aftermarket is past the bottom of the current recession, but it’s likely that there could be continued consolidation and contraction of dealers and aftermarket suppliers, says Fred Fox, chairman of LeMans Corp. The company owns Parts Unlimited and Drag Specialties, two of the country’s leading powersports distributors, and services more than 9,000 North American dealers. It also operates a European distribution operation based in Trier, Germany.

Fred Fox

Fox made his comments here Saturday, at the company’s annual National Vendor Presentation (NVP). More than 150 suppliers and an estimated 400 dealers are expected to participate in the five-day event, up from last year.

Fox touched on a number of topics in his state-of-the-industry address and in private comments with me during the show, including:

  • LOW POINT ECONOMICALLY. “I think we’re past the low part of the (recession) curve, as far as the aftermarket is concerned. Most of our sales reps are reporting positive attitudes and encouraging comments in their dealer stores,” he said. When people don’t buy new, they tend to fix up the old, he added.
  • SALES ACTIVITY. Fox said that sales at LeMans were “good” in July and sales “look good” for August, too. He didn’t provide numbers, however, and declined to provide sales figures for the year, which ends in September. He told the audience that dealers in the Sturgis, SD, area and vendors that displayed at the recent rally reported strong attendance and excellent sales.
  • EUROPEAN BUSINESS. The company distributes about 100 brands in Europe and expects to increase this to about 150 brands by next spring. Parts opened its $38 million warehouse in Trier last August. The four-tier facility  covers 177,600 square feet and has inventory worth about $10 million.
  • SUPPLIER CONSOLIDATIONS. A number of suppliers are re-evaluating their future now that the important summer season is winding down and they are facing the slow fall season. Weak cash flow and tightened bank credit are causing some problems, he said. “A few are going to be quitting,” Fox told an audience of suppliers and media representatives.  But he told the audience that he is prepared to assist selected companies when possible. For more than 40 years, Fox has developed a history of fostering mergers among suppliers and of providing individual companies with flexible purchasing programs during slow periods. “If anybody here says,  “The bank is about to call my note one of these days,’ and you need help with that, don’t be afraid to call,” he told the vendor audience.
  • DISTRIBUTORS. Fox said that some competing distributors are using price-cutting business models aimed at cash-strapped dealers. “The thing that scares us,” he said, “is that these distributors, who are selling only on price, aren’t helping the dealers and they aren’t helping you,” he told the suppliers. “More pins in the map doesn’t mean more sales for your product,” he told them, suggesting that loyalty and quality service is more important than adding additional outlets.
  • DISTRIBUTOR CONSIGNMENT PROGRAMS. Fox vehemently denied rumors that Parts/Drag is testing consignment programs in selected dealerships.  “No, absolutely not,” he said, regarding consignment programs at LeMans. “It’s not in our playbook. Consignment is for product that is selling poorly or for stuff you can’t sell. It’s a mistake. We don’t have one nickel’s worth (of product) out there (on consignment). It will not happen in this company.“ Fox said there’s a simple reason for the no-consignment policy at LeMans: “We want the guy to have first class product and have an investment in his business. If you offer consignment, you’re betting on defeat. If a guy has one helmet over here that he’s paid for, and one over there that’s on consignment, guess which one he wants to sell.”  Also, he said, the tactic tends to prop up weak dealers and keeps them going against the good dealers in the area. “If you fill up your store with obsolete product that doesn’t move and then give it back and get some more obsolete stuff that doesn’t move, that’s a bad idea.”

The show ends today. “Attendance has been up from last year,” said Fox, “and the mood among dealers and suppliers I’ve talked with has been excellent.”  JD

Contact me with story ideas and news tips at
jdelmont@dealernews.com or 952/893-6876.

Checking in with Tucker Rocky’s Steve Johnson

August 15, 2010

I didn’t have a chance to participate in Tucker Rocky’s national sales meeting in Texas last month, so I tracked down TR”s chief Steve Johnson to get his reaction to the five-day event and to see what he had going at the big Fort Worth-based national distributor.

Steve Johnson

The show was different this year, by design. More aimed at training and business improvement than entertainment and relationship-building. “This show was a lot more about product and selling product,” said Johnson. “It was less about fun and more about dealer training and how to run a good dealership.”

In Johnson’s view, the participating vendors and dealers “were more than positive, they were engaged” in what was going on. “A lot of people are still excited to be in this industry. But there’s a realization that there’s a new norm; it may come back a bit, but it’s going to be at a slower pace. You can’t expect 10%-15% compound growth. You have to hunker down and run your business as best you can. People were fully engaged; more so than ever before.”

Dennis Johnson, editor-in-chief of Dealernews magazine visited the show and did a nice job of reporting on the event in the August issue of the magazine. I’m not going to duplicate his efforts here, but Steve covered some interesting points in our conversation, many focusing on dealer training and customer service.

Big Push On Customer Service

As we chatted, Steve told me a story about customer service that came from his previous experience in the foodservice business. To paraphrase his story: There once was a large bakery that produced custom products for a high-end local grocery store. The big thing was fresh birthday cakes, made the same day and featuring custom greetings. It was an important item for the retailer and produced nice margins for both the bakery and the retailer. The cakes were always delivered on time, the names were spelled correctly, and everyone was happy. But one day, there was a mistake; a cake didn’t get produced for a birthday party that day. The customer went crazy, of course; what was she going to do for the party that afternoon?

(more…)

I Have Returned from Vacation

August 9, 2010

Joe Delmont

It’s always great to be on vacation, but it’s nice to be back, too. I’ve recently spent the better part of two weeks vacationing on a lake in northern Wisconsin with my wife, Bobbie, the three kids, Steve, Bryan, and Kate, and four grandkids. I golfed, read three novels, played with the grandkids, and spent too much time with a big, ol’ black Lab mutt named Jimmy, who visited every day. Jimmy is the only dog I every knew who retrieved rocks. That’s rocks, as in stones, big stones, that he would dig out of the bottom of the lake and then drop at your feet with a big, wet grin. Obviously, Jimmy doesn’t know the difference between a rock and a tennis ball.

Summer’s a busy time anyway, even without a vacation in the north woods. My wife and I have picked up two days of babysitting for the grandkids on Tuesday and Wednesday to save them some day care dollars. Four little bundles of energy, ranging from seven months to six years, each wanting lots of attention involving library visits (good), swimming lessons at the neighbor’s pool (not so good), and trips to the local kiddy park with juice and snacks (bad).

OK, I know I’ve said I want to spend time with the new generation, but it’s difficult to keep up. Bobbie and I don’t remember how we raised three kids of our own. Must have been some grandparents heavily involved in that schedule.

Story Backlog
At any rate, I’m back at the keyboard, and I’m looking at a stack of story notes. Tucker Rocky. Baja Motorsports. ITC’s investigation of intellectual property rights. CFMOTO’s suit against EPA. And a couple of other industry stories based upon research from Power Products Marketing, the Minneapolis research firm, plus my column for September Dealernews and the Dealer Lab report on Bill Shenk’s June performance—another profitable month.  I’m also heading to the Parts Unlimited show in Janesville and visiting the new Baja headquarters at the complex of its parent company TTI in Anderson, SC, at the end of the month.

And suddenly it’s September. Where has the year gone? JD

Contact me with story ideas and news tips at
jdelmont@dealernews.com or 612/845-8091.

Is there an electric motorcycle in your future?

August 3, 2010

This story originally appeared in the Dealernews August 2010 issue.
Looking for new incremental revenue? Why not consider selling electric motorcycles next year? New research indicates it may be worthwhile.
“If an established OEM got electric machines into their dealer organization,” Greg Boeder says, “I think you could start to talk about selling quite a few units.” Boeder is a senior partner at Power Products Marketing (PPM), a Minneapolis firm that tracks retail sales in the powersports market. PPM recently completed research on the market potential for electric motorcycles in the U.S. The project included surveying OEMs that are building electrics, and others that are considering doing so, as well as more than 100 owners of electrics.
“Many in the industry today,” Boeder says, “think [electric] is going to have an impact on our business, whereas a year ago I don’t think anyone believed that. There’s a lot more interest, but there’s no product out there that a major OEM is standing behind.”
Boeder’s not the only one who feels this way. The MIC this spring launched its Electric Vehicle Task Force. “We solicited interest among the OEM membership and our boards,” says Paul Vitrano, who heads the group. “We thought it was important to examine the issues that seem to be growing in this segment. We thought the MIC was the place to make that happen.”
Initially, the task force is looking at two broad areas: government regulation and consumer education. The government work includes developing technical specifications. On the consumer side, the task force wants the industry to present a consistent message to buyers about electric motorcycles, to help potential buyers compare machines on an apple-to-apple basis.
The big questions for consumers regarding electric vehicles, Vitrano says, are: How far will it get me? And how fast will it go? “So, we’re looking at developing uniform ways to calculate that information and present it, on a voluntary basis,” he says. “We want voluntary, consistent thinking on the best way to present these performance capabilities.”
Says Vitrano: “The industry has to speak clearly so that consumers understand the product and are not confused.” The task force is developing an FAQ, or standard lexicon, so the public understands the definitions of key terms that are unique to electric vehicles.

Market potential
The market potential for this segment today doesn’t seem to be very large, and there doesn’t seem to a major player in the field yet, according to Boeder’s research. But it’s worth noting that Polaris has made a commitment to electric vehicles with its Breeze neighborhood electric vehicle and its Ranger electric UTVs.
The research shows that the typical buyer of an electric motorcycle is affluent, mostly male and, perhaps most important, an experienced motorcycle owner. “This is not a first-time buyer product,” says Boeder. “The first-time buyers, including the stereotypical green enthusiasts, are looking, but those who are buying have current or previous motorcycle experience.”
They buy, he says, for commuting and short-run general transportation. “They are aware of the range limitations of electrics,” he says, “and if their motorcycle riding needs include touring and longer trips, they will keep their gas machines.”
The market for electric motorcycles, the research suggests, is tiny primarily because no major OEM offers them. “The two leading suppliers, Zero and Brammo, have very limited distribution or ineffective distribution,” Boeder notes. Brammo is distributed through Best Buy. “Outside of Southern California,” he says, “the need to rely on sales reps and online purchasing will limit growth in the near term.”
But Boeder sees potential for an established OEM with a good product. “If the typical OEM has 1,000 dealers,” he says, “it would not be out of line to think that each one could sell three, four or five units. Everywhere you look, there is an affluent motorcycle rider, or former rider, who would consider an electric motorcycle, considering the state of the world.”
Are the Chinese a factor? Probably not, says Boeder, though they have sold electric scooters. “Most scooters sold during the gas-price craze,” he notes, “sold for less than $1,500 and were sold to first-time buyers. Stepping up from a cheap Asian scooter to a $7,000 or $8,000 electric motorcycle seems a stretch to us.”

A note of caution
Dealers probably shouldn’t rush out and buy electrics. There are some considerations beyond limited product availability. Experts note that the sales conversation is different for an electric machine, and the sales staff requires training in the features and benefits of this new segment. Service staff also require new training, and there will be some new parts to be inventoried, such as batteries and controllers.
A former racer now working for a major OEM told me he finds the segment interesting but isn’t ready to embrace it. “You have to get the weight right,” he says, “and the range right and the price right. And the performance just isn’t there. You’re trading out performance and paying a high premium. On the other hand, if you want to improve your carbon footprint. … [The electric segment] certainly is an interesting [market] space, but I don’t see anyone having success until someone gets the range up, the price down and provides acceptable performance.”
Electric bikes may not be worth it this year, but they may be worth keeping on your radar for next year.

How valuable is your last customer?

August 2, 2010

This story originally appeared in the Dealernews August 2010 issue.

Are your best employees the ones interacting with your customers? The ones who know your product line the best, the ones who are the most affable, the most personable? If they aren’t, why aren’t you training them to be?

Suzuki’s Rod Lopusnak asks dealers to consider “The Foot Locker Challenge.” When a person walks into any Foot Locker shoe store, that person gets a better sales presentation than if he or she were walking into a motorcycle dealership to buy a new bike. Foot Locker’s sales staff is professional and well dressed, and usually tries to upsell related products, not just the $100 pair of cross-trainers. Foot Locker employees are trained in the company’s sales processes.
Alas, the same can’t be said for many powersports dealerships.

Lopusnak, who is the OEM’s national sales manager, joined Clark Vitulli, Arnie Ackerman, Paul Leinberger and Steve Johnson on a “Success Strategies” panel discussion held last month during Tucker Rocky’s annual sales meeting and dealer show near Dallas. The hour-long discussion covered lots of things, from MAP policies to the best ways of reducing labor costs and cutting back on inventory. But the two themes that seemed to color every other topic were training and education — and that it’s up to the dealer to set the standard employees must follow.

Vitulli, owner of Harley-Davidson of St. Augustine (a Top 100 dealer) and former CEO of America’s PowerSports, said frontline employees — the greeters, parts counter reps, sales staff, etc. — need to be trained well. These people need to be bulletproof, he said, and have to know exactly what they’re doing in their respective departments.

“If there’s anything that you can take away from this [seminar] it’s that you need to have processes in a dealership, and the owner needs to be there to manage them,” Lopusnak said. “That is the absolute, No. 1 thing I’m seeing, regardless of everything — that dealerships don’t have processes. You have to have processes or you’re not going to be successful, and you’re not going to make money.”

When the tone is set from the top down, the effects transcend departmental boundaries. I think back to any of my previous employers. When the management was good, work went smoothly. If management sucked, so went the workday.

I’m a big fan of the research presentations given by Leinberger, a noted researcher and market analyst, at various MIC meetings. He’s been fairly prescient in forecasting how the consumer market will behave. Ackerman, chairman of the MAG Group, brought the strengths of a successful portfolio of brands; Lopusnak his background with Tucker Rocky and Suzuki; and Vitulli the experience of overseeing one of the country’s largest dealer groups. Each person’s comments built upon the others’ and resulted in an interesting, multilayered conversation. Some of the takeaways:
• Make sure you offer something your competitors don’t.
• It’s important to build a relationship with your customers.
• Stocking parts and accessories that have high turn rates makes sense.
• Make the dealership a fun place for customers and employees.
• Offer training and licensing for new riders.
• Monitor your store’s metrics.
• And my favorite, from Vitulli: “Treat every customer as if they’re the last customer you’ll ever see.”

Sound familiar? These are the fundamentals of any good business. These are the topics that Dealernews columnists and others have covered over countless magazine pages for decades.

Whenever I come across discussions like this one, I can’t help but link them to my own experience with retailers, whether they be motorcycle dealerships or my neighborhood market. The takeaways are the very things I require, as a consumer, out of a retailer. If they’re not there, I take my business elsewhere. I’m not picky, but I know I have options. Why not pick the best option for my needs?

This year’s Top 100 competition again offers a Merit Award for Best Customer Service. It’s an important award, recognizing a dealership for the most innovative and successful customer service program it has created and implemented over the last year. Once you get through your basic Top 100 nomination form, you’ll be sent an e-mail inviting you to qualify for one of nearly 18 individual Merit Awards.

Dennis Johnson
Editor in Chief
dennis.johnson@dealernews.com