Saturday, May 8, 2010

Chinese Price Wars

It's always interesting to see whats going on in the market.

2010 is already at the mid-point for the industry and several high profile stores across the US are closing. Meanwhile several Chinese manufacturers are fighting it out in public swapping sales reps, cutting prices on GoKarts and ATVs in an effort to get more of the cash the retailers have left. Consumers online love to fan the flames, of course, because it makes for good debates online, but mostly because pro-summers who are fans and riders tend to think they know the industry. The truth is mostly half truths come out and most of what needs to be known can't be explained because eventually it makes it out into the public sector. So you have to be careful what you say because the guy that operates out of his house without any assets, without insurance, without a DMV or importers license he doesn't care if he goes to court. He's not in it for the long term and had nothing to loose from the start. There are more and more retailers like this bringing into the market the lowest common denominator to the types of exchanges online, in the stores, and in the marketplace.

Great stores take time to build and they get to the point where they must adapt to the changes the same way distributors do. One case in point and I'm sad to say is one of the longest running scooter and kart distributors in Miami AAA just closed the store had been a staple for 30 plus years in Miami. So its sad to see a legitimate retailer go out of business. Instead you have all the local Craigs List distributors and people selling parts on message boards, drop shipping from their houses. Consumers and Pro-summers alike need to start asking questions like are they really helping anyone other than the Chinese factories by shopping from these pseudo shops?

I think stores need to be smarter of who they pick as well. The guy that sells around them or the guy that sends them business. Some of the shop owners I know don't really care or think the internet doesn't affect them, but it does. It's the reason shops close. It's funny they don't tell me I'm right until after the fact. Then I have the other type, the guy's that come up to me and we got get some espresso or we meet for lunch. One store owner I know with two locations isn't my greatest customer, but takes me out to dinner just so we can brainstorm. More than once he's invited other store owners and I think this his greatest strength he's friendly with all his regional competitors. At these dinners we've not only talked about brands and who's doing what but we've managed to figure out who is going around them particularly new importers and new brands.

Now this is where the Scooter Maven comes out. You have to know what you're doing when you're in the industry because if you screw your importer, dealers, or clients its very easy in this market to find another brand. I know this because I've managed to switch more than one store to another brand. If you have the type of relationship that means real influence inside the customer base you have what the vendors and producers fear and that's the ability to switch dealers to another product you distribute or that you recommend. Every single day a store asks me the question " Should I carry this brand? " and I have to give them an unbiased answer even if the brand president is a personal friend. Just so I make myself clear, if you screw the dealers by drop shipping or selling direct be it a vehicle, part, or accessory all it takes is an industry insider to convince them to switch or to tell them check out this article online on the company. That's the truth and that's why despite wanting more sales and more revenue we have to have some ethics.

This week I had calls from sales reps and was caught in the middle of inter-Chinese price war. My opinion the way to sell is not price, its the quality of the product and service. I had dealers asking me if they should buy from one company or the other solely based on price without any regard to service, marketing, technology, and I had to give them the best possible answer. The best answer in this case was to not buy at all if the decision was solely based on price something the dealers didn't want to hear. I also had a good lecture for the sales reps because setting up dealers for the sake of a sale is locking up territories ( this is a whole other speech ) in the end what it came down to is that theres a proper way of doing this and everyone is so hell bent on getting the sale they are forgetting what its about.

I know the high profile sales of 2006 and 2007 are gone. It's going to take a long time for quality retailers to come back to the marketplace. Those days won't come back unless gas hits $4. Meaning nobody will be buying RVs, ATVs, Go Karts but everyone will be rushing for scooters.
That's not what I would like to see either, it has to be a gradual return to real enforcement of DMV laws everywhere. The OEMs also have to crackdown on the dropshipments. I think more legitimate brands need to put an end to it and it's hard to say no to a sale, believe me I know, but its better to do that than to let one online retailer ruin your brand. This happens all the time and more companies in the industry need to put an end to this. CLOSE THE GUY WORKING FROM HIS GARAGE.

Now this is not something message boards, Ebay guys, craig list sellers, and small backyard shops want to hear, but its the truth. Sometimes when manufacturers, producers, or importers engage these pro-summers it only makes the situation worse. Since legitimate entrepreneurs with companies, insurance, retail locations etc... ( real overhead the guy in his garage doesn't have) can't come out and basically say " hey this guy is a full time truck driver by day he should not be drop shipping scooters and ATVs on a message board since he has no DMV license " because then the OEM or distributor looks like the bad guy. Still for any brand to become legitimate in the marketplace they will have to put an end to it before the CSP or NHTSA do.

The same has happened in the parts business and I've called out a lot manufacturers to their faces what I see as a backstabbing of the dealer. 2009 caused a lot of brands that traditionally sold only to distributors to turn to the internet in desperation. Basically bypassing distributors and selling direct to the public, braking promises, braking agreements and causing all sorts of havoc. The end users do see the effects, but the constant search for better pricing completely disregards the need for stores to stock, provide service, and allow brands to make a profit. That profit allows for things such as warranties and giving good customer support.

I'm convinced many of the moves we saw in late 2009 are a mistake and many of these brands will have to change. A few of my industry contacts disagreed in 2009 when I wrote my articles for Motorcycle Product News and since then have come back and said "hey you were right so and so factory never paid me my commissions" and my whole opinion on that is when it gets hot you see what people are truly made of. It's called ethics. It's unethical to run a drop shipping website selling for less to the public if you are selling to dealers. It's unethical for parts OEMs to sell under false names on Ebay or to bypass importers and dealers. Yet I see it everyday and its a thorn in the industry. We have to support the "Real" retailers and I think its something many of my industry peers have forgotten. I don't blame some of the salespeople they are just employees following what the boss at the top commands, but when you get the emails or call a store and the number is disconnected it does get to you.

I'm hoping we start having less of that in 2010.

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