Tuesday, March 15, 2011

A changing industry, Big Box Retailers and What has happened to Dealers this year?

Every single day it get's harder for dealers to compete.

As a distributor I am really grateful for the dealers that actually stock up in the beginning of the year allowing us to forecast and plan for 2011. We are all at cross-roads in this new age. To deal or not to deal with the big box retailer as the decline number of dealers despite gas prices start to add up. Shops are coming back to life, but is it sufficient to rescue the industry? I find myself asking the same question every single day.

However, we've come to the point where most scooter shops are just in time and refuse to stock unless you have something they absolutely need. This was pretty evident at the dealer expo this year where only one out of ten would come up to the booth to place an order. Then later when they absolutely need something they remember they haven't purchased something in two years. To me that's not a dealership, that's just someone that needs something. A dealer represents your brands, buys everything from a light bulb to that high volume item like an exhaust. I talk about this because I see the slide the industry is on right now in the United States and the pressure it puts on companies like MRP to go big box or direct.

I feel for the retailer I do, but the reality is a day doesn't go buy without a shop basically saying something like "I just want to buy one part why can't I get dealer pricing?" Seriously folks, if I wanted to sell one part to someone I would do retail and bypass the concept of a retail shop. I have always believed in the dealer, so I ask can the dealers restore my faith in the concept of wholesale only?
Distributors need dealers to show brands, not just push a sale. We need them to provide service, sales, and stock so that distributors can forecast. The other important aspect is they are the front line to counter the ever-increasing pressure form big box merchants.

Dealers are the front line when it comes to parts and accessories for the industry. Big Box locations like Costco, BJ's, Sears (Baja), Tractor Supply (Sportworks/Baja/Carter), Pep Boys (Baja), NAPA (WY), Home Depot (Sportworks), even Best Buy ( Did you see Brammo electric motorcycles in there last year?) Rural King, Farm & Fleet, Farm & Home Supply, Western Auto, Power Tools, are all carrying big box brands. From Tomberlin to Baja Powersports you see more names in these big box stores making the store just a service center. That's why stores need brands that are not sold in the big box retailers, they need brands that don't go retail direct. They are also starting to buy parts. To me thats a threat or a bonus that cannot be ignored because when I sell to a big box retailer we do volume.

If every brand you have in your shop can be purchased online or on Ebay then what is the point of the dealer. Seriously, I wouldn't need dealers if that was my primary outlet? We haven't gotten to that point yet. I want my dealers to stay alive because it becomes a sliding scale. All it takes for companies that depends on say SAMs Club is to have a recall or for them to stop buying parts and your company disappears. Anyone remember YerfDog? Godfrey's company? You have a recall from one major distributor and there goes your company. Poof - Gone! Same with parts you start selling all your wares to Pep Boys and they stop buying - Poof - Gone! So that's why MRP is sticking to the dealer only principle, but it does get hard when they keep knocking on our door.

The industry has gotten to the point where companies like Leo Vince take full page ads out talking about the decline of the Dealer Show http://www.thetruthaboutindy.com/

Companies like Leo Vince would rather sell on Ebay, Consumer Direct, than deal with sub-distributors and in many cases are just calling it like it is. The Dealer Expo should be for Dealers, but you have a bunch of people allowed to attend because in their state they have a retail license but work from a U-Haul. Let's be honest about what's happened to the industry in general then. Because if I'm going to spend $10k to exhibit I don't want all the dealers distracted by a motorcycle auction instead of spending money on new product. I don't want Chinese distributors that sell to WPS, PU, and to myself at the show going around us two or three years after you help establish their brands in the USA picking up dealers or selling samples from their booths. Like really, I am supposed to believe Advanstar or the MIC will apply any rules to the Chinese companies? They were 90% of the show this year. They were selling samples from their booths to the dealers in plain sight so they wouldn't have to take the parts back to China with them. These are the same companies now selling parts direct from China on Ebay sending them as gifts so they don't pay taxes while every distributor that complies with the law gets screwed on tariffs.

I also don't want people walking around asking if they can drop ship from their house. Maybe we should actually check who we are letting into these shows these days.

That's why as much as I regret the Ebay situation of the powersports business, I tell you that real dealers and distributors need to hold the line. Stop selling on Ebay, stop selling retail, and raise our standards. If you have no minimums, no buy ins and stand for nothing, the industry becomes nothing. We are headed into the age of anything goes. I hate the idea that if this slide continues that I will be forced to sell on Ebay just like everyone else, I'm hoping the dealers stick with us, start buying again because if this is the industry we're working towards it won't be a pretty one.

Leo Vince puts it right out there. If you buy nothing you get the minimum discount, if you buy X you get the best discount. At MRP we're forced to follow suit, but we haven't taken the extra step many of our competitors have done in setting up an 1800 number and selling consumer direct. Honestly, if we keep going in this direction we will end up like Italy where dealers barely make a living on service because you can buy all the brands direct from the OEM.

I wish Dealers would get organized and actually put their money where their moral compass was, but most people are too busy watching the bottom dollar to care. We have let the rules slide so far our industry might be too far gone to come back.

Every major distributor in the business is already setting up retail locations, retail websites, and drop shipping from each other. I worry what will be left of the industry.

The Leo Vince ad might have been a bad thing, but it's got a real point. I give them credit for calling it like it is. They don't care what happens because they sell no matter what. Brings me back to the Dealer Expo. You have to try harder at the show and harder with the dealers that attend to get fewer sales, then you get poor treatment by the people supposed to be helping you sell more. I just got a $1500 bill for shipping from Dealer Expo despite my box being properly labeled, despite my carrier being there on time, despite this having happened to me 3 times in 11 years. Despite me warning them I wouldn't put up with it anymore and that I would refuse to accept charges from someone that costs 400% more than my regular carrier. They always have some excuse. It's not Advanstar's fault its George Fern, then Fern blames the yard and the fact that Dealer Expo changed my booth number 3 times etc... I really don't care. It's the poor treatment of vendors at the shows, the sliding scale of the dealers, and the fact that dealers don't stock at these shows anymore. It's the diminishing returns at the dealer show year on year that have soured everyone in the industry on this. I was a guest speaker, I got more out of the seminar we gave on a personal level than the business I did because the sales didn't justify the expenses. Especially when George Fern pulls this 3 out of 11 times I exhibit.

I feel for the dealers I really do, but if one purchase from NAPA here in Miami is bigger than 30 dealers, it's better for me to sell more parts to NAPA than to focus on small dealers that no longer stock. Sadly, that's where we are headed because yesterday I saw it first hand. I had to beg a dealer to buy more than the TNG parts he had pre-sold, the manager from NAPA Auto Parts was out of scooter parts and spent $2,000. So much like the rest of the Powersports Industry I am forced to deal with the big box guy. Normally I could hold the line, but day after day this gets old when you have dealers not willing to stock a light bulb.

Comments? Thoughts?

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