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2011 Doesn’t Look Much Better than 2010

October 18, 2010

The U.S. Economy Is In a Flatline Mode.
Consider the Situation When You Vote Next Month

Last January, I attended a dealer 20-Group meeting and offered my outlook for the year. In a nutshell, I told the dealers not to expect a flood of excited customers in the spring; it just wasn’t in the cards. And, in my view, they would be better off planning for a slow season rather than hoping for a heavy increase in floor traffic. I was roundly criticized by one successful dealer for being too negative.

Unfortunately, traffic did not pick up in the second and third quarters and this quarter doesn’t look too hot, either. Now, looking ahead, I don’t think there is much hope for a big improvement in 2011. I’m basing my initial forecast in part on what I’m hearing from a number of sources, and in part on an excellent analysis that appeared Oct. 12, 2010, in the  New York Times. The lengthy report carries the gloomy headline, “Across the U.S., Long Recovery Looks Like Recession.” I suppose I could stop right here; you get the point.

The bottom line is that it’s going to take years to recover from this recession, the downturn that’s been the worst for this country since the Great Depression. Consider the situation as you build your 2011 business plan and as you stand in the voting booth next month.

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Posted in Delmont, economy, Uncategorized | 1 Comment »

Profiting From Failed Competitors

October 13, 2010

“Dealers struggle with this because they feel the pain of their
competitor going out of business. What do you say to this guy?
It’s not a fun conversation, but it’s something you’ve got to do.”

—Bill Shenk

Nobody likes to see a local business fail. The question is, How do you deal with it? How do you treat a competitor that has failed or is failing? Ignore his problem? Sympathize? Take advantage of his situation? What are you prepared to do?

What if you helped yourself and helped her at the same time… by quickly purchasing some of his most valuable customer assets?

It’s a sensitive situation, of course, especially if you’ve had a cordial relationship with the competitor. But the reality is that when that store closes, several things are likely to happen, and most of them are not going to benefit you unless you take quick action. For example, assuming that he has many of the same lines that you carry:

  • He’s going to have a closeout sale that’s going to suck many of the hot prospects out of the market. That means you lose sales today and in the near future as consumers move up their purchases.
  • When he closes, his OEMs may very well set up a new dealer, or dealers, and if this happens, the new competition very likely is going to be more aggressive and better financed than his predecessor. Now, you have a tougher competitor than you did before; that doesn’t sound like fun, does it?
  • Your OEMs may give you a chance to take over his point, or at least the OEM may sell you his inventory at a discount— if they don’t sell it to another of your competitors.

So, if you wait, your options aren’t very good and they actually could be bad enough TO PUT YOU OUT OF BUSINESS. What are you going to do? I asked Bill Shenk, head of PowerHouse Dealer consulting services and the key man in Dealernews’ Dealer Lab project, if this subject had come up in his 20 Group meetings. It has, he said, and he told me some of the steps that his dealers have taken in this situation.

“Going after ORPHAN CUSTOMERS is one of the best ways to boost your business in a tough economy,” says Shenk. “Orphan customers— those without a dealer relationship— are already in the lifestyle and they are looking for a dealership to take care of them.

“But you have to be PROACTIVE. Only one person is going to get that customer list,” emphasizes Shenk. “OEMs tend to split up the list among surrounding dealers. And the (failed) dealer may have brands you don’t carry; you want to get those names, too.”

First, put sensitivities aside, for the moment, and move into action. Make a list of the things that you can do to take advantage of the big change in your marketplace. Here is a sample Action Plan:

CALL your competitor and tell him that you sympathize with his situation and you want to do some things that will help both of you. Offer to pay him for pieces of his business that he won’t be able to sell elsewhere.

BUY his phone number and have calls to his store forwarded to your dealership. Set up a separate number coming into your store so that your employees know where the calls are coming from. Then they can answer with a special greeting. “You have to tell the customers that you bought the number from the previous dealer and that you are trying to take care of them,” says Shenk. This straightforward approach creates a comfort level with the new customers and creates confidence that you will service their needs, he says.

OFFER to purchase his customer list. There are more customers than the ones who have purchased new units; those generally are available from the OEM. “Say there’s a store 30 miles away that carries one of your lines. A nice store might be worth 100 new units a month,” says Shenk. “So, if you get a list of those who purchased in the last two years, you might get 2,500 names from the OEM. But there really might be 10,000 active customers on the total list, people who have purchased parts and accessories and service.”

REVIEW the dealer’s DMS. You’ll get more information here than you would from your OEM. The DMS probably will provide you with the customer’s entire purchase transaction record.

RUN ADVERTISING aimed at your competitor’s customers, offering inexpensive products and services. “It’s easier for these prospects to try you and this new experience for $100, rather than buying a unit for several thousand dollars,” points out Shenk. “It’s a lot easier to drive to your store and try it for a small, first time purchase.” But don’t spend a lot of money on splashy ads. “The cost for advertising to attract these customers can go way through the roof,” says Shenk. “There’s no ROI here.”

PAY THE DEALER to write a letter to his customers recommending your dealership as the place to go for service and support.

SCOOP UP an existing franchise that could fit your operation as quickly as possible. “My preference is to be a motorcycle dealer or an ATV dealer,” says Shenk, “rather than a single-line store. People would rather go to a store that has it all, rather than a one-brand store. That’s been proven.”

Working with your failed competitor isn’t something most of us want to do, but it’s something that you should definitely consider and then move on quickly. “This is a real time sensitive deal,” says Shenk. “Dealers struggle with this because they feel the pain of their competitor going out of business. What do you say to this guy? It’s not a fun conversation, but it’s something you’ve got to do.”  JD

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

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Posted in Delmont, retail sales, V7 Classic | Leave a Comment »

Major Management Changes at CFMOTO

October 8, 2010

CFMOTO, the Chinese powersports company, has made several top level management changes to its U.S. subsidiary based in suburban Minneapolis, according to sources close to the company. The changes include beefing up the management team with outside professionals and a shift in responsibility for Lev Mirman, the former president of the U.S. operation, CFMOTO Powersports.

Mirman retains his equity position with about a 10% ownership of the U.S. operation. Under the new setup, Mirman will focus on legal and regulatory concerns involving CARB, DOT and EPA.

The company declined to discuss the changes in any detail when I contacted the CFMOTO office today.

The new management team is designed to increase efficiencies, and help the company expand its product portfolio into new areas beyond its ATV, scooter and motorcycle products, sources told me. CFMOTO has about 200 U.S. dealers, down from a high of about 215, but it has been adding dealers this year, the company said.

CFMOTO is one of the few Chinese manufacturers that has established its own subsidiary in the U.S., similar to the Japanese models in which the manufacture manages its own brand through its own manufacturing and distribution channel.  Most other Chinese and Taiwanese companies simply hire independent importer/distributor companies to handle their products in this market.

CFMOTO’s parent company,  ChunFeng Holding Group, Ltd., was established in 1989. The group has eight wholly-owned subsidiaries engaged in manufacturing of liquid cooled engines, scooters, motorcycles, vehicle parts and accessories, and investments. The largest engine it manufactures is a 500cc unit, and the smallest is 50cc. JD

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

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Posted in ATV, Delmont, Motorcycle, scooters | Leave a Comment »

Retailing Questions Continue for Powersports

October 4, 2010

Wells Fargo Consumer Conference

There wasn’t much to excite investors at the recent two-day consumer conference held by Wells Fargo Securities, according to a report issued by the company last week. The conference was held Sept. 29-30 in New York, but there were not many powersports companies among the 64 firm that gave presentations to the analysts. Perhaps the best known powersports participants were Arctic Cat and Brunswick. Other related companies included International Speedway Corp., Penske Automotive, Tractor Supply, Marine Products, and U.S. Auto Parts Network.

Several trends ran through the presentations, according to reports compiled by attending analysts. These include: A continuing major shift to online marketing in a number of forms; personalized marketing is growing, using the Internet and social media to drive sales at online and bricks and mortar sites; increased sourcing costs which could put pressure on margins even though many companies are operating in a more efficient manner, and holiday inventories seem to be in good shape.

“Powersports retail sales visibility likely will be clouded until the beginning of seasonal sales in March,”  Senior analyst Tim Conder wrote in his conference summary report. Near-term price movements of powersports stocks most likely will be tied to general economic activities, he wrote. In his conclusion about the leisure segment, Conder says he likes certain toy companies, followed by cruise lines and powersports companies. Not a real strong recommendation.

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Converting Buyers To Repeat Customers

September 27, 2010

Customers For Life: How To Turn that One-Time Buyer
Into a Lifetime Customer

How much would you pay to acquire a lifetime customer? One who would come  back to your dealership time after time to buy things, year after year? How about $15 and a few hours of your time? I thought so.

All you have to do is read a small paperback book, or, better yet, pick up a bunch of copies for your key employees. The book is the bestselling classic, “Customers For Life“, by Carl Sewell and Paul B.Brown. It also includes  a brief but informative section by management consultant Tom Peters. The book is published by Doubleday, initially in 1990 and reprinted in 2002. But it’s still valuable today, two decades later. It might be the best investment of a hundred bucks or so in staff training that you ever made. I don’t work for Amazon, but here’s where you can read other reviews and order the book on-line, if you wish.

The easy-to-read paperback contains 41 chapters in 210 pages. But you don’t have to read the entire book, front to back. Pick out chapters that are important to you, and start there. “Customers” is written by Carl Sewell, a Dallas car dealer, who is one of the most successful sellers of luxury cars in the country. His associate, Paul Brown, is a former writer and editor at Business Week, Forbes, Financial World, and Inc., and a specialist in customer service. These guys know what they are talking about and they know how to say it in plain, simple language that’s easy to grasp.

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Posted in Customer Service, Delmont | 1 Comment »

Customer Service: A Tale of Two Companies

September 17, 2010

Amazon.com, A Winner. Target Stores, A Loser.

This is a story about customer service and how the same problem was handled by two different retailers, one a leading bricks and mortar operation and the other, an on-line business.

I’m talking about Amazon.com, Inc., the on-line business headquartered in Seattle,  and Target Corporation, based in Minneapolis.

Here’s my tale of how the two major retailers, using totally different business models, provided service to a customer, me, when I had a problem with a defective product. Amazon, the on-line retailer, did it correctly, beyond my greatest expectations, and will continue to receive lots of my business. Target, the hugely successful bricks and mortar retailer and one of my favorite local places to shop, completely dropped the ball, to the point of rudeness and stupidity, and has lost a big chunk of my business forever.

On June 24, 2010, I purchased a Kindle digital reader from my local Target store in West St. Paul, Minnesota.  I paid $189 and change for it and was happy to get it. I added a nifty leather carrying case to protect it and was off and running. The service I received from Target electronics people was helpful, and everything was good. I spent money with my local retailer, and I got the product I wanted at the price I wanted, all without the problems sometimes encountered with on-line purchases of sophisticated electronic products. Life was good.

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Posted in Customer Service, Delmont | 5 Comments »

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.

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Posted in Aftermarket, Delmont | 1 Comment »

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?

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Posted in Aftermarket, Delmont, Distributor, Tucker Rocky | Leave a Comment »

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.

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Posted in Baja, Delmont, EPA | Leave a Comment »

MIC Launches Electric Vehicle Task Force

June 28, 2010

Recognizing the growing revenue potential of electric vehicles for the powersports industry, the Motorcycle Industry Council (MIC) has created a task force to study several issues related to this product segment.

Paul Vitrano

The Electric Vehicle Task Force was formed in April and had its initial meeting in May. The group is headed by Paul Vitrano, who serves in a number of roles for the MIC and its related organizations, including serving as executive vice president and general counsel of the Specialty Vehicle Institute of America (SVIA).

“We solicited interest among the OEM membership and our boards,” Vitrano told me recently, “and 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.”

About a dozen companies were represented at the first meeting, but Vitrano declined to identify them. Almost all major powersports OEMs were represented and most electric manufacturing companies, he said.

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Posted in Uncategorized | 2 Comments »

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