Stock strong products that earn their space
Some big brands are well known and easy to sell, but do they have good customer and dealer support behind them? Are they profitable, or are they overly saturated in the territory or too available in the growing world of discount mail order? Has your store become a fitting room or technical advisor for a big aftermarket brand that continually blows gobs of close-outs into your local competition and the Internet?
Some brands have grown without eroding their in-store profitability. Others have evolved into dot-com brands on an endless discontinued status.
Brands you carry should not be selected only based on gross profit. This is not the best unit of measure for a brand. The ultimate test of any good OEM or aftermarket brand inside 21st century specialty stores is still long-term profit per square foot per month. Consistent earning power by area is where a brand's power lies. Large items occupying lots of space with lower profit margins and/or slow turns kill profits. Sounds like those new units, doesn't it? But your business plan might need those bulky machines to prime the more profitable aftermarket side.
The powersports industry's traditional two-step distribution mechanism breeds a binge-and-purge sequence of big buys (fill rate) and big sell-offs (make room for new) throughout the year, thereby fueling a heavier close-out mail-order contingency of recognized brands. That's bad for brand building.
The more steps in the distribution channel, the more waste there is to move out along the system. Tie that with a branded manufacturer's need to introduce new products every year, and we are essentially training our retail customers to wait until last year's stuff goes on sale on the Web. Manufacturing-direct industries such as the bicycle industry still have lots of big brand close-outs and Internet sellers too, but eliminating the extra step in distribution lessens the amplitude of the channel's binging and purging. The pipeline cleans out faster with fewer steps in the middle.
The more people in the lineup, the more the message gets distorted at the end. Manufacturers and dealers in more real-time buying relationships minimize waste and maximize brand focus. Do you recall when Oakley was still selling through distributors? Since going dealer-direct, its dealer margins and channel control have increased while its focus has grown the brand into new areas. Where would it be today if it were still one of five goggle/sunglass brands in a thick distributor catalog? Dealers buying manufacturer-direct, however, must buy further in advance and inventory more for the reward of a higher margin. Extra margins take extra planning while also preserving brand strength.
The big distributors provide a great service of piecemeal, overnight delivery and convenience, but the long-range effects have been to commoditize individual brands. When there are nine competing helmet lines, 10 exhaust brands and 10 tire lineups available in one distributor catalog, how does a manufacturer (or you) get to focus on any one of them? Brands — cram them all together and they start to look the same. Offer too many yourself and you will have evolved from a specialty store to a grocery store.
Pick and Choose
Perhaps it's time to narrow your focus to more profitable brand selections with good, old-fashioned quality and support. I didn't say more expensive, unique, entry-level or commonplace. Your chain store competition is buying manufacturer-direct while the dot-coms are buying huge quantities of discounted close-outs. How will you compete against them if you're selling everything at a 35 percent margin while they are at 45 percent to 50 percent?
In a world that offers more of everything to a customer at a discount, the brick-and-mortar stores will need to discover who the dealer-friendliest brands really are and go there.
Eric Anderson is the self-proclaimed "Big Stinger" of Scorpion Sports. Contact him at email@example.com.