Follow the Money — Even Overseas

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Distributor update Parts distributor Middleman Economy

Say what you want about fred fox and company; they know how to run a business. Long ago Fox decided that he would build Lemans Corp. by supporting powersports dealers with same- or next-day shipping for more than a hundred-thousand parts numbers. Those dealers, in turn, would commit to buying a minimum amount of products from him each year.

Fox kept this focus, no doubt alienating many smaller dealerships across the country who either would not or could not buy a minimum of $10,000 in products from Parts Unlimited or Drag Specialties in a given 12 months. But it's not in Lemans' business plan to support each and every dealer out there. This company is in it like many of you: to make money.

And money it makes. Even with the economy in the proverbial toilet and powersports sales suffering through its first decline in more than a decade, Lemans continues to turn a profit. It has eight warehouses across North America (six in the U.S. and two in Canada), and all of those mortgages are now paid off — so while you may still be wrestling with interest rate payments, rest assured Lemans seems to be mortgage-free. "We've never been in better shape financially," Fox told vendors and press during the Parts/Drag NVP show in August.

The U.S. market is in decline? Well, Europe's healthy, so that's where Parts is going to play next. And by "next," we mean now. Parts-Europe is scheduled to officially open for business in the spring, but the new German-based warehouse is already taking orders for Thor products. Once fully operational, Parts-Europe will support roughly 100,000 parts numbers, Fox said, serving dealerships from "northern Siberia to South Africa." And if you have trouble believing that, Fox will tell you that he already has three dealerships in Russia buying $200,000 worth of product.

Look out, Custom Chrome-Europe: Fox told vendors that he believes his European business will match his U.S. sales volume in 10 to 12 years. To this, he suggested that Parts and Drag vendors consider the European market for future growth. For U.S.-based manufacturers, Fox said Lemans is looking into securing more cost-effective container shipping charges so that product can get to overseas markets more easily and cheaply.

NORTH AMERICAN MARKET

"We have had 12 to 18 months of 'pretty slow,'" Fox said. The custom V-twin side of the business has become "completely stagnant." The ATV accessories business was down about 11 to 14 percent, "although we're getting more than our share." Still, by late August Fox told the industry that business had been picking up, and he expected that by the time Lemans' fiscal year ended on Sept. 30 he would be able to report a sales increase from 2007.

The 418,000 square foot Reno, Nev., warehouse, which opened last year, is fully operational and has been responsible for a sales volume increase of 50 percent in 2008. The Reno facility enables Parts/Drag to ship products to Southern California dealers within 24 hours, as long as Parts can pull product by UPS's early evening ship deadline. For those wondering why the Reno facility didn't host a show this year, Lemans decided to make it a biennial event to give its vendors a financial break. The Calgary, Alberta, warehouse is next up for a renovation, he noted.

Parts' 2009 catalog has 140,000 individual products. The U.S. operation shows no signs of slowing — but it will be maneuvering to help get product to dealers quickly. Lemans' fill rate dropped to 90 percent this year, a condition that Fox put squarely on the shoulders of select manufacturers who, he said, failed to produce to schedule. At the August meeting he implored vendors to look for efficiencies in their business so they can keep manufacturing levels and prices stable. "Make sure the dealers can get 30 to 40 percent margin," he urged.

Fox's message to dealers was to not let their inventory levels drop, or risk being bested by better-stocked competitors down the street. If a dealer is short on cash and having trouble stocking inventory as a result, "tell them to sell it out of the catalog and we'll have it for [them] tomorrow."