Fred Fox: Aftermarket's upturn has started

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MADISON, Wis. - The 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 this weekend at the company’s annual National Vendor Presentation (NVP) in Madison. 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, S.D., 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.”