According to Greg Blackwell, maintaining a high fill rate is the best way for distributors to help dealers. Not heavy discounts. Not easier terms. And certainly not drop-shipping to consumers or consignment sales.
Blackwell, LeMans Corp.’s VP of sales, told Dealernews in mid-August that the company’s fill rate was about the same as the year before: 92.8 percent.
In reaction to the smaller market, many dealers are stocking lighter and selling more often out of catalogs. “The way we look at it, that falls right into our game plan,” Blackwell says. “Dealers know they can order something and have it next day or in two days from Parts Unlimited or Drag Specialties.”
Some suppliers are willing to ship special orders directly to consumers, enticing some retailers, especially those with heavy Internet sales, to slash their overhead by stocking next to nothing. “That’s a bad thing for the brick-and-mortar dealer, and that’s why we’ll never do it,” Blackwell says.
All dealers buying from LeMans must have a physical storefront, though the company may be supplying some online-only stores inadvertently. “I would never sit here and tell you we don’t,” Blackwell says, “because I’ve stumbled across situations in which maybe one of our reps set up somebody who wasn’t legitimate.” (LeMans encourages dealers to report all such offenders.)
Some suppliers try to compensate for low fill rates with discounts, Blackwell says. “We have a joke we try to teach or reps, which is 5 percent of nothing is still nothing,” he says. “If a guy gets a 5 percent discount on a Dunlop tire order, but he can’t get his order, then what difference does it make that he got a discount? … We try to take the price out of the equation. We live on service and our programs. We’re going to be competitive with price, but we’re never going to be the cheapest guys in town.”
LeMans teaches its reps to woo dealers away from discounters by offering to become (at first anyway) a backup supplier. “We joke that Fred has built a heck of a company on filling back-orders,” says Blackwell, referring to LeMans founder and CEO Fred Fox. “That’s our philosophy: We say just order from us because we can get it for you every day.”
Excessively lenient ordering terms are also detrimental, Blackwell says. “Sometimes too much financing is getting dealers in trouble. I mean, we’re hearing some of our competitors are offering 120-day terms on tire orders. It’s just out of control.”
Consignment programs allow dealers not to pay at all (except in retail space). “That’s a lifeline to some dealers that probably shouldn’t be in business if they can’t afford to be in business,” Blackwell says. “That’s a bad deal.”
For the most part, LeMans terms and programs haven’t changed. A notable exception is that the company has ceased raising its annual minimum for dealer orders.
Blackwell reports that dealers are more hesitant to use LeMans’ own delayed-payment programs such as spring dating. “We’ve actually seen that diminish,” he says. “We have a lot of dealers that don’t use the program anymore. … In this day and age, people are saying, ‘I don’t want to take out a loan anymore; I want to pay for it.’ And we like that. They want to use our normal 30-day terms, and we’re perfectly fine with that.
“I’ll admit it: We’re the toughest in the industry on credit,” he continues. ”Fred likes to say, ‘I’m not the Bank of Wisconsin.’ He’s using his money to invest in our business, and we expect dealers to do the same thing.”
Fox owns all his warehouses and is continually improving them. The latest tweak to the Janesville, Wis., warehouse is the installation of packing stations that tilt so workers don’t have to bend over boxes. The stations also rise and lower. “It’s important that we invest a million dollars in something like that,” Blackwell says. “It’s better for the employee because they’re not straining as much to do things. And if it’s easier to load the boxes, that means it’ll be quicker. If it’s quicker, we get those boxes out faster.”
The most state-of-the-art warehouse is the one in Germany for Parts Europe. Fox has described a high-tech system in which a computer calculates the perfect-sized box for every shipment, while a machine glues on the top and bottom of each box to reduce theft while in transit.
Another costly investment helps dealers. LeMans reps are now educating dealers on a new computer program that can show them their 12-month ordering history for any given part. The system also reports the 10 best-selling items, and reminds dealers what they sold last year during the upcoming three-month period, making forecasting easier.
Dealers generally seem to be comfortable with computers. About 75 percent of their LeMans orders are now online, Blackwell says. That is up from roughly 45 percent in 2006, according to a Dealernews report from that time period.
Growing — and yet contracting
Even as it improves and expands worldwide, LeMans has had to cut costs like everybody else. This past summer the company laid off a small percentage of employees in several divisions, including some of its brand managers and product specialists. (A notable new employee is Icon brand manager Steve Schoen. He once worked for Valencia Sport Group, the former owner of SixSixOne and other brands. Before that, he was with Spy Optics for five years.)
LeMans has also seen a slight dip in number of road reps. In mid-August it had 124 for Parts Unlimited and 42 for Drag Specialties. “We have lost a couple of guys in some of the smaller markets that have been having a tough time,” Blackwell says, adding that reps who’d lost too many dealers decided to pursue other opportunities. “So what we’ve done is, rather than put another rep in that territory, we’ve been trying to break the territory back up again and give it to some of the reps that are around the area to help them out.”
Fox spoke of dealership closures in his annual address to vendors during LeMans’ sales meeting in August. “Last year there were predictions that it could be as many as 30 percent,” he said. “Now I think the realistic forecast is maybe 10 percent, and most of those aren’t little guys. They’re big guys where they got out of trust with the bank, or they built too expensive of a facility with too much overhead.”
Vendor sales are down similarly, Fox said. “The person who’s in the aftermarket business generally isn’t down more than 10 percent, and a lot of them are down less. [But] that isn’t universal,” he warned, adding that some vendors have quit the market altogether.
Blackwell suggests that LeMans may be saying goodbye to some vendors whether or not they’re in business. “To be real honest, we’ve actually been doing some weeding out of some vendors or product lines that aren’t performing real well — because those are costly. … We look bad in the dealers’ eyes if we can’t deliver a product.”
Likewise, don’t expect too many additions to the LeMans lineup. “We’re always picking up a few new little guys here and there that are making a specialized product that we feel is filling a niche market,” Blackwell says. “But there’s nothing out there that we’ve been looking for. We feel that our catalogs are balanced really well.”
Not to suggest that LeMans isn’t sympathetic. “We know it’s tough out there,” Blackwell says. “Costs continue to go up. Freight costs are going up. It’s costing us more to ship pipes. It’s costing us more to ship tires. Our vendors’ supply lines are slowing down because of the world economy. There are less ships coming out of Asia, which means there are less containers coming out of Asia. It’s taking longer to get product.
“Think about the pipe guy,” he continues. “He’s having trouble getting steel or getting aluminum because the aluminum companies have cut back staff. So there have been cutbacks all the way through the whole supply line, which has really slowed down what we’re doing overall and makes it harder to buy, forecast and figure out lead times.”
During his speech to vendors Fox even offered to buy their inventory months early — if it made sense financially.
The bottom line is the industry is continuing to adjust to a settled market after years of huge increases. “I talked about that in my sales meeting with reps,” Blackwell says. “I said, ‘Guys, we were having monthly increases of 20, 30, 40 percent every month. You couldn’t drive around fast enough to collect orders. Now we’re having to work for those orders.’”
Retailers are doing likewise, says Blackwell, who was recently told of Harley-Davidson dealers now willing to work on snowmobiles. “Everybody is looking for some business,” he says.