Parts NVP Update: Fox Encouraged by Signs of Growth in Down Market

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The sour economy and its impact on the motorcycle industry has had a negative effect on business for LeMans, Corp., parent company of parts, garments and accessories distributors Parts Unlimited and Drag Specialties, but corporate chairman Fred Fox says there are still markets experiencing growth, and thus continued opportunity to sell.

"We've been through down cycles, and we're in a down cycle right now," Fox said in a speech to 167 of the company's vendors who assembled in Madison, Wis. last week for a five-day National Vendor Presentation (NVP) — the distributor's major sales meeting of the year. "We’re not publishing figures, and we never have, but our sales are going to be down this year."

While sales as a whole are down, particularly for items such as helmets and apparel, ATV and off-road gear, Fox says there are some gains being experienced, mostly in on-road service items such as tires, brakes, batteries, chains, tools, cables and fluids.

LeMans employs roughly 1,200 people and supplies product to an estimated 12,000 retailers worldwide. The company fulfills approximately 20,000 orders per day, most of which are shipped within 45 minutes of receipt. The average dealer orders four times per week, and about 65 to 70 percent of dealers now order by computer rather than by telephone.

In his speech, Fox focused on five topics that may be of interest to dealers:

A FOCUS ON THE POSITIVE
A distributor is nothing without its dealer customer, so Fox says LeMans has implemented a program in which regional sales managers visit dealerships and attempt to coach them how to continue operating through difficult times.

"When a guy comes through the front door of the shop, you don't cry and whine how bad it is, or talk about politics or anything else, you tell him about the specials going on and open the door to the sale," Fox says. "We try to coach them (the dealers) not to go for a knee-jerk solution and to stick to the basics. People who want to play golf are still playing golf, people who want to go fishing are still going fishing. Eighty-five percent of people are still employed, and in some places 90 percent of people are still employed; don't listen too much about the 10 percent of people who don't have any money in their pocket, work on the people who still want to talk about motorcycles and ride motorcycles, and come up with something to talk about other than the fact that times are tough."

INVENTORY CONTROL
LeMans being short on product creates a situation more dire than being overstocked on product, Fox says, adding that, unlike dealer inventories, a distributor's product supply can be easily pushed toward future sales goals.

In the past year LeMans has increased its inventory $10 to $20 million dollars. Why? "Because we don't know exactly what somebody else is going to run out of," Fox said. "Two years ago I said things are going to get tougher and that companies are going to have to watch their costs and control their inventories. So our goal is to predict what may run short and to have our buyers look into what we estimated and whether we're over or under."

"If everyone cuts back, somebody somewhere is going to cut too much. So it takes good forecasting, it takes good buyers, and it takes a review every couple of days."

MARGINS
Expenses are cutting into margins for everyone involved in the product distribution channel, Fox says. "Unfortunately, in the last few years, UPS raised their rates and implemented over-size charges, fuel surcharges, etc. Even more so on the dealer level. Still, my goal is that nothing goes to the dealer at less than 35 percent so they can stay in business.

"If you can get dealers more margins, everyone would be happy."

RETURN POLICY
"One of the rumors I hear is that we don't take returns," Fox says. "Well, we do. We have a formula. While you can't wait until August or September to take everything you didn't sell and ship it back for credit, we do take a certain percentage of what they (dealers) bought with a small penalty. So we say that they'd be better to mark it down, put it on a table up front and get rid of it rather than box it up and ship it to us and have us re-label it."

ADVERTISING POLICY
"We can enforce advertised price on our own brands, like Icon and Thor and Moose, and we do," Fox says. "They (dealers) can advertise retail, or they can't advertise at all.

"However if one of our vendors comes to us and asks us to enforce it (pricing) for them, that's something I can't legally do. We're not trying to control what the dealer sells it for, we're just trying to control what they advertise it for.

"So there's no legal way I can say 'You can't sell to this person'. If they put in their ad that the product is sold for suggested retail, or that the consumer call for price, and the consumer phones them or e-mails them, it's no different than going into a car dealer or refrigerator store and having a salesman quote the retail price of $899 and say they've got an overstock and that they'll sell to them today for $699. You can't stop that.

"We would never try to enforce what a dealer sells for. They can give it away if they want to. But if somebody violates our advertising policy, we enforce it unilaterally. It doesn't matter how much business they do with us."

See the October issue of Dealernews magazine for our annual Distributor's Report Card and further news from Parts Unlimited and Drag Specialties.

—Submitted by Guido Ebert