EDITOR'S NOTE: A strong euro is beckoning U.S. suppliers overseas. Two leading distributors, Parts Unlimited and Tucker Rocky, have vastly different plans by which to capitalize on the trend.
The euro's strength versus the dollar is attracting more Europeans than ever before to product sourced from the United States. Parts Unlimited and Tucker Rocky are the two largest powersports distributors here. While both already are doing business in Europe, the two have very different outlooks of their future on the European continent.
Dealernews talked with Tucker Rocky Distributing CEO Steve Johnson and Greg Blackwell, VP of sales for Wisconsin-based LeMans Corp, parent company of Parts Unlimited and Drag Specialties, to better understand their business dealings in Europe. The conversations were edited for clarity and brevity.
Dealernews: What were you and your team doing at EICMA in Italy last November?
Blackwell: Obviously we do a lot of business with European vendors over here in the United States so, while we were there, we 1) wanted to talk about that business, and 2) discussed our future in Europe with some key vendors.
Johnson: We had four objectives at EICMA: 1) to connect with many of our current manufacturers who attended; 2) to look for new product that would fit into our product portfolio; 3) to connect with distributors from around the world who currently distribute TR brands; and 4) to take the opportunity to find new distributors in areas where we are not currently selling those TR brands.
Dealernews: How do you understand the European powersports distribution system to differ from the U.S.? What's the process there?
Blackwell: Certainly the distribution system in Europe is very different than here. Although it is slowly changing, you've had an importer in France who carries one tire, one oil line, one helmet and one chain, and it's really very much how it was 20 years ago here in the United States. You end up having a lot of distributors, or importers, of a brand.
There's also a lot of dealer-direct business done by suppliers in the U.S. for dealers in Europe; companies that have their own subsidiaries in different countries. They may have a subsidiary in England and a subsidiary in Germany, so they'll have their own warehouse and handle the dealer-direct business that way.
Johnson: I believe that most distributors are smaller, more connected to their customers in their country; there are few successful "pan-European" distributors. While there is a European Union, in reality, there are many countries, many languages and many cultures. The U.S. is more homogeneous. While transportation and currency in Europe has been homogenized and made easier, there are still differences between countries. In Europe, there are many smaller distributors, many more "focused" distributors, and much more manufacturing direct to dealers.
Dealernews: How are your businesses operating in Europe? And, I guess when talking about distribution, we actually have to talk about house brands vs. vendor brands…
Blackwell: We've been doing a lot of business internationally, which I don't think people think about. We've been selling in Europe for a lot of vendors who have products that we sell in the U.S., that have asked us to sell their products internationally. And we have a lot of dealers around the world that contact us to buy product. But we don't have a warehouse there right now, so anything that we've been shipping internationally is shipped direct to the dealer from one of our existing locations.
Johnson: We have concentrated on three TR-owned brands that have — and we've focused on finding quality distributors who are respected in their geography. Long term, we may expand our efforts to other house brands. Most of the great supplied brands that we distribute in the U.S. already have some form of European distribution. We are trying to learn from our suppliers in the U.S. regarding how they distribute in Europe. There may be opportunities to partner with some of our supplied brands to expand their distribution if they currently do not have European distribution.
Dealernews: What's the future for your company in Europe?
Blackwell: We're going. We've purchased the property in Trier, Germany, we have a building designed — in fact Fred's headed over again to meet with the contractor — and we've literally drawn up the plans, which we even shared with some people while over there recently. At this point in time our goal is to have that building open by this time next year. And I say "goal" because there are always speed bumps. We still have some fact-finding we're doing.
Johnson: We have no plans to build warehousing or compete with our current distributors. I believe that the best strategy for Tucker Rocky is to utilize some of the good distributors that are currently operating in Europe. We have built a good set of relationships with several distributors in Europe and view them as long term partners.
Obviously, we could try to start our own operation and go into competition with our current distributors, or find a third party logistics supplier to provide distribution services. But my bias is to build relationships with the existing networks, and leverage their expertise, network and relationships, rather than trying to compete with them.
Dealernews: Some of your suppliers already have European distribution. So if a U.S. distributor were to take their U.S. business model to Europe, they could have to go through their catalog and make decisions brand-by-brand. Your thoughts?
Blackwell: We are hearing from many vendors who've made it clear they are behind us going to Europe with their brands. There are a lot of open arms. But, we also have a lot of vendors who say to us that they already have importers or distributors in certain countries, and so we always honor those requests. You also have to be careful with some of the product because of the laws and import laws on materials and textiles and things like that; you can't ship them from some countries in Asia to the United States and then ship them to another country. The law doesn't allow that. So you really have to be on top of the materials that the products are being made of because of all the duty regulations and everything.
As for our own branded items, like Thor and Icon and Z1R and Arctiva, we already know what we're doing with those, so we could take those [into any future LeMans warehouse in Europe] immediately.
Johnson: If Tucker or any other distributor were to try to open a U.S. business model in Europe, the suppliers that have existing distribution would have a serious decision to make. Some would support their current distributors and not align with a new US distributor. Some would possibly move to the new distributor. Those are the tough decisions that will have to be made by each manufacturer. While I can't predict, I would guess that many manufacturers that have longstanding relationships with existing distributors would not take the risk of moving from their current partners.