Tucker Rocky Adapts to Downturn

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Tucker Rocky’s sales are down slightly for the first time in years as dealers order less, close shop or fall behind in their payments. But the distributor’s marketing efforts are up. Its fill rates are holding steady. And its dealer show this past week was no less of a success than last year’s.

So says Tucker Rocky president Steve Johnson, who sat down with Dealernews during the show to fill us in on what’s happening at Tucker and the aftermarket in general.

Dealer Closings
Just how many dealerships have closed? “I can tell you it’s up significantly over past years,” Johnson says. “I don’t have a number because sometimes even in good times they can stop buying from us for whatever reason.”

Other dealers may be in business but are missing payments. “We’re having to watch credit like everybody else,” Johnson says. “We try to work with the dealers, we try to be flexible, we try to be understanding, but also we have to protect ourselves as best we can. I can’t give you any numbers as far as millions of dollars that are past due over what they were last year, but we’re up over last year.”

Johnson fears more closings. As an analogy, he points out that many retailers go out of business after Christmas. “The Christmas season in our industry is April, May and June,” he says, “and Santa Claus hasn’t come yet, so I’m a little concerned about some dealers, more in the fall than the winter, being able to pay the bills through those times when you have a normal dip in volume.”

Johnson also worries, naturally, that dealers will not order enough PG&A. “If you cut back too far, customers won’t come in, and that drives them either to your competition or the Internet,” he says. “So it’s a fine balance, but dealers still need to create an environment in which customers want to come back even during these tough times.”

This is the key to survival, he asserts. “At the end of the day, the dealers who do a good job of serving customers, who have a broader base of business — whether it be parts and accessories or service — the dealers who stay connected with their customers by creating events, creating an environment where the customers want to come back, those dealers, as long as they’re not too leveraged, will do fine. In fact, they’ll be stronger on the backside of this.”

Tucker supplies about 10,000 stores, Johnson says. “But there’s a lot of fairly smaller ones,” he adds, “so I would say that the true dealers who drive the business are probably closer to 8,000.” That business is down in what Johnson calls “an overall slight decline in sales.”

He partly blames the fall in new-unit sales. “The other thing,” he says, “is that the tightening of credit has made it very, very difficult to finance accessories when you buy a bike.”

According to Johnson, dealers today should consult with their Tucker rep more than ever. “The reps have an ability to go out and see 20, 30, 40 of a dealer’s closest competitors and then tell that dealer, ‘I don’t know how to tell you this, but here are some areas where you really could improve. Here’s where I think you’re getting beat.’”

Adapting to a Contracting Market
In response to the downturn, Tucker has cut only slightly its workforce of about 700. “We’ve eliminated a position or two,” Johnson says, “but we haven’t had what I would call massive layoffs, as the OEs have had to do. We’ve always run fairly lean.”

The number of outside reps, about 150, is surprisingly up over last year, but Johnson says there are no plans to add more territories or warehouses. “Overall, our fill rate is probably a little bit better because volume is down a bit,” he points out. “We’re very, very prepared to continue to put in the capital to maintain our fill rate.”

A slightly growing number of vendors have gone out of business, Johnson says, but no major names. There also have been more vendor supply failures. “But I don’t think back-ordered items are up a massive amount,” he says.

Still, the economy has caused Tucker Rocky to rethink its portfolio of about 105,000 SKUs. A distributor known for taking chances on product choices may be cutting back on experimentation. “We are looking much more closely at the portfolio,” Johnson says. “When you’re on a hypergrowth mode, it’s easy to keep adding products and seeing what’s going to work and trying things. When you’re clearly having a contraction, it forces you to step back a little and say, ‘OK, how many lines of this — whether it’s goggles or some other category — do I need? Do I need six manufacturers? Where am I winning? Where are the marginal ones? Can I simplify without giving up much on the bottom line?’”

Not that Tucker isn’t open to new ideas. “Even in a contracting economy,” Johnson says, “you look for opportunities to bring in products to build the company. But you’ll also look at the products that aren’t paying their way and try to do some cleansing at the same time.”

One of Tucker’s most exciting new vendors is Renthal. “I’ve known [Renthal co-founder] Henry Rosenthal for five, six years," Johnson says. "He’s been a wonderful competitor of ours because we have ProTaper. And he looks at us as a pretty strong competitor. I’ve always had a huge amount of respect for Henry and (continued on page 2)

the company he has built and his product. And we finally got them this year, although it took a long time, a lot of talks with Henry, to do it.”

A Renthal rep who was manning the booth at the show claims that the partnership now gives Tucker the advantage of having the No. 1 and No. 2 brands for dirtbike hard parts.

The other recent big addition is Scorpion helmets. “We parted ways with KBC and had a gaping hole in midpriced helmets,” Johnson says.

Speed and Strength will be coming out with helmets next season. At least one model is even being teased in S.S. advertisements. Will Scorpion eventually prove to be competition? “If Speed and Strength were up and going, then Scorpion might not have made as much sense,” Johnson admits. “But Scorpion is a strong brand in the marketplace. We got unbelievable feedback from dealers. So I think it will be a great positive for Tucker Rocky to have Scorpion, and I still think there’s room for Speed and Strength, too.”

Johnson recently removed brand and segment management from his VP of sales, who will now focus entirely on sales processes and training. “That allows me to get closer to the segment management, brand management, marketing, and so forth,” he says.

Notes of an Aftermarket Watcher
Are any product segments getting hit harder than others, say those targeted toward riders of ATVs, cruisers, sportbikes, etc.?

“I don’t know that there is anything that’s coming out of this thing unscathed right now,” Johnson says.

Instead of breaking down the market by vehicle type, he breaks it down another way. “Clearly the products that get put on new units when they’re bought are stressed out more than the commodities,” he explains.

He adds: “The expensive product where there’s an alternative at a lower price — it may not be the same quality, but at an alternative lower price — that tends to get more stressed. Very, very expensive helmets tend to be hit harder than the lower-priced helmets, as an example. Custom wheels that get put on new ATVs, that part of the market has just really been hit hard.

“So you can go through the portfolio and you can say, ‘When do people buy this?’ And if it’s expensive, if it gets bought with a new unit, that tends to be more stressed than a commodity. That’s one of the clear changes that we’ve seen. I think there has been a migration to what I would call value, downgrading.”

As Americans continue to add to their savings accounts, Johnson thinks they’re delaying purchases of nonessential items: “I don’t have any data on this, but I think there are certain product lines where people are just running them longer: ‘I’d love to get another Arai helmet, but I can go another year. I’ve love to get a new jacket, but I can go another year.’”

Johnson says sales of many commodity items are actually up. He notes that although unit sales have dropped between 30 percent and 50 percent, more powersports units are probably being ridden than ever before — thanks to their durability. “I’ve got ATVs that are probably 12 years old. They’re still running, and they start as well as my new ATVs, sometimes better. So I guarantee that there were more ATVs sold last year or this year than went away out of the market,” he says. “And this drives commodity sales: tires, oils, chains, replacement products. I think people are maintaining the bikes and are still using them. It’s still a passionate industry.”

BONUS COVERAGE:
Johnson Responds to Dealer Complaints
Dealers usually have only nice things to say about Tucker Rocky. They love the company’s fill rates, ordering process, return policies, and willingness to take chances on unusual vendors like Frogg Toggs and DVS. But even the best of companies receive complaints. We asked Tucker Rocky president Steve Johnson to respond to a couple that we’ve heard from various dealers over the years.

Blowout sales on current items: A few dealers have said that Tucker does not protect the wholesale value of its house brands as well as other distributors. They report buying a current item at a standard price, and then the next week seeing that item go on sale. They worry that their competitors will buy at the lower price and undersell them.

“We will aggressively move product,” Johnson responds. “Whether you’re a retailer or distributor, the way the financials work, it’s all about the margins and the turns. It’s about making sure you always have fresh, clean inventory.”

Johnson compares a dealer’s missing out on a sale to the buying of electronics. “You buy a computer today, and tomorrow they come out with a newer, faster one, cheaper than the one you bought last week. That’s just part of the normal retail environment.”

He also points out that many dealers love the sales. “If we’re overstocked and we got product that’s going to be replaced, we will aggressively move it out. And that creates opportunities, too, for dealers to go out and sometimes make more margin, and create value for their customers.”

Retailers should have a similar attitude toward their own inventory, Johnson says. “After you’ve had a product in place for so long and it’s not selling, mark it down. You have to have a retail mentality of Get It Out.”

Enforcement of MAP pricing: Some dealers have claimed that Tucker is not as good as Parts Unlimited at enforcing its minimum advertised prices for its house brands. Dealers primarily cite Internet retailers as offenders.

Says Johnson, “My view is, MAP pricing is good for the dealers, and it needs to be universally enforced. Dealers are in a tough environment, and it’s important for them to make margin on their product. If it’s just going to be price football out there, there’s always gong to be somebody that’s going to be willing to sell it for a lower price. And so I think MAP pricing is good.”

Tucker Rocky itself does not monitor Internet prices. “Typically the enforcement tends to come from dealers,” Johnson says, “because they’re looking at it closer than we are. We can’t go out on all the gazillion websites that are out there and look at all the products. We don’t have systems that do that.”

Tucker Rocky takes all dealer reports on MAP violations seriously, Johnson claims. “When we hear about it, we move on it. We absolutely make phone calls.”

Regarding Web sales in general, Johnson confirms that all T.R. dealers must have a brick-and-mortar storefront (though he eludes to one Web-only retailer that was grandfathered in many years ago). “Our policy is: Look, the Internet is here, it’s real, it’s a legitimate retailing venue, but we also make sure they have a storefront with hours and a phone, a brick-and-mortar dealership — even if 95 percent of the sales still may come from the Internet.”

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