Dealernews recently talked with Tucker Rocky Distributing President/COO Steve Johnson to learn how the nation’s second-largest parts, garments and accessories distributor plans to address current industry trends. The conversation was edited for brevity and clarity.
DEALERNEWS: What are TR’s main goals for 2008/2009?
STEVE JOHNSON: We have a whole series of goals that range from growth to financial. We have been on a growth path for the past five years, and we expect to continue our growth. But more important than just setting growth goals, it is critical for a company to look at the details and steps to achieve these goals. The resulting growth and financial numbers are more of a scorecard that tells you how you have executed the details of your business. So, what is important to me is that we continue to examine ways to better serve our dealer base. I believe that our dealers have an extremely complex job. Much of the industry’s customer base is faced with higher fuel costs, food costs, credit costs as well as deflating housing values in some markets. Dealers, to be successful, need to carry inventory, merchandise and display product, have knowledgeable sales people to help the customer, manage complex inventory issues (high SKU count, changing demand patterns, etc.) and deal with the same financial pressures the consumers are faced with today.
DN: How does TR plan to accomplish those goals?
JOHNSON: For Tucker Rocky to continue to grow, we must continue to find ways to help and support the dealers. I recognize how difficult a dealer’s job is. I believe that if we do our job well, we will be rewarded with more of their business. So our goals are to continue to search for the product that consumers want and dealers need; be reliable and consistent for the dealers; have quality inventory; and ship orders on time and accurately. We must continuously look for ways to help the dealer by identifying product they can sell to improve their profitability and support them in training their sales staff.
DN: What is TR's No. 1 barrier to improving business in 2008/2009?
JOHNSON: We must focus on what we can control and recognize what we cannot control. We can take a dim view of the economy and be in a defensive mode, but I am more of a positive person. I believe that most dealers recognize the issues that they are facing and are dealing with these issues. We are seeing a clear shift in the market. I am positive about the fact that more scooters and small displacement bikes are being sold. I believe that, because of the gas crunch, more people are looking at these products to save money. I see this as a real positive for dealers who are trying to satisfy this shift in the market.
DN: How does TR plan to overcome that barrier?
JOHNSON: As we see shifts in the market like scooters, we are and have been looking for product lines that align with these changes. Bottom line: We must be a student of our industry – continuously looking at where change is being made – and we must be nimble and flexible to respond to the changes we see coming.
DN: What were the major topics/concerns dealers brought up at Tucker Rocky’s recent national supplier’s meeting?
JOHNSON: For the most part, the dealers were extremely positive at our meeting. They were looking for new products and they were looking for information on existing products. It is naive to think that some dealers are not worried about the economy – most are trying to find a balance between how much product they inventory and have available versus the risk and cost. There is always a fine line between being fiscally responsible and leaning out inventory too much to where a dealer sends his business to a competitor. I think that most dealers are trying to find this balance.
DN: How does TR plan to address those topics/concerns?
JOHNSON: Our job is to have the inventory when a dealer needs it and to show dealers the product that has demand and that can be sold to improve the profitability of their retail operation.
DN: Has the slowdown in new unit sales impacted TR’s business?
JOHNSON: We have seen some clear shifts in the business because of new unit sales. For example: It is no secret that new dirt bike sales are down. This has slowed the growth of some of the accessories that are put on new dirt bikes. But, on the other side, the basics and commodities are continuing to show strong growth.
DN: Many, many people – dealers, analysts, aftermarket companies – are asking about dealership closings. Do you track that?
JOHNSON: We are very aware of dealer closings, and we are seeing more of this happening this year. We don’t believe the business is going away. In some cases, the business is moving down the street. In some cases, the business is migrating to dealers with a stronger Internet presence. Our goal and hope is that good dealers with strong selling and merchandising skills will survive the current economic climate. We have seen these cycles before, and strong retail operators will survive and thrive in the long-term.
DN: Which PG&A product segments – ATV, sportbike, cruiser, UTV hard parts; on-road apparel; off-road apparel; helmets – are showing growth? Which are declining?
JOHNSON: We are continuing to see growth in most of our segments. Off-road apparel is a little soft compared to prior years, but we are seeing good growth with in the ATV area; UTV is providing nice growth numbers; and on-road components are continuing to grow.
DN: How many new vendors did TR add in the past year? Are there any suppliers who “left” the line-up?
JOHNSON: We added about 100 new suppliers and there are a few that have been discontinued either because of poor performance or going out of business.
DN: How many SKUs, in total, does TR have?
JOHNSON: That is a moving target and always growing, but we probably are close to 100,000 SKUs available.
DN: Why did TR come out with a new apparel line, Speed & Strength? Who are you targeting with the brand?
JOHNSON: We added Speed & Strength to fill a void that we had in our product portfolio. We have River Road, which is primarily the black leather traditional cruising market; and we have First Gear, which has been designed for the consumer that is looking for quality and high functionality touring clothing. We recognized that we were missing a segment of the market that wanted current fashion designs combined with functionality at an affordable price. We are very fortunate to have linked with Bruce Parker, the father of Joe Rocket, to be our partner in bringing Speed & Strength to market. Bruce understands the apparel side of the motorcycle industry and has done an outstanding job in taking that knowledge and linking it with great design efforts to create new excitement for the dealers and the consumers.
DN: What kind of programs does TR have to aid dealers in moving product? Do those come from TR or the vendor company?
JOHNSON: Probably the best support we can give dealers is to be a part of their training system – helping train the people in the dealerships on how to represent and sell the product. We have added more sales specialists to focus on rep and dealer training, and we will continue to look for opportunities to improve sales training. We also depend very heavily on our manufacturers to provide training to our rep force and the dealers.
DN: How has the currency situation – the weak dollar – impacted your business?
JOHNSON: We are seeing pressure from two fronts: 1) a weak dollar and 2) commodity and labor increases. Clearly, as the dollar has weakened, it has lead to price increases. Some of these increases we have to absorb. In some cases, the price increases become so painful that they have to be passed on to the dealer and ultimately the consumer. We have also seen significant increases in production costs driven by commodity cost increases and by large labor cost increases – especially from Asia. We all are competing for scarce resources and ultimately many of these costs have to be passed on.
DN: Any news regarding TR facilities – warehouses or changes in the distribution system?
JOHNSON: It has been several years since we combined operations of two warehouses into the one new warehouse in Pennsylvania. That operation has been one of our top performers in Tucker Rocky and has proven to be a very good move. We have no plans to add new warehouses to our network. We believe that our network today is doing a very good job in supplying next-day service to a majority of our customers. Having said that, we are always looking for ways to extend the reach of next-day service.
DN: What are TR’s plans for Europe? How are you currently distributing your house brands there?
JOHNSON: We are currently distributing Answer, ProTaper, and MSR internationally. We believe that there are opportunities by expanding distribution outside of the U.S., and we enjoy good business in Europe and Australia.
We could open a distribution center overseas and start distributing our brands as well as many other brands. However, we have taken a different strategy. We believe that there are many great distributors around the world that have built long-term relationships with their manufacturers and their dealers. While they say the world is “getting smaller” and business is getting easier to do cross boarders, this industry is still built on relationships and, in many of these countries, the relationships are with the local distributors. So, currently, our strategy will be to work with and support the "in-country" distributors.