By Dave McMahon
Editor in Chief
We here at Powersports Business always try to inspire success. Whether it’s by attending dealer meetings (multiple times in August) to learn about the challenges you face or by accepting invitations to press rides to provide you with the inside scoop on the latest machines that will drive customers into your stores (those trips never get old!), we take pride in our connectedness.
So it’s with that sense of reality that I allow a dealer, and longtime PSB reader, to take over this spot for this edition of the magazine. Vaughn Penrod, owner of Penco Power Products in Kalispell, Montana, wrote to us to tell us about being a dealership owner in 2016.
“My brothers and I started a powersports dealership in a small tourist town in northwest Montana back in 1986, and let me tell you, times have changed in the powersports industry.
“We started as a small engine, automotive and sharpening service center. Within a few years, we were accepted by Arctic Cat, and that started our powersports journey. We have now grown into a thriving dealership that carries Yamaha, KTM and Husqvarna. Our business has grown into an $8 million-a-year business.
“I will say that the journey has been both rewarding and disappointing. Rewarding, for the obvious reasons of making a life and a living in such a beautiful place and raising our families here. Disappointing because it seems that most of the OEMs and suppliers have forgotten the key things that have helped them be successful in the industry. One of those key things is the dealers.
“I guess I can relate it to our government from the standpoint of we, as dealers, don’t hold much value anymore, yet we are a huge reason for the OEMs’ and suppliers’ success in the industry. The needs and health of the dealers are not a concern anymore. There have been times that we are in direct competition with the OEMs and suppliers. It is sad that greed has taken the place of common sense and good old-fashioned business.
“There was a time that OEMs and dealers worked as partners in a two-step process to assure that the consumer got a good product with superior local service, and we all made a profit. Now, we, as dealers, are seeing margins that are getting lower and lower. We are seeing OEMs caring less and less about our health, even though we are the boots on the ground, so to speak, for them. If we don’t sell enough, they just set up another dealer or put current new product in a box store or catalog at discount prices. There’s no concern with our inventories or health.
“I have watched so many OEMs and suppliers ignore the core business values that got them and the industry where they are today. We are challenged every day with figuring out how to compete with discounting and no MAP policies that are enforced. Also, each OEM and supplier can move more product at a quicker rate than the competition, with no concern for the health of the dealer that has made the investment to represent this product.
“The industry has become so focused on moving product that it is ignoring all the key things that got them where they are today. Quality and good customer service is what will keep OEMs and suppliers in business. The dealers are still, and always will be, a very important piece of that puzzle. The manufacturers and suppliers are determined to force programs on us, as dealers, regardless of whether it is healthy for us or not. It is time that they step back and look at the big picture and think back on what got them to the place they are at — the dealer.
“I represent a company that manufactures commercial mowing equipment that retails from $9,000 to $18,000. They have been in business for 25 years, and the same business beliefs that got them started are the same beliefs and practices that have built them into one of the most respected companies in the industry. The key has been great dealers giving great service with 100 percent support from the manufacturer at all levels.
“It is not about the number of mowers they sell; it is about the satisfaction of the end user. It takes all pieces of the puzzle to get that.
“The dealer is a key piece of the puzzle for the suppliers and the OEMs. I feel they have forgotten that. Remember, boots on the ground.
“Many powersports dealers, myself included, have spent millions of dollars on state-of-the-art facilities to represent the OEMs. Many times we are driven to take on this debt at the OEM’s request, so we can be an elite type of dealer of some sort. In our case, it was a ‘pilot store’ in the year 2000.
“What we are seeing in the industry is the suppliers and OEMs are so concerned with market share that they are creating programs that benefit them but force us to lower our profit margins to be competitive. Sometimes we even have to compete with internet pricing that they have allowed. Rather than have good, strong dealers that represent the product well and help retain the value of the product, they would rather flood the market with many dealers and create price wars, so no one can make any money. As a dealer, this creates less concern for the product. Why would a dealer want to represent that product? The product loses value and ends up in a catalog or on the internet at pricing below the dealer’s original cost.
“At one point, the two-step distribution was a very effective way of moving product and servicing the end user, while creating an exciting and thriving powersports industry. Now, we spend much of the time matching catalog and internet prices with no profit, just to move the product. It has turned into a cutthroat business.”
An abbreviated version of this article appeared in the Sept. 6, 2016, edition of Powersports Business. The rest of the article follows.
“When you have OEMs in the industry that will allow homeowners and sport enthusiast to become ‘dealers’ with the only requirements consisting of having a set of tools and a catalog, something is very wrong. The OEMs have become dictators and not business partners, as they were in the past. The industry that once was fun and profitable for everyone has become a day-to-day battle for survival, and the battles are being created by what we thought were business partners.
“It would be nice if the OEMs and suppliers would realized we are the boots on the ground, and without us, things would be much different and much harder for them.
"There are some manufacturers that still care about the dealers and realize the teamwork between the manufacturer and dealer works well and creates profit and customer satisfaction, along with building a superior product.
“One of our largest clothing lines is Klim. They have been a great partner in business and realize what it takes to market and retain the value in their product — good dealers. Walker Manufacturing out of Fort Collins, Colorado, is a manufacturer that I have done business with for 25 years, and I feel they have a business model that everyone should follow. Fair pricing and good customer service (a strong dealer network) are still the main ingredients for a successful product.
“Don’t misunderstand me; I’m not condemning all OEMs and suppliers. The OEMs and suppliers that are still working with and respecting the dealers know who they are. I need to thank them, as well, for continuing to do business in this way.”
Dave McMahon is editor in chief of Powersports Business. Contact him at 763/383-4411 or firstname.lastname@example.org.
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Copyright 2016 Powersports Business