Jun. 30, 2008 – Big success in a down market

By Steve Bauer
Managing Editor
WHITE BEAR LAKE, Minn. — As many powersports manufacturers struggle for sales growth in the current challenging economy, the Trike Shop co-owner Doug Lindholm has seen record growth the past several years, and expectations for this year and beyond remain lofty.
“We’ve been averaging 35-45 percent growth,” Lindholm said, “and we expect that to continue.”
The Trike Shop, which specializes in building trike conversion kits for touring motorcycles and utilizes a dealer-direct distribution system, has adapted its manufacturing to cater to Baby Boomers who have both the capital and the passion to ride, but might not be able to handle a motorcycle because of physical limitations.
“I think we’re a little insulated from the economy because people who want to buy a motorcycle sometimes need a trike,” he said. “It isn’t necessarily a want. It’s a need part of what is generally thought of as a want industry. They’re retired, older individuals and aren’t as susceptible to market changes as others. That’s why we haven’t seen much change in our sales growth during the past two years.”
Customers over the age of 65 have been a huge part of the success of the trike market in general, and Lindholm says his company is simply giving older riders the opportunity to still enjoy the sport with friends and family.
“There are people who enter our market every day who weren’t in it 5-10 years ago,” he said. “If all their friends are riding on the weekends, but they can’t participate because they can’t ride a bike anymore, this allows them to do that. The vast majority have been bike enthusiasts their entire lives, and this is just a natural progression for them. We will have some who come from boating to trikes, but most have been bike enthusiasts for years.”

Building the business
The Trike Shop began as a unique hobby, with Doug’s father Dick converting Volkswagens into trikes for sale to customers in Minnesota. The business continued to grow through the 1970s and ’80s, and after graduating from college, Doug convinced his father to grow the business beyond local sales.
“We moved into our current facility in 1990, and we quickly realized that we’d have to do more than convert Volkswagens to pay our mortgage and stay in business,” he said. “Before then it was more of a hobby. That’s when we started hiring more staff and design products that were easier to distribute than the Volkswagen trikes.”
Although the Volkswagen trikes were bringing in a good local income, Lindholm says he and his father both knew they weren’t the future of trikes.
“We saw other companies that made trike conversions for motorcycles, and we realized what a great idea that was, and that it was the next step in trikes,” he said. “There were no trike conversion kits in the 1970s and ’80s. Things have changed a lot in the past 20 years, and we’re doing our best to change with them.”
The duo’s first conversion kit was a Honda Goldwing 1500, and Lindholm says although the building of it was archaic compared to the technology available today, the theory behind building their trikes has stayed the same for nearly 20 years.
“It was crude compared to what we’re doing today, but the theory behind it was the same,” he said. “The guys who designed the very first conversion kit are still with us today. Same lead welder, same engineer and painters.”
Since moving into a 2,500-square-foot building near the back of the property they purchased in 1990, the Trike Shop has grown into its current 25,000-square-foot facility, and is now outsourcing much of its work.
“We’ve been able to stay at the same property yet grow our output quite a bit,” Lindholm said. “In the future, we’re looking to add a second shift. We have the capabilities in terms of the facility size to do it, so we hope to be able to go into a second shift in 2009. Once that happens, we anticipate sales growing at an even faster rate.”

Easy advertising
Lindholm says the Trike Shop has seen spikes in its sales dating back to 2000, which was when the company began to focus on building a dealer network. Today, the company has a network of 85 dealers, a majority of which are Honda dealerships. Lindholm says the majority of sales come from customer referrals, and although the company barely advertises, it’s struggling to keep pace with its sales orders.
“Every time I set up a dealer, the sales keep adding up, and a lot of our sales come from word of mouth, so the more areas you have covered, the easier it is to have your current customers spread the word,” he said. “We don’t do a large amount of media or advertising, basically the gas station is our sales floor.”
Lindholm says the company has always had healthy sales interest from customers, so the company has been able to focus less on advertising and more on the manufacturing aspect of the company.
“It doesn’t help to add fuel to the fire in terms of advertising if you can’t manufacture a quality product to begin with,” he said. “Right now our growing reputation has led to good word-of-mouth, and that’s been working for us. We run a couple of ads in magazines, but nothing significant. We certainly will do more in the future if we need to, but when you’re booked out for four months, it’s hard to keep taking on new customers and not be able to deliver in a timely fashion.”
Lindholm says recently the Trike Shop has been trying to persuade more of its dealers to inventory product in the off-season so it’s available to customers during the selling season, which would help ease the number of back-ordered kits the company must produce.
“That seems to be the biggest challenge for us, getting dealers to buy the product in the off-season and then warehouse it,” he said. “It’s something they don’t want to do, but you have to. The dealers that are proactive are very successful, but our goal is to have even more of them.”

Growing competition
One area of the trike segment Lindholm admits there has been dramatic change to recently is the number of competitors that are popping up every day. The company has its sights set on competing with large manufacturers like Lehman Trikes, but at the same time is wary of new manufacturers looking to gain market share, especially those from Asia.
“We’re concerned about the fact that at some point the Chinese will come out with their own versions of trike conversions. Right now you’re seeing some Japanese companies manufacturing them that are similar to what we make here,” he said. “Most of the time we always display our stuff up front, our chassis is on display so you can look at it and touch it, etc. The quality is obvious when you can see it up close. The proof is in the ride. That’s the hard part of selling these products, our emphasis on the quality of the manufacturing and the ride. It’s not something you can see in a brochure, you have to convey it some other way. I love it when people really ask in-depth questions about our trikes because I can’t stand it when someone buys a trike based solely on the color or the design. That’s just scratching the surface, the bulk of our work is the inside the bike.”
Even with the new competition on the horizon, Lindholm says the company is within reach of catching competitors, and also must educate customers and dealers about the differences between a Trike Shop vehicle and a sport trike, like the BRP Spyder, for example.
“We think about catching up to and surpassing a company like Lehman every day,” Lindholm said. “They’re building more units than us, but we’re catching up very quickly. We are today what they were 3-4 years ago, we’re not that far behind. As far as models like the Spyder go, it’s very cool and interesting, but it’s not anything like what we’re doing. That’s a more sporty trike. We’re building touring trikes. The customers I have talked to who rode them like them, but those trikes are built for a different demographic. I don’t see us competing directly with a model like that, but you always have concerns.”

Roadsmith line
A step the Trike Shop has taken to separate itself from the competition is to brand its own line of trikes, the Roadsmith. Lindholm says the Roadsmith line is key because in the past customers thought of Trike Shop kits as generic, and that branding their trikes has been important in terms of both industry and customer recognition.
“The Trike Shop name has been around since the early 1970s, and it’s a good name for a place that builds trikes, but it’s not a good product line name,” he said. “That’s what we’ve always been missing until recently. So in 2006 we came out with the Roadsmith trikes.”
All of the company’s trikes are now branded under the Roadsmith name, with a signature logo attached to the back of each trike.
“There are particular model numbers with each one depending on whether it’s a specific Harley, Gold Wing, etc.,” he said. “It’s helped people realize that we actually have a line of trikes. It’s not just the shop or store that you bought it at, but actually the name of the line.”
Lindholm says the ultimate goal for the branding effort is to have dealers and customers associate first with the Roadsmith name instead of the Trike Shop.
“We’ll see how long it will take people to catch on, maybe five years, but we’re currently attempting to make that transition where the Roadsmith name is what people associate us with,” he said.

Challenges still ahead
Lindholm admits The Trike Shop didn’t do a great job of branding its trikes during the early days of the business, and the unfortunate result is that it became generally referred to as a generic trike kit. Because the market is much more competitive than in the past, he says the branding effort is just one of many steps the company is taking to ensure customers recognize both the company and the quality of its product.
“There really are no bad trikes out there anymore,” he said. “In the early days there were a lot of companies making trikes that had quality and durability shortcomings. Today, the U.S. companies do a lot more testing and the quality is good around the board. And that’s part of what we sell here is safety, security and fun. And with the market the way it is, trikes are a great profit opportunity for dealers.
“You should be building and selling what you know people want to buy. You look around at the crowds in places like Sturgis, you see a lot of gray hairs there. We’re just capitalizing on a market we know will continue to be there for years to come, and hopefully more dealers can realize the opportunity there, as well.”