FOCUS – The Chain Store Challenge to Powersports Dealers

The line of goods and services almost doesn't matter. Be it clothing or shoes, hardware, automotive needs, toys, recorded music, food, or pet supplies, big chain stores have increasingly displaced local mom-and-pop stores as the dominant outlets in market after market all across the country. The result is that total reliance on the franchised dealer channel for major brand products is now history.
With Arctic Cat four-wheelers and Kolpin mini-quads now being sold in Gander Mountain Stores, and Cat ATVs also sold in Bass Pro Shops, the powersports industry is now facing the chain store issue head on. What is likely to happen in the future? Will chain stores replace franchised local dealers as the dominant outlets for powersports products like all terrain vehicles? For some insight, we can take a look at a very similar business: outdoor power equipment.
Lawnmowers, yard tractors, and similar equipment are widely sold by home and garden centers, some of whom have some kind of service arrangements. And these products have been sold for a generation by discount stores that generally have no service capabilities. Over the years, almost all the surviving manufacturers of these property-care products have gradually yielded to the buying power and wide distribution capabilities of the chain stores. By doing so, they have forsaken the franchised servicing dealer, or at least pushed the dealer channel into the background. One result has a marked deterioration of owner service for this class of product.
Although some franchised dealers have embraced this trend as an opportunity to expand their service business by working with the chain stores, other dealers choose not service chain store equipment. And other third-party service has proved to be less a totally satisfactory answer.
One major manufacturer, MTD (Cub Cadet, White, Yard Man, and many other brands), has now established its own retail service organization, called Mower MD, on a limited basis with the possibility of going national.
So are we looking at a sea change in the powersports business? It is really too early to tell. Dealer reaction to Arctic Cat's move has been mixed. One dealer Powersports Business talked with was very concerned until he examined a chain store operation and decided it wasn't going to hurt him any. But another dealer dropped their ATV line (a different brand) on the mere rumor that a local chain store was going to handle it.
So far, chain store locations selling Arctic Cat quads are required to have an internal service department with trained personnel just like any other franchised dealership, and this is a significant departure from what happened in the outdoor power equipment business. And although these chain stores can display a tremendous volume of equipment and supporting goods of all kinds, and can promote this business widely, they currently appear to view ATVs simply as another accessory. It's just part of providing whatever a hunter or fisherman needs to pursue his or her chosen recreation, and they do not appear to be targeting the non-hunting or fishing customer. One chain store employee tells us that his company pretty much ignores supporting the organized ATV user groups, revealing that “corporate donates a lot of money to other user groups.” This employee went further to say that his company also makes it hard for his department to compete for ATV business from non-store customers. “They tie our hands a lot,” he says, and what we have observed from store visits and examining advertising and promotional practices tends to reinforce that.
Kolpin, who is primarily an accessories supplier, is walking both sides of the street successfully according to Jamie Ratajczek, General Manager of the Powersports Division. “We are experiencing sales growth through both channels,” Ratajczek says. “Obviously our heritage is in the hunting market, so we have always had a strong presence there with our gun boots and ATV mounting brackets. We view the powersports dealers as a key market segment for our products and plan on growing our presence there.”
The lesson for the franchised dealer: be aware of the new competition for hunting market ATV sales.

- Dave Wells

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