An emerging parts company – March 13, 2006

INDIANAPOLIS — The Dealer Expo here features the big distributors such as Parts Unlimited and Tucker Rocky, and they focus on promoting their house brands and their big suppliers. That’s only natural. But often hidden within these huge display areas are relatively small startup suppliers that have interesting products and intriguing potential.
HydroDynamics, a four-year-old company based in San Diego, is one of these hidden finds.
Performance Products Produce Growth
The hottest product for HydroDynamics today is its package of ATV performance suspension parts developed by owner Darren McGarvie.
The i5500 sport quad front suspension kit, for example, includes shocks, A-arms, tie rods, brake lines, ball joints, tools and a complete DVD instructional video. It’s the leading kit of its kind, says Brian Bott, vice president of sales and marketing.
The iShock kit was developed last summer and was introduced at the Dealer Expo here this year. It was one of the Nifty Fifty products selected by Powersports Business for its innovative approach as a performance upgrade.
“The show was fantastic for us,” says Bott. “I feel as though I talked to more dealers this year than in previous years.” HydroDynamics had booth space in areas of the Tucker Rocky and Motorcycle Stuff exhibits, as well as several others.
All the parts in the iShock kit are proprietary and have been developed by McGarvie, 35. Several patents have been applied for.
The i5500 kit is unusual, says Bott, because it’s the only product of its kind that lets the consumer buy an off-the-shelf package of matched proprietary ATV performance suspension parts that he can install himself.
The kit retails for $1,849.95, and the dealer margin ranges from 30 percent to 38 percent.
HydroDynamics posted a revenue gain last year of more than 64 percent, fueled in large part by the new sales from the i5500 kit, says Bott. The closely held company recorded sales of more than $3 million last year and is planning for similar growth this year, Bott said during an interview with Powersports Business.
Need Plus Solution Yields Sales
McGarvie, who owns the company with his wife Daena, stumbled upon the idea for a performance package when he ran the parts department at a large dealership in Southern California.
He found it hugely frustrating to have a customer stand at the parts counter asking for performance suspension parts that he didn’t have. McGarvie would make four or five calls to different suppliers looking for compatible parts while his potential customer waited …. and waited…. and waited some more. The answer always was the same: He could get the parts, but it would take four to six weeks. He rarely made the sale.
“Here’s a customer who is ready to spend $2,000 and you tell him to wait six weeks? People who have that kind of money don’t want to wait,” points out Bott.
Eventually McGarvie left the dealership to work for an aftermarket manufacturing company and early in 2002 he and Daena launched HydroDynamics.
A Growing Operation
HydroDynamics moved into a 15,000 sq. ft. facility two years ago that contains a machine shop, warehouse, offices and product development area. Manufacturing is outsourced to companies in the United States and Asia. HydroDynamics produces other branded and private label suspension products for ATVs and dirt bikes, in addition to the iShock system.
Last year, 75 percent of the company’s revenues came from ATV products, 15 percent from motorcycle, and 10 percent from products for utility vehicles (UTVs). That is expected to change to about 40/40/20, lead by ATV and UTV products, says Bott, because the company is boosting its UTV product lineup. “The (Yamaha) Rhino is going to be a huge focus for us,” says Bott. The company offers shocks for the Rhino, and it plans to add a suspension package for it similar to the i5500. It also plans to offer an ATV chrome package this year, as well. And it is developing suspension products for street bikes that could be available by 2008, says Bott.
While HydroDynamics sells through distributors, it also sells direct to a dealer network of about 500 stores with its three-person national sales staff.
Advertising and promotion are priority items for the company, notes Bott, pointing out the company pushes consumers to dealers through Web sites, print advertising — more than $180,000 is being spent for magazines, such as Dirt Wheels and Quad — dealer race team support, packaging and point-of-purchase materials. “We spend a lot of money to ensure that the product is displayed well at a low cost to the dealer,” says Bott. While many suspension products are shipped in plain boxes, HydroDynamics pushes the consumer appeal aspect of packaging.
HydroDynamics also guarantees one week shock rebuilding, much better than the typical industry turnaround of about four weeks, says Bott.
The iShock package is the best value in town, says Bott. “If priced individually, the components would cost about $2,400 and they wouldn’t be matched the way these are,” he says.
Could HydoDynamics be one of those small jewels that pop up every year at the Dealer Expo? Based on its recent product success and future plans, it certainly could be. psb

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