Apr. 21, 2008 – Setting a new standard

By Steve Bauer
Managing Editor
KYMCO USA President Eric Bondy vividly recalls the questions he had from dealers two years ago at Dealer Expo. “What kind of discounts do you offer? Can I get a better deal if I order an extra crate of scooters?”
This year those questions weren’t asked because Bondy & Co. chose not to attend an event overflowing with importers that put price on a pedestal.
The Taiwanese brand that first entered the U.S. market eight years ago as a price-friendly alternative to larger American and Japanese OEMs has evolved its business model. While many overseas competitors flood the market with nearly every product segment imaginable, KYMCO has mainly specialized in two markets.
Where others have set up small distribution centers near U.S. transportation hubs, KYMCO has invested seven figures in a sprawling South Carolina facility.
Where parts fulfillment remains a guessing game with some new entry OEMs, KYMCO boasts a fill rate that matches or exceeds some national distributors.
The result: A growing dealer network and a U.S. retail sales volume that exceeds some of the industry’s most prestigious European motorcycle brands.With a sales volume of 15,000 units in 2007, a change in focus from price to value, specialization in key market arenas and a U.S. infrastructure to support that, KYMCO USA has created a new standard for its offshore competitors.
Now with the recent backing of its Taiwanese parent company, the manufacturer is committing millions in R&D and marketing to build customer brand awareness and further entrenching itself into the U.S. market.
For these accomplishments and his ability to separate KYMCO USA from a swarm of offshore competitors, Bondy has been named Powersports Business’ 2008 Executive of the Year.
Success in a down market
In 2007, KYMCO USA was able to increase its sales in two segments that struggled to hold onto consumers. While the ATV market was down nearly 15 percent in 2007 and the scooter segment remained essentially flat, according to Motorcycle Industry Council data, KYMCO USA recorded an 8 percent growth in ATV sales and 12.8 percent growth in scooters. Though its wholesale volume was down compared to 2006, the company still had sales of approximately 15,000 units in 2007.
While that sales volume might push KYMCO to the lead amongst OEMs that have entered the U.S. market in recent years, Bondy says he views the company as a small manufacturer that refuses to get caught up in its own success.
“I don’t know if we’ll ever view ourselves as a major player, but we certainly are aspiring to compete against the big players,” he said. “We’ve built quality products since the first day we entered the U.S. market and that hasn’t changed. I think that’s really at the cornerstone of a lot of the success that we’ve been able to achieve during the past eight years.”
Bondy says he likes to think of KYMCO as an underdog in the industry, and that such a mentality is a strong motivator to resist taking a step back to admire the company’s success.
“I don’t want to get complacent and say, ‘OK, we’ve arrived and now we’re one of the big eight OEMs’, because I really don’t think that we have,” he said.

U.S. infrastructure
In the middle of 2007, KYMCO Taiwan became a 50 percent partner with KYMCO USA, and the partnership has allowed the company to focus on its long-term vision for the U.S. market. Now KYMCO Taiwan can invest heavily into U.S.-specific product development, increases in advertising and promotions and building a larger national dealer network.
“As a worldwide manufacturer KYMCO Taiwan would build an ATV that might work great in Europe for on-road uses, but there would need to be changes made for off-road uses in the U.S., so we’re going to start focusing a lot more of our testing and development here in the U.S.,” Bondy said.
The company is aiming to branch out in the U.S. ATV market with more utility and sport models. Another potential growth opportunity for KYMCO is its entrance into the UTV market, something Bondy is particularly proud of.
“It’s been in development for a long time, and we think it has several advantages over some of our competitors’ models,” he said. “Frankly we think there are a couple areas where we can walk into this market and be industry leaders. And so that’s tremendously exciting for a company like ours.”
Another large undertaking the company recently completed was to streamline its three-building distribution network down to one centralized location, an 80,000 square-foot warehouse at the company’s headquarters in Spartanburg, S.C. Bondy says the infrastructure change has not only been a success in terms of increasing efficiency in moving freight to dealers, but it also has cut the company’s shipping costs.
“We really felt that we could do a much better job in managing our shipping to dealers and delivery in a timely manner by moving things to a centralized location,” he said. “And with fuel prices the way they are, we can now negotiate with freight companies on a much more reasonable level, where in the past really it was up to the logistic warehouses to negotiate with the freight companies to a certain extent, and we were kind of at their mercy.”

Parts availability
The distribution center also has helped with parts availability and timely shipping from online orders. Bondy says although the company’s fill rates have always been high, this is an opportunity for them to improve it even more.
“I know there is a stigma from some dealers who don’t work with us regarding parts availability, and I think it’s interesting because too often we get lumped into this group of off-shore manufacturers, and so there is a perception out there that this particular group will bring product in, sell it and then not support it,” he said.
Bondy argues that anyone who has dealt directly with KYMCO understands that’s the opposite of its business model.
“We strive to first put the infrastructure in place to support the dealers, to support the parts and do all the things we need to do to be a good business partner,” he said. “Do we have parts shortages? I think every company has parts shortages, but our fill rates are normally above that 92-93 percent range, and I think that’s consistent with some of the better players in the industry. We’re normally carrying more than seven figures of parts inventory at any given time. I think we have room to improve, and we’re looking for ways to do that, even to the point where we’re making capital investments both into our facilities and how we manage that business to help us out.”
The new centralized distribution center has been welcomed by KYMCO dealers who say parts shipments, either ordered directly or online, have never been better.
“Their parts availability is excellent,” said Martin Solano, president of Solano Cycle, which has two locations in Florida. “I rarely have to wait on something, and if I need to I can reach top management with a simple phone call. Their online ordering has improved as well, it’s more user friendly.”
The biggest reason for the online improvement has been the company’s partnership with ARI for its parts program, which can either be through online access or CD driven material so dealers have more accurate versions of what they’re searching for. Bondy says the company also uses ARI to facilitate its online warranty claims processing, which began in 2007. The ARI partnership is just one example of moves KYMCO has made to reach out to its dealers.
“We’ve been very fortunate to partner with some great companies like ARI or Dealership University, which I’m really excited about and believe can be a great tool for us going forward is the ability to educate the dealers on products, service, all the other areas,” he said. “We’ve got a great partner in Sheffield Financial to help us on the retail finance side, GE on the wholesale side, and we’ve got our own KYMCO protection plan for our extended warranties.”

Specialization
One of the biggest keys to KYMCO’s growth in the past five years has been its approach to focusing almost entirely on scooters and ATVs. Bondy says the fact that the company has only launched two main product lines is no mistake, as it follows a philosophy to focus on excelling in a particular segment before moving on.
Few would argue KYMCO is one of the market leaders in the two-wheel scooter segment, and it’s that type of commitment the company is now focusing on with its ATV line. But as the company’s dealers will attest to, KYMCO’s success is due to factors beyond just its products.
“They are the pre-eminent scooter brand in the U.S.,” Solano of the Florida dealerships said. “I sell a lot of different brands of scooters, but the difference with KYMCO is they’re established. They have a great dealer network; the product support is there, and they do a lot of advertising with us, a lot of co-op. They support the brand, and they go out of their way to make sure they are backing up their product.”
Bondy says the company took on a major undertaking when it developed its ATV line, and because of the quality of competitors KYMCO knew it would be going up against; it insisted the R&D and other infrastructure was in place before the company would move forward.
Although there were concerns from KYMCO dealers about a dropoff in dealer support while the company launched its ATV line five years ago, those interviewed agreed that the situation has improved greatly.
“Parts availability was a problem and they were having a hard time maintaining a steady flow of scooter parts,” said John Rice, general manager of Cycles 128 in Beverly, Mass. “They’ve really improved, however, and we’re pleased with their support and service. The ATV line was a big step for them, and they really put so much effort into supporting their products.”
Bondy says the ATV launch was particularly tough for the U.S. office, as the company was understaffed and overwhelmed.
“When we first started on ATVs, at the time there were only seven people that worked at this company, so yeah, there was a little bit of a drop off in our dealer support, but that was quickly resolved,” he said. “We have a much larger hill to climb on the ATV side when you look at the level of competition, and what those companies have accomplished. Although it’s daunting, it’s exciting because what we think can be our growth opportunity is reaching new customers through our dedicated network of dealers, who have a passion for our products.”

A strong dealer network
Bondy believes the biggest key to KYMCO’s success as a two-market manufacturer is based on a solid distribution network of dealers. With a current dealer network of 700 strong, KYMCO continues to focus on individual dealer growth, with the goal of trying to find the best people to partner with in each individual market.
“I think from a competitive standpoint in the down market we’re currently in, we have to give our dealers an opportunity to make money in this business,” he said. “Because if they’re not making money, they’re not going to stay with us very long, and so we’re really trying to focus on programs that are dedicated to dealer profitability. It’s getting harder and harder because our margins are getting squeezed and costs go up. You have to pass those costs onto consumers, and the market really hasn’t allowed the industry to take very large price increases during the past few years. So when you do things like fuel surcharges, it affects everyone’s margins.”

Customer brand recognition
One of KYMCO’s biggest obstacles has been gaining strong brand recognition from consumers, a feat Bondy says the company is taking a new approach toward.
“We’re going to start focusing a lot more on what our messages are and how to communicate that best to the consumers,” he said. “We’re doing a ton more consumer shows kind of at the grassroots level, exposing our brand to as many people as we can on not only the display side, but also on the riding and demonstration aspect.”
Bondy is excited about the new partnership with KYMCO Taiwan, as the company has pledged to use its financial resources to create a large consumer marketing campaign in the near future.
“To me one of the biggest advantages of having KYMCO Taiwan coming over is that they can look now long-term into the investment that we put into the United States,” he said. “So we can develop some long-term planning from an advertising, promotion and pure marketing standpoint to make sure we’re reaching the consumers.”
Besides the millions the parent company is investing on the R&D of new U.S.-specific products, Bondy estimates KYMCO Taiwan’s marketing and promotions investment will increase between 40-60 percent in the next few years.
“You’d be hard-pressed already to pick up a motorcycle or ATV magazine and not find a KYMCO ad in it. We’re very consistent and conscious about that. It’s something we believe very strongly in regarding reaching our customers,” he said. “But we’ll also start expanding into some of the lifestyle publications and some of the areas we haven’t been prevalent in previously. We’ll also look at starting a television ad campaign.”
KYMCO dealers interviewed by Powersports Business agree that the brand has some local consumer brand awareness, where customers swear by the brand’s reliability and product service.
“I’ve been selling KYMCOs for eight years, and they’re starting to gain some brand awareness,” said Adam Baker of Sportique Scooters, which has four locations in Colorado. “In this area at least, there’s definite brand awareness to who KYMCO is and how reliable they are. And that’s really where they’ve gained their reputation and have to continue to focus on. They’re like Hondas; they just don’t break. And when they do, the company does pro-active recalls and has done a great job.”
Bondy is the first to admit that no amount of ad revenue will bring added customer recognition if a rider is ultimately disappointed with the end product and services.
“We spent a lot of time, energy and money during the past seven years working to reach industry people, telling the KYMCO story and really touting the quality of the product,” he said. “On the consumer brand side, how long will it take? I don’t think we’ll ever finish. But success won’t come just by throwing a lot of money at marketing ourselves. Customers have to know once they purchase one of our vehicles that we stand behind it 100 percent, and will do whatever we can to ensure their sales and riding experience is a great one.”

No shortcuts to success
The company believes its 2007 success will be a springboard for 2008 and beyond. Bondy says KYMCO expects to create excitement among consumers and dealers with the introduction of several new models this year, and overall sales are projected to grow in the high single digits, and possibly in the low double digits.
Regardless of the success the company might have, Bondy says it’s more important to him for the industry and consumers to understand that KYMCO isn’t taking any shortcuts when it comes to competing in the market.
“It’s critically important to me for the industry and consumers to know we are trying to do things the right way,” he said. “We’re taking care of our dealers, we’re good corporate citizens, we’re following EPA guidelines and doing the things you’re supposed to do to be a good business in this industry. And if you do those things right, hopefully good things will result and the industry will respect that.”