Aftermarket shows resilience to recession

By Neil Pascale
Editor
“Cautiously optimistic” appears to be the new buzzword for the aftermarket industry’s outlook in 2009.
A number of aftermarket officials used those words to describe their expectations for the coming selling season as they approach one of the larger PG&A shows of the year, the Dealer Expo in Indianapolis.
“The potential is there, we think,” Doug Muellner, national sales manager for FMF, said of potential growth in sales for 2009. “We’re cautiously optimistic.”
Part of that restrained confidence, coming not only from Muellner but many other aftermarket officials, is the result of a mixed 2008. Some distributors and aftermarket suppliers have reported revenue growth while others are reporting down years.
Dealer sales in PG&A fell nearly 2 percent, according to ADP Lightspeed’s survey of more than 200 U.S. metric and v-twin dealerships conducted for Powersports Business. Still the U.S. retail swoon seen in the fourth quarter across all industries was not a big factor on the year-end results. Through August, dealer PG&A sales were near the same level, down less than 2 percent.
While the overall nation was down, there were tremendous differences around the U.S., with the South up and the West down.
This follows a year when PG&A sales were essentially flat to 2006, according to the ADP Lightspeed dealer study.
However much the aftermarket was down in 2008, it has clearly shown more recession resiliency than new unit sales, which fell nearly 16 percent, according to the Motorcycle Industry Council’s year-end report. New unit sales reported on by the MIC have now fallen by a double-digit percentage for the past two years.
“When people can’t afford or can’t obtain financing for a new motorcycle, what we saw was a pretty strong display of enthusiasm in purchasing gear, whether it’s helmets, jackets or what-have-you,” said Richard Kimes, director of marketing for national distributor Helmet House.

Spending patterns
The UTV parts and accessory business remains robust while the same can’t be said for the sport ATV side.
“UTV is still strong,” said Brad Kruckenberg, general manager for Moose Racing. “It’s not as strong as it was. When it came out of the gates, we had months and months of really big growth because it was the new thing. That plateaued a little bit but UTV is still pretty good.”
The same can’t be said for PG&A sales on the sport side of ATVs, which has followed the trend of new unit sales where utility has fared better than the recreation side during the challenging U.S. economy.
“We’ve seen some of the high-performance ATV parts fall off pretty hard,” Kruckenberg said.
What hasn’t fallen off, surprisingly, is the high-end part of the aftermarket. Several companies reported stable, if not growing, sales on high-end products.
“Shoei, a premium, high-priced product, had very strong growth for a highly developed brand,” Kimes of Helmet House said, noting the brand’s revenue growth approached 10 percent in 2008.
Muellner of FMF saw similar trends.
“In spite of the economic conditions, we were pleasantly surprised at the resilience of our high-end, four-stroke stuff,” he said, noting the company’s 4.1 system fared well during the past year. “Even with a reduced or restricted enthusiast base out there, our product has held up very, very well as far as movement goes.
“So for us, the high end and the low end held up good. In some cases we were surprised at how well it held up, which goes to the integrity and reputation of our product and ongoing development.”
FMF, like many other companies, did see softening in the dirt segment.
“Where we saw a slowing in movement was our mid-level items, which is somewhere between a serious enthusiast and just a weekend trail rider,” he said. “That was a little soft.”
In such economic downturns, aftermarket officials have noticed that established brands tend to fare better.
“When times get a little difficult, they (consumers) want to make a safer choice,” Kimes said. “With things like a Shoei helmet, people will justify that in their minds. It’s not just about being cheap, it’s about getting a great return on their investment. Once people understand what those products have to offer, they’re willing to invest.”

Positive signs
One reason there is cautious optimism is that U.S. gas prices have fallen, meaning the chance to get that weekend rider back out on the trails in the spring could have a significant impact on the market.
Plus for a second straight year, the industry is benefiting from a solid snow season.
“Plows have been the shining star,” Kruckenberg of Moose Racing said. “It’s the second year in a row that we’ve had good snow conditions so plows have been really good. We had an excellent December with plow sales. It actually eclipsed last year’s sales and last December was an extremely good month for us.”
Another reason for cautious optimism: Despite the economic challenges, the industry’s consumer has remained predictable in one positive way.
“Industry wide, the No. 1 question retail consumers have is what’s new?” said Phil Davy, Icon’s brand manager. “It’s not what’s on sale, or what’s on closeout? They have those questions as well, but the No. 1 question they ask is: ‘What’s new?’
“Honestly it seems to me, people are looking for stuff that is different and unusual rather than the same old thing,” Davy said. “If dealers are stocking the old thing in motocross gear or street gear, it seems like they’re having more trouble selling stuff in this economy than if they are stocking new, unusual things.”
That extends to the helmet arena, where Icon believes its recent growth will extend into the new selling season.
“We’re projecting, fully knowing where exactly everything is, we’re still projecting growth,” Davy said of 2009 expectations, noting that growth is expected to be “healthy, single-digit growth.
“Honestly I would be hugely surprised with what our plan is if we have to take a step backward. Hugely surprised.”