Apr. 21, 2008 – How dealers and distributors can avoid a big step backward

The industry has come such a long way in the 38 years that I have been in it. My fear is that we might be poised for a giant step backward. As an industry we have ridden the wave of technology with the products we sell and the way we manage the exercise. Yet in 2008 the motorcycle distribution process remains archaic and totally nonresponsive to the marketplace.
Dealers finding themselves overwhelmed with inventory, a perceived haughty indifference from suppliers and market conditions that threaten the survival of his/her business, are looking for support from their state legislature. We have seen draconian measures taken in Montana that are being emulated in other states as dealers are literally seeking protection from their suppliers. Legislators have long recognized the relationship between OEMs and dealers is not conducted on a level playing field and, given that the dealer and his staff are also voters, have been receptive to enacting protective legislation. Couple in the argument that recent haphazard importation of product has created the need to protect the consuming public by regulating distribution, and you expand the number of responsive and supportive regulators.
I have long been a very outspoken advocate for dealer franchise protection legislation, and still feel strongly that every state must have, and continually update, laws to protect dealers from abuses by suppliers. However, the problem for which dealers are currently seeking relief will not be solved by legislation. The manner in which motorcycles are distributed from OEM distributors to dealers erodes the value of the product and the very viability of the retail business. The industry has to come up with the answer from within.
As I wrote in my last column, Harley-Davidson has come up with some creative thinking. The implementation of their Retail Sales Objective (RSO) plan and all of the related support has not been without some resistance by their dealers. Metric OEMs face a more daunting challenge, since the majority of their dealers represent multiple brands. An OEM could argue that an effort to regulate days supply, by adjusting shipments in response to actual sales, would result in his competing OEMs loading the dealers up to the point that they could not accept future shipments from a supportive OEM, even if they were appropriate.
Since I am not a lawyer, it is perfectly acceptable for me to ask questions that I do not have the answer for. I do not have a ready answer for just what we, as an industry, should do. But we do need to ask the questions. What needs to happen for us to have the right amount of product in the right place at the right time? What changes need to happen at the distributor level? What needs to be changed at the dealer level?
I’m sure that both dealers and OEM suppliers would have no problem coming up with a wish list for what the other should do. Given that the wrong inventory in the wrong place at the wrong time is the biggest problem the entire industry faces, we might be at a point, as never before, that there could be some genuine give and take and a real effort to avoid the giant step backward that seems very likely and imminent.

A FACILITATOR

The National Council of Motorcycle Dealer Associations is holding its annual meeting on April 10 in Dallas. An agenda item will be what the council could do to facilitate a meeting where the inventory issue, problems, challenges and solutions could be openly discussed. It might be necessary to consider a complete revamp of the distributor’s dealer agreements. A solution to the current inventory problem is not likely to be something dealers can expect to be handed to them. There might need to be serious concessions by both distributors and dealers. The first step to coming up with the needed answers is to ask the right questions. The national council can play a vital role in helping to bring about a creative and meaningful dialogue, particularly since real concessions by dealers might need to be called for. Cheers, Ed. psb
Ed Lemco has been involved with the powersports industry for more than 30 years. Lemco, the former owner of Lemco Management Group, is the founder of the National Council of Motorcycle Dealer Associations. Lemco currently operates a call center for dealers in St Croix.