A question of commitment – January 22, 2007
January 22, 2007
Filed under Features
Yamaha’s watercraft group and at least six Michigan WaveRunner dealers find themselves in a battle over the right to sell Yamaha watercraft.
The problem stems from the dealers’ 2007 orders. To the dealers in question, the orders seem on par with their past history, as well as the state’s current dreary economic situation. To Yamaha, their order numbers appear to be another example of a lack of complete commitment to the watercraft industry.
To date, all six dealers have been notified of Yamaha’s intention to terminate their WaveRunner franchises because they did not aggresively promote and stock WaveRunners. Most dealers indicate they will take the decision to arbitration.
According to the dealers, each of which is located along the western edge of the state near Lake Michigan, the troubles began anywhere from 30 minutes to 45 days after they placed their orders for ’07 models. The dealers were told their order volume was insufficient, and they could either increase those orders, or find themselves out of the Yamaha watercraft business. In each case, the dealer in question said they previously never had a minimum requirement when it came to watercraft purchases. Yamaha reportedly asked for increases of around 25 percent of a dealer’s existing order.
“We were a little bit stunned,” Matt Isard, owner of Powers Motorsports in Fremont, Mich., told Powersports Business. “After so many years of not having a minimum or maximum, for them to come after us and say now you need X-amount…with the economy in Michigan, it’s not a very good time to ask your dealers to up their orders.”
“The economy is horrible here in Michigan,” echoes Marty Martin of Oxford’s Wheels USA. “I’d say most dealers are down 40 to 60 percent across the board on everything.”
According to Yamaha Watercraft Group President Mark Speaks, however, market share, not the economy, is the most important factor behind the decision to ask the dealers in question to increase orders, or lose the brand.
“It has been our practice for many years now to focus on partnering with the most committed dealers in any market,” Speaks said. “As part of that process, each year we go through and review to see who appears to be committed and who’s not. These days we have a dealer network that for the most part is pretty committed, but there are still some dealers who remain in the business, but really aren’t in the watercraft business. They probably are big with other product lines, but don’t really pay attention to watercraft. And that’s not the kind of partner we’re looking for.
“It’s based on market share, which isn’t affected by the economy. Whether the economy is great or not, that affects all manufacturers equally.”
For Yamaha, that market share has been historically low in this area of Michigan. In fact, company representatives say the territory is one of Yamaha’s worst performing segments from that perspective.
“In any given market, I can say that we have dealers who are really committed to growing their business, really committed to taking care of watercraft customers, and then we have had some in the past that just park a few WaveRunners on the floor, don’t really know a lot about the product, and, our assumption is, don’t do a very good job of servicing the customer,” Speaks said.
“And over time, we’ve been notifying those dealers that you either need to get into the business, or it would be better for you to get out of the business. You’re probably not taking good care of our customer, and it’s probably not a good investment for you. If you’re putting a lot of effort into selling 20 WaveRunners a year, but you’re primarily a motorcycle dealer, you might be better off to put that effort into selling (more) motorcycles.”
That sentiment rubs some longtime Yamaha dealers the wrong way. One such dealers is Jim Faiella of Peacock Ltd. Motorsports, Baldwin, Mich., who has been a Yamaha motorcycle, ATV and snowmobile dealer for a number of years. Looking at his carryover inventory from 2006, Faiella made the decision to reduce his order for ’07, a move he felt was necessary to get his inventory — and interest payments — under control.
Faiella says 30 minutes after his order was placed, Yamaha’s response was to recommend terminating the PWC franchise. “That’s really the crutch of this deal,” says Faiella. “This was absolutely pre-planned, pre-meditated, without any dealer having any clue what was going on.
“That just set me off. I’ve been a dealer since 1986. I took on the watercraft in ’92. I’ve struggled through the years with them and sold over 500 Yamaha watercraft and jet boats. We’re in a very rural, vacation area of Michigan, and I do $10 million in the middle of a national forest because I take care of my customers.
“Within the last seven to eight years, they’ve set three dealers up around me that shrunk my market by probably 75 percent. And now they’re canceling two of the three guys they set up. If anything, they probably should have just canceled those two guys, and strengthened my dealership.”
Says owner Dan Quinn, U-Win Motorsports, Ludington, Mich., who ordered an equivalent amount of WaveRunners to the previous year, “they just wanted to make market share grow…and thought they were going to double up orders to make it happen.”
What makes the situation an ever more bitter pill to swallow for Faiella is he contends Yamaha did not have a sales rep in his territory until only recently, instead handling things by phone from Atlanta. “Yamaha basically dropped its support,” argues Faiella, “whereas my Sea-Doo rep was in my store every three months.”
Faiella also says that Sea-Doo trimmed his allocation order for the 2007 models.
Yamaha Regional Manager Ray Smith acknowledges that some rural territories have had phone, rather than road reps, at varying stages. The idea that the notice of termination came out of the blue, however, is dismissed. According to both Smith and Speaks, Yamaha counsels dealerships they feel are not meeting their goals on ways to improve sales, and numerous warnings are given before the franchise is ever threatened.
“This should not be a surprise to those guys,” says Smith. “We can tell that there’s a problem way before it gets to this point. We do the best we can to communicate that to the dealer and ask for improvement, setting goals so hopefully they understand where we need to go. What we expect out of them, and what is in the dealer agreement that they signed with us as a basic performance level.”
Speaks is confident Yamaha has never non-renewed or canceled any dealership out of the blue. “We don’t do that,” he said. “A district manager who has suggested not renewing an account has to provide documentation to satisfy his boss that we have maintained a dialogue with the dealer, made it clear to him that we’re not happy with market share.”
As Speaks contends, few dealers take it well when their franchise is threatened. “Typically when that happens they’ll complain that they haven’t seen the district manager in years, nobody has ever told them that they weren’t doing a good job, and in every case that I’ve ever worked personally, I’ve found that they’ve seen their district manager a lot, and that the DSM has documented those conversations on every call report, and somebody at the dealership, not always the owner, has signed the report indicating they were part of the conversation.”
That’s precisely what happened with the dealerships in question, according to newly installed District Manager Tony Horn. “It was not for lack of placement orders,” Horn said. “It was based on years and years and years of documentation, and asking them to participate at a level to help them achieve at least the average market share sales of what the other dealers in the area were selling. And we were just unable to do that. That forced us into a position of trying to better our dealer network and better serve our customer by having maybe fewer dealers that are stronger dealers, that will be able to do the marketing and spend the money to serve the product and the customers of the area.”
Yamaha officials also bring up the point of service, contending that a dealer who sells an abundance of the brand’s other lines, but few watercraft, may not have the technicians and training to service the watercraft line to the standards of a larger volume dealer who places a greater emphasis on water vehicles.
Still, Yamaha dealer Isard sees things differently.
“I understand Yamaha watercraft is a separate franchise,” says Isard, who plans to appeal the decision. “But on the other hand, we carry the full line of Yamaha’s other products — ATVs, motorcycles, dirt bikes, snowmobiles. We’re in the Top 10 in the district all the time. Obviously everybody’s got their niche, but you’d think Yamaha as a whole would support that.”
To Yamaha officials, however, a big snow/motorcycle/ATV store doesn’t necessarily translate into a strong member of the watercraft group.
“It’s been our experience that when you have a dealer in a big market selling a small number of units, they really don’t put any effort into knowing the product, knowing the customer, knowing the customers’ needs, and that is part of the reason why they don’t sell very many units,” Speaks said. “They’re not the kind of dealers that we can build our business with, and our product line is probably just a distraction.
“They’d be probably better off focusing on other products.” psb