OPE Industry Forecasts: Leading minds give heads up on what’s in line for 2009 (Part I)

The following is the first of a two-part series:


Outdoor Power Equipment recently asked nearly two dozen OPE industry leaders to provide the inside scoop on the state of the industry entering 2009.
Specifically, we asked the following questions:
1. What is new and exciting about your organization heading into 2009?
2. What is your organization doing to weather the tough economic climate, and what should OPE dealers do?
3. What are the three biggest challenges that OPE dealers will face in the next two years, and how should they address them?
4. What are the hottest trends in the OPE industry today, and which new trends will emerge over the next five years?
5. What was the OPE industry’s biggest story in 2008, and what will be its biggest story in 2009?
6. What is your overall outlook for the OPE industry heading into 2009 and beyond?
OPE received the following written responses, in order, Dec. 15-22, 2008:



BOB WALKER
PRESIDENT
WALKER MFG. CO.
(FORT COLLINS, COLO.)

1. What is new and exciting about your organization heading into 2009?
We are continuing to make progress by offering one new model tractor (Super B with 26-hp. fuel-injection engine) and several improvements and new options for 2009. What’s exciting about our organization — after 28 years, we are still in business as a family-owned, independent company with a focus on being a dependable, stable supplier of power equipment to our customers.
2. What is your organization doing to weather the tough economic climate, and what should OPE dealers do?
My dad always used to say about tough economic times, “The first objective is to stay in business.” We are making the moves to follow that advice, including slowing down our factory production by 10 percent to better fit the current market demand and making price adjustments to respond to unprecedented instability in costs of purchased materials (steel, plastic, rubber) and components.
Dealers should follow the same advice as above about making “staying in business” as the primary objective. Also, I saw a recent article that suggested three other things to keep in mind during this time: 1) Things are never as bad as the media and naysayers are reporting — bad news sells; 2) Your action in hard times sets the rewards for good times. Make your own success by not getting distracted by the times, by focusing on what is important and what you need to do; you’ll benefit from being clear headed and keeping as stable as possible as you steer your business through turbulence; and 3) Good times follow bad times; there is a season. Article credit: “Harder Times,” Nick Burkholder, onperformance.com.
3. What are the three biggest challenges that OPE dealers will face in the next two years, and how should they address them?
I have four challenges instead of three. 
1) Making the transition away from selling products that are “consumable and throwaway (mass merchant stuff),” to selling durable, serviceable products where the dealer adds value by delivering service.
2) Bringing young people into the organization with a passion for business and for power equipment, blending youthful energy with the leadership and mentoring of the older generation; young people are still being born to be in this business — dealers just need to find them.
3) Dealers need to keep an independent attitude and stay independent. Some of the manufacturers and distributors in the industry have marketing strategies that eventually make the dealer captive (slaved) to them over time; demands for brand purity and high dealer inventories lead to a loss of dealer independence. If a dealer is going to make the investment to be in their own business and then allow someone (a big manufacturer) to run their business for them, they may as well go get an 8-5 job and forget being “on their own.”
4) Dealers are going to need to keep up with technology advances both in business operations and power equipment. For example, the industry will be moving to more and more fuel-injection engines in the next few years; dealer technicians will need to be trained to troubleshoot and service these engines.
How should dealers address these challenges? In a word, see the trends and make the moves.
4. What are the hottest trends in the OPE industry today, and which new trends will emerge over the next five years?
Power equipment fuel efficiency and reduced noise levels are trends that will shape the OPE industry products in the next several years. Some major technology breakthroughs in lightweight, high-capacity electrical energy storage devices are needed, but given that happening, we could see more electrically powered power equipment.
5. What was the OPE industry’s biggest story in 2008, and what will be its biggest story in 2009?
I don’t have good answers to the biggest story question, but I would say that industry consolidations and “strategic alliances” continue to be some of the most interesting stories to me.
6. What is your overall outlook for the OPE industry heading into 2009 and beyond?
I am an optimist in my outlook so I think better days are ahead for the industry and for dealers, while understanding that it will probably be 2010 before we see some recovery and progress from the current state of the industry.



ROCK REED
ASSISTANT VICE PRESIDENT
HONDA POWER EQUIPMENT
(ALPHARETTA, GA.)
1. What is new and exciting about your organization heading into 2009?

As Honda Power Equipment heads into 2009, we are planning to introduce new products that will, first and foremost, help people get things done, while adding ease of operation and fuel efficiency as benefits to our customers.
2. What is your organization doing to weather the tough economic climate, and what should OPE dealers do?
In the face of unprecedented global economic challenges, outdoor power equipment dealers will most likely be managing their businesses more closely than ever. Finding creative ways to serve consumers in an economical manner will be vital to dealers’ success.
3. What are the three biggest challenges that OPE dealers will face in the next two years, and how should they address them?
There really are two main challenges for outdoor power equipment dealers — ones that most other businesses are facing now and will likely be facing in the near future: dwindling retail traffic and diminished consumer confidence. There are many avenues to address these issues, and all approaches will require fresh thinking and new methodologies to achieve realistic business goals. More personalized consumer interaction and enhanced customer services may bridge some gaps in consumer confidence.
4. What are the hottest trends in the OPE industry today, and which new trends will emerge over the next five years?
A focus on both fuel efficiency and the environment will remain strong within the outdoor power equipment industry. In recent months, for example, we have seen wide fluctuations in fuel prices — definitely a top-of-mind concern for the average consumer. In order to stay competitive within our industry, it will be key to continue to offer our consumers technologies and products that will help them accomplish their tasks at hand while also conserving as much fuel as possible. This meets both a financial need and an environmental need for customers.
5. What was the OPE industry’s biggest story in 2008, and what will be its biggest story in 2009?
The industry’s biggest story of the year is our global economy’s economic crisis. Although we hope this crisis will end in short order, the effects of today’s financial situation will likely be felt into 2009 and beyond.
6. What is your overall outlook for the OPE industry heading into 2009 and beyond?
The outdoor power equipment industry remains cautiously optimistic, particularly as we evaluate the business decisions necessary to both ensure our future and pave the way for tomorrow’s innovations and successes. By making prudent decisions now, our industry will be better positioned to sustain our longevity for the future.



FRED WHYTE
PRESIDENT
STIHL INC.
(VIRGINIA BEACH, VA.)

1. What is new and exciting about your organization heading into 2009?
Despite the challenges of a weak economy and drought in parts of the country for much of the year, we achieved a 17th consecutive record sales year in 2008. We look to build on that momentum in 2009 with new products, inventive marketing and comprehensive sales programs. Our 2009 product introductions will include our new line of low-emission, fuel-efficient handheld leaf blowers, shredder/vacs, chain saws and trimmers. We will also be introducing new programs that focus on enhancing our dealers’ expertise in servicing equipment and their visibility in the marketplace.
2. What is your organization doing to weather the tough economic climate, and what should OPE dealers do?
There is no doubt that our economic environment is fairly unpredictable. However, it is also one that provides opportunity for servicing dealers. In a tough economy, cost-conscious customers tend to buy fewer new items, instead looking to keep what they have running longer. For those customers buying new products, there is also a focus on value, not just on price or convenience. The basic “want” versus “need” debate ensues across all purchase considerations. As a consequence, the hometown dealer — who offers product value, has established relationships in the community, and has built their business reputation on genuine customer service — may well have an advantage over the more impersonal, price-driven big box stores.
At STIHL, it is, for the most part, “business as usual.” Our strategy over the years may have seemed overly conservative to some; however, it positions us well to deal with economic downturns. We see this economy as an opportunity to examine business practices, eliminate waste, and to diligently evaluate how and where we invest, insisting on improved reporting and measurement to ensure we realize the desired return on our investment.  These are fundamental business practices, but absolutely necessary as we evaluate 2009. 
We also are staying true to our “dealer only” retail strategy and investing in their business health by providing programs like the STIHL Marketing Advantage Program that enables STIHL dealers to leverage their individual advertising dollars with investment from their STIHL distributor and STIHL Inc. Other standard tools we offer include technical training and merchandising programs that focus on a dealer’s unique advantages over big box competition. And we are offering programs that take advantage of the latest technologies, including tailored Web sites and text message mobile marketing.
Dealers who examine their business practices, market their services proactively, and take advantage of the sales and marketing tools their suppliers offer stand to not only survive this economy, but potentially realize an even greater measure of success.
3. What are the three biggest challenges that OPE dealers will face in the next two years, and how should they address them?
The three biggest challenges for OPE dealers will be the economy; continued attrition and mergers among suppliers; and environmental legislation, including the volatility of emerging energy issues.
The economy – From the housing market to the credit crunch, 2009 will prove interesting, to say the least. I’ve addressed this in other responses to some degree, but I encourage dealers to align themselves with reputable manufacturers who are actively supporting the independent servicing dealer.
Attrition and mergers – Outcomes will leave fewer manufacturers to choose from and possible related equipment shortages. Long-term planning and alignment with dependable, well-financed suppliers remain critical.
Environmental legislation – EPA Tier 3 regulations will begin having their full effect in 2010, as well as the possible advent of higher ethanol-blended fuels causing problems in customer equipment. In addition, noise ordinances, equipment bans and greenhouse gases will need to remain on the radar. The push toward accelerated implementation of higher ethanol-blended fuels, like E15 and E20, will undoubtedly increase complications for users, dealers and manufacturers alike.
The sheer instability of the economy and energy future (fuel prices, etc.) will make planning a challenge and require companies of all sizes, at all levels of the industry (from end user to dealer to distributor to manufacturer), to be nimble in responding to changing marketplace conditions.
4. What are the hottest trends in the OPE industry today, and which new trends will emerge over the next five years?
The hottest trends include increasing emphasis on technology, mergers/acquisitions, diversification of product and service offerings, and sustainability.
Increasing emphasis on technology – According to trendwatching.com, an independent consumer trends firm, we are living in an “Expectation Economy” populated by consumers who have increasingly higher expectations for products and services and base their decisions on ever-expanding information resources and filters that help them find the “best of the best.” Dealers need to take advantage of this trend and ensure that their online presence is designed to attract and inform new prospects and existing customers. A well-designed Search Engine Optimized (SEO) Web site can be one of the least-expensive means to a profitable end.
Mergers/acquisitions – A difficult economy, more stringent emissions requirements, and an uncertain energy price future will put significant pressure on manufacturers to stay competitive. Some will continue the trend in acquisitions and further reduce the number of industry suppliers. Manufacturers must either make the necessary investment to develop their own high-performance and low-emission technologies, or they must partner with, or even acquire, companies to help them comply.
Diversification of product and service offerings – According to the Professional Landcare Network (PLANET), landscape contractor members are diversifying their service offerings beyond traditional landscaping as they seek to stay profitable. These services include hardscaping, irrigation installation and maintenance, and decorative lighting, just to name a few. OPE dealers need to evaluate if they are offering the right mix of products to capitalize on the evolving needs of these customers. For instance, stocking pavers and cut-off machines for hardscape applications might not have been considered just five years ago by most dealers with landscape customers. Today, it’s becoming more commonplace as landscape service offerings are diversified to meet changing customer needs.
The environment – Making changes in business operations to minimize the environmental footprint will remain a good business decision. More stringent emissions requirements are becoming a reality, and noise ordinances and equipment bans are just some of the challenges facing OPE customers. And, I would expect to see more opportunities for dealers, distributors, manufacturers and local regulatory authorities to work together to avoid all-out bans, through such initiatives as the highly successful South Coast Air Quality Management District’s backpack blower exchange program and Louisville Metro Air Pollution Control District equipment rebate program, designed to replace higher-polluting equipment in use with low-emission alternatives.
5. What was the OPE industry’s biggest story in 2008, and what will be its biggest story in 2009?
To say “the economy” would be too easy. Perhaps the biggest story specific to the OPE industry was the enactment of EPA Tier 3. For 2009, the impact of the new administration on the OPE industry will undoubtedly make some headlines.
6. What is your overall outlook for the OPE industry heading into 2009 and beyond?
The first half of 2009 will likely prove particularly challenging, with more possible attrition among manufacturers and downsizing of employees across industries. We remain optimistic for signs of a turnaround in the second half of the year. No matter what twists and turns the future may hold in 2009, dealers who actively and consistently promote their key points of difference through the exclusive brands they carry and the superior services they provide will find opportunity where others may only see uncertainty.



BEV DeVRIENDT
PRESIDENT
OUTDOOR POWER EQUIPMENT AND
ENGINE SERVICE ASSOCIATION (OPEESA) &
PRESIDENT
POWER EQUIPMENT DISTRIBUTORS, INC.
(RICHMOND, MICH.)

1. What is new and exciting about your organization heading into 2009?
Having new, innovative product to sell is exciting! The competitive challenge in knowing that aggressive, creative thinking is key to success has opened us up to unique opportunities.
2. What is your organization doing to weather the tough economic climate, and what should OPE dealers do?
Working on inefficiencies. Looking at all processes and expenses to see where cost saving can be made. Putting together alternative plans to cash flow the business.
3. What are the three biggest challenges that OPE dealers will face in the next two years, and how should they address them?
Financing the sale, I believe, will be the biggest challenge dealers will need to overcome. Dealers will need to have varied options for retail credit. 
Secondly, would be the rising prices. Focus needs to be put on the value of the product RESULTS, not just iron. 
Lastly, theft appears to be climbing. Securing product and having business systems that catch discrepancies will be beneficial.
4. What are the hottest trends in the OPE industry today, and which new trends will emerge over the next five years?
Back to basics. Customers are focusing on productivity and reliability, not bells and whistles. They only want what makes them run more profitably. Quality time spent with today’s customer will build loyalty that will pay dividends in the future.
5. What was the OPE industry’s biggest story in 2008, and what will be its biggest story in 2009?
It appears that 2008 had dealers gaining ground against the box stores. Many consumers are finding value in what the dealer has to offer them. I believe that will be expanded on in 2009, and the innovative dealer will have an opportunity to outshine his competition.
6. What is your overall outlook for the OPE industry heading into 2009 and beyond? 
We are a hearty industry that has survived tough times in the past. Product will sell as long as grass is growing and snow is falling. Recognition of value will grow as we partner with our customers to grow our mutual businesses.



GREG IMUS
VICE PRESIDENT
SALES, MARKETING &
TECHNICAL SERVICES
SHINDAIWA, INC.
(TUALATIN, ORE.)

1. What is new and exciting about your organization heading into 2009?
The most noteworthy element for our company is the structure of the organization itself. While our day-to-day operation hasn’t changed, we are now part of a larger, more powerful group. In December, Yamabiko Corporation, the new holding company that now owns both Shindaiwa and Echo, became operational. We expect this collaboration to result in improved flow of new products and programs to make it easier for Shindaiwa customers to buy, sell, and service our products.
With Shindaiwa now a member of Yamabiko group, our customers will reap the rewards of our new economies of scale in research, development, sourcing, manufacturing and logistics. Through our collaboration within the Yamabiko Group, Shindaiwa will become better, stronger, and a more formidable competitor. Combined, our group now has the highest market share in the commercial landscape market. This will help to shift the balance of power in OPE and give dealers even more reason to support our products.
With regard to today’s business, we have just released a number of new products, including the world’s most powerful commercial backpack blowers, as well as the T282 commercial trimmer, which stacks up better than its popular predecessors, our T25, T27 and T270. We also have some outstanding sales support tools to help dealers move Shindaiwa products to their customers more quickly and easily. Our new product development process has always followed incredibly high standards of quality.
And our quality does not stop with our products and support materials. We have just launched a new forecasting and order/inventory management system in collaboration with our distributors. Once fully operational, this system will enable us to better match production to local market needs and provide the highest level of service to our customers. One day soon, we even hope to be able to drill down demand and inventory needs to the level of our dealers’ showrooms.
2. What is your organization doing to weather the tough economic climate, and what should OPE dealers do?
We are paying close attention to basic fundamentals (the blocking and tackling) of our business. This includes special emphasis and focus on key customers and key products. We understand our responsibility to take care of those taking the best care of us. And, we are willing to walk the extra mile to assist our customers in building their sales, profits and market share. 
Because of uncertainties with the economy and retail sales, dealers should remember the 20:80 rule, and focus their time and money on those customers and products that account for the majority of their income. Naturally, dealers should focus on operating profitably. They should monitor and manage inventories and receivables closely. Instead of waiting for problems to develop, dealers should monitor their performance regularly and not be shy about taking action if they recognize negative trends. Be proactive rather than reactive.
Because of tough conditions, we see a lot of manufacturers, distributors and dealers growing more conservative with production and inventories. While prudence is merited, we all also need to avoid making the “down” market into a self-fulfilling prophecy. If weather conditions are right and the economy doesn’t fall completely into the tank, demand for OPE products may prove to be better than it might appear in our crystal ball today. As an industry, we need to avoid being caught flat footed.
3. What are the three biggest challenges that OPE dealers will face in the next two years, and how should they address them?
1) Perhaps the biggest challenge will be uncertainties with overall retail sales for OPE equipment. Most everyone expects some kind of a downturn in 2009, and extra efforts should be made to focus on important products and customers. Cost-effective and timely programs and events to help stimulate profitable sales should be pursued. Dealers should also strengthen their relationships with suppliers, like the Shindaiwa team, who are flexible and willing to work with them. Dealers should also remember whose name is on their store and resist letting someone else tell them how to run their business. At the same time dealers are focusing on their winning product lines and customers, they should also downscale their support of products and/or customers that don’t support them.
2) Dealers should figure out how they can be profitable and sustain themselves through these tough times even with less overall sales volume. Like most successful businesses, those dealers who have a basic operating plan and budget figured out in advance rather than a reactionary mode will likely do better. 
The big financial ingredients are the combination of margins less expenses and cash flow. More emphasis should be placed on generating margin dollars rather than sales dollars, and dealers should proactively manage inventories and receivables. Now is not the time to have lots of slow-moving stock or to sell to customers who are historically “slow” payers.
At the same time, let’s remember that we are in a service business and take steps to have the right products available when the right customers need them.
3) With the general tightening of credit, dealers should make sure they are able to offer their customers attractive credit programs. For example, our Yard Card program is an easy-to-use way to sell not only wholegoods, but also higher-margin parts and accessories throughout the season. And once the finance company gives the green light, it is non recourse to dealers.
Besides those three, I’d like to mention one other issue that challenges the OPE dealer. Our industry is faced with a lack of qualified service techs. Shindaiwa and others are working to remedy this with more formalized training programs, such as our new TechNet online training program, as well as our face-to-face service schools. Both of these are excellent, low-cost ways for dealers to provide high levels of service to their customers. Plus, we are actively supporting certification through EETC. Dealers need to examine their service centers and find ways to offer compensation and work environments that their service techs will find satisfying. We need to keep them in our industry.
4. What are the hottest trends in the OPE industry today, and which new trends will emerge over the next five years?
We believe we are becoming less of a “throwaway” society and people are becoming more environmentally responsible. Part of environmental responsibility includes supplying products that offer long service life. “Green” means more than emissions and fuel consumption. High-quality products like those made by Shindaiwa stay on the job longer so fewer end up in landfills over time as compared to equipment of lower quality.
This translates to solid opportunities for products like our patented C4 Technology models, which provide users with outstanding performance and durability, as well as reduced fuel consumption and lower levels of emission and noise. We expect fuel prices to accelerate again after the economy regains strength. End users will necessarily pay closer and closer attention to fuel costs. For many large commercial users, fuel is their No. 2 operating cost behind labor and ahead of equipment depreciation. 
Also, watch for future development of commercial products using alternative fuel sources. Besides continued improvements in fuel efficiency, we will also see continued stronger emphasis on noise, vibration and emissions. Our industry has been very responsible in meeting some pretty tough standards. The standards will get tougher, and manufacturers with high engineering standards will continue to deliver products that meet the environmental standards society demands, along with the performance standards that our customers need.
5. What was the OPE industry’s biggest story in 2008, and what will be its biggest story in 2009?
Perhaps the biggest story revolves around the huge changes in our economy that are still unfolding. I’ve been in the OPE industry for 25-plus years, and this is the first time I can recall the economy trumping the weather in terms of the buzz it’s generated as an outside force that affects our business prospects for the coming season.
After the first half of 2008, the U.S. economy was still registering positive growth, but then came the huge spike in energy costs, the subprime mortgage mess, erosion of credit availability and the general lack of confidence among consumers. Who would have believed at this time last year that premium gas would cost $4.49 in July and $1.89 in December? This story certainly is still in process and will touch our industry more in 2009. Some other notable stories last year in the OPE industry:
Continued consolidation and changes among various handheld product manufacturers, including the formation of Yamabiko Corporation, which will greatly enhance our competitiveness and ability to serve customers, along with John Deere’s exit from the handheld business and its subsequent alliance with Stihl.
With the election of President Barack Obama, there likely will be a tightening of government regulations on OPE products. Talk is strong that he will surround himself with folks who will want to place even stricter standards on products like ours. The result will be cleaner products and a cleaner environment. We are not concerned about this possibility because all of our new products have a comfortable margin versus today’s standards, and we are extremely well positioned to deal with tougher standards in the future.
Another interesting story is the continued strong support of ethanol for use as a fuel for OPE equipment. While it might be good for some farmers raising corn, to date it does not seem to be penciling out.
Numerous biofuel concerns have already failed, and there is little support for the use of ethanol beyond 10 percent of fuel volume. 
6. What is your overall outlook for the OPE industry heading into 2009 and beyond?
There is every reason to be confident in the long-term growth of our industry. As I mentioned earlier, the economy in 2009 will present us with an interesting set of challenges with which we all must deal proactively. We must be careful, however, not to allow a lack of confidence to put our industry into position where we cannot react if market conditions for OPE products improve over the course of the season. 
Don’t be mistaken, our end customers are still highly active with our equipment. We’ve seen a big increase in parts sales over the past several months, and I imagine our competitors are seeing similar results. This just means users are being conservative and working to stretch the life of their equipment. So, demand for new equipment will spike sooner or later.
For the past several years, we have seen the OPE market share among independent servicing dealers suffer as mass merchants have gained strength, momentum and lots of market share. With ever-stricter product standards, we will see more need for technical service. Plus, customers will be looking for advice from equ

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