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

The last 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. 23, 2008-Jan. 26, 2009:

JOE DYKES
ASSOCIATE DIRECTOR
OF OPE PROGRAMS
NORTH AMERICAN
EQUIPMENT DEALERS
ASSOCIATION (NAEDA)
(FENTON, MO.)
1. What is new and exciting about your organization heading into 2009?
We introduced Power Pro to the equipment industry in October at the 2008 GIE+EXPO. It’s an accreditation program for dealers who sell and service outdoor power equipment. We expect the momentum we received during Power Pro’s launch to carry over into 2009 and beyond. Dealers tell us they appreciate the program and will use their accreditation status to market their businesses. We’re pleased with the attention Power Pro has received. Also, NAEDA’s board approved a standing Workforce Development Committee. The committee will take on the tough task of developing a strategy to recruit skilled employees for the equipment industry. The committee is working with NAEDA’s affiliates and other organizations to raise the level of awareness about job opportunities in the industry, especially at dealerships where service technicians are in high demand.
2. What is your organization doing to weather the tough economic climate, and what should OPE dealers do?
Like any organization, we are closely watching our expenses and working to reduce operating costs. To save money, we turn off lights and computers, use the association’s discount freight program for shipping, and use e-mail as much as possible. We also request annual bids on healthcare plans and search for the lowest airfares when long-distance travel is necessary. We’re also cross-training employees to handle additional tasks without adding more staff. Our budgets are zero-based — we account for every dollar.
Many dealers are doing some of the same things, but it’s their management of inventory that may yield the greatest savings. Many OPE dealers carry multiple brands, and they may have to evaluate each brand’s performance and maybe drop one (or two) that isn’t performing. It’s a tough decision to make. But when inventory isn’t turning at an acceptable rate, it’s a financial burden.
On the positive side, we know that many dealers are skillful at diversifying their businesses. More and more outdoor power equipment dealers are adding allied merchandise — clothing, shoes, boots and gloves, or safety gear, for example — to give consumers more choices when they purchase equipment.
3. What are the three biggest challenges that OPE dealers will face in the next two years, and how should they address them?
Credit, credit, credit… Actually, this is one item, but it’s a major item for anyone involved in the distribution channel. Manufacturers need credit to build equipment and fund their finance programs…dealers need credit for inventory purchases…and consumers need to have the ability to borrow to buy. We’re going into a year not knowing what it will take to get the credit markets moving again. Workforce availability may also affect dealers, especially their commercial customers who provide professional lawn care and landscaping. There were shortages last year, and, unless Congress changes the cap on visiting workers under the H2B visa program, labor shortages may be an issue again. Of course, if the economy continues to underperform, we may have a reversal of last year and have more jobseekers than jobs. Finally, dealers — like all businesses — will be challenged to generate sufficient revenue and manage cash flow.  
4. What are the hottest trends in the OPE industry today, and which new trends will emerge over the next five years?
Equipment manufacturers offer amazing machinery — and it’s not a trend, it’s a constant. Equipment is more efficient and more productive, and it’s built to meet or exceed air-quality standards for emissions or noise. The continuously evolving technology of equipment is impressive. Where dealers are concerned, we believe they’re more interested than ever to improve the image of the industry, which is why we worked with dealers throughout North America in developing Power Pro. Dealers are investing in new buildings, employee training, service vehicles and equipment to promote what mass merchandisers can’t offer — professional sales and complete service. Casual shoppers may not care what they buy or where they buy it because many of their decisions are based on price. Savvy consumers, however, have higher expectations. They expect quality equipment and expert service, neither of which is available in a box you pull from a shelf.
5. What was the OPE industry’s biggest story in 2008, and what will be its biggest story in 2009?
The economy was far and away the biggest story in 2008. It will remain the biggest story in 2009, but not only because of its up and downs. We are seeing the federal government take on an unprecedented role in the future of failing or financially troubled companies, and it’s anyone’s guess if this will stabilize the economy and inspire growth.
6. What is your overall outlook for the OPE industry heading into 2009 and beyond?
We’re concerned about the economy and consumer confidence, and that raises our concern about dealer profitability.

JOHN HEDGES
DIRECTOR OF
SALES & MARKETING
CENTRAL POWER
DISTRIBUTORS, INC.
(ANOKA, MINN.)
1. What is new and exciting about your organization heading into 2009?
2008 was a great year for many of our consumer lines but flat for the pro markets. As we venture into 2009, we are faced with an economy many of us haven’t witnessed before, a stock market that is in turmoil, and a new leader of our country. What can be more exciting than those three things?
There have been events that have taken place that affect us going into 2009. We plan to use those events to create new, exciting opportunities for our company.
2. What is your organization doing to weather the tough economic climate, and what should OPE dealers do?
These are tough economic times, and sadly to say, we haven’t seen the worst yet. In the OPE markets, it will be important for traditional commercial dealers to consider stocking consumer parts in 2009. The pro market could remain weak and trend downward. The consumer zero turns should have another good year because the products are priced competitively and are “good enough” to do the job for a short time.
Start looking for options for consumer finance because that industry might be tightening its standards. Easy credit will come back, but not for several years. This is true for both dealer floor plans and consumer finance.
3. What are the three biggest challenges that OPE dealers will face in the next two years, and how should they address them?
The biggest challenges facing our industry for the next two years are stronger Internet sales, decline of consumer credit, and sluggish equipment sales. If you are a dealer and you don’t offer online sales, you may lose business to the dealers/suppliers that do. Several years ago, people started to realize their time was worth something and did things that added value to their day. Today, while that is still true, convenience and availability might top the list of why a person buys online.
The loss of consumer credit or the lack of loans by the finance companies will force distributors and dealers to create their own finance programs. Larger money down and higher monthly payments could be a gross example of what might be the norm. Start thinking of alternatives, and seek distributors/manufacturers willing to assist you.
Equipment sales will suffer over the next two years because of the weak economy. Position your business to have higher parts inventory even if that means stocking more than you prefer. I have been preaching that those who have the parts will get the business (and repeat business). Those who don’t, will not.
4. What are the hottest trends in the OPE industry today, and which new trends will emerge over the next five years?
Trends don’t have to be positive; they can also be negative. The strong are getting stronger, and the weak are getting weaker or being purchased. This is a trend that will continue for several years. I keep talking about financing, but I believe there will be changes to the way a dealer can do business. Internet parts sales will continue to grow, and we will probably begin to see more wholegood purchases online, too.
5. What was the OPE industry’s biggest story in 2008, and what will be its biggest story in 2009?
Gas prices have been all over the board, surcharges placed on shipments and materials, and Tecumseh deciding to quit manufacturing engines.
2009 will be about smaller productions, decreased workforce, and survival of the independent dealer.
6. What is your overall outlook for the OPE industry heading into 2009 and beyond?
Our country is in economic turmoil and will remain in turmoil for a couple of years. People will still need to keep their yards mowed so either parts or wholegoods will grow, but not both.
I believe EPA will continue to dictate the costs of our units. More replacement parts will be sold to maintain the old units already in the field and procrastination to purchase new equipment will take place. Therefore, wholegood sales will be down. Have parts on hand to maintain and create a new loyal customer base. Do things you have never done before. Find a way to add value to what you do. When you figure it out, let everyone know what that is.

PETER ARIENS
PRESIDENT
STENS CORP.
(JASPER, IND.)
1. What is new and exciting about your organization heading into 2009?
Stens has continued to grow our product line this year with nearly 1,000 new parts added to our product offering. We are branching out to include items such as landscape racks from TrimmerTrap, new engines from Kawasaki and Kohler, as well as traditional replacement parts for chain saws to zero turns to golf course equipment.
Stens continues to lead the parts industry with innovation such as our agreement with LCT Engines and our continued expansion of Heftee Lift and MoJack offerings. Stens is also very proud to release the Silver Streak name under the Stens banner. Silver Streak has been known in the industry for 50 years. While the name has continued in that tradition, it is now owned by Stens. We have added a new line of mulching blades under the Silver Streak name, as well as new chain saw bar and chain products to round out the line.
We are very excited to continue to differentiate ourselves by adding these products to our offering.
On Nov. 1, 2008, Stens opened our first facility in Canada to service our dealers throughout Canada. With the opening of this new facility came an agreement to supply all of Canada with the Kawasaki line of equipment, replacement engines, as well as parts to service them. On Jan. 19, 2009, Stens became the supplier for all of Canada for Kawasaki-related products, including warranty. Stens is proud to continue our expansion to the North.
2. What is your organization doing to weather the tough economic climate, and what should OPE dealers do?
In tough times, there are always silver linings. At Stens, we would not be expanding our line if we were not confident in the power of this industry and the opportunities that are still available. Stens does, however, manage the business as prudently as possible especially in tougher economic times. In the industry as it goes, when times are tough, people will tend to repair their products and hold them longer rather than buy new. This fits very well with Stens’ overall strategy and especially fits with our engine replacement strategy by offering LCT, Kawasaki and Kohler engines to fit up to current equipment. Instead of a landscaper buying a new piece of equipment, they may decide to replace the powerhead, which is good news for the dealers as well as Stens. The dealer may lose the sale on the whole unit, but they are still available to offer a solution to their customers. 
OPE dealers must be careful to watch their cash very closely in these times as banks and other lending institutions are going to make it hard to borrow for the whole of 2009. 
3. What are the three biggest challenges that OPE dealers will face in the next two years, and how should they address them?
1) Continued regulations coming from the federal and state governments.
2) Drawing traffic and meeting customer expectations at their facilities.
3) Attracting good help, both technical and not.
The first issue is one that dealers will have a hard time tackling on their own. OPE manufacturers and the associations are working hard at trying to keep the regulations to a minimum or addressing them in other ways. The state and federal governments, however, do not seem to have an end to how far they are trying to push all industries, not just our own. Dealers need to be involved on the local level to make certain that cities do not get overzealous on noise and air quality independent of their state and federal government. If dealers are locally active, they can make a huge difference as most of the issues can be dealt with when open communication is happening.
Drawing customers and keeping them is a theme that is consistent year in and year out. If you do not have a game plan as to how you are going to attract new customers and keep your older customers coming back, then I would suggest you do that as a New Year’s resolution. If you do not know how to start, contact your local university or a couple of industry management consultants can get you there quickly; Jim Paluch or Bob Clements are good options.
Attracting good help, especially technical, continues to be an issue. I think that with a proactive plan, you can lay the groundwork to attract the right people and nurture them to success in your organization. There are also industry associations working hard to promote the industry and to attract the right people to get into the industry.
4. What are the hottest trends in the OPE industry today, and which new trends will emerge over the next five years?
On the equipment side, it seems to be about utility and productivity. Time is money; therefore, tools that will allow for those two attributes will continue to succeed in the future.
Productivity in the shop and at the counter will continue to be a trend. Dealer business software today allows for greater flexibility and productivity such that dealers can do so much, with so little, that your shops can run better than ever.
5. What was the OPE industry’s biggest story in 2008, and what will be its biggest story in 2009?
I think the biggest story of 2008 is the near cataclysmic collapse of our financial system. This not only affects our industry but the whole of our United States capitalist system. Our financial system is like a big jellyfish. It moves with awkward brilliance and has a million tentacles and touch points which affect everything. Start with housing, which greatly affects our industry, all the way down to the current bank lending situation, which is happening with very tight restrictions. This is going to be with us throughout 2009 and in the housing industry (I predict) through at least the middle of 2010. The biggest story of 2009 will be the new President, his cabinet and the democratically controlled Congress. If Congress gets too overzealous with its plans for a greatly expanded government like they have talked about, I think President Obama will have to step in and be the voice of reason. The government will not be able to spend us out of our recession. Not even a $1-trillion stimulus plan will do it either. If we believe in the capitalist system, only tax cuts to spur investment and growth can do that.
6. What is your overall outlook for the OPE industry heading into 2009 and beyond?
There is a very bright future for our industry, both in 2009 and beyond. We have products that our customers need, we have the knowledge that our customers require to complete tasks, and we have people in this industry who are outstanding. With this recipe, we will be stronger as an industry after our current recession passes.

MARK STINSON
PRESIDENT
EXMARK MFG.
(BEATRICE, NEB.)
1. What is new and exciting about your organization heading into 2009?
At GIE+EXPO in October 2008, Exmark unveiled the new Next Lazer Z, an evolution of our most popular mower, the Lazer Z. The Next Lazer Z will be available at most Exmark dealerships in time for the 2009 buying season.
Everyone at Exmark is really excited about this mower, which we spent more than three years developing. And it all started with feedback from our distribution channel. Long before production of the Next Lazer Z began, Exmark staff spent hundreds of hours in the field talking with landscape professionals and dealers. Our goal was to understand their needs and expectations so that we could enhance our product in ways that could make customers’ lives a little easier.
One of the things that became obvious, through these conversations, was that customers are increasingly tying productivity to comfort. You can’t spend 12 hours a day on a mower that is uncomfortable. So, one of the things we included on the Next Lazer Z is an entirely new seating system with a three-dimensional motion isolation layout, which reduces vibration, bumps and jarring.
Also in 2009, Exmark will ship all Next Lazer Z and Next Lazer Z AS products to distributors and dealers in returnable steel crates. These returnable steel crates will reduce dealers’ setup time dramatically. With the new crates, the dealer pulls two pins, connects the battery cables, puts fuel in, and drives the mower off the crate. This is going to save our dealers time and money.
2. What is your organization doing to weather the tough economic climate, and what should OPE dealers do?
Exmark has been incorporating lean manufacturing practices for a number of years, but we’ve become even more efficient and innovative during the past year. For example, with the Next Lazer Z, we redesigned our production line to build Every-Model-Every-Day for all major products and decreased our plant process lead time (from welding “dock” to shipping “dock”) to 24 clock hours or less.
During this economic downturn, many of our dealer-partners are focusing their efforts on retaining the customers they have worked so hard to earn over the years. They are finding new ways to provide greater service and support to the landscape contractor, including product bundling, aggressive retail finance programs and equipment rentals. And with the launch of the Next Lazer Z, our dealers are running regional and local programs to promote the lower cost of ownership of this new product platform. All of these activities have created a relatively positive outlook for our dealer-partners.
3. What are the three biggest challenges that OPE dealers will face in the next two years, and how should they address them?
The economic shakeup has forced everyone — from manufacturers and distributors to dealers and landscape contractors — to look closely at their individual businesses and identify strengths and improvement opportunities. One of the big challenges dealers will face is creating a stable business environment while controlling costs and managing inventory levels. In addition, dealers will be forced to evaluate their product lines to ensure that they are partnering with a manufacturer who provides a broad range of products, supports their individual growth initiatives, and has the business backing to thrive in a challenging economy.
Dealers should also fight the temptation to discount their products due to a fear of declining sales; rather, they should identify other value-added services to enhance their customer relationships while retaining the product integrity. In doing so, these dealers will be poised to experience a quicker turnaround when the economic climate begins to improve without compromising their long-term profitability.
4. What are the hottest trends in the OPE industry today, and which new trends will emerge over the next five years?
The most obvious trend is toward environmentally friendly technologies and alternative fuel sources. To meet this growing demand, Exmark has developed several mowing products that are propane powered, as well as biodiesel compatible. In addition, Exmark continues to aggressively evaluate hybrid technologies and electric-powered drive systems in order to provide our customers with leading-edge commercial-grade equipment.
Another trend that continues to gain momentum is the demand for equipment that is longer lasting and offers a lower total cost of ownership. Like most maturing technologies, there is an expectation that mid-mount zero-turn mowing equipment will become less complex, easier to maintain, and less expensive to operate. Exmark’s response to this growing demand is the Next Lazer Z, which was introduced to the general public at GIE+EXPO 2008 in Louisville. The Next Lazer Z offers our customers superior cutting technology with half the number of parts as its predecessor, the Lazer Z. This evolutionary platform will enhance our customers’ performance, last longer, and cost less to operate than other mowing products.   
5. What was the OPE industry’s biggest story in 2008, and what will be its biggest story in 2009? 
Undoubtedly, the biggest story of 2008 was the steady decline of the economy. Although the impact was not necessarily measured by the total number of units retailed, it has certainly impacted the overall health of the landscape professional. Many landscape contractors are being forced to compete with an influx of entry-level businesses that have joined the industry due to loss of jobs in other business sectors. This new level of “low-priced” competition is forcing more established contractors to re-bid on long-standing contracts, creating less-expensive services and reducing overall operating margins. 
This reduction in operating capital has forced many well-established contractors to seek less-expensive equipment, which quickly becomes a performance and maintenance challenge. 
Alternatively, many contractors are seeking greater diversity of services that offer higher margins and greater differentiation and enable them to be a single-source supplier to key customers.     
6. What is your overall outlook for the OPE industry heading into 2009 and beyond?
It is obvious that the economic downturn has had a major impact on every business. However, we strongly believe that this challenging business environment will create tremendous opportunity for dealers who exercise solid business discipline and continue to invest in their individual growth. Additionally, challenging times will create a higher sense of urgency for competitive manufacturers to create new products, redesign current products, or pursue acquisition opportunities, thus changing the industry landscape. 

WILL COATES
PRESIDENT
BILLY GOAT INDUSTRIES, INC.
(LEE’S SUMMIT, MO.)
1. What is new and exciting about your organization heading into 2009?
Our excitement begins with a strong finish to 2008. Starting in late 2007 and continuing throughout 2008, Billy Goat focused on reducing channel inventory and on accelerating inventory turns. We also made necessary adjustments to our forecasts and expenses consistent with our run rates. Those decisions, a lot of hard work and some welcome in-season business allowed us to finish the back half of 2008 on a strong note.
Our plans for 2009 include design improvements in our product lineup, an exciting line extension, and a merchandising program that we think dealers are going to be quite happy with. We expect business to be tough in 2009, but we’ve got our marching orders and we’re not sitting still. 
2. What is your organization doing to weather the tough economic climate, and what should OPE dealers do?
First, we all need to remind ourselves that this downturn is part of a cycle. It’s hard to ignore all the negative news, but with time, things will get better. Credit is really tight and cash is king, so watching inventories is hugely important, as is staying current on payables. It’s important that dealers avoid the temptations of buying beyond their comfort level just to get the best deal. The combination of constant communication with suppliers and quick replenishment of moving stock offers the greatest probability of maximizing revenues on limited assets.
With so many retailers going under, it’s important that customers know dealers are “Open for Business,” so it makes sense for dealers to display the broadest product lineup possible for the least investment, advertise as much as they can afford, and service the heck out of the customers who grace their doors.
For its part, Billy Goat remains committed to healthy channel inventories, offering innovative products customers want, advertising nationally to create awareness, and providing dealers with the tools to help them maximize sales.
3. What are the three biggest challenges that OPE dealers will face in the next two years, and how should they address them?
Credit for working capital and inventory and retail financing will be huge challenges in the short term. There’s also less capacity in floor planning. Everyone is already, or will soon be, feeling the squeeze. My advice is to get tight with your banker and understand his underwriting guidelines. Even if you don’t need him today, you probably will soon. Many dealers try to be everything to everybody. Carrying two or three brands in the same product category is unfocused, confusing, and it ties up a lot of floorspace and credit lines.  My advice is to consolidate your chosen categories under as few suppliers as possible — it will make your life a lot easier and leverage your assets and energies. If your supplier in a particular category knows you’re committed to promoting his brand, he’s a lot more likely to support you in good times and in bad.
It started in 2008, but a recurring theme for the next couple of years will include robust service and parts business. Many contractors and homeowners are milking every last drop out of old, tired equipment. This can be profitable business in an otherwise challenging retail environment. The shortage of qualified mechanics has been well documented, so now is a great opportunity to find qualified help.
4. What are the hottest trends in the OPE industry today, and which new trends will emerge over the next five years?
I envision a return to basics. Many homeowners who outsourced lawn and garden care will soon assume those responsibilities, and they’ll be more demanding in what they buy. There is mass-merchant product and commercial-duty equipment, but not much in the way of the “prosumer” product. This is an opportunity. Advances in batteries may yield interesting new products. Run time between recharging and numbers of discharge cycles are important factors.
OPE sales have historically been tied to new housing starts. I believe that the days of building McMansions on 1-plus acres in suburbia are largely over. As baby boomers look to downgrade, the inventory of large houses will grow. The question is whether there will be enough buyers and enough credit available to absorb the capacity over the next five years. The next generation of buyers seems to want smaller but better-equipped houses on smaller lots. Instead of grass, they’ll invest in landscaping and hardscaping.
5. What was the OPE industry’s biggest story in 2008, and what will be its biggest story in 2009?
To me, any stories deemed “big” in 2008 will be dwarfed by those yet to come in 2009. It’s clear that there’s too much capacity in some OPE categories and that some companies already find themselves in financial distress.
6. What is your overall outlook for the OPE industry heading into 2009 and beyond?
I’m bullish for the long term because the need for OPE products will remain. For the traditionalists, growth will be hard to come by. The companies who thrive will listen to their customers, invest in innovation, and adapt accordingly.

PAT CAPPUCCI
PRESIDENT AND COO
SCHILLER GROUNDS CARE, INC.
(SOUTHAMPTON, PA.)
1. What is new and exciting about your organization heading into 2009? 
On Jan. 1, 2009, our two affiliated companies — Schiller-Pfeiffer, manufacturer of Classen, Little Wonder and Mantis brand equipment; and Commercial Grounds Care, manufacturer of BOB-CAT, Bunton, Ryan and Steiner brand equipment — merged, creating Schiller Grounds Care, Inc. Our seven brands cover a multitude of outdoor power equipment categories, including gardening, landscaping and grounds/turf care products. United, we offer exceptional value and growth potential to dealers. The merger will allow us to operate on one platform and focus on growing our individual brands.   <