OPE Industry Forecasts: Will business pick up again in 2010? (Part II)
The following is the last of a two-part series:
Outdoor Power Equipment recently asked several OPE industry leaders to shed some light on the state of the industry entering 2010.
Specifically, we asked the following thought-provoking questions:
What is new and exciting about your company?
What impact will the federal government make on the OPE industry during the remaining three years of U.S. President Barack Obama’s current term?
How will the environmental and energy-independence movements impact the OPE industry during the next five years?
What are your top-five OPE dealer survival tips for the next five years?
What will be the biggest trends to emerge in the OPE industry during the next five years?
What is your overall outlook for the OPE industry in 2010?
OPE received the following written responses, in order, Jan. 18-28, 2010:
PETER ARIENS
PRESIDENT
STENS
(JASPER, IND.)
1. What is new and exciting about your company?
PA: Stens continues to develop new and exciting ways to differentiate ourselves in the industry, and 2010 is no exception. Stens has added more than 500 new items to our product line, including new biodegradable oils and grease. We have also added ethanol treatment from STA-BIL and special Tygon fuel line for low permeation which resists swelling and which is CARB approved. Stens continues to review our products for cross-reference applications and have found through a project that Stens products fit more than 200,000 applications in the industry. This is up from the 30,000 fits applications that we thought existed just a year ago. Dealers need to talk to their Stens sales representatives to understand how to get access to all these new applications.
2. What impact will the federal government make on the OPE industry during the remaining three years of U.S. President Barack Obama’s current term?
PA: I am unsure of the ability of this Congress to move the aggressive agenda forward that they had in the early stages of the President’s first year. The appetite of the American people right now seems to be: Why are you going so fast? I think the American people are much smarter than Congress gives them credit for, and they are starting to fight back with letters and calls to the offices of their elected officials. I have seen the past six months what it means to awaken the American spirit. This means that Cap and Trade, which would have been the most damaging on the industry, seems to be off the table right now. I think health care is a more pressing issue for them. Time will tell because their agenda is far, wide, and potentially very destructive to business.
3. How will the environmental and energy-independence movements impact the OPE industry during the next five years?
PA: It will have a great impact and one that offers opportunities for the entrepreneur if done correctly. As an industry, we will have to get smarter about the products we bring to market. We will need to understand what our carbon footprint is and to support the global need to look for alternatives to the standard product used in the market for generations. We are already seeing the industry move that way with electric golf-course products, solar-powered electric/robotic mowers, as well as electric riding mowers. This is just the tip of the iceberg relative to the opportunities that will exist in the next 20 years. I do say, however, that until Washington has a more coherent energy policy, investments will be all over the map, including solar, hydrogen, wind power, electric hybrids, etc. You can see that right now it is a feast and not all of them will survive. It will depend on where the money flows and the perceived value of each of these alternatives.
4. What are your top-five OPE dealer survival tips for the next five years?
PA:
1) I believe that I said this last year, but I would say it again: Find out where every dollar goes in your business so that you can, in turn, make more. Once you have an understanding of how money is made in each of your respective businesses, where it goes, and what you have left at the end, you can actually affect it positively.
If there is any one thing that affects people from paying us as a supplier, it is their cash flow. Those customers with a formal cash-flow spreadsheet, never seem to get into trouble because they know where their dollars are made and where they are spent. If you are unsure how to start, you can pick up business software at Staples or you can make a call to a local accountant who can help you pull all of the information together to get you going. It is a small price to pay to get you organized and more profitable in 2010.
2) Rationalize your product lines to make sure you have the right brands and products to satisfy your markets.
3) Reduce the number of transactions on the back end of the business. You need to find real productivity gains in the business and look to your vendors for that support.
4) Buy Stens parts as they offer the highest quality to value ratio (Please accept this not-too-subliminal message).
5) When in doubt, go back to 1-4.
5. What will be the biggest trends to emerge in the OPE industry during the next five years?
PA: I think you will see innovations coming in the industry as all customers are still looking for productivity tools. Whether you are a consumer who wants to get the yard done quicker and with more quality, or a commercial landscaper who needs productivity tools to maximize labor dollars, these new products will help. You will also continue to see the Internet as a major force. If you are a dealer and do not have a Web site yet, you need to get on that. The Internet has become an online store, as well as a search mechanism, so that you do not have to get in your car and drive to three stores to check out the product. You can check online and pick it up or have it delivered directly to your door.
I also see the big box stores playing an even larger role. I do not know what that will look like, but they are looking to continue their growth and it could come at the expense of the independent dealer. The dealer still has advantages, so they will need to leverage that message with the consumers in their market areas.
6. What is your overall outlook for the OPE industry in 2010?
PA: I think the industry will pull up from the doldrums of 2009, but not at a very rapid clip. I see modest growth for the industry, but that, at least, is a positive sign compared to where we have been for the past few years. At some point, equipment will wear out beyond the point where you can fix it, and then consumers will need to buy. I believe that we are close to that point. The aftermarket parts business has been very good, as many dealers have found a nice alternative for their customers. I don’t know of too many customers that turn down an opportunity to save money in this economy. That trend will continue through next year.
JOE FAHEY
VICE PRESIDENT
MARKETING
ECHO INCORPORATED
(LAKE ZURICH, ILL.)
1. What is new and exciting about your company?
JF: It’s a very exciting time here at ECHO Incorporated. New products are always at the top of the list, and this year is no exception. We’ll be introducing the new PB-770, which will be the most powerful backpack blower in the market. We will also be at lower price points with our GT-225 trimmer and new PB-250 handheld blower. In addition, 2010 will be our first full year with the BRD-280 Bed Redefiner, which has been a big success in the market.
In addition to new products, effective January 1, we have gone to a 2-year commercial warranty. Our 5-year consumer warranty has been extremely well received by dealers and customers alike, so it only makes sense that we extend our commercial warranty to demonstrate our confidence in our products.
The biggest issue, though, is our merger with Shindaiwa. Last year, we officially merged companies and operations. We’ve been extremely busy consolidating processes, systems and distribution. We’ve also made a significant investment in parts inventory and availability. This year will be our first as a joint operation. Dealers can expect improved sales and marketing programs by representing both brands through a single distributor.
2. What impact will the federal government make on the OPE industry during the remaining three years of U.S. President Barack Obama’s current term?
JF: The President has a very “green” agenda, which will ultimately impact us. The immediate issue is ethanol content in fuel. We should expect direction on this soon, as it is currently under study. The bigger issue is emissions. There is always the possibility of reducing emissions levels even further; however, nothing is imminent. A further reduction would radically change the face of the handheld business.
3. How will the environmental and energy-independence movements impact the OPE industry during the next five years?
JF: We caught a sneak preview of this in 2008 when gasoline was over $4 a gallon. Commercial customers became much more fuel conscious, as it suddenly made a much bigger impact on the bottom line. Oil continues to move upward, and, as it does, customers will demand greater fuel efficiency or general lower cost of operation. When you combine this with environmental concerns, it becomes clear that new technologies will become more commonplace in the handheld arena. These could include pure 4-stroke, fuel-injection and battery products. Five years from now, the product mix could be quite different than it is today.
4. What are your top-five OPE dealer survival tips for the next five years?
JF: The dealers who are reading this article are survivors, so there isn’t much I can tell them that they don’t already know. I do have a general suggestion, though. As you can see by the questions presented here, these are demanding and changing times. Don’t get caught living in the past. Know what is true (not rumored or assumed) today. Try to anticipate the future and adjust your mindset and business model accordingly. This applies to economic conditions, customers and suppliers alike.
5. What will be the biggest trends to emerge in the OPE industry during the next five years?
JF: I think the key issues will be continued consolidation and new technology. These aren’t new, just an expansion of what we are already witnessing. Manufacturers will continue to merge to achieve synergy and efficiency. This is happening everywhere, not just in our industry. As mentioned previously, whether it’s due to rising oil prices or increased environmental sensitivity, there will be new technologies which will need to be embraced by manufacturers, dealers and customers alike.
6. What is your overall outlook for the OPE industry in 2010?
JF: Weather aside, we should be optimistic about 2010. Economically, the worst is behind us, although persistent high unemployment and tight credit will continue to be a problem. However, economic “green chutes” are starting to emerge and attitudes are becoming more positive. The recovery will be evident but slow.
DAN ARIENS
PRESIDENT
ARIENS COMPANY
(BRILLION, WIS.)
1. What is new and exciting about your company?
DA: It’s exciting to me that we’ve managed the business for the current economy, and we’re going into the next season in a sound financial position. We did this while keeping full employment, maintaining margins for our dealer partners, and resisting flooding the market with inventory. At the same time, we continued to invest in product development so that when the OPE consumer re-emerges, we’ll be ready with the right equipment for the market. We worked on things that have impact for the customer and servicing dealer like simpler designs, fewer leak points and improved output torque. As a result, we have a professional Gravely unit, the Gravely Pro-Turn 200 Series, which I believe is going to redefine what commercial contractors will want in their fleets at a price/value proposition that is unmatchable.
2. What impact will the federal government make on the OPE industry during the remaining three years of U.S. President Barack Obama’s current term?
DA: I am hoping that the federal government takes a nap for the next three years.
However, unlikely that seems, as I write this, I have just poured a seldom-consumed glass of 25-year-old single-malt Scotch, to celebrate the results of the Massachusetts Senate race. A government of the people, for the people, is one which allows free-enterprise entrepreneurs to create opportunities, which then create jobs and lead this economy out of this massive recession. Let us all remember: The government does not create any job this economic system should desire; it only creates jobs for itself and its own interests. If we expect the government to “create jobs,” then we should mostly want the government to Do Nothing!
I am now re-energized that maybe, just maybe, we will have a Congress that does us all a favor for the next several years — and takes a nap.
However, in the event that we continue to be bombarded by new regulations, and a swelling government (back to reality), we are preparing to remain a nimble manufacturing company, which drives our continuous-improvement journey and maintains a stable American manufacturing system able to serve our customers with the best product, at the best value, when they want it.
3. How will the environmental and energy-independence movements impact the OPE industry during the next five years?
DA: It will continue to drive product development, but ultimately, consumers will dictate the direction by demonstrating what they will pay for improved environmental performance. For example, we have developed the AMP electric riding mower — an interesting platform to provide an emission-free, quality rider. The success of that innovation is up to the consumer and that will take time to mature. In the meantime, it is our job to continue to research alternatives for expanding and fragmenting markets around the globe.
4. What are your top-five OPE dealer survival tips for the next five years?
DA:
1) Continue to plan and manage your business for cash. Do not take on excessive risk on your real estate or your working capital. The value of your real estate is likely declining; look for opportunities for that second location, but plan that the decline in the value of commercial real estate is going to continue to decline until about 2012. If you are looking to buy, think in terms of one half of the value the realtor is offering today. Or better yet, wait for the bank foreclosure notice, then think 20 cents on today’s dollar.
2) Take a second look at your service business. In my experience, when a dealer truly looks at their service profit center, they find they are leaving a lot of money on the table. With more customers servicing right now, this becomes even more critical.
3) Continue to maintain customer contact, so you can be top-of-mind when homeowners start to buy again. Use the Internet; consider personalizing every sale with a follow-up call or e-mail to see if they are happy in their first three weeks. Mostly differentiate yourself from your retail competition.
4) Use this time in a slower economy to put pencil to paper and evaluate your margin options among OEMs. Make the tough decisions on your floor plan and inventory allocations based on your relationship with your suppliers, and the margin you make with each line you have on the floor. Be wary of the “special deals” on last year’s inventory.
5) Evaluate your staff. In these difficult times of very high unemployment, you should expect the very best from your staff. If they are not giving you and your customers the extra effort required in these difficult times, you have to move on. Get the right people on the bus and the right people on the right seats on the bus.
5. What will be the biggest trends to emerge in the OPE industry during the next five years?
DA: Consolidation among brands and manufacturers will continue. The economy will not come back to the level it was prior to the recession, and this segment will have to adjust on the product supply side. We are in the middle of an unprecedented four years of decline in OPE sales; there is still too much capacity in our industry for the limited sales.
As a result of excess capacity, pricing pressures from the market will continue, and it will force OEMs to design and build smarter. This will meet another trend, which is a back-to-basics mentality among consumers.
Environmental pressures will continue in this political environment, and, as an industry, we also need to make sure customers and lawmakers understand the benefits of healthy lawns. This is a message which must be communicated at multiple levels. The OPEI is and will continue to drive a very focused message on lawn benefits to the earth, but also at the state, county and city level, all of the channels of OPE distribution must be vigilant on making sure that your local politicians have the facts about the benefits of green space and lawns in particular.
6. What is your overall outlook for the OPE industry in 2010?
DA: Fortunately, we are in an industry which makes tools, not toys. Consumers, who are still in the market, will be practical; they will replace or repair tools which make their most important asset — their yard — look great. I am always optimistic with the idea that whatever comes our way, good or bad, opportunities open up one way or another. As a private, nimble company with really smart and passionate employees, I like where we are and the industry we are serving. Life is about what you do with the time here on earth; it’s not “just do it” — it’s what will you do to make this a better place, a better industry, a better country, a better business, better people in your business, serving customers as best we can. What will you do? What can you do to make a difference in 2010? Sitting around waiting for this government to make it all better is not in the DNA of an OPE retailer. I am optimistic for a strong 2010 because we are going to make it a better year!
JIM GRAFFT
PRESIDENT & CEO
CERTIFIED PARTS CORPORATION
(JANESVILLE, WIS.)
1. What is new and exciting about your company?
JG: I don’t know where to start. We have so much that is new and exciting here at Certified Parts Corporation. At this time last year, we were working on the Tecumseh contract. The way negotiations were going, I did not think I could come to terms with the seller. They kept trying to exclude needed fixtures and assembly equipment needed for manufacturing. Their idea of manufacturing equipment was molds and dies, so they sold all the assembly equipment off to a third party. I kept telling them that I needed the equipment to make parts for warranty and service business. However, the seller just did not understand that there are many specialized pieces of machinery that were good for only one thing and that was making a particular Tecumseh part. This was especially true for the carburetor manufacturing equipment that was located in the Czech Republic. They sold this equipment to a third party without my knowledge, and the new owner was unwilling to negotiate for my repurchase. It has taken a lot of time and effort, but we have started to manufacture some of the special pieces of equipment to machine and assemble the carburetors in Wisconsin. In the end, we got the contract signed to purchase Tecumseh last February, and we should be manufacturing the Tecumseh carburetors in the U.S. and shipping by the end of January this year. CPC is excited to bring manufacturing back to the U.S. After moving 275 semi-truck loads and getting the parts and warranty system in place, I thought we had enough accomplished for one year. Then, in December, a new opportunity became available when Hoffco/Comet was put up for sale. It was a company that I could not pass up. Hoffco/Comet is a great fit for my TecumsehPower motors, and most of my customers also used or sold Comet products. By year-end, we had bought two of the greatest names in the outdoor power equipment industry. The who’s who of our OEM customers would be the leading brands and world-class companies. In my mind, we had a very exciting year.
2. What impact will the federal government make on the OPE industry during the remaining three years of U.S. President Barack Obama’s current term?
JG: Credit will be a big part for the next few years. People need to borrow money to make big purchases such as lawn mowers and snow blowers. If people can’t get loans to buy a house, they probably aren’t going to need outdoor power equipment. Credit will be a large part of the recovery, and, without it, we are in for a long ride.
3. How will the environmental and energy-independence movements impact the OPE industry during the next five years?
JG: Everybody wants green, and that is all well and good; however, there needs to be a balance that we can all live with. If environmental and energy issues keep driving costs up, it won’t be a good thing. It will drive the economy down, and all segments of society will ultimately be hurt.
4. What are your top-five OPE dealer survival tips for the next five years?
JG:
1) Cash flow…keep on top of it.
2) Keep your customers happy. They have a lot of options out there.
3) Keep on good terms with your vendors. You need them as much as they need you.
4) Don’t be afraid to think outside the box. If something is not working, change it!
5) Keep your employees happy. Unless you can do it all alone, you need good people to represent you.
5. What will be the biggest trends to emerge in the OPE industry during the next five years?
JG: The big box stores will continue to sell the bulk of the finished product. The independent dealers that provide great service and good quality products will grow further and faster than in the past. The best servicing dealers will be well rewarded for their efforts.
6. What is your overall outlook for the OPE industry in 2010?
JG: Hold on! We are still in for a rough ride. There will be more fallout in 2010, and there will be a lot more opportunities for those of us that are looking for them. As the OPE industry hits the economic head winds, keep going forward and don’t look back.
LINDA BEATTIE
PUBLIC RELATIONS SPECIALIST
SCHILLER GROUNDS CARE, INC.
(SOUTHAMPTON, PA.)
1. What is new and exciting about your company?
LB: Schiller Grounds Care, Inc. serves the OPE industry through the manufacturing of a diverse line of outdoor power equipment in the gardening, landscaping, turf care, debris management and grounds maintenance categories. Products are sold globally under the BOB-CAT, Classen, Little Wonder, Mantis, Ryan and Steiner brand names. Through the combined strength of these strong, long-standing brands, Schiller brings hundreds of products to the OPE marketplace. Product offerings include aerators, blowers, composters, dethatchers (turf rakes), edgers, hedge trimmers, log splitters, mowers, seeders, sod cutters, tillers, tractors, vacuums (wheeled and truck mounted), and wheeled loaders. Providing such a broad variety of equipment to the OPE industry, there is virtually always something new and exciting going on at Schiller!
New technology has long been an exciting driver of successful Schiller brand products. This year is no exception. Through advanced engine technologies, nearly the entire line of BOB-CAT mowers features new, cleaner-burning, fuel-efficient, enhanced-performance engines. As a matter of fact, our entire line of BOB-CAT commercial and residential walk-behind and zero-turn riding mowers came into 2010 completely 2011 emission compliant — two years before mandates required. Kawasaki FX and FS Series engines have replaced the KAI and FH Series models. These engines were created first and foremost to meet 2011 emission requirements, but compliance doesn’t mean constraint. The design of the Kawasaki FX and FS Series engines offers better fuel economy (through the use of the Hemispherical Combustion Chambers and V-Valve technology), enhanced cooling, lower engine noise and more horsepower over their predecessors. Being emission compliant throughout the BOB-CAT line by December 2009 was impressive, but we wanted to go beyond the norm. This season, we’ll introduce our new Predator-Pro 37-hp. DFI. The latest Predator-Pro commercial rider offers digital fuel injection that provides an increase in fuel economy of up to 30 percent while providing a significant increase in performance due to the Electronic Governor, or E-Gov for short. The increase in performance comes from the engine’s ability to adjust to load conditions without rpm loss, resulting in instantaneous power on demand. This equates to both increased performance and substantial fuel economy for our customers. Units come in 61- and 72-inch decks. Also new to the Predator-Pro line this year is the 30-hp. LP-61 (liquid propane) zero-turn rider. The LP-61 is powered by a Generac 990 30-hp. liquid propane engine, which is fueled directly by liquid propane (no LP gaseous conversion kit required) and utilizes the same liquid propane technology that most liquid propane forklift trucks use. Units come with a choice of side- or rear-discharge, 61-inch decks.
We have also made significant advancement in vibration absorption technology. The 2010 Ryan Jr. Sod Cutter features a new handle configuration that works in unison with vibration isolators to significantly reduce the vibration to the user during operation — a marked 75-percent decrease in the level of vibration felt by the user over current units. This greatly increases the length of time a user can run the sod cutter without fatigue, allowing the residential user to complete their job quicker and the professional landscaper to fit more sod cutting jobs into a single day. We’ve also incorporated a rear caster wheel and new height adjustment features. The 2010 Ryan Jr. Sod Cutter is CE approved and ships fully assembled. Later in the year, we’ll launch several new products throughout our various brand lines.
2. What impact will the federal government make on the OPE industry during the remaining three years of U.S. President Barack Obama’s current term?
LB: For many OEMs, there are still looming 2010-2011 government-mandated emissions requirements to be met. This may present a real challenge as sales of new equipment were soft in 2009 with customers opting to fix rather than replace. Many dealers are likely sitting on some 2009 inventory and may resist bringing new units in early in the season. This could extend into 2011 as well for OEMs that took a two-step approach to achieving 2010-2011 compliance. Also ongoing is the debate on increasing ethanol levels in gasoline from 10 percent to 15 percent. The concern here is ethanol’s effect on smaller engines, especially 2-cycle engines that require a gasoline/oil mixture. Ethanol being an alcohol naturally breaks down the oil in the fuel mixture, decreasing lubrication to the engine that can cause failures.
