OPE Industry Forecasts: What is foreseen for 2014? (Part I)
The following is the first of a two-part series:
Outdoor Power Equipment recently surveyed several executives about the state of the OPE industry heading into 2014.
Specifically, we asked the following thought-provoking questions:
What does your company or organization have planned for 2014?
What were the OPE industry’s biggest stories of 2013, and what will make headlines in 2014?
What will be the OPE industry’s top trends in 2014?
Aside from the weather, what challenges will OPE dealers face in 2014, and how should they address them?
What is your overall outlook for the OPE industry in 2014?
OPE received the following written responses, in order, Dec. 9-19, 2013:
BOB WALKER
PRESIDENT
WALKER MFG. CO.
(FORT COLLINS, COLO.)
1. What does your company or organization have planned for 2014?
Bob Walker: For our dealers, we will continue to offer the “Out Front Advantage Sales Training” (OFAST) that was started in the 2013 season. This is a two-day “boot camp” held at our factory outdoor training facility with eight classes of 20 dealer sales personnel in each class. We had great response from the dealers that attended in 2013, and the increased sales that occurred afterward confirmed the effectiveness. Product development continues to be a strong emphasis with the introduction of two models that are significantly redesigned from earlier models. We are planning to make a mid-year introduction of our next-generation grass-handling model, which is a completely new design offering great performance and a new lower price point. Walker continues our single “sales with service” channel of marketing with dealer-only sales. Walker continues to be a family-owned and family-managed company with the third-generation Walker family members now at work in the company.
2. What were the OPE industry’s biggest stories of 2013, and what will make headlines in 2014?
Bob Walker: I don’t know if this should be classified as the biggest story of 2013, but to me, it was significant to mark the passing of two pioneers in the OPE industry. I would like to honor the memory of Dane Scag (founder of Bob-Cat, Scag Power Equipment and Great Dane Power Equipment) and Dick Tegtmeier (co-founder of Exmark and founder of Encore) as two who made significant contributions to the design and manufacturing of commercial-grade lawn mowers. I am not sure what will make the headlines for our industry in 2014.
3. What will be the OPE industry’s top trends in 2014?
Bob Walker: The trend will continue for more commercial mowers to be offered with electronic fuel injection engines. In the next few years, it can be predicted that engines with carburetors will no longer be used in commercial mowers. Also, the trend will continue to grow for online sales of spare parts, both OEM and aftermarket.
4. Aside from the weather, what challenges will OPE dealers face in 2014, and how should they address them?
Bob Walker: As noted in my previous response, we think dealers will be challenged to maintain their share of spare parts sales due to the convenience and increasing popularity of ordering online. The way for a dealer to meet this challenge, taking a page from Bob Clements (consultant to OPE dealers) counsel, is for dealers to “have good prices and have everything the customer needs.” Dealers still have the advantage if they are able to offer a high level of customer service. A dealer never wants to say, “We can order that for you.” As a manufacturer, Walker has no plans to participate in online sales, as we are committed to supporting our dealer program, but that does not stop some enterprising dealers from selling OEM parts online.
5. What is your overall outlook for the OPE industry in 2014?
Bob Walker: We expect to see a 5- to 10-percent increase in sales in 2014 and think the industry as a whole will continue to experience modest single- or low double-digit growth.
JOHN HEDGES
DIRECTOR OF SALES & MARKETING
CENTRAL POWER DISTRIBUTORS, INC. (CPD)
(ANOKA, MINN.)
1. What does your company or organization have planned for 2014?
John Hedges: The industry has seemed to stabilize for the moment with regards to EPA (Environmental Protection Agency), CARB (California Air Resources Board), mergers, acquisitions and companies going out of business. I bring that up because CARB and EPA have dictated the industry for the last 5 years (at least). Having Kohler, MTD, Lauson and LCT engines, this is good news for CPD. Our suppliers have done a great job keeping up on the regulations, and this is allowing us to grow in our market area. Obviously, these two entities are still creating regulations, but for the time being, we all know what is expected for a few years.
We will offer a couple of new product lines in 2014 that will help us in markets we aren’t active with today. This will allow us to develop relationships and sell other items we carry to the new customers.
CPD has a business model that is working, and we will continue to develop that. There is one OEM line that has been on our radar for a few years, and we hope 2014 is the year we can begin marketing their products and parts.
2. What were the OPE industry’s biggest stories of 2013, and what will make headlines in 2014?
John Hedges: Having a late spring and being able to recover was a big story in 2013. While we had really late snow, it had little impact on our business. In May, you’re supposed to play golf, not shovel snow.
I believe the lead up to the Affordable Care Act and the impact on our industry (and economy) was, and remains, big news. Today, I don’t think we know the impact it will have on our industry over the next couple of years. We still don’t know if insurance companies will cancel existing corporate plans when they try to renew in 2014. If the majority of Americans are on the government plan and have to pay more, it could be really good for parts sales and bad for new equipment. New equipment has taken a hit for several years now because of economic woes. Landscapers will have to raise their prices, which could lead to more people doing their own lawns. It’s just too early to tell.
3. What will be the OPE industry’s top trends in 2014?
John Hedges: I will stay with the Affordable Care Act and the impact on the economy. Our industry claims to be recession proof, but is it Affordable Care Act proof? Stay tuned and keep trending.
Congress will continue to take a negative hit to their popularity, which will impact the 2014 mid-term elections. Which way? Stay tuned and keep trending.
E10, E15, E85, what will the industry do about the fuel we see at the pumps today? If the economy takes a deep turn again for the worse, people may try the cheapest gas available, which will ruin their engines. Stay tuned and keep trending.
There is a high cost of service training, and the service techs are aging. How will the manufacturers and the distributors train the dealers using technology to an aging group? Will it be through webinars, online universities or another method? Stay tuned and keep trending.
The Internet will continue to be a more popular place to buy parts for consumers. How will the dealers react when the end user needs something serviced? Stay tuned and keep trending.
4. Aside from the weather, what challenges will OPE dealers face in 2014, and how should they address them?
John Hedges: Dealers will have to embrace the Internet customers differently than the mass merchant customers. With smartphones allowing for ordering on-the-go, dealers will have to be visible online more than ever. In today’s fast-paced world, a customer, to some degree, doesn’t care where a part comes from. The Internet customer relies on ease of ordering and price. If dealers can’t keep up with that way of ordering, they may need to get out of the way. My suggestion is to have a website with ordering capabilities. Make your website known by using stickers on the products and something to give the customer with your online ordering information. And last, give the customer a choice to have the part(s) delivered or come to the store and pick up. Allow them to sign up for e-mail coupons and specials and then do monthly e-mails. This way, your name and website address stay in front of them. There is nowhere else they should want to buy their parts.
As I mentioned earlier, educating techs to work on new emission-approved engines will be critical to the success of many companies. EFI engines are growing in market share. The OEMs and distributors must be on the same page to teach the dealer techs how to work on them. What they learned 2-3 years ago may not apply to the new engines made today. Online training will be the method of teaching, and if the dealers aren’t online, they will be left behind. However, for every thought, there is an exception. We have Amish customers who may never have Internet access, so we have to have an alternative method to teach, not just electronically. As if that isn’t challenging enough, there is also new Tier 4-approved diesels on the way!
5. What is your overall outlook for the OPE industry in 2014?
John Hedges: In our monthly newsletter, we have a poll each month. The December poll asks how the dealer feels heading into 2014. The results were overwhelming that 2014 will be a good year. As one dealer said, “I didn’t make it 36 years by worrying about something that hasn’t happened yet.” So true.
I said that the techs are aging, but many of our industry leaders are aging too. It will be interesting to see the succession plans taking place over the next few years and how the companies they represent move forward. In some cases where they don’t have successors, we might see some industry consolidation continue.
PETE AND KELLY YUNKER
CO-OWNERS
POWER EQUIPMENT SYSTEMS, INC. (PES)
(SALEM, ORE.)
1. What does your company or organization have planned for 2014?
Yunkers: For 2014, we are focusing on investing in people and technology to optimize growth opportunities. Some of these investments include: expanding our inside and outside sales team, relocating to a new and larger facility, implementing technology to increase sales force effectiveness, and revamping our website to enhance the customer experience. We are also working on a Vision/Purpose engagement initiative to revitalize our company culture.
2. What were the OPE industry’s biggest stories of 2013, and what will make headlines in 2014?
Yunkers: 2013 was a little quiet in the OPE industry. Most of the headlines seemed to focus on companies investing in personnel and strengthening their benches. Kohler has new leadership in Brian Melka, its new VP Kohler Engines, Americas. Husqvarna appointed Alan Shaw as its Head of Americas. Closer to home, we have hired both a VP of Operations, David Crain, and a VP of Sales, Joe Bonaventura. For 2014, we expect technology to take a lead in the headlines as companies look for ways to connect with customers in this digital world.
3. What will be the OPE industry’s top trends in 2014?
Yunkers: We are seeing an increase of new incentives and measurements of service parts with manufacturers. The competition between OEM and aftermarket will get even more competitive in 2014. In addition, we believe manufacturers and distributors will be either enhancing or launching sales force automation technology to increase sales and give solid metrics that will drive strategic programming and resource allocation.
4. Aside from the weather, what challenges will OPE dealers face in 2014, and how should they address them?
Yunkers: Millennials (a.k.a. Generation Y) are starting to hit their peak in new home ownership. With that comes a unique customer base for lawn and garden equipment. Successful dealers will have figured out the best ways to connect to this next generation and will have positioned themselves as the local expert on lawn and garden equipment.
5. What is your overall outlook for the OPE industry in 2014?
Yunkers: We feel the industry is poised for growth in 2014. Economic conditions will continue to improve. End users will have increased cash on hand or credit available. This, combined with stronger housing starts, should mean a robust year in 2014. Of course, unfavorable weather conditions trump everything.
BRAD MURPHY
& PAM MEYER
EQUIPMENT SALES MANAGER
SUBARU INDUSTRIAL POWER PRODUCTS
(LAKE ZURICH, ILL.)
1. What does your company or organization have planned for 2014?
Brad Murphy: Subaru is always looking for innovative ways to improve our engines and equipment and offer our OEMs and customers a high-quality, durable and efficient product. Last year, we introduced two new big block V-Twin engines to fill the growing demand for larger, air-cooled gasoline engines with increased power. We had an overwhelmingly positive response, so in 2014, we’re going to press forward in expanding the big block line.
2. What were the OPE industry’s biggest stories of 2013, and what will make headlines in 2014?
Brad Murphy: The introduction of E15 to the market has been a hot topic and will likely continue to be one in 2014. This fuel is universally opposed by the vast majority of those in our industry because of the problems it causes. Using E15 in small, non-road engines can have harmful and costly effects. Most engines would have great difficulty in meeting both emissions and performance expectations with this type of alcohol range.
In addition, our experience with E85 has shown that customers have a tendency to purchase the lowest-priced gasoline, not realizing it will damage their engines, regardless of any warning labels on gas station pumps. We expect to see the same with E15.
Pam Meyer: The introduction of E15 is a big issue, and will continue to play a major role in the years to come. People want to save money on their fuel, but often don’t understand that ethanol is just not meant for small engines. This affects Subaru’s entire product line, whether it’s an engine on an OEM piece of equipment or our own Subaru generators and pumps.
3. What will be the OPE industry’s top trends in 2014?
Brad Murphy: The new fuel blends go bad very quickly, so the most common problem people are having involves the carburetors gumming up. So, to alleviate the industry’s biggest problem, it makes sense to move to a design with no carburetor. Electronic fuel-injection (EFI) engines have that.
We saw EFI on cars, then on expensive motorcycles, then finally on twin-cylinder, air-cooled engines. I suspect it will move right down to single cylinders within the next year or two. Subaru offers fuel injection in our V-Twins, and we’re going to offer more EFI options going forward. With EFI, the consumer will get a more reliable, more sophisticated engine that will run cleaner. I believe EFI is the future for the entire industry.
We see fuel injection with the electronic governor as the future, both to meet the ever-improving exhaust/emissions standards and to provide performance and reliability. Plus, when combined with the electronic rather than a mechanical governor, the engine requires fewer wires and gives OEMs more options for integrating the engine operation into the electronic controls of our equipment.
Subaru Industrial Power Products has an advantage because our basic engine design is more advanced than our competitors. We exclusively make premium-class engines with the latest combustion chambers and OHC technology, so our engines are inherently more efficient and operate cleaner. In addition, we’ve already been through this because of our automotive experience.
4. Aside from the weather, what challenges will OPE dealers face in 2014, and how should they address them?
Brad Murphy: There has always been competition from the large stores. The most successful stores going forward will continue to provide strong service and expertise and continue to incorporate technology into their stores. These offerings will enable them to grow and expand, even in the face of continued competition from large box stores.
5. What is your overall outlook for the OPE industry in 2014?
Brad Murphy: I think 2014 is going to be a good year with substantial growth. The past few years have been challenging, but the stores that have weathered the storm are that much stronger. They have learned lessons and have used them to work to their advantage.
Pam Meyer: We’re excited to watch the economy continue to turn around. During the recession, customers were looking for lower-cost, high-quality products. Our SGX line of generators stood as a great option for these consumers. Even as people continue to watch their spending, Subaru’s SGX line of generators still stands as a great option. These units have all the key features — the 5-year warranty on the engine, GFCI receptacles, hour meter and wheel kit — for those customers looking for cost-efficient yet high-quality products.
KRIS KISER
PRESIDENT AND CEO
OUTDOOR POWER EQUIPMENT INSTITUTE (OPEI)
(ALEXANDRIA, VA.)
1. What does your company or organization have planned for 2014?
Kris Kiser (also known by his nickname “Chain Saw Kiser” for his prominent role on ethanol education): The Outdoor Power Equipment Institute (OPEI) will continue to broaden its ‘Look Before You Pump’ program, a national ethanol education and consumer protection campaign launched at GIE+EXPO 2013.
The goal of this campaign is to caution consumers that it is harmful and illegal to use higher than 10-percent ethanol gas in any outdoor power equipment, such as mowers, chain saws, snow throwers, UTVs, generators and other small-engine products. As many know, more and more gas stations are offering higher levels of ethanol-blended fuels (E15, E30, E85), but little has been done to educate consumers about the harm posed by using these fuels in our equipment.
In order to achieve this ethanol education goal, we need to work in partnership with dealers and retailers across the country to alert consumers about the changing fuels market and advise them how best to avoid unintentional misfueling.
In October 2013, we began the first phase of ‘Look Before You Pump’ and distributed a range of materials to dealers in the form of product hangtags, videos, posters, rack cards and counter mats, to name a few. These are available for download and purchase at http://tinyurl.com/EthanolEducation. Our OPEI members want to make sure that dealers have the resources necessary to educate and protect the consumer.
In 2014, we will move further into the retail market with the ‘Look Before You Pump’ education program, and we are currently in discussions with big box retail stores. We may not be able to reach every single consumer with this important message, but the outdoor power equipment industry is determined to protect our consumers and bridge the ethanol education gap.
2014 will mark the year that OPEI takes a giant leap forward in representing and reporting on the battery/electric market.
Several new electric/battery-focused members have joined OPEI, including iRobot, Positec, Stanley Black & Decker, and Sunrise Global Marketing, and OPEI has formed an electrics products committee, led by representatives from Stanley Black & Decker and TTI. We also welcomed John Cunningham, president of the Consumer Products Group at Stanley Black & Decker, Inc., to the Board this year.
This year, you’ll see the first-ever OPEI/ANSI standard for an electric robotic mower. We’ve also expanded our statistics and global reporting to encompass electric/battery products.
We’re proud that OPEI has become the go-to place for reliable, timely statistical information and shipment data for our industry. Our commitment to reporting will only grow in 2014, as we set out on a joint effort with our European partners to collect meaningful global data.
2. What were the OPE industry’s biggest stories of 2013, and what will make headlines in 2014?
Kris Kiser: The continued drama revolving around the rollout of higher ethanol fuel blends continued to take center stage in 2013.
The rollout of 15-percent ethanol (E15) continues to be challenged in the courts by OPEI and other engine associations in the boating, motorcycle and snowmobile industries, to name a few. But, at the core of this issue, is the renewable fuel standard (RFS) regulation itself.
The EPA recently lowered the biofuel targets, including those for corn ethanol, and is currently fielding public comment on our renewable fuels policy. OPEI has asked Congress and the EPA to acknowledge that the current RFS policy does not reflect market conditions anymore: Gas consumption has fallen, the use of flex fuel vehicles has not grown, and corn ethanol is the only product currently available to meet the biofuel targets. Unfortunately, corn ethanol as a biofuel is not a solid strategy since it is corrosive and damaging to a range of engines.
2014 will be another year where we watch and hope that Congress and the EPA will create a sound, long-term renewable fuels policy that allows our industry to design products for a ‘drop-in’ fuel that is supported by infrastructure.
In the meantime, we are wary of the current situation. We’ve hit the ethanol blend wall, and that means that every gallon of gasoline is at ethanol saturation, meaning the fuel dispensed will have 10-percent — or 11- or 12-percent — ethanol. We need to remind consumers that they need to ‘Look Before You Pump,’ but also be careful with seasonal- and limited-use outdoor power equipment. They need to make sure tanks are empty when sitting more than 30 days and stabilize the fuel.
In October 2013, those that attended the GIE+EXPO tradeshow experienced a resurgent, energetic industry event. Exhibitor numbers were up; Dealer Day — celebrating its second year — was buzzing with activity reflecting an increasing numbers of attendees; and we announced an extension of our partnership with Hardscape North America.
3. What will be the OPE industry’s top trends in 2014?
Kris Kiser: In 2014, we’ll see an ongoing effort to make OPE products for every person, regardless of age and physical ability. Products will continue to spotlight ergonomic features, a variety of supported fuel sources, and designs that make products lighter, easier to store, and easier to use, such as electric start and even built-in hand warmers for snow throwers.
We’ll need to keep an eye on the emissions and regulatory climate. We’re into full implementation of Tier III emissions now, but we’ll likely hear news on the evolution toward Tier IV at some point.
4. Aside from the weather, what challenges will OPE dealers face in 2014, and how should they address them?
Kris Kiser: See response to first question.
5. What is your overall outlook for the OPE industry in 2014?
Kris Kiser: The overall outlook for shipments is strong for 2014. We’ve already had a number of adverse winter events, so snow products, chain saws and generators are moving at a brisk pace. With landscapers out there moving snow, and other contractors tasked with tree and debris removal, they should be in a good cash position for spring 2014 product spending.
We’re seeing positive growth in all of our OPEI shipment categories, with double-digit growth in the rider mower market.
TODD WINSTEAD
PRESIDENT
TIDEWATER POWER EQUIPMENT COMPANY
(VIRGINIA BEACH, VA.)
& PRESIDENT
OUTDOOR POWER EQUIPMENT AND ENGINE SERVICE ASSOCIATION, INC. (OPEESA)
(ESSEX, CONN.)
1. What does your company or organization have planned for 2014?
Todd Winstead: We are very excited to be announcing several changes at OPEESA, including a new look and new member benefits, at our annual meeting this year in Indian Wells, Calif.
OPEESA is also expanding dealer educational opportunities on our website at www.OPEESA.com thanks to the generosity of several of our manufacturing and affiliate members, including American Honda Motor Company and GE.
In addition to the two things mentioned above, we are pursuing industry collaboration with other associations. We are working with OPEI to help promote its “Look Before You Pump” campaign and anticipate other industry and cross-industry efforts in the coming year.
2. What were the OPE industry’s biggest stories of 2013, and what will make headlines in 2014?
Todd Winstead: For 2013, the lack of major weather events was probably key. For 2014, ongoing ethanol issues, as well as federal and state regulations, will probably make headlines.
3. What will be the OPE industry’s top trends in 2014?
Todd Winstead: From my point of view, propane will probably be a trending issue. We are not sure how big it will be, but based on what is being done in R&D, it might be the next “big” thing. Dealers should also see growth in their businesses; OPEESA distributors will try to help make sure they are prepared for it.
4. Aside from the weather, what challenges will OPE dealers face in 2014, and how should they address them?
Todd Winstead: Dealers will face many challenges and should be ready to address at least some of the following issues:
* Competing in an online world — We think that by focusing on products that need to be serviced and shedding products once they become a commodity and are found online will help them succeed.
* Upgrading dealership — They should partner with key suppliers to reduce cost.
* Hiring, training & retaining good employees — Outsource HR to a local firm; most dealers do not have the revenue to support a full-time HR person.
* Shrinking margins — Partner with key suppliers to aide in developing your value proposition. Having a clear value proposition will help the dealer get more for their products.
* Health care — This is an issue that everyone has been struggling with — whether you are a distributor, manufacturer or dealer. Check with your insurance agent, HR firms, and state insurance commissioners. Just make sure to confirm what you are being told is accurate — many requirements are still changing. Join your local dealer association; networking is a great way to receive free advice.
5. What is your overall outlook for the OPE industry in 2014?
Todd Winstead: I am fairly optimistic about 2014 based on economic forecasts I receive from several sources — both within the OPE industry and as general overviews of the U.S. economy. We have prepared our company for growth and anticipate we will have a good year. But, as always, weather can change any forecast. With the rainfall shortage predicted in some parts of the country, there is always the possibility that growth will not happen for at least some segments of the OPE industry in the U.S.
STAN GUYER
PRESIDENT
THE GRASSHOPPER CO.
<SPAN
