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EYE ON THE INDUSTRY

DISTURBING SITUATION IN THE FUN KART INDUSTRY
Opinion by Kenneth R. Hueftle

I am writing in response to several disturbing trends developing in the karting industry. If these trends continue to develop, the fun kart industry will cease to exist within three or four years. Critics will scoff as such claims. Consider this and perhaps your viewpoint will be altered.

Many companies are selling karts direct to mass merchandisers, a trend that has accelerated greatly during the last twelve months. While realizing tremendous short-term gains, manufacturers are simultaneously destroying their long-term viability.

Virtually every unit sold via (a) mass merchant is delivered to a customer in a “box”. There is no service, no parts or warranty backup, and no experienced individual to match the capabilities of the user with the kart.

How many of these units will even start for the customer?
Even if it starts, how long will it run with no professional help or advice?
How does a customer react when he or she can’t obtain satisfaction?

In a very short period of time, the customer tells his/her friends and neighbors about their negative experience, depressing any chances of future growth in karting.

Manufacturers are directly competing with their dealer network. Even if only one model is sold to mass merchants, it destroys a dealer’s profit margin for the entire line. A dealer cannot retail a single seat kart when the local Sam’s Club retails a two seat model for $150 less. Never mind that it may be a substandard one-wheel drive unit. The average customer does not know the difference until they buy one. And no, please don’t tell me that this customer will upgrade and buy from me after they get burned at a warehouse club. This will rarely happen.

I have heard several attempts to spin control by various companies. One executive stated “selling products through alternative retail channels exposes a more diverse customer base to the product, enhancing opportunities for all members of the retail community”. While this “suit” obviously has a masterful command of the English language, it is still a blatant lie.

The worst offenders are alienating their dealer base, and increasing their dependence upon mass merchants. Instead of spreading their risk over a few hundred dealers, they are at the mercy of the mass merchant accounts. What happens when they lose one of these accounts? Up to half of their production can disappear. And since any intelligent dealer won’t support them, what will they do? Remember, there are several vendors pursuing this business. When a vendor dos not accede to mass merchants’ demands to lower their prices (and of course, profits), another vendor will be glad to sell them for less. What was a product with built-in value is rapidly being relegated to a commodity status. The affected manufacturers may be doubling their production, but what is their margin?

Another fatuous claim by industry executives is that a dealer should eagerly accept mass merchant karts for service and warranty, that is a tremendous opportunity to reap significant profits.

Briggs & Stratton said the same thing in the 1970s to their lawn and garden dealers. Now most shops in that industry try to exist to “cull the crumbs” thrown to them by mass merchants. Warranty work, of course. In general, very few now earn a respectable living in this industry.

Any dealer who pursues such “opportunities” hastens his/her demise. You give away the most important weapon is your arsenal: parts and service. Servicing the local BJ’s karts lends them instant respectability. No customer will purchase a kart from a dealer when they can buy it much cheaper at the local discount mart. Especially when they can come to you for service.

Manufacturers need only to consult recent history to an inkling of their future, if such short-term practices are continued. Mass merchants such as Sears, Penney’s, Pep-Boys, etc. destroyed the mini-bike industry in the very early ‘70s. They virtually destroyed the karting industry in the early 1980s. They destroyed the moped industry in the late ‘70s. Merchandisers strip-mined such products for a couple of years, earned quick profits, while simultaneously destroying the long-term health of these industries.

In closing, and at the risk of repetition, I would like to directly address the (fun kart) manufacturers. Many of you realize over half your sales via mass merchants. As I write this, several additional manufacturers are aggressively pursuing these accounts. You can’t be both a mass merchant purveyor and still expect to retain your dealers. You can’t have it both ways. You can pick short-term greed (remember the 1980s), and fail or long-term growth and profits. Most of corporate America has learned this lesson the hard way. Must you destroy yet another fabulous product opportunity for all involved? The cliché that “those who ignore history are doomed to repeat it” amply describes the present problem this industry faces.

ABOUT THE AUTHOR: Kenneth R. Hueftle is with Mini Trail Bikes, Inc. of Lindenwold, New Jersey.

END

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