Interview with Lee Richey, General Manager, Emak USA
Varied Distribution Channels
"Right now, we're working through three channels of distribution. The predominant one, the one we're focusing most on right now, is a two-step program of 10 distributors throughout North America. The distributors then set up, train and support the local dealers. In Ohio, our home base, we work directly with 30 independent dealers. This allows us to keep our finger directly on the pulse of the market.
Lee Richey, General Manager, Emak USA
"The third channel of distribution that we work with is Menards, which is a regional big box chain that has 270 stores, located mainly in the Midwest. We've positioned Emak as the premium line of handheld equipment that Menards handles. They've done a good job for us.
"A big part of our agreement with Menards is our commitment to set up servicing dealers within 20 miles of each of their stores to service and support Emak-branded equipment. We've honored that commitment and it's working very well for us.
"For these dealers, we encourage and provide them with incentives to stock and sell our products. It's about a 50/50 split between those who service products only, and those that service and stock products. If they want to provide service only, we're set up to pay them for warranty repairs as well as adjustments for other repairs."
"In 2006, the first year that Emak USA was established, we had a total of 50 stock dealers. Today, we have 900, not including the 270 Menards stores. So, we're working hard to build a strong dealer base. We're shooting to have 3,000-5,000 dealers in the next 3-5 years.
"Our distributors do the recruiting of independent dealers. The ability to stock and service products is an absolute must. Our distributors administer the cooperative advertising and sales promotion programs, as well as our warranty program. Dealers also go to the distributor when they need inventory or to submit their warranty claims. Our distributors are strategically located throughout the U.S., so product and parts are available close to the local markets."
The 'Best' Dealers
"The first thing we look for in a dealership is that they know how to operate a profitable business. When I say that, I mean he understands that he must make a profit and doesn't necessarily discount just because a customer walks into his store and says, 'I can buy this down the road cheaper.' He understands his costs of doing business, so he sells profitably.
"The second thing he does is he stands behind his product and is willing and capable to take care of any problems that come up. That means his people attend and participate in our training sessions that not only help in selling the product but to service the product.
"The next thing that he does is promote the product. Many of our dealers also carry other lines. Normally, we try to make our products more profitable than the other brands. So, if a customer is looking for a chainsaw and asks for another brand or is undecided, we expect his salespeople to take the customer through the unique features of Emak equipment. For example, we're the only one that offers factory equipped self-sharpening chainsaws right now. And we reward those dealers who promote our products with a higher margin."
The Ethanol Issue
"The use of ethanol is challenging all handheld equipment manufacturers. Our basic position is if the blend is 10% or less, we can deal with it. If it's 15% or more we're going to have to go to the drawing board, otherwise we're going to have massive failures.
"When it gets to 15% and above, you need solid steel fuel lines, but because you need to be able to use the equipment in all positions, flexible fuel lines are required. We know 15% ethanol will eat them up.
"In addition, alcohol is a solvent and two-stroke engines use a mix of oil and fuel. When you wash that oil off with the solvent, you don't have the lubrication you need. So not only will we have fuel line problems, we'll have some lubrication problems, too."
"Right now, we're working on a new family of trimmers in the 22cc range and on a new 45cc chainsaw. "But the big push is that Emak is committed to making all of its products EPA-compliant, which is a huge task.
"This year we introduced three new compliant chainsaws, the MT3500, the MT3750 and 4100. Next year we're looking at the 45cc chainsaw and five new models of 22cc consumer trimmers. Based on that engine, we're going to have a new 20cc hedge trimmer and we also have active projects going on with our large 65-70cc backpack blowers and our little top handle chainsaw."
A Flat Market
"Until the 2012 election is settled, people are going to continue holding their money close to their vests. But I'm preparing for better chainsaw sales. With energy prices what they are, and potentially going higher, more people will be cutting wood and being more self-sufficient, so I think chainsaws are going to go up. I don't see a lot of growth in the rest of the products, like blowers, string trimmers and hedge trimmers.
"It looks like we've reached the bottom as far as landscape contractors and the professional market goes. Those who have their grounds maintained professionally will continue to do so. With the exception of chainsaws, where I see a 5-7% increase, I would say overall sales are going to remain flat or grow less than 2%."