By Meredith Kaplan Burns
Successful businesspeople have enjoyed the highs of a good economy and endured the lows of a less-than-ideal economy. These same people can tell you that among the keys to their success is learning to adapt their businesses to weather the more difficult times, which in turn allows them to perform stronger as better economic times emerge.
The question then becomes, “How do I make my business stronger?”
At the 2012 PRI Trade Show, the focus of the annual Industry Roundtable was on marketing and distribution of racing parts in 2013.
The discussion began with the question, “How have things changed since the economy changed?” One point mentioned was that profit margins have decreased, but, according to panel members, that doesn’t necessarily mean racing businesses will lose profit. It simply means these businesses need to take steps to increase sales, such as becoming more diverse and expanding their customer base to different types of racing and markets that they may have never reached before.
As many racing businesspeople face continued challenges, Performance Racing Industry plans to devote its online columns in 2013 to these challenges, discussing what established racing business owners are doing to keep their businesses going, as well as how they are able remain competitive.
For this January article, we interviewed two racing retailers who candidly addressed some of the issues they are facing, and the steps they are taking to make their businesses stronger.
Bob East operates Beast Enterprises, in Brownsburg, Indiana, which is an open wheel race car building operation that also offers sales of racing components. In response to the challenging economy, he reported that his business cut overhead, downsized, and increased its used parts sales.
The three biggest challenges Beast Enterprises has faced in the past five years have been race teams folding, lack of sponsors, and buying products more carefully (focused on pricing). To combat these challenges, East reported that his company’s chassis keep winning, which keeps his name in front of racers, while his business team focuses on providing quality service, which includes simply working harder.
45 Race Shop, a racing retail store in Milan, Tennessee, has trimmed its overhead and now micromanages its inventory, according to owner Brandon Maxwell. He explained, “We haven’t changed a lot of things, we are just constantly trying to maintain the customer base we have.”
The biggest challenges faced by his business in the past five years include a lack of interest (“There are not many new racers getting into the sport”); cash flow (“Shorter racing seasons and less cars equals fewer sales”); and Internet sales (“It’s hard to compete with 24/7 online stores that tend to have prices that are not competitively priced in comparison to the quality of the product.”)
East also cited low-price mail-order and Internet retailers as one of the biggest challenges facing racing retailers today.
In fact, according to the recent Racing Business Survey that appears in Performance Racing Industry’s January 2013 issue, 21 percent of survey respondents claimed the most significant business challenge they encountered in 2012 came from competition from Internet businesses. This was the highest-rated answer, as the next closest response was “poor sales” at 9 percent.
But how do you set your business apart from the online-only retailers? East stressed the service that he and his team provide at the race track and their race shop.
Maxwell noted, “We try to keep a touch-and-feel inventory. We keep the items that require a little bit of technical help that you can’t always get when you are online shopping.”
While 45 Race Shop does offer sales through its website, Maxwell said, “We have a full service store/website. The biggest challenge we face is the costs associated with advertising online. It is really hard for a small, family-owned business to compete on a national level with the larger companies that are geared toward that. It has not really affected sales, because we tend to sell to our normal customers that might not have time to get out to the store during regular business hours.”
Approaching your customer base creatively, and acquiring new customers, can also help racing businesses. At the recent Roundtable, Bill Schlieper of Pro Power Racing, in Sullivan, Wisconsin, added, “I think our market is better than people think. There are people out there spending money, you just need to figure out how to get them to your business.”