What will it take to get manufacturers to get a better distribution system?

Hello all. This is my first post here and I'd like to address the distribution system that is keeping Chinese product from being great.

I work as a Store Manager for Vespa Milwaukee, ride a vintage Honda Scrambler and vintage Lambretta, and have been studying the Chinese scooter and motorcycle industy since '03. As a long-time shopkeeper and sales person my predictions for the growth of Chinese product have mostly come to be. But I still am amazed that the manufactures have not fixed the system that is holding them back.

Dealernews, a powersports industry magazine in the US now reports that the Chinese scooter sales have peaked and are headed south. Sales of traditional brands have begun a new upswing. The gas prices have caused a %50+ spike in sales this season and the Chinese manufacturers are not going to get to capitalize on it like they should have. Kymco, Genuine, TGB, Piaggio and many other traditional brands have empty warehouses here in the US. And motorcycles sales, which are in a slight slump, are up for dual-sports and enduros.

Word has spread thoughout the US that all Chinese scoots and bikes are poorly made, poorly supported and horribly distributed. The blogs, BBS's, and websites of those who opposes new brands are steadily convincing more people to stay away from Chinese product. And the cheap,uninformative, terribly outdated websites that middleman distributors use to hawk new brands are proof enough that they will not spend a penny to promote the new brands. In fact, many potential customers can see right through the empty claims and downright lies.

Compounding this issue, the traditional US scooter shops (who have skill and resources) have begun to turn away the Chinese bike owners. Also, the newer shops that sold only chinese bikes (but couldn't fix them) have been closing up in large numbers. The claimed bottleneck in both cases is, quote: "we can't get parts or manuals for those things"

So, can we have this discusion here? I'm not trying to bash anything, I'm just looking for informed and interested people to "think-up" some solutions.

What do you think would help or fix the problem of new brand creation, importation, and distribution?

Thanks, Peej

Hi
Welcome to the forum.

Same situation in Australia.

Except I don't think there is that many if any Chinese Scooters here due to

A : poor marketing

B : No one is willing to get the ADR(needed to get bike registered in Australia)

Dual sports and Enduros have increased sales again this year.

What will it take to get the Chinese motorcycle industry established my view

A quality product at a price that is well below the established brands to start with until they have proven themselves reliable.

Full back up of parts and service.

A stack of money thrown at marketing.

ADR for Australia

Time

More cooperation from Chinese manufacturers

Scooter sales where second.

Those stupid Chinese pit bikes did the Chinese motorcycle industry here no good.

Exactly the situation here in Spain. The market for bikes and scooters has been booming since the government introduced changes to the licensing laws that allow anyone to ride up to a 125 using only their car driving licence.
Chinese fly-by-night importers have sprung up everywhere, bringing container loads of own-branded machines, but bugger-all spares and technical info.
They deal mainly with low budget shops that employ poorly trained "mechanics" that make a mess of repairs and service and send the brand into disrepute.
Never mind eh?. Tomorrow we think of another name and import another container load of bikes and start again.
The worst offenders even set up import and distribution business and then claim that they're manufacturers and that the machines are made in Spain. As a lot of these new to bikes customers are ignorant of the progress of motorcycle business, etc they take the bait and a few months later are disappointed by the poor warranty service and non-existent spares.

I feel the Chinese have enough capital and industrial might (some makers manufacture millions of bikes a year) to set-up proper distribution networks, and most important, use their own names and not the situation we have now, where a Jinlun 125 cruiser is sold here by something like 10 different importers, all using a different name.
Bike sales figures are regularly published which show that if they were united, Chinese bikes nearly outsell all the other makes put together, but unfortunately as individuals they are cutting each others throat.

Peej,

Welcome to the site and thanks for your honest and concerned question. The answer, unfortunately isn't an easy one.

1) Corporate culture
Many, if not all, of the Chinese manufacturers that tried to set up distribution in the US back around 03' did so in an incredibly half-assed manner, simply trying to dump unsupported goods on a population of consumers that is more informed and savvy than anything they had previously encountered. Some of them are slowly trying to fix the problems like lack of parts and svc. manuals but just like many things in China, all of the major companies are tied to state owned enterprises one way or another and have an unimaginable amount of bureaucratic inertia to overcome. This is a massive problem which can be overcome with the right parties and people in place but they haven't surfaced yet and points at another, likely even bigger problem...

2) Domestic woes
As a country of 1.4 billion people, many of them riders of small displacement motorbikes and motorcycle variants, the Chinese domestic market is a huge cash cow for the manufacturers. Unfortunately, the gub'ment is screwing the two wheeled market in favor of the more modern and face bearing four wheeled industry, leading only to increased fuel consumption and horrendous grid-lock traffic. Along with this, new rules and restriction on where motorcycles can be used, esp. within downtown city limits, makes bikes less and less practical for people when for a little more money a buyer can have all the glory of owning an tiny tin-can automobile. The domestic woes have made manufacturers look outside to their nearest and most profitable (as well as most potent in terms of currency conversion) market which are developing nations.

3) Focus on developing nations
Unlike Western "developed" nations, there are whole continents of people in Africa, South America and some parts of Eastern Europe to whom a 200cc Chinese DR200 derivative is a great upgrade to what has been previously available. People from these "developing" nations tend to be more habituated to parts supply problems and willing to work through these issues on their own.

MyChinaMoto has more than a couple of these folks and they're a great asset for their unique knowledge and experience of these bikes through the amount of time, money and energy they put into repairing, upgrading and custom-fabricating parts for these simple but valiant machines. I have a feeling the marketing for Chinese bikes in these countries will tend to be a bit easier and cheaper since the prices are likely more reasonably controlled, the product relatively good and the value of the Chinese RMB will go further allowing manufacturers to also engage in some direct distribution and warehouse ownership.

4) Product marketing to the West...
Marketing to "Western" nations is not cheap or easy for most - if not all - of the Chinese manufacturers because they have no experience or budget to do market products effectively. From a country that sees motorcycling as a cheap menas of transportation, the move to a "passion" and "lifestyle" market is constantly confounding resulting in endless lines of funny often non-sensical and ineffective slogans like "Own your way". This once again points at cutlural differences which will take some time to overcome that at the same time need to change within their corporate structures to become eaiser to move, change and make suitable decision based on individual market necessities.

5) The wrong solution...
is to ask importers to do all that for you, which is exactly what they've done and still continue to do. It's almost as though they're waiting for a magical importer to come down out of the sky and say "I want to buy 50,000 of your bikes for sale nationwide and I will absorb all marketing, warehousing and distribution costs while using your factory's name." What they usually get are small time middle-man operators who take both the manufacturers and customers to the bank while offering very little in means of parts or service support.

As a result, it's very clear they need to set up direct distribution in some countries so they control the pricing and support but that costs them money. Some have already tried but failed to back up their efforts with effective marketing and, maybe even more importantly, a strong passionate belief in their product.


6) Right now...
I guess what I'm trying to say is that there is no solution that in one fell-swoop can eliminate all of these problems. Japanese companies with excellent products and branding are reacting and can move faster. I think if Chinese manufacturers decide to make the changes and "step up to the plate" what we'll have is a consumer level battle royal yielding an enormous amount of market options for en buyer like in the early 80's when Honda and Yamaha went at it.

So, while the manufacturers get their acts together, if we as consumers want to see them take off it will require some patience on our parts and a temporary simplification of our normal "expected standards" that we've become accustomed to. Understandably, not everyone will feel this is necessary esp. if they're only considering themselves at the end of the day. Those with interest in the entire industry and sport in and of itself may have different feelings towards this because a little fresh competition and new faces on the block are generally a "Good Thing(tm)". For example, this new 125cc joint venture British-American-Chinese bike being produced for MotoGP next year has some interesting features like an up-side down cylinder. I, for one, will like to see it on the starting line (even if way in the back) and think it's bound to make some news if it's raced by the right person and can take even one podium position.

It will be a long and uncertain road for the future of Chinese motorcycles but many of the people on this and other lists are here at the "ground level", so to speak, not to much unlike Japanese bike were 40 years ago. Will Chinese bikes rise up to challenge their near rivals? Not sure, but the evolutionary process could be interesting to watch and, if interested, participate in because I certainly wouldn't mind seeing more people on two wheels enjoying cheap and efficient transportation in North America...just like so many of the riders in "developing" nations who as good people only affirm that all riders have something deeper than the machine in common.

CC

Thanks for your thoughts and replies, gents. I assumed there were other folks out there who have pondered and perhaps even fretted this issue. Many people in the US powersport industry would just as soon see the Chinese manufacturers hang themselves and are busy supplying rope.

My first-hand expirience with this started a few years back when a former US Customs guy started a joint venture with Qingqi here in the Milwaukee area. I visited the warehouse to answer a posting for an outside sales rep. The chaos and dissorganization was immediately apparent - but, I could see tons of potential. I never took the position, but I did befriend their mechanic and we are still good friends. He provided me with an excellent insiders view of what was and wasn't working. At the time I was working sales with a local Honda/Suzuki/Ducati dealership. Having access to those brands dealers manuals and comparing them to the new import business model became a personal project. Also, I figured that the future of powersport would belong to China.

Nobody can argue that Milwaukee doesn't understand manufacturing. We built the cranes that dug the Panama canal and were, at one time, the "machineshop to the world". Harley D, Briggs and Stratton, Johnson Controls are all still headquartered here. Sure, manufacturing is well past its prime here, but the lessons learned don't have to be learned over and over again. Lean manufacturing, just-in-time inventory and quality systems have come into play and are here to stay. The idea that a manufacturer should control, protect, and grow it's own brand seems to be ignored.

Bigdamo you're cetainly correct to identify "full back up of parts" as one of the big issues. It may even trump quality production - 'cuz people who buy bargain brands know that they may need to fix it themselves. They just need parts availibility and manuals to do so. Buckets of cash for marketing would be nice...but will come in time if a good foothold is established. Even Piaggio doesn't spend that much on marketing here in the US. But, you can be sure that they protect and nurture their brands. Price points are extremely important as well, and we are just seeing the first importers (ie. Qlink) trying to distinguish themselves from the pack with price and promises. But what consumer is going to be able to dissern the differences?

Now I deeply respect the entreprenuerial spirit that encourages people to make something from nothing, and risk it all for a shot at success. The strong will survive...but so will the crafty, the cheats, and the exploiters. A company has to have a strong moral compass to avoid the pitfalls of ill-gotten gains. Businesses with integrity must cling to the hope that "the truth will out" and consumers will vote with their dollars. Because, in a thoat-cutting contest, the winner is usually the best, most ruthless killer.

Crazy Carl, your response is well though out and well written. I can see you have passion and concern for the future of this issue. There can be no shame in wanting to create a few jobs along the way either. The big solutions may not come from competition and survival of the fittest, as life shows us that survival of the most cooperative is viable as well. Years ago I worked as a produce buyer for a large Organic Co-op. With good networking and benchmarking we were able to get many and different stores to join together and claim marketshare from much bigger competitors. Small farms could grow into multi-million dollar concerns once they knew they had a market. And the markets could rest secure that they would not be dropped or outbid for critical supplies. Cooperation works, but has to be kept very lean or everything gets decided by commitee...and that's slow and ponderous.

Many challenges have to be met for the Chinese Manufacturers to place their own distribution centers into foriegn markets. That risk will also bring the biggest rewards. Are these companies aware of how little percentage the end dealers makes when they sell a unit? I mean that when a traditional brand cycle or scooter goes out the door, the dealer makes just %15 of retail price. Distributors of Chinese bikes are making the lion share of profits, even if they allow their non-traditional dealers to make %30 or %40 mark-up. Traditional dealers are also handed freight fees, marketing fees, and even stocking-level quotas. Traditional brands also impose many other dealer restrictions, but still have businesses fighting to gain the brand.

In my opinion the first part of the puzzle to be fixed is parts availibilty. Tens of thousands of customers are already dissappointed and could be retained...if they could get parts and translated shop manuals. Traditional garages and freelance mechanics will continue to turn the alt-brand riders away if they have no easy access to support. I would think that even some of the developing countries customers would pay more for some access to parts. Perhaps a small number of warehouses worldwide could be shipping parts to all corners of the world and providing manuals in all languages.

We'll all be watching the Maxtra GP project and hoping for a real R+D effort.

Thanks again, Peej

I notice alot of manufactures are now starting to shy away from having full blown workshop manuals for there products.

They have discovered there is money to be made in repairs for the dealers.

better than the 10%-15% selling a bike.

Quote:

---

Originally Posted by CrazyCarl

5) The wrong solution...
is to ask importers to do all that for you, which is exactly what they've done and still continue to do. It's almost as though they're waiting for a magical importer to come down out of the sky and say "I want to buy 50,000 of your bikes for sale nationwide and I will absorb all marketing, warehousing and distribution costs while using your factory's name."

---

And why would someone do that? You get all set up with distribution, warehousing, parts support, and marketing and...find the factory has cut another deal with someone else to sell the exact same machines! The other importer hasn't made the investment and has lower overhead, so they undercut you. This has already happened often enough in the American market that I can't imagine anyone investing serious money in the China bike business now.

But lets say it actually works and starts to take off. You've proved there's a market and money to be made. What then? It's not like you're offering something consumers can't get from anyone else. Honda, Suzuki and Yamaha build the same range of bikes in their factories in low cost manufacturing centers (China, India, Thailand, Brazil). This means they can match your product and price points, but they have existing infrastruture and great branding. All you've done is wake the sleeping giant.

Tom

Yes, who indeed would want that kind of risk. And what manufacturer would want to put thier reputation and future in the hands of a middle-man.

Here's a concrete example from yesterday of how the current system is broken. I went to a local cycle shop to pick up a rebored barrel for one of my bikes. The owner, who knows me well, told me that he turns away dozens of chinese bike/scooter owners every month 'cuz he's sick of not finding parts or manuals. He has the space and resources to take the work, but is plenty busy with Britt/US bikes. He would add more techs to take the work IF he could get parts. Milwaukee is a huge biker town, and many shops and garages thrive here...but none of them will work on Chinese bikes. Customers can call every shop in Milwaukee, only to be turned away repeatedly. And, it is this reoccuring bad expirience that, I fear, will turn them away from powersports alltogether.

Milwaukee had two small scooter shops selling Chinese product and both of those went belly-up this spring. Hundreds of customers have no support for their bargain bikes. You can bet their next purchase will not be a non-traditional brand. And, you can bet they will each tell ten people of their dissappointment. Now midwesterers are frugal...but we're not dumb.

If I had a spare million or two...the time would be ripe to start a small franchise of "Bargain Wheels" sales and service. Put one shop in each of the 20 largest US cities. Sell parts and service, of course, but also take in ALL dropship brands for qualified assembly and delivery to the end customer. That way as new importers constantly pop up and die off, you would not be married to any particular brand. You would not give any brand loyalty because it will not be rewarded.

What do you all think of that idea?

It's a smart idea which many of the manufacturers would cream over if you came to them saying "I've got 20 stores in every major city of the US and am willing to take care of all distribution, parts supply, service and marketing."

If you haven't already, it may be worth contacting a couple of the factories in China to get a feeling of what it's like to work with them. It may be hard to start with 20 shops but at this time I think it's important to start with a manuf that a distributor/shop can:

A) Get reliable shipments of parts from
B) Have a sellable product at a good price (not ripping off the customer)
C) Last but DEFINITELY not least...Feel comfortable working with

Even though you may not be able to get a huge project together, contacting the manufs directly will certainly be an educational experience!
:eekers:

CC

One big problem with motorcycle manufacturing in China is that most of the factories are no more than assembly plants and they source 90% of their parts from local suppliers.

There is money to be made in parts and service for sure, but getting consistent quality parts delivered will be an enormous task, not to mention getting them made and delivered on time.

To be profitable you are looking at importing parts by the container load, and without an experienced westerner on the ground in China to do QC for you there is every chance that the parts you receive will not be acceptable.

It is not uncommon for Chinese manufacturers to reject 40% to 50% of the parts that arrive at the factories. They can afford to ship them back to their local suppliers. A company in the states can not.

PresterJohn is right. In our industry (Industrial electronics) there are plenty of examples of Spanish importers/distributors of Chinese power supplies, that have invested time and money in warehousing, setting-up distribution network, advertising, gathering technical data and manuals, trips to China, bought massive stocks and THEN a few months later some backstreet outfit is selling the same items, often with the same brand name and have bought them direct from the manufacturer. A distribution agreement with these people means nothing. Strangely enough this is a Taiwanese manufacturer, so you can imagine what mainland ones are like.
Chinese businessmen have been described variously as "having high business acumen but low business ethics" and having "a culture of corruption that makes African dictators look like philanthropists".

Carl, I wrote one store in each of 20 places...but 20 stores in each would be super saturated! That would be K-mart big! It would be a good start just to have one store in each of the strongest powersports market-cities. Tons of parts would need to be housed, organized and shipped from a central warehouse to a connected parts and service network. So, no matter who does it, I'm still suprised that the manufs don't want the action themselves.

What Eddie says about the manufs also having to do parts sourcing is both part of the problem and part of the cure. Since most of the manufs who are mostly assemblers are already doing that sourcing(scrounging) and parts swapping...a large knowledge base is started, but not recorded. I'm saying that the copy cat type assembler can easily make money by provideing the a,b,c,d,e,ect. grade parts replacements for good selling models.

On the other hand, the top ten have large enough operations to be controlling their parts steam better. They seem to be improving their QC and bench testing as well. And, yes, they waste time and money when parts don't pass QC and returns and shortages eat profits. So wouldn't they love to be able to place even larger orders with parts producers? Wouldn't they save if they put more effort into procurement.

I know a west coast guy who does parts and warranty support for a big importer, and he had also shared that many batches of parts have huge fail rates when bench tested/inspected. Shipping broken parts is just a waste of gas, time, and shipping fees. So, Eddie you probably are spot on when you say that a good and loyal agent would have to be on the ground with sourcing.

Carl, I've been to the Indy show here, which is the Superbowl of motorcycle trade shows in the US. Many Chinese companies have attended in the past few years. I've had some interface, but I don't speak Chinese, so opportunities were limited. Most were just hunting for container sales and anything else is a distraction. The traditional US dealers network was baffled by the non-traditonal importing/distributing...and are mostly waiting to see who shakes out. Why would these huge manufs put there brands in the hands of middle men? When a company translates it's maketing supplies, but does not bother to have them proofread or tailor them to the market they are showing how much they care about their brand.

Carl, you mention that contacting manufs will yield an education...and I'm sure you're right. I detect some doubt with the encouragement. And, in some ways, the landscape is already changing. Qingqi has an exclusive distrib, QJ is growing and consolidating brands, top ten manufs seem to be getting the message that brand is important. Some will build and some will fall.

Peej

One alternative to get yourself lots of extra sales is practised here in Spain.

Two or three importers have deals with large superstore chains that display a couple of scooters and some bikes in their stores, alongside other items of leisure or sports equipment, groceries, kitchen utensils, clothes, etc.

The (usually ignorant) punter waiting for his wife to do the rest of the weeks shopping, is swayed by the cheaper sticker price that bulk buying by the superstore has achieved and buys one. Of course the superstore staff know nothing about bikes, and it doesn't matter as they refer you to a nearby bike shop that you pick up the bike from. The samples in the store, covered with sticky finger marks from the kiddies, and often displaying broken plastic parts, are not for sale, just for display.

At the first sign of trouble you naturally go back to the shop that you pick up the bike from, and then the trouble begins:

The shop, having made hardly any money from the Superstore-arranged sale, and resentful at being used only as delivery boys by the importer, is reluctant to carry out warranty work and finds all sorts of excuses to avoid doing it, convincing the punter that it's not covered, it was your fault, etc. The disgruntled punter goes back to the Superstore to complain and...nothing, he's referred back and forth between shops and ends up a disappointed man, lawyers are engaged, forums are contacted, etc.

There are thousands of these cases around, but in the sales figures for the importer things look good, they quote total sales figures, boosted by how many units they've sold to the Superstore, as proof of the quality of the brand they're selling. You know, like the famous "1,000,000,000 flies can't be wrong, eat shit...".

These Superstores have 100's of branches all over Spain, and to my knowledge there are at least 4 chains that sell Chinese bikes: Alcampo, Eroski, Corte Inglés, Carrefour. That's a lot of bikes shifted.

Of course they never know the number of disatisfied customers they trail behind and the damage this does to motorcycling and the trade. Communal condo garages and repair shops are full of half-dismantled bikes waiting for spares that will never arrive as the importer has done a runner, or for payment from a reluctant customer. Some half-dismantled examples are in dealers, where the machines have been cannibalised to provide spares for the more.."determined" (read violent) customers.

In the meantime importation and sales are left to jokers like these:

http://www.scooterdepot.us/200cc-4-S...ike-p-168.html

They quote a ridiculous list price of $3599 for an unknown (no make given) Chinese 200cc dual sport bike, but then offer it for $899...just think of the saving!.

But then, just LOOK at what you get FREE:

FREE: 180 days parts warranty (your defective and badly-made part will be replaced free of charge by an equally defective crap part)
FREE: Owner's Manual Handbook (Wow, hardly any maker does this!)
FREE: Decals ( Amazing)
FREE: Tool Kit (Even my Monkey bikes come with one, mind you it's a novelty for Harley owners...)
FREE: Technical Support (Yeah..."look pal, we'll send you a new spark plug next month if you mind yer f*****g manners next time..")

Right on. That's exactly the kind of faulty distribution model that reflects poorly on the industry, sours new riders and leaves people driving unmaintained cycles. Cycles that then will be less safe and less fun to own.

These new customers turn to non existant shop manuals and shoddily translated owners manuals as a first step.

Then some try the internet to get some resources...and get some.

Networking sites are a real bright spot. I'm glad for this site.

Mostly, customers have a very time-intensive learning curve that cancels a good portion of their savings/value equation. Teaching them exactly why people pay more for a tradition brand. In a word...Support.

I wonder what price a scooter/motorcycle manuf would want for a complete parts kit, ie one of each and every part needed to make any one specific model. I know that importers end up scavanging parts off damaged units. Just think what an clever tech could do with parts...a parts list...a compatable parts list...a shop manual...and an invoice pad!

Peej

Quote:

---

Originally Posted by gpPeej

Just think what an clever tech could do with parts...a parts list...a compatable parts list...a shop manual...and an invoice pad!
Peej

---

Some people have started doing this. This British outfit seems to deal with sourcing spares in general for Chinese bikes:

http://www.china-parts.co.uk/

Peej,

Sorry for the late reply but I'm only accessing the net at limited intervals now. I'm not really sure why a manuf would want to put their products into the hands of middle men and then not support their products with effective marketing but I think it's a lreaning curve for the manufacturers. It will take some time for parties on both sides of the pond to understand where the other is coming from in an manner that mututally benefits everone in the LONG run.

Right now I think the prevailing attitude of both parties is: I'm taking a chance (high risk) by doing business with you so I'm going to be sure to get what I want out of this deal.

None of it looks very pretty right now and nothing would make me more happy than to have someone speak up about an overwhelmingly positive experience handing the import of these bikes. I wish I could do it myself but really don't have the resources or connections at the moment.

These changes will take some time but the wheels are still turning! :riding:

CC