With consolidation rampant throughout the U.S. economy, the RV industry’s aftermarket parts and accessories companies – suppliers, dealers and distributors alike – are now taking their turn. The driver in this case is LKQ Corp. (Nasdaq: LKQ), a Fortune 500 company that in less than two years has acquired the nation’s top three distributors – Keystone Automotive Operations Inc.’s NTP Distribution Inc., Atlanta-based Stag-Parkway Inc. and, most recently, The Coast Distribution System Inc. The fact that all three companies are now operating under the same corporate umbrella managed by Keystone – one dominant player — has generated plenty of industry buzz on several levels. So, Bill Rogers, vice president and general manager of Keystone/NTP-STAG, agreed to address some of those concerns in this, a new weekly e-feature called, ah, “The Buzz.”
RVB: Some in the marketplace right now are concerned at how all this consolidation may potentially limit options for suppliers and dealers and result in higher prices. How would you respond to that criticism as it relates to the NTP, STAG and Coast rollup?
Rogers: We know there’s a concern out there. We know it because we are in constant contact with our suppliers and dealers as we work through our integration plan and because we are listening and making strategic decisions to ensure that those concerns are addressed up front.
From a suppliers perspective I think the benefits of consolidation are sometimes lost in the debate. If you consider the cost of selling to three competitors – the cost of training, supporting catalogs, trade shows, discounts and promotions – it is considerable. Not just from a financial perspective, but from a time perspective as well. Essentially it takes three times the effort. Take this a step further and consider the effort that was required to fill orders for more than 20 warehouse locations. That’s 20 P.O.’s, 20 AR records that have to be managed, 20 picks and 20 shipments. Consolidation cuts the amount of work to service the accounts from an administrative perspective by two-thirds.
The other benefit that comes along with having a larger presence in the market is coverage. This is a critical and often overlooked benefit when suppliers are considering their distribution strategy. Here’s an example of what I’m referring to: Imagine getting complete market coverage – U.S. and Canada — on a key product launch. When you can leverage an organization like ours, the sheer size brings an inertia and energy to the initiative that translates into improved business. It’s a lot harder to get that kind of penetration and collaborative results working with several different companies or businesses that don’t understand the market.
RVB: Is your approach to the RV industry any different than it is for your automotive clients?
We have made considerable changes to how Keystone fundamentally operates to insure the “automotive” model doesn’t override the requirements to serve our RV customers. We have unique order entry requirements for RV and automotive. We have separate sales teams for both. Most of our product management and marketing functions are unique to the market. Most important, we have exceptional people who came to us through our acquisitions and have been in the industry for years and years. These folks know more than we could ever learn if we had to develop the know-how organically.
With those changes and experience come significant benefits to our dealer customers as well. We have the largest inventory of parts and accessories in the market, so dealers shouldn’t have to hunt around for the part they’re looking for. We also have unique marketing, education, merchandising and trade show offerings that the individual competitive companies would have had difficulty delivering. So, you see, consolidation has benefits for dealers, too.
RVB: What about pricing – a delicate topic that logically emerges when one company, in this case Keystone, gains such a dominant edge?
You know, we’ve made it a priority to try and keep our pricing aligned with what customers were getting from their prior distributor. It hasn’t been easy. In some instances we found that dealers were buying below our costs, which needed to be corrected. In some instances we found that we mismanaged the data during integration and inadvertently changed a price – which, by the way, we corrected once we discovered our error.
In some instances we actually lowered the price. We are not consciously going out and raising prices to our customers. We are however, mindful of maintaining reasonable margins so that we can continue to support the market for the long haul.
At the end of the day, consolidation brings about an emotional response from folks. We get that. What we are trying to do is stay focused on the task at hand – maintaining our service levels through integration – while building an organization that earns the trust of our customers. We honestly don’t mind being held to a high standard because we believe as the leader we should set the pace and tone for the type of experience customers deserve. Our hope is this standard is applied equally across the market as suppliers and dealers consider their options.