As J&P Cycles approaches its 40th anniversary year in 2019, company President Zach Parham gives his first interview since its parent company emerged from its reorganization filing. He says that business for the world’s largest parts and accessories retailer is “bigger, better and faster” than ever, but his remarks about the changing nature of the market have proven prescient – coming before our recent series on the Community Garage movement, and before Harley’s “More Roads” strategic vision addressed the issue
of urban dwelling riders…
When J&P Cycles’ parent company MAG (Motorsports Aftermarket Group) filed for reorganization in the bankruptcy court in November last year, the news sent shockwaves around the market. The primary focus in most of the industry responses was on the impact it would have on industry distributor Tucker Rocky (now re-branded as Tucker) and the well-known brand subsidiaries in the group such as Vance & Hines, Performance Machine, Kuryakyn and others.
The concern also centered, quite rightly, around the impact on independent vendors that sold to Tucker, and especially the dozens of smaller, typically specialist vendors, for whom the potential hit could be devastating.
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| Zach Parham, President of J&P Cycles, and son of founders John and Jill Parham |
‘we had our best ever May’
By the time MAG emerged from the filing in April this year most of the money owed to vendors (over 90 percent) had been paid, but there still were many smaller specialists for whom the unpaid debt remained a major setback. The fact that Federal filing regulations prevent any business in such circumstances from repaying all monies owed was of little comfort to those specialists that were left, and still are, struggling with fall-out.
Through the entire saga though, there was one “business unit” in the MAG portfolio that didn’t come into the spotlight quite so intensively, which, given that technically speaking J&P Cycles is the world’s largest motorcycle parts and accessory retailer and a major customer for a large proportion of industry vendors, including those smaller specialists, was a surprise.
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| Zach Parham, President of J&P Cycles, ‘walks the walk’ and is ideally placed to steer J&P in the direction of ‘new gen’ consumers. He did a 3,500 mile round trip to Sturgis on a BMW R nineT |
The primary reason was that while the turnover and business model of MAG’s other foray into retail channel ownership hasn’t worked out (Motorcycle Superstore, bought by MAG in 2012), J&P, as a business, had the ‘hinterland’, footprint, heritage and control over its ‘traffic’ to largely resist the decline in industry sales.
‘we are a retailer, not a distributor’
The decline that started a decade ago with the effects of the 2008 financial crisis and after a brief 24 months of growth three years later, continued in the 48 months following Lacy Diversified’s acquisition of MAG in 2014, and through the recent filing process.
Following the merger with Tucker Rocky, one of the steps taken by MAG was to fold the remaining sales of Motorcycle Superstore into a J&P structure that is based on three primary channels - online sales through the J&P website which, at 70 percent of sales, is by far the largest channel; the 100 plus sales agents that J&P has at its Daytona call center, which delivers another 20 percent of sales, with the remaining 10 percent coming through its three year-round brick and mortar stores (Daytona, Sturgis and at the former headquarters at Anamosa, Iowa) and its burgeoning mobile retail presence at the major rallies and other events.
Speaking about the impact that the filing process had on J&P, Zach Parham, company President and son of founders John and Jill Parham told AMD: “We managed to almost entirely maintain our fill rates throughout the filing process, so the impact to our customers was minimal.
‘50% from the primary distributors’
“The only real impacts for us were with some of our vendors. Most of the people we buy direct from realized that J&P was a sound and solvent business, but we did end up causing some of our vendors a cash flow issue and some of the smaller ones were inevitably hit quite hard by the filing - but mostly I think we were able to maintain goodwill and find a resolution.
“By February or March, we were current with all our direct vendors. The U.S. Trustee had final decision in who was paid and how much. MAG as a whole was able to pay the majority of industry vendors in full and 100% of what was allowed by the U.S. Trustee. We are grateful to our partners that worked with us through that process and thank them for standing by us.
“We saw some softness for a couple of months as the process played out, but that mostly on a regional basis, and largely weather based.
“Regardless, the filing became a big topic and, under those circumstances, whether or not you are doing well gets clouded by the headline news. The inventory build-up delays we did experience were largely the result of perception - initially some vendors were cautious about continuing to ship, which was quite natural. But for the most part we were able to serve our customers throughout and really saw no effect, to be honest.
“As it happens, we couldn’t have emerged from the process at a better time. We had said we hoped to be out by March or April, so being able to keep our word was huge. We are up on last year - in both volume and revenue. May was the biggest month J&P Cycles has ever had, we were up in June and July, and following a very strong Sturgis for us and the vendors who partner with us there, it looks like we’ll be up for August too. We are continuing to grow in a down market across all three of our channels.”
J&P buys around 50 percent of its inventory from the primary three distributors in the market, including the product they need from Vance & Hines, Performance Machine and the other MAG brands.
‘service is everything’
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| J&P store at Daytona Beach |
“We are a retailer, not a distributor. We retail to the consumer, so do not expect to buy at the same or better prices than distributors. J&P has always been very careful to maintain that line. Hopefully we buy well, our volume should mean that we can get the best pricing available in the market, but we do not leverage our buying power any further than that, and we do not abuse our MAG relationships. We are focussed on the other positive competitive advantages we have. Price is important, but service is everything.”
One of those advantages, clearly, is scale. But it wasn’t always that way. When John and Jill Parham started their adventure in 1979, it was a very different world, a very different market. The focus was on parts for older bikes, buying, selling at and running swap meets and ‘old timer’ events around the Midwest and their home state of Iowa.
The annual swap meet that they staged for many years at McCormick Place, Chicago, was a major event for many years, though gradually, as the market changed, John and Jill pulled back from events and used parts, successfully transitioning the business to retail, building up a huge national following for their annual mail order catalogs (indeed international following - 10 percent of sales are still overseas).
Fast forward to now, and while J&P do still print catalogs, late model and vintage, the center of gravity has moved decisively online and to the website, with social media a major tool for communicating with ‘home wrenchers’.
Altogether the business offers access to some 100,000 SKUs - from the market’s well known vendors, of course, but J&P still has a reputation for the more specialized and harder to source replacements, especially for older models.
The core business remains Harley-Davidsons, but Indian Motorcycle accessories are growing, and the company has a strong presence in the metric cruiser market and especially with Honda Gold Wing enthusiasts.
‘regular, intense and comprehensive’
Another competitive advantage that comes with scale is access to the Tucker Distribution Center network in the United States.
“Efficient retailing on our scale is as much about touching a product as few times as possible as it is about anything else. We are able to use the five Tucker warehouses. They touch the product once, drop-shipping the inventory we buy from them direct to our customers. Tucker has improved its fill rates and reduced ship times this year to be better than ever, which has helped us improve our customer experience.
“The inventory we buy direct from vendors and other distributors is more than 50 percent of what we sell, and we receive that direct at our own 250,000 sq ft Louisville, Kentucky warehouse and ship to consumers from there.
“Overall more than 70 percent of our shipments are getting to customers in two days or less. As with everyone else, it is all about getting the product to the customer as quickly as possible.”
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J&P Cycles' event tour - the Tour Truck program consists of two 53 foot semis at 12 events a year |
Returning to the three angles of attack J&P has, its three channels, Zach is especially enthused about its store and event business “as that gives us the chance to be in front of our customers - to hear what they are saying about their riding, their bikes, their lifestyle. The Iowa store is open year round, and the annual rally we host is the largest motorcycle rally in the state of Iowa.
“Our Tour Truck program consists of two 53 foot semis at 12 events a year - the three big ones and others that give us a good geographical spread. We have anywhere between five and 15 of our own mechanics and techs there with us.
“We are trying to give our customers a genuine retail experience on the fly, so we look at what we do as really being a mobile showroom. This year we acquired thousands of new customers from our Tour truck events.
“At some of the events we set up with the Vance & Hines truck too, so then it is really a three-truck critical mass. We are fully committed to the Rallies for the long term - so long as our customers keep going, so will we. For the most part we are getting the traffic we need at the events to show record sales.
“It is our long-term intention to have retail stores, and the year-round presence at Sturgis and Daytona is a big strategic advantage. Our call center is upstairs above our Daytona store and, as with the rallies, we get a huge amount of rider feedback with our team through there too.
“Our people are not just “call handlers”, they are our eyes and ears. For our customers they are a genuine industry resource. They mostly ride - and we encourage that - and the training they get is as regular, comprehensive and intense as we can make it.”
Asked about the future and the changes he is seeing, Zach said that “J&P has been 90 percent Harley most of its life. It grew as Harley grew. But in the last five years we have started to see that shift. First with Indian motorcycles, and that is growing for us, but also now with new customers looking for parts for different platforms, and with the growing number of parts we are carrying for metric brand street bikes.
“We will never abandon our heritage, we supply parts for Harley-Davidsons back to the Knuckleheads, but when we see a change, naturally we embrace it.
“The new generation of riders are into Retro. The Triumphs, Scramblers, the R nineTs and the like, so we are engaging with the younger customer as our core customers age. We are trying to engage at an earlier age too, so that as they transition to bigger bikes in later years, we will be able to continue supporting them through their life journey as riders.
‘it isn’t just bolt-ons and oil changes’
“I think that as an industry we are not yet quite where we need to be in that regard. A lot of people are buying lightweights such as the Ninja 300 and the 390 Superduke, and as a parts and accessory industry we have the opportunity to redefine our offer just as riders are redefining their riding needs and preferences just as the Boomer did 40 years ago.
“The market needs to move with riders and that is difficult at present as a lot of the models being ridden are transitional platforms. Not platforms for deep spending or customization, but there are still ways of reaching them. We’ve done this through gear sales - a large proportion of our sales are jackets, boots and gloves - and service items of course. Price point is an issue, it always will be when you are addressing a younger audience, but we have to be looking at where the next stages of their riding journey takes them.”
I asked Zach what trends he is seeing in terms of home wrenching - if we are now looking at a largely forever staples market with new consumers, or will there be customizing, and will new generations develop a ‘mojo’ for independent stores?
“It’s not out of the question. It’s a great question, and this is something that we are looking at very closely. Everybody needs to be.
“We are seeing a surprisingly large proportion of our customers being comfortable doing a surprisingly large proportion of complicated work themselves. It isn’t just all bolt-ons and oil changes.
“The more complex videos we have on our website and social media feeds, such as changing an engine out or doing a stage 3, get as many views as an oil change, helmet review or putting new grips on the bars. This is very interesting and, potentially, very significant for the industry.
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| The company reports having had an excellent Sturgis rally this year |
“We think that although a lot of the business is still centered on the Boomer demographic, and they are still the majority of our customers, there is no doubt that this is changing.
“Statistically what we are seeing now is almost a one-on-one relationship with what we call ‘next Gen’ riders – the Millennials and X-ers – and they are interested in learning how to do things on their own and have the bragging rights of doing it themselves, rather than completely depending on the dealer for service and installation. They are watching our videos and talking with our call center, and they are learning how to do it.
“So, the opportunity is for us to give them the tools that they need so they are confident enough to be able to do it on their own, or if they get stuck part way through, then rather than hauling the bike down to their local dealer on a trailer, they can call us and we can help them finish it.
“Another thing we are seeing is the opening of more and more shop co-ops, especially in metropolitan areas, downtown. I think we can help them a great deal too. Downtown urban riders are just not going to ride out of town to go to a dealership.
“Whatever we can do to help the consumer feel they can do for themselves has got to be good for the future of the market. It is really our main goal to do that, and we are trying to serve the customer in a new way - to teach them how to work on their own bike, and hopefully they’ll buy the parts from us, of course.
“The community garages are essentially the same - they are also all about helping people to learn how to work on their own bikes, not being afraid to be on a lift alongside another person and ask questions or call us to get help.
“It’s easy to think that maybe it’s not so good for the conventional brick and mortar stores, or businesses such as our sister company Tucker, but in terms of the long term health of the parts market and the dealer network, especially those who are specialist in performance work and custom work, it is a good thing. You can’t operate a successful business in an unpopular market – as we all contribute to re-growing the popularity of riding, its popularity grows, so will we all.
“The more work being done on bikes and the more comfortable people are to buy a bike and be a part of a peer group scene, just as the Boomers were at the start, just as the H.O.G groups and clubs are, the market will grow. More parts and accessories will be sold and, eventually, the more bikes there will be on the road. The growth must start with the riders. Then it is up to the businesses, at all levels of the market, to follow them and serve their needs and tastes. Just as it always has been.
“Another shift we are seeing is the move to mobile – well over 50 percent of our website traffic is from mobile devices now. A large portion of our sales are therefore off mobile too. A big initiative here at J&P is to make sure we can make the mobile experience a good one, with Techs who can chat and see what the rider is doing, see the bike he or she is working on and what they are doing. We are making a big investment in the nature of the mobile experience we offer.
“Increasingly people now carry a smart phone in the way they used to carry a wallet. We are in the process of updating our site to make it easier for customers to browse and shop for products on their smartphone.”
Zach is simultaneously positive about the future, about the market, and about the role that J&P can have in the market of the future.
“Down the years we have helped hundreds of thousands of riders connect with vendors, and we have especially been able to bring the small manufacturers closer to customers than they ever would otherwise have got - J&P’s longevity means we have been among the first businesses to genuinely help to grow brands, and doing so that remains an opportunity for us to benefit from being associated with something unique. It gives us differentiation - it helps our brand stand out in turn.
“In the future it is that differentiation that all businesses need. Competitive advantages are there to provide the opportunity to do different and unique things, and if you do them well, then the consumers of the future, those who are emerging now, will value your role in their riding lifestyle.
That is how the shops and all the small businesses did it in the past and that hasn’t changed - it’s not just business, it’s personal and it’s up to all of us to be the partner that delivers a unique and distinctive experience.
“Our philosophy hasn't changed. Being able to offer riders the widest variety of brands and products for the bikes in their garage, and inspire them with ideas to customize and personalize is what J&P Cycles started out doing, and everything we are seeing points to that being an ever-bigger part of the market moving forward.
“Dealers are in suburbia not in urban areas. There are very few downtown dealers or even custom shops, so as populations continue to shift, continue to urbanize, whether they are home-wrenching or using a community garage space, J&P can help them towards achieving a goal that the non-local shops can’t.
“We are everywhere, the shops are not.”
