Some call hard tonneaus the niche within the niche, and they might be right. With soft covers and hard caps forming the ends of pickup cover market, hard tonneaus fall somewhere in between. But where do they stand in the marketplace? Better yet, where have they been this summer with such factors as higher fuel prices, specialty trucks entering the market and sales projections a question for the remainder of the year?
We polled a panel of experts to get to the hard facts on hard tonneaus for summer – and fall – 2011.
Effects of gas prices, Japan disasters
Outside factors of the market such as gas and diesel prices fluctuating, the crises in Japan that slowed pickup production and the recent rise in new and used truck sales – where do they fit on the overall light-duty truck market?
For San Diego-based Truck Covers USA, Nils Forssman says, “Fuel prices always have an effect on the market; not just the truck industry, but every conceivable consumer market. Although people have become somewhat accustomed to the high prices, if we see $5 a gallon, I believe that this will have a dramatic impact on the truck market. Fuel prices define how we use our luxury vehicles, but vehicles in the workplace don’t slow down – they must keep moving and working. The effects of any slowdown in production, we believe, will only cause a move to another manufacturer/model. The consumer will be looking at fuel-efficient trucks and those accessories which enhance fuel efficiency. The market is still very unpredictable; however, we believe, whether in the commercial fleet or private sector, slow but steady growth will continue to be seen and felt as we move toward fall.”
Tobi Schopf of SnugTop Custom Fiberglass Mfg., Long Beach, Calif., says, “The worldwide impact of the Japan disaster has certainly had an impact on pickup truck production and also gas prices. All of this has also negatively impacted the sale of accessories for these vehicles. Because of the short supply of vehicles, the auto companies have drastically lowered the consumer incentives. Lower cash incentives also mean less money in the pocket to accessorize the truck. The persistent high unemployment and high gas prices are fueling the uncertainty in the economy and have resulted in very cautious consumer behavior. Negative media reports are not helping this situation.”
At Leer, Elkhart, Ind., Dennis DeLeonard, says, “Truck sales – and truck accessory sales – have had to battle against several negative market factors in the first half of the year. The spike in fuel prices, ongoing economic challenges and production issues caused by the tragedies in Japan have impacted the purchase decisions of pickup buyers in both practical and emotional ways. As the economy slowly recovers steam, and as consumers get past the ‘fear factor’ of escalating fuel prices through the rest of the year, we expect a minor rebound in pickup truck sales. That rebound will consist of built-up demand from consumers and commercial buyers who need to replace their pickups, and will be encouraged by truck manufacturers trying to recoup lost sales with price incentives and promotions.”
Elkhart, Ind.-based Raider Industries’ Randy Goble points out the opportunity side: “While many accessories firms are concerned about the sluggish pace of pickup sales, Raider is seeing opportunities in its expansion of distribution and growing dealer network. With production now headquartered in the central-U.S. city of Elkhart, Ind., Raider is well-poised to bring its -¦ product to new markets. In other words, we’re not expecting truck sales to fuel our growth; we’re expanding the playing field.”
Brett Motheral from Century Truck Caps, Elkhart, Ind., says, “Century dealers are hungry for a healthy, robust recovery and of course would prefer it now rather than later. Realistically, though, we see only a modest improvement in pickup truck sales through the end of the year, inspired primarily by manufacturer’s incentives and pent-up demand from purchases postponed earlier in the year.”
In Rogersville, Mo., UnderCover’s Jason Hutchins sees some upswing. “I think the light-duty truck market will see a slight percentage of growth through summer and into fall or, at worst, it will sustain,” he says. “I think we saw the biggest dip in sales a few years ago when everyone feared the $3 mark for a gallon of gas. This dip brought us back to the core of our American truck buyers; these consumers have a need for trucks and will always be truck buyers. I also feel that we have been conditioned to the higher cost of fuel [$4/gal. this summer], and it is not feared as much as the $3 mark was years ago.”
At Applied Products Inc., Grand Forks, N.D., Andy Nephew says, “Sales of new and used pickups continue to rise, but their percentage compared to overall vehicle sales remain at an all-time low. I do believe the rise in sales will continue, but at a slow and steady pace.”
San Fernando, Calif.-based Bak Industries’ Charly Henley adds that, “Regarding fuel, every tonneau cover manufacturer will tell you that a tonneau cover will save fuel economy; and it’s true. Fuel prices will continue to rise, and using products like the Bak Flip and buying trucks like the F150 EcoBoost will ensure you get the most from your fuel budget. We are forecasting continued increases in sales. I think the key is to focus on the rise in truck sales as it reflects a country that is rolling up its sleeves and getting back to work. The tragedy in Japan will affect Toyota inventory, but we see Ford, GM, Dodge and the other truck manufacturers ready to deliver the trucks consumers need.”
Any rise in tonneau prices?
We followed up that question by asking how hard tonneau sales for the rest of 3rd and 4th quarters will be affected. And what about prices rising at the retail level, if raw materials prices have to rise? Schopf from SnugTop says, “Hopefully, by the 3rd and 4th quarter, things will have stabilized and the economy will be on stronger footing. Because of the high gas prices, hard tonneaus remain a smart buy for the pickup as they help gas consumption through improved aerodynamics. Prices are likely to go up because of continuing increases of raw material costs. Most manufacturers have become very lean over the past few years and efficiencies are harder to achieve today, leading to higher prices.”
DeLeonard from Leer tells us, “Any upturn in truck sales rates has a positive effect on tonneau sales. -¦ Petroleum prices have a major impact on our cost of raw materials and shipping. We’ll use a combination of cost-saving measures to minimize the need for any price increase.”
Hutchins from UnderCover says, “Hard tonneau cover sales have suffered over the last few years due to the softening new-truck market. However, we are seeing a steady increase and expect this will be the case for the rest of 2011, as well. Hard tonneaus fit in a segment of the market that for many consumers is a ‘must have’ item, and whether it is a necessity or a want, they will purchase again and again with each new truck. The repeat buyer seems to be a trend that we see regularly with UnderCover consumers. As for raw material costs, we have experienced increases this year and do everything in our power to avoid passing it along to the customer.”
Nephew from Applied Products says, “Our Retrax sales follow the light-duty truck market very closely. With the majority of our covers going on new pickups, I’d expect that our sales will continue to rise at a slow and steady pace, as well. Increasing prices is something that no manufacturer likes to do, but it’s part of the process. If our costs increase, so does every other channel’s cost.”
Henley says, “Bak Industries is in high gear with its production and does not see it slowing in the next two quarters. Our research shows that [our] tonneau covers will sell as good or better this fall and winter as they have been in the spring and summer. In the fall, more consumers start to worry about autumn leaves and winter snow, and of course Bak Flip is perfect in these wet and freezing conditions. In order to sustain our forecasted growth, Bak must keep its margins in order to maintain its independence as a family-run company. While the government continues to print money, there will be inflation and at the same time raw material costs are increasing. Don’t forget you are “Buying American,” as [our] factory employs 200 Americans right here in Southern California.”
Forssman from Truck Covers adds, “There is definitely a direct relation to truck sales, truck production and tonneau sales. It is interesting that even in the unstable economy and fluctuating fuel prices, we have seen a steady growth since November 2010. We believe this will continue; progress will be slow and we do not foresee anything dramatic changing in the industry for some time.”
New models breed new aftermarket sales
Our next question dealt with new lifestyle trucks such as the Ford Raptor and Dodge Ram’s 1500 Express. Are these trucks expected to be a boon for the aftermarket? Goble says, “We’re always glad to see new, exciting, appealing trucks enter the market. The sales and marketing activity that surrounds them and their competition is good for pickup sales in general. Low-price-point trucks like the Ram 1500 Express are exactly what young pickup enthusiasts need to fulfill their desire for self-expression and their self-expression translates into accessory sales.”
Motheral agrees. “We’re pickup truck people and we love to see the manufacturers stretching the pickup into new forms aimed at new, younger markets,” he says.” “As pickup sales show, it is time for something new to bring prospects back onto the pickup truck section of the new-car sales lot. We’re hoping the new introductions inspire a wave of customization. We’ve seen it many times before: Exciting new vehicles inspire people to express their individuality and creativity -” and everyone in the accessory business benefits.”
Hutchins tells us, “I feel it brings exposure to the aftermarket. You may never sell a suspension system to a guy with a Raptor or sell a bumper cover to a person with a 1500 Express. However, many potential buyers see these trucks at the dealerships and on the roads and desire to have their trucks personalized with like items. The fact that Mopar offers 300 accessories does not overpower the many thousands of accessories available in the aftermarket. Not to mention that they can typically be purchased from a truck accessory store or online for much less than the dealership. Both Ford and Chrysler have a cover available through their program; and even though they sell a few, most consumers wish to shop a little. Before they make a large purchase they will look at other hard tonneaus, and more often than not they will choose a cover not offered by the dealership.”
Nephew keeps the vibe going with, “I think every time new models enter the market it’s a positive for the aftermarket industry. Owners of these unique niche-market models tend to be some of the best advocates of a product a manufacturer can get, whether it’s through word of mouth, online forums, etc. Those who will be able to tailor their product towards these groups will most likely see success.”
Henley says, “Bak Flip is already featured on several Ford F150 Raptor forums as well as Dodge Ram Box forums, Ridgeline and Avalanche forums. These are exciting new trucks with outstanding factory features that are perfectly complimented with the addition of [our cover]. As a global company, Bak is ready for these kinds of market changes.”
Forssman says, “The Ford Raptor has been, to date, our most popular model to cover with both our American Roll and Work Cover. Even when accessories are available at an OEM level, and are strong at that level, customers are still looking for options. Building brand name recognition still attracts to us many of these customers.”
Schopf adds that “niche market trucks have always been good for the market since they create excitement among consumers and truck enthusiasts. The Raptor and the Ram couldn’t be more different. The Raptor is certainly not an entry-level product and is, in fact, selling at the upper price range. At the same time, it shows that consumers are not always looking for the lowest price and that there is room for a premium product when the value is communicated correctly. Truck owners still want to be different and look for style and performance. The introduction of more ’boutique-style’ pickups will certainly be good for certain aftermarket manufacturers.”
Naturally, we asked about the fleet and commercial markets. Hutchins tells us, “We have remained steady for the last few years with fleet and commercial trucks, and over the last few months [of spring] we saw a rise in these markets. It is always hard for us to determine how well these markets are doing since we support our distributors and dealers, and all of these sales go through them. Commercial and fleet always seem to be a constant during lagging retail sales.”
Nephew says, “Our commercial and fleet accounts have been surprisingly steady for us as of late. Although not a large percentage of sales, these markets have proven to be consistent and profitable over the past few years.”
Forssman says, “Growth in the fleet and commercial markets has been substantial and dramatic. Commercial and fleet customers need to secure their tools and equipment. For these truck owners, a tonneau cover goes from being a luxury to a necessity. Our covers are built for heavy users, and we have seen huge success in government and other fleet business.”
Schopf says that “commercial fleets have picked up some of the slack from the appearance market. SnugTop has had noticeable increases of truck caps and tonneaus to small- to medium-sized fleets. These mostly local fleets are expertly serviced by our distributors/restylers while large fleets often have central national buying offices making it more difficult to get distributors involved.”
DeLeonard brings up a difference: “Fleets and commercial users of trucks buy pickups because they can make money with them. That’s an entirely different motivation than the ones at work for retail purchases. We’re seeing Leer commercial cap sales growing as an overall percentage of our sales; more vigorous growth will probably depend upon the recovery of the housing and construction markets.”
There’s the hard tonneau market roundup for this summer and fall. But the lid is never really closed on these niche products, is it?
How suppliers help shops
Restyling asked how truck accessory manufacturers and suppliers are helping their truck shop and restyling retailer buyers. UnderCover’s Jason Hutchins tells us, “We always support our dealers by keeping the cost to them as competitive as possible and by offering a very high quality product. We also feel that by manufacturing in the U.S.A. we honor a loyal “American Made” buying consumer. We have recently started a “Dealer Only” website that contains content to assist them in selling more product. Not only does it promote selling more UnderCover products, it also contains info and webinars for increasing retail sales in general. We want to become a tool for dealers to use to become a stronger and more secure retailer.”
Andy Nephew, of Applied Products Inc., says, “When the economy took a downturn back in 2009, we took it upon ourselves to help those retailers that had helped us get to where we are today. We implemented a jobber/dealer volume discount, ran quarterly promotions, produced a bi-monthly newsletter and started same-day shipping, to name a few. We had great response from our jobber/dealer network, so we’ve continued some of these ‘dealer incentives’ to this day.”
Bak Industries’ Charly Henley also notes something new: “For the last six years, Bak has been developing a new website concept [that launched in June], designed to get customers off the Internet and back into the retail stores. [The website] allows local retailers a home-page presence on Google without the expense of building a website or pay-per-click advertising. As we all know, customers are shopping online to find the best deal. But what they may forget is that local stores sell the same products and offer local service. So, why not buy ‘locally’ to support your community? [The site] details the different types of tonneau cover designs and gives online consumers all the information they need to make an informed purchase. When the consumer goes to buy, they can pick up the tonneau cover at their local dealer and even have it installed by their trained professionals. The [website’s] dealer network inventory is supported by the traditional stocking warehouse distributors.”
At Truck Covers USA, Nils Forssman says his dealers are “our top priority. We do not sell direct to the consumer. We support the dealer in whatever capacity they require. They are our link to the consumer – the end user. Therefore, we must educate them on our product features and installation. We attend fleet, trade and consumer shows throughout the year. We advertise in both trade and consumer publications. Our Web presence is keen, as well. Nearly half of the consumers shop through Web searches and we do our best to be a key player for the market. Our job is to build brand awareness – and we continue to strive to do more. We also provide point-of-sale displays. The hard-tonneau market often requires the consumer to be able to have a ‘hands-on’ experience prior to purchase. We provide dealers with the tools and literature to assist in their sales efforts.”
SnugTop’s Tobi Schopf says, his company “is expanding its Web presence and has been able to channel more and more leads to our dealers. Online coupons, social media, online contests all make a difference. Our sales force is also helping local dealers by assisting in sales calls to well-known local fleets using SnugTop-owned trucks and demos.”
Leer’s Dennis DeLeonard tell us that Leer is providing “powerful new tools online and in dealers’ showrooms to help them capture more sales and establish profitable, long-term relationships with customers. For example, in the virtual world, the Leer website generates hundreds of well-qualified sales leads each day. In the brick-and-mortar world, Leer has a nationwide initiative to link [its dealers] to new-car and new-truck dealerships, and to send local and regional fleet customers to local dealers who can service them -best.”