In the highly competitive snowmobile industry, Polaris Industries Inc. was looking for an Internet advantage without—literally—giving away the stores.
The Medina, Minn.-based manufacturer has a retail channel of more than 2,000 independent dealerships in U.S. and Canada. Many of the shops are mom-and-pop outfits that are intimidated by the prospect of Internet sales.
Polaris didn’t want to lose that base. So it created a Web site (www.polarisindustries.com) that pays local retailers a commission on every product sold, including accessories, in their geographic area, while allowing customers to order custom-made snowmobiles that are delivered through the retail stores. Polaris also contracted with a Web design shop to provide customer service representatives to answer calls on behalf of the dealers.
Polaris’ clothing and accessory sales rose from $130 million in 1999 to between $200 million and $210 million in 2000, the first year products were offered on the Web. A wider array of products—more than 1,700 items—are today being offered on the Internet, and profit margins are higher even after paying retailers an unspecified commission, said Polaris CEO Tom Piller.
The Internet is proving a valuable sales venue for snowmobiles, which average about $6,000 apiece. Approximately 20,000 customized snowmobiles will be delivered to dealers this fall, following Web orders received directly from consumers during a promotion earlier this year. Polaris expects to sell between 65,000 and 80,000 snowmobiles this year.
Advent of mass customization
Dell Computer Corp. made build-to-order big business in the technology field, and IBM Corp.’s decision more than a year ago to take all orders direct over the Internet was a watershed event heralding the advent of mass customization. But the process is still somewhat new to durable goods manufacturers.
"Most companies are still making things and taking orders for them in batch mode," said Richard Tully, partner in the strategy practice at Deloitte Consulting L.L.C. "As Polaris begins to build customized snowmobiles in season [without a significant lag time between order and delivery] things will get even more interesting.’’
The automotive industry is trying similar measures, said Vanessa Fox, senior analyst with AMR Research Inc., Boston.
Ford Motor Co., BMW of North America Inc. and Toyota Motor Sales USA Inc. are leaders in the automotive industry in distributing sales leads to dealers based on customer orders placed via the Web. But Polaris’ efforts to include dealers in all product sales—including accessories and clothing—stands out, Fox said.
Piller said gaining a competitive advantage over Bombardier Inc.’s Recreational Products Division, Arctic Cat Inc. Yamaha Motor Corp. USA, Cypress, Calif., drove its Web strategy.
"While we offer customization over the Internet, we opted against direct sales,’’ Piller said. "We wanted to use the Internet as a tool to strengthen the distribution network, not to replace it.’’
Soon at a dealer near you
This fall, the 20,000 snowmobiles ordered in advance on the Internet will be delivered through Polaris’ South Dakota distribution facility to a local dealer, who will contact the customer, take payment and complete delivery.
The commission program for accessories and clothing sold on the Internet was a key to winning dealer support. Polaris contracted with interactive design and e-commerce service company Digital River Inc., Eden Prairie, Minn., to provide customer service representatives seven days a week, 24 hours a day to Internet buyers. Orders and returns for accessories are fulfilled through a central Polaris warehouse.
"Polaris has done a great job with channel management,’’ said Joel Ronning, CEO of Digital River Inc. "They’ve done a lot of thinking about how to keep up dealers’ incentive as they’ve gone direct."
Industrywide, sales of new snowmobiles totaled $821 million in 2000; 208,000 units were sold worldwide, including 187,000 in the U.S. and Canada, according to the International Snowmobile Manufacturers Association.