Polaris Industries hopes to roar into the retail sector the same way it entered the motorcycle industry a few years ago.
A manufacturer of off-road four-wheelers, snowmobiles and motorcycles, Medina-based Polaris has traditionally left the selling of products to a network of independent dealers.
But that changed in November, with the $665 million acquisition of Transamerican Auto Parts (TAP). With that one deal, Polaris instantly became a player in the Jeep and truck accessories store business. TAP runs 4 Wheel Parts stores and on Saturday is opening its 80th store — its first in Minnesota.
“We should be at 100 stores by 2020,” said Steve Eastman, president of Polaris Parts, Garments & Accessories. “And over time there is opportunity for growth outside the United States. We definitely see this as a strong growth business.”
Aftermarket truck accessories represent a $10 billion industry. Because it’s a fragmented market with many players, experienced businesses such as Polaris and the 50-year-old TAP should be able to snag more market share, officials said.
Analysts said the new retail store approach may help Polaris diversify at a critical time. The company has recalled nearly 400,000 off-road vehicles over two years due to potential mechanical problems and fire risks. That, along with softer demand across the entire recreational vehicle market, contributed to Polaris’ stock price falling 40 percent.
At the time of the acquisition, Polaris CEO Scott Wine told analysts that TAP and its 4 Wheel Parts stores gave Polaris an “immediate leadership position in a growing market, and allows us to accelerate Polaris’ growth and profitability.”
Time will tell, said Wedbush Securities analyst James Hardiman.
“Buying TAP was a head scratcher for a lot of investors,” he said. Wall Street expected a big acquisition from Polaris, but one tied to manufacturing or scaling up its motorcycle line.
“A lot of investors were also concerned about the timing,” Hardiman said. With TAP, Polaris “made the biggest acquisition in its history at the same time it was going through the biggest quality issue in its history. So buying TAP was a surprise. The jury is still out on TAP. Still, you hope they have some success.”
4 Wheel Parts caters to truck and Jeep enthusiasts by customizing vehicles and selling accessories such as beefed-up bumpers, suspension lift-kits, rugged shocks and fat tires that can smooth out jagged off-road rides. On-site service technicians install the hefty add-ons.
On average, walk-in 4 Wheel customers drop $800 on truck accessories. Special orders from dealerships who need to “trick out” a truck for a customer are an average $5,000 to $8,000 per vehicle, said Brooklyn Park store manager John Tague.
“We enthusiasts can get a little ridiculous,” he said while showing off his own customized Dodge Ram truck that was completely wrap-painted in 4 Wheel’s bright logo.
Before relocating from Birmingham, Ala., to open the Brooklyn Park store, Tague outfitted two customers’ vehicles with so many customized “Mack Daddy” accessories, he said each was worth $100,000 by the time he was done. One truck sported 24 karat gold stitching.
TAP also runs six distribution warehouses for online orders. In 2016, it had 1,750 employees and $740 million a year in annual sales.
Since November, however, it has grown. Polaris opened five more 4 Wheel Parts stores, the one in Brooklyn Park plus others in Colorado, Idaho and South Carolina.
More stores could open in Minnesota depending on how well Brooklyn Park fares, Eastman said. Right now, 4 Wheel Parts is big in California, Texas, Colorado, Florida and Ohio. With organic growth plus new stores, Polaris hopes the chain will push past its $5 billion annual sales target for the first time. Polaris reported $4.5 billion in global sales in 2016 and has forecast 10 to 13 percent growth this year.
Eastman would not disclose Polaris’ long-term financial goals for TAP/4 Wheel. “But we are excited. We think we will do very well,” he said.
The Brooklyn Park store expects to do a lot of business with local truck lovers. “But about 30 percent of our business [will come] from dealers,” Tague said. The shop just won a custom order for a Jeep from Luther Brookdale Chevrolet in Brooklyn Center.
Alex Shoeberg, service manager at Walser Jeep Dodge Ram in Hopkins, said Polaris’ new store will compete with specialty shops like Automotive Concepts in New Hope and Sunroofs Etc. in Eden Prairie. In some cases, it might even compete with local truck dealers who want to retain more accessory work in-house.
Still, Doug Sprinthall, spokesman for the Walser Automotive chain, said Minnesota is probably a good market for Polaris to try its hand at the business.
“Jeep people like to personalize their vehicles, especially people who buy the Jeep Wrangler,” he said. “They really see themselves as an individual and really want to make their vehicles unique.”
Sprinthall said many dealers do some custom work, but don’t like dealing with factory warranties and hate doing major suspension lifts on trucks. The potential liability issues make dealers nervous, so they refer customers elsewhere.
“So the aftermarket companies around town do a better job than the dealers do [with attracting that business],” Sprinthall said.
Competition worries did not faze anybody Thursday as the new team at Brooklyn Park busily prepared for Saturday’s grand opening. Inside the store, two trucks loaded with the extras were mounted on rocks to greet customers at the door. Store shelves and walls were fully loaded.
The store has a freshly imported staff of 10 TAP workers from around the United States. The group includes six mechanics and technicians who will accessorize trucks to customer specifications in the large shop next door. It sports eight giant truck bays.
TAP is well known for its proprietary brand of accessories that sell under the names Pro Comp, Rubicon Express, Smittybilt, Poison Spyder, G2, LR2 and Trail Master.
Since the acquisition, Polaris is selling its proprietary Pro Armor brand inside 4 Wheel Parts Stores, Eastman and Tague said.
“Pro Armor is the one aftermarket product brand where there is a natural link between [off-road ATVs] and on road trucks and Jeeps,” Eastman said.