CARLSBAD, Calif. (BRAIN) — As a strong U.S. dollar continues its tight grip on a weak euro, Campagnolo North America is doing what few companies choose to do. Since February, the high-end Italian component maker has dropped its wholesale prices to U.S. distributors 18 percent. The latest cut — 10 percent — took effect April 1, said Tom Kattus, Campagnolo NA's general manager.
With Campy's manufacturing centered at its headquarters in Vincenza, Italy, and with two factories in Romania, the company is better positioned to increase its sales in the U.S. market and among OE manufacturers. "It just gives us more buying power without costing us anything," Kattus said. "It's completely based — 100 percent — on the foreign exchange rate improvement," he said.
While distributors are generally pleased with the price cut, some are still selling inventory bought when the euro was at $1.25 or higher. "If distributors had bought at the $1.23 or higher range, they're getting a bit of margin gain, but overall the weighted gross margin is pretty decent," Kattus added.
About 85 percent of Campy's business in North America is in aftermarket sales through a roster of key distributors including Euro-Asia Imports, Ochsner, QBP, BTI, J&B, Hawley, SBA and Gita in the U.S and Great Western Bicycle and Lambert in Canada.
Nonetheless, Campy — long revered by cycling aficionados and industry veterans — has been a tough sell to consumers. Campy equipment is pricey compared with products from Shimano and SRAM, and it's a price differential that Kattus struggles with. But with the shift in exchange rates he's taking advantage of a rare opportunity to increase sales.
"It's interesting. We are driving to get more OE spec and Raleigh and Masi have come aboard for 2016. We're also getting pretty good spec in Europe. Our challenge in the past has been logistics in Taiwan," Kattus said. The company now has a bonded warehouse in Taichung to improve delivery to manufacturers and to teach factory employees the best methods for installing Campy drivetrains and parts.
"So the logistics is better, but the price differential between OE and retail pricing for Shimano and SRAM — both have aggressive pricing levels — it's still difficult. But we continue to push," Kattus said.
"We have no aspirations to be a Shimano or a SRAM. We want to keep the image, the mystique of Campagnolo, but at the same time grow the business," he said.
That's a difficult proposition with only five employees in North America — two of whom are in Campagnolo vans traveling on the East and West Coasts meeting with dealers.
Part of Campy's outreach is focused on getting IBDs and staff on Campy equipment. "We have an employee purchase program that's going really well. We're starting to get a lot of product into their hands, as well as the industry, at 15 percent below wholesale. It's a pretty sweet little deal," Kattus said.
"Retailers and their staff need to have a comfort level with Campy. Customers who go to stores for their expertise may talk to someone on the sales floor and ask what do they ride. Having them on Campy gives them a comfort level to talk about our products, and that could give OEMs more confidence to put it on their bikes," Kattus said.
"It is a sea of sameness out there. Some customers may want a Toyota — it's a good product. But others may want a Porsche or a Ferrari. Everyone is making carbon bikes in Taiwan, yet product managers need to figure out a way to differentiate their product and give consumers a reason to buy it.
"But what they do is try to get the highest spec possible at the lowest price. So instead of increasing the average sales price, they're decreasing the average sales price, and that's a big chunk of dealers' revenue," he said.
