A Family-Run Firm Peddles Its Products to Mass Merchandisers

Daniel J. Munoz//August 9, 2005//

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Date: October 5, 1994

Location: Parsippany

Title: A Family-Run Firm Peddles Its Products to Mass Merchandisers

Author: Dan Goldblatt

Subject: Kent International goes after the youth market with its bicycles and helmets

Cats that dance between the feet of horses rarely get stepped on. That”s not because the horses are careful. It”s because cats are quick on their feet and know where to jump when the big animal moves. Kent International, a family-run bicycle business in Parsippany, is that kind of company. It has scampered successfully around the hooves of huge competitors, avoiding fatal blows by moving quickly and finding a niche where it can prosper. Such agility is even more important at a time when its primary market, large retailers, is going through massive upheaval and consolidation.

Arnold Kamler, Kent”s president and the son of founder Philip, says his firm has found its place by specializing in the sale of imported children”s bikes, primarily to huge retail chains. In addition, Kent recently added a successful line of helmets. Finally, Kamler”s four-person product development staff is always working on new accessories like fancy seats and lights that allow avid riders to customize their bikes.

The Kamler family is in its third generation of two-wheeling. The first Kamler in America, Abraham, opened a bike shop on South Orange Avenue and Howard Street in Newark in the early part of the century after arriving from Europe. He survived the Depression by collecting junked bikes and making them ridable. His son Philip, 77, founded Philkam Cycle Supply on Kent Street in Newark in 1958, wholesaling parts and accessories. In 1958, the company got into its present business, importing foreign-made bicycles for sale in the U.S. Philip retains the title of chairman, though he is no longer active on a daily basis.

Arnold joined the firm in June 1972, two weeks after graduating from American University. Since he had some experience from summers spent assembling bikes and stocking shelves, he started as a customer service clerk, making sure clients got spare parts on time and answering technical questions. Succession is frequently a problem in family-run businesses, but Kamler says it was “always assumed I would take over.” He technically became president in 1976 at the age of 26, but says it was 1981 before he actually assumed the president”s duties from his father. Arnold”s brother-in-law, John K. Levi, is also vice president.

During the 1960s, Kamler says, “The business grew dramatically.” Huge retailers like Korvettes and Bradleys emerged and became good clients. Such mass marketers now make up about 80% of Kent”s sales.

As sales increased, prices for the European-made bikes that Kent then imported starting escalating, so the firm shifted to buying bikes in Taiwan and Japan. As the market has changed and price competition has heated up, Kent, like many other American companies, has continued following lower-priced labor. According to Kamler, the majority of the bikes it now sells are from the Philippines, China and Indonesia.

Kent tried assembling bikes in the U.S. between 1981 and 1992, but stopped. “It just wasn”t cost effective,” Kamler says, who realized that American consumers do not care where his bikes came from as long as the price and product are good. The majority of bikes sold in the U.S., however, are still made domestically.

Kamler says his firm sells some 600,000 bikes a year. Sales peaked in the mid-1980s at 1 million, leveled off to about 500,000 a year and started picking up again last year. Those figures mirror the industry as a whole: U.S. sales plummeted from 12.6 million in 1987 to 9.9 million the following year. In 1993, U.S. sales picked up to 13 million units worth $4 billion in sales. Bill Fields, an Arizona-based industry consultant, estimates that 13.4 million bikes will roll out this year. Credit for this increase goes to the current fad for so-called mountain bikes and increased awareness of physical fitness and environmental concerns.

Fields says market share information in the bike industry is “impossible to come by,” and Kamler, like his competitors, won”t provide precise numbers. Kent reportedly will have revenues this year in the “$25 million to $50 million range.” Employment in Parsippany is seasonal, running from a low of 40 to a high of around 100. A few more people work at Kent”s New York City showroom and its Hong Kong sales office. Fields sees Kent as a small player and says his research suggests that Kent has a 3% to 4% share of U.S. bike sales in the mass merchandiser market and 5% to 6% of accessory and helmet sales. Huffy, an Ohio-based company that makes its own bikes domestically, is number one. Number two is Murray Ohio, which, despite its name, is based outside of Nashville.

Kent sells 80% of its bikes to the large chains, and changes in that industry have had a major impact on the company. The most important, according to Kamler, is the fact that fewer mass retailers are now in business. Says he: “Over the past 10 years there have been a tremendous number of bankruptcies and mergers.” Kamler cites two Massachusetts-based chains: Zayre”s, which had hundreds of stores around the country, and Child World, which had some 200 outlets. “Both went out of business,” he says, “and left us with a going-away present.” That present was “substantial amounts” in unpaid bills; Kent recovered little of it in bankruptcy proceedings.

Kent used to sell to 75 mass-market accounts. Now it deals with fewer than 20. Says Kamler: “The pressure on each item, on each presentation, becomes enormous.” As a result, Kent puts a lot of thought into the product lines carried by two different types of stores. The mass toy outlets, like Toys ”R” Us, want to offer customers a broad range of goods and are good places for Kent to sell accessories. But general retail giants, like Caldor or Service Merchandise, may carry only 18 or so models and aren”t interested in Kent”s padded seats or its new motorcycle-style bike. Kent has to have a product line for each.

The retail consolidation, though, has provided opportunities. For one thing, selling to a monster retailer like Toys ”R” Us or Target, which adds 50 stores or more a year, can mean a lot of units sold. Some of the biggest vendors send weekly sales figures back to Parsippany, allowing Kamler and his designers to know which models are hot and which are cold. As a result, the company makes quick and frequent changes in its products. In the past, Kamler says, “We used to turn over about 20% of the line per year–new colors, different bells and whistles.” Now, he says, about 60% of the line changes annually.

The biggest recent development at Kent has been the addition of its USA Helmet subsidiary in late 1992. Kamler had been considering expanding into helmets, but it took four hours in the emergency room at Saint Barnabas Hospital with his son after a biking accident to finalize the decision. The boy, who hadn”t been wearing a helmet when he took his spill, was fine, and now helmets are “the most dynamic part of our business,” Kamler says.

He claims that last year he sold 100,000 helmets, which are made in the U.S. and assembled in the Parsippany plant, and expects to move about 600,000 this year. This, he says, would give Kent 5% of the U.S. market. Two factors account for the success of the new venture. One, the country is increasingly safety-conscious. Nine states and a number of cities now require riders to use helmets, and 13 more states, including New Jersey, are considering passing new laws or broadening existing legislation. Second, relatively few bike riders today wear helmets, so the market potential is huge.

Kent has also tried to improve its business with independent bike dealers. It has launched a line called Thrusters, which unlike its mass outlet products, don”t carry the Kent name and are priced to give independents a higher profit margin than mass merchandisers require. Like Kent”s other products, Thrusters are directed at teens and younger riders, which account for some 95% of the company”s bike sales.

Analysts are optimistic about the bicycle industry”s prospects, and don”t expect another debacle like that of the late 1980s, when inventory piled up and sales dropped. But can a small player like Kent continue to survive against competitors like Huffy, which cranks out 4 million units a year in what Fields calls “the most efficient bike factory in the world”? Fields firmly says, “Yes.” In a business of relatively slow-moving giants like Huffy and Murray Ohio, he says, there is “always room for niche players as long as they are agile and clever.” Kamler, who is currently looking for a hockey star to endorse Kent”s knee pads, thinks that moves like that show his company is agile and clever–even as it runs where horses tread. u