Monday, December 31, 2001

SEWELL, N.J. - Electric Mobility's "not making any money" in its dealer division and as of Jan. 1 stopped selling its popular Rascal scooters and TurnAbout power wheelchair through HMEs, preferring instead to focus on the more lucrative direct-to-consumer market.

"I think the dealers have to understand that by continuing to drive down the manufacturers' margins, they are going to be in a position where they have less manufacturers to choose from," Electric Mobility President Michael Flowers told HME News.

Since alerting its dealers of the company's decision, EM has eliminated its 15-person dealer sales staff and discontinued all trade advertising and related marketing efforts.

The move comes after EM initiated efforts earlier this year - following an Inside Edition expose on its high-pressure direct sales tactics - to boost sales of the Rascal through dealers. That effort failed, in part, because EM's profit margins in the dealer division didn't support the additional sales and marketing, Flowers said.

Electric Mobility's decision has angered dealers who sell the Rascal and TurnAbout, EM's premium power wheelchair.

"I could see it if I did something wrong, but that is not the case," said Don Labbe of Discount Scooters in Lincoln, R.I. "We feel like we got kicked in the mouth. Now they are saying, 'We don't need you anymore.'"

Flowers said "this is not meant to slap anyone in the face. This is a business decision we made because we are not profitable. (Other manufacturers) might be a lot smarter than we are and be able to run their business profitably. For us it's a business we had very little involvement in until seven years ago."

Electric Mobility started as a direct-to-consumer business.

HMEs have had an uneasy relationship with Electric Mobility because until now the company has sold product direct and through dealers. As such, many providers viewed Electric Mobility as a manufacturer and a competitor. (They may still: the company will continue to offer dealers its commodity power wheelchairs.)

"They were obviously not successful with the dealer network since they are pulling out," said Dan Meuser, president of Pride Mobility Products. "And it's because they didn't dedicate the resources to providing partnerships with providers. It doesn't work without it."

Flowers disagreed, saying Electric Mobility generated plenty of leads for providers but "we could never get them to close." Additionally, he said, a number of manufacturers have been able to offset the low margins on scooters by offering high-end rehab products, which is not where EM's expertise lies.

Providers have accused Electric Mobility of aggressive direct-sales tactics that "gouge" consumers by selling them scooters for $5,000 to $6,000 - scooters dealers might sell for $2,000 to $3,000.

"There is something called being reasonable," said Charlie Lefever, until now an exclusive dealer of EM products. "To make over 400% profit is a lot. I guess I feel a little piqued at the way they operate."

Flowers said there is a "misperception of what we are charging for our products. Our sales include a lot of features and options that dealers don't take the time to sell to consumers."

Ultimately, Flowers believes the downward pricing pressures may discourage more manufactures from entering the scooter marketing, limiting provider choice. He doesn't, however, expect other manufactures to rush to embrace a direct sales strategy. There's a lot to it, from advertising to following up on leads to providing service.

On that point, Pride's Meuser agreed.

"We're a manufacturer, and we have our expertise." he said. "Providers have their expertise. Mike and Electric Mobility are trying to do it all themselves. We think that is a tremendous challenge. It's not in our business." HME