The Powersports Industry & M/C Roadracing

Wall mart has destroyed more small town family business than anybody else.

My retired aunt returned a dead aquarium fish there.

Not even joking

 

Jeff,
Tire companies have entered a race to the bottom, all of them not just pirelli, telling your customer "you need to committ" is hilarious at best when 10 years ago they did not have SXS at 20K and the flooring costs that go with them and the space they take up. A little known fact Wells Fargo collected over 52 MILLION from powersports dealers in the first 8 months of this year in flooring interest and dealers are having to get bigger buildings to house the SXS. The market has shifted away from 2 wheel and costs for dealers to stay in business has gone up that is why we are still seeing dealer consolidation in almost every market.

That is a cheap ass way of saying hey it's not my fault. Tire comapnies lowered margin and don't want to put the effort into MAP pricing and protecting retailers, the it's not my job... BS is what holds this industry back. The fact is the tire market in a dealers PMA is only so big, he has tons of other things he can stock and make more money on than tires... The tire manufacturer that is going to increase sales at brick and motor is the one that introduces competitive MAP pricing and enforces it. MAP pricing will incentivize the dealers to stock products that they know they don't have to worry about a pricing discussion every time someone walks in. Also before you come back with they just need to buy on the program.... How does a dealer buy on the Pirelli, Metzeler, Dunlop, Michelin, and Kenda, and Maxxis tire programs when they have to pay 30 - 40k pear year in flooring interest because the cost of units have doubled? Being a good supplier/partner to the dealer is looking at their business as whole not just going in there and asking for orders and saying what have you done for me this week...

 

Jeff,
If you are comparing the purchase of Skippy Peanut butter in a LARGE BOX retailer (grocery) with multiple locations and 1,000's of products that the consumer needs to buy to survive, to a $300-$600 set of tires for a toy that's some funny shit right there. They are two completely different purchases, from two completely different types of retailers that take two completely different types of selling and costs to make that sale...

Also if you compare the purchase of a vehicle to that same purchase that's even funnier.
Should I take the time to educate you about a 4 square in vehicle purchasing and how that effects the money a dealer makes on that vehicle purchase? Your comparison to tires sales is a bit lacking.....

If you want to compare something in retail like a motorcycle tire purchase try gear or something else... The fact is parts departments in the motorcycle retailer are facing downward pricing pressure from online retailers with much less overhead. Tire companies typically stick their head in the sand and say you just need to" buy on the program". Products that have strong MAP pricing benefit EVERYONE including the online retailer and the brick and motor guys... THAT is something that has been proven over and over and over again and is legal..."buying on the program and teaching dealers to go deep" has proven not to work so sticking with the same old and outdated way of doing business needs to change.

 

Dunlop has had MAP for a few years now, Metzeler/Pirelli started last year. Michelin goes live January 1.

 

To say that online retailers have lower overhead costs is disingenuous. If it were so cheap, every OEM dealer would build up their own online presence and make money there.

No, to do it without some ARI website, recruit, train and retain good, knowledgeable staff (eg. good at sizing people up on the first shipment, up selling, conflict resolution &etc), pay for programmers, server space, data developers, warehouse staff and shipping costs (because shipping is always free even when it’s embedded in the cost of whatever you’re buying) ... yes, way less overhead if you don’t understand how to do it properly [irony].

 

From a customer's perspective, the rebate program that Dunlop had this year seemed pretty effective. They were offering a rebate on tires, but then had an additional rebate if you had any kind of service done at dealers in their program. I ended up purchasing two sets of tires for my street bikes and with the rebates, the tires were cheaper than if I bought them online and it included mounting and balancing (since that was additional service that qualified for the extra rebate). No idea how this impacted Dunlop's bottom line, but it seemed to benefit both me, the customer, and the shop.

 

"recruit, train and retain good, knowledgeable staff"-- Dealers have the same cost
"pay for programmers, server space, data developers, warehouse staff and shipping costs" = DMS systems, advertising, retail space costs vs warehouse space costs, floor planning costs, etc. dollar for dollar sold, across all things the online retailer sells and the brick and motor store sells, there is no way an online retailer has the same costs as a traditional brick and motor store selling units with the costs of retail space VS warehouse space...

 

One of the things killing Brick & Mortars is employee apathy... mostly the reason I shop online and won't go into a multi line dealer at all in the N Metro.

 

There is less overhead in online, compared to a dealership. That’s fact.

The aforementioned dealership I spoke of has a separate building with their online business. There’s very little to it and is basically a breakdown/transfer point for orders. They stock very little, because most inventory arrives in 1-2 days. They have a few menial people for the receiving/shipping dept and a few, somewhat-menial people to man the phones and work the site. Across the street is their dealership. That place is stacked with units, apparel, oils, service, trained personnel, etc. There’s no possible way to compare the two, as far as overhead.

I have a friend who is the largest online retailer of his market segment on eBay and Amazon. He hovers at ~$1M in inventory and does ~110-130 transactions each weekday and ~150-200 transactions over a weekend. He has a minimal showroom, only because distributors require him to be a B&M business. His investment is in the warehouse. He has 5 employees. Comparatively speaking, there’s no B&M-only businesses, in his industry, doing similar gross revenue and margins he is, yet, they carry more overhead because of having to stock units. Any business with a sales floor is buried in overhead.

Online have less overhead, no way around it.

 

If it’s so cheap, why isn’t every dealer doing it? I’ll defer to my original point; you have to hire the talent to set it up and maintain it. And if you don’t think there are adversing costs for an online retailer, you clearly have no understanding of what it takes to run a successful etail business.

 

A lot of that comes from lack of pay and benefits.

It’s really hard to have a vested interest in an employer, when the employer could give two shits about the employee and their well-being. If the employees’ efforts are elevating the business and ownership, it’s the responsibility of the ownership to bring everyone up with them. If not, people lose interest and seek other employment. At some point, there will be no one left to draw from to man those positions, because of a developed reputation.

The shop where I worked at, there was a silent money man and two co-owners running the show. When the employees are struggling to survive and the co-owners are building new homes, buying new vehicles, going on vacations, flying their private plane, have every toy one could want, it’s difficult. It was everything I could do to pay $350/mo rent, a payment on a $700 car, eating one hot meal a day, etc. I worked sales one week and sold 13 units. I was to get $50/unit bonus. Come payday, they’d reduced it $25, claiming they couldn’t afford to pay what they’d originally said. Even today, that place only pays $35/unit bonus. As one of the sales guys said to me, “Why even try for that?”. There’s zero incentive, anymore.

Now, you’re faced with a warm body, in these places. Most likely, they’ll have to order what you went in there for, so you may as well just order it yourself and have it on your front step, a day or two later. For me, that saves me a 45min drive each way, gas, and mileage on a vehicle. Furthermore, my order is always correct.

 

Because the B&M’s are already buried in overhead, with what they already have. When they look at doing an online operation, all they see is even more overhead. So many shops are already in the red and can’t stomach throwing even more money at it. The above comments about the SXS segment and what dealers are facing with them are the truth. Furthermore, the OEM requirement costs to carry their franchises has exponentially increased, causing many dealerships to chop franchises. When one factors they’re operating in an industry that isn’t doing very well, it becomes understandable why they don’t further bury themselves in an online endeavor. They’ve got enough on their plates.

Obviously, YOU have no idea what it takes to setup and run a successful online business. There’s not near the “talent” required you claim. I know this, because I’ve seen the back ends of a couple really big operations (apparently, you missed that part), down to a smaller, single employee operation. In fact, I know a couple making a living off an Amazon store, have zero overhead, and input very little into it. They’re just a storefront, with Amazon filling the orders. But, you go on with your bad self and skewed ideals. You’re clueless.

 

You’re totally right. I’ve no idea how to run an internet brand, an eBay presence or Amazon storefront, nor have I had any experience in such an operation that does. I rescind all previous comments because I also don’t know what it’s like to see a $600 POP-display item, that I didn’t order, show up out of nowhere from an OEM, or even wonder where these 12 new units that I didn’t ask for at the end of the season end up on a floor plan.

I will always look to industry insiders for comment on basic economic principals and shit.

 

Because what's the point ? There's already dozens of big dealers doing it, trying to beat each other being the cheapest, free shipping, no hassle return policy etc. Anybody looking online for the cheapest is going to buy from the cheapest. I've been running a shop for 22 years now and it's gotten to the point that you can't make much money on sales, too many lowballers willing to sell for basically no profit. I'm at the point where my bread and butter is service and the knowledge I've got from years of experience. Ethanol gas / lack of use = gunked up carbs. That's a good chunk of my work..

 

Same shit, different year.

And then people wonder why the industry is struggling.

 

I totally get it. Trust me.

We had 10 franchises, between two locations, and I worked under two different ownerships. I saw everything but the dealership financials and worked in every department but the finance office. I was immersed in the business, trying to learn everything I could, in hopes of moving up. I absolutely loved the industry then, as I do now.

Your mention of POP displays and 12 units is a perfect example of something an online retailer doesn’t have to deal with. That overhead right there is enough to acquire a stand-alone building and put a few people in for receiving/shipping of a startup online business.

Your mentioning of the displays and units reflects exactly what I said above about already being buried in overhead and the unwillingness to add further to that with an online endeavor. You’ve already got shit coming at you from every direction. Adding to that is daunting, I know.

As “Banditracer” mentioned, pricing is everything and will be your advertisement, which comes from word-of-mouth on social media, forums, and use of filters on eBay and Amazon. There’s very little loyalty, so no need to spend much, if any, money on advertising, anywhere, chasing customers. You just need to be cheap. Now, there are some exceptions to that, especially when comparing how different online retailers do business, like Babbitt’s versus Revzilla, for instance.

If you ever get through SPI, I’ll be glad to take you to my buddy’s business I mentioned before. You’d be blown away by how little is required to do so much. Take another look at the number of transactions I mentioned above, as well. As he explained to me, there may be bad weather, bad economic times, bad whatever going on somewhere on this earth, but, it’s not going on everywhere. He ships worldwide and is pretty-much immune to local conditions. They walk into a list of waiting orders, every single morning, and did nothing but create a listing to get them.

You and I are on the same sheet of music, it’s just I don’t believe you fully understand how little is involved in doing it.

Peace.

 

I'm a rep at PU so I see exactly what you guys are talking about every day. Its not easy to make money anymore and just opening up an online store isn't good enough anymore. The big internet shops are BIG now, and they have a ton of money invested and the margins are generally pretty thin. I have a couple medium sized online guys and one really big one and I'd say they are spending nearly the same as my brick and mortar guys especially now as they all have to get new software for the sales tax laws and make changes to their sites in many cases. My really big guy pays well and makes very smart decisions about what he will and won't sell based on margin, shipping costs, quality, etc. That brings up probably the biggest problem I see-most of the shop owners are not business minded but are enthusiasts trying to run a business. You can go too far in that direction too with the mega stores generally owned by car guys that don't have any enthusiasm for the sport too. The perfect mix is tough to achieve but I have a few shops that are killing it because they love the industry and know how to run a profitable business. Having good employees is really hard and I have some shops that are willing to pay a pretty damn good wage but they can't find anyone worth hiring. I know quite a few reps that have gone back to shops because they can make the same money and not spend a ton on fuel, samples, etc. Hell I've been tempted too! I don't know where I'm going with all this but I agree with what most of you guys are saying and its disheartening to see the industry I love struggling so much.

 

I'm not sure that you understand how retail sales work in big box and grocery stores.
Skippy Peanut Butter pays for any shelf space they have in the stores. Not in sales incentives but actual payments to the store.
When was the last time a tire company paid a dealer for shelf space?
You are not comparing apples to apples.

The times where dealers stocked loads of tires are long gone. The money isn't there anymore.
So the difference in pricing to online stores who has a nationwide sales area and therefore volume, and the local mom and pop shop keeps growing.
If sales are down 20% it's a matter of which company can grab market share.

@Spooner what do you see in the market? How are your tire sales?

 

Tire sales for me are going up but a lot of that is Tucker being out of so many dunlops the last few months, plus our tire program is pretty strong so I'm getting more dealers switching over. I know the industry was down like 17% last year but we were only down a small percentage so I'd say whats happening to me is common across the country.

I'd say the tire companies are finally starting to think about the brick and mortar guys with the map policies and programs they have in place. With dunlop the program sizes are very conservative as far as how many you have to buy to do their programs. When you combine those and the MAP price you can actually make some decent margins. Pirelli and Metzeler have MAP but their pricing is still very low so even with program orders its tough to make any money which is further killing their market share. I'm glad to see Michelin finally putting MAP in place and we will see how their programs are in January but they are getting more aggressive and the margin is improving for sure.

I think the key for this stuff to work for a dealer is they need to stick with a limited amount of brands and look to see who has the most competitive program for the type of tire they can sell. I've personally never been a huge fan of dunlop tires but they are pretty damn good these days and they seem to care the most for the brick and mortar with their programs and rebates like mentioned above. So many shops have given up and think they can't make money on tires and it just isn't true now and you don't have to buy 100 tires at a time to do it. Plus its a great way to boost other add ons like oil changes, brakes, chains, sprockets, etc because now you have their bike on the lift and can look it over.

 

When you say “spending nearly the same”, do you mean with you or for the whole business?

You’re exactly right; it’s not easy and margins are thin. I think, everyone is trying to find the way forward, without a positive direction.

The shop I used to work for has moved onto yet another ownership (the 3rd) and they’re car guys. Their money is the only way the place stays open, from what I’ve heard from employees and can see. The place is like a morgue, now. It’s too bad, because I know how things used to be.

Stay at PU. My rep, Todd Sheedy, tried coming to work at our shop and quickly regretted it. Luckily, he was able to return to PU. He’s exceptional at what he does and taught me a lot. He was only ever interested in working together for the good of both of us and never pushed anything, while other reps were bent on trying to cram anything they could into the shop. The latter is not the way to do it. Many reps could sure learn from Todd.

Keep plugging away, man. There are far worse places to be than PU.