SEMA eNews Vol. 13, No. 21, May 27, 2010

Overall Profits Edge Up for Powersports Industry Segment

  side-by-side
  Powersports dealers report that side-by-side sales are up due to increased accessory offerings and a consumer need for utility vehicles.

Gart Sutton & Associates (GSA), a leading authority of retail profitability in the powersports industry, recently polled some of its 20-group powersports dealers to get a better picture of what was happening in the powersports industry from the front lines.

Sutton and his team of industry experts will present Powersports Dealer Update Workshops at the 2010 SEMA Show in Las Vegas, November 1–2, at the Renaissance Hotel next to the Las Vegas Convention Center.

GSA's poll revealed the following:

1. Dealer failures have been at a record high level for two years. Since some of these dealers were heavy discounters, this should help surviving dealers in affected regions. Many dealers who were not up on their performance-to-industry benchmarks and didn't respond quickly to reduce expenses relative to revenue never had a chance.

2. Current motorcycle sales continue to be down; 2008 was off 30%–40% from 2007 and 2009 was considerably off compared to 2008. Many dealers reported that March 2010 business was much better than last year, however.

3. Floor traffic is picking up, dealers are holding better margins, and some banks and credit unions are starting to free up money and "buy deeper" (lower credit scores).

4. Most dealers have reduced old inventory and are no longer "warehouses" for the manufacturers.

5. Parts sales and service work are strong, as customers are repairing rather than replacing their units.

Other positive indicators from March 2010 year-to-date compared with 2009 include:

  • Overall store gross profit: up 2%
  • Overall net operating profit: up 2.5%
  • Personnel and administration expenses as a percentage of GP: down
  • Percentage of revenue change: up more than 18% for groups reviewed
  • New and pre-owned unit gross profit: up for all products except scooters
  • Service labor margin: up 9%–10%
  • F&I net operating profit $ PVS: up more than 160%

Current Unit Trends
Midsize street motorcycles and models with rebates are selling to today's budget-conscious customers. Sport bike sales remain slow but have picked up somewhat. Financing and insurance have been a problem here. These customers tend to be younger and many have poor credit. Off-road bike sales have been slow, except for a few models with high demand and low availability. Scooter sales have suffered as fuel prices remain relatively low.

ATV sales have been soft for the last few years, but are up from last spring. UTV ("side-by-sides") sales have been doing well. This market has grown due to wholegoods and accessory product expansion and improvements, combined with the need for utility vehicles. Some farmers, for example, are using these as a low-cost alternative to trucks and tractors for certain jobs.

Consumer Trends
Dealers report that today's consumers tend to be more mature with higher incomes and good credit histories, but take longer to close. They may come in four or more times before making a buying decision. Many have completed considerable web research. They know more about the products and what is on sale on dealer websites.

Marketing Trends
Most dealers report that traditional advertising is not producing. They are finding better results from social marketing, working trade/sports shows and community events.

Other Trends and Opportunities
Dealer Internet sales and using eBay to move obsolete inventory have changed dealership business structures. This profit center will only continue to grow. Social marketing through services such as Twitter, Facebook and YouTube has become more significant to powersports businesses. Dealers must become more creative and Internet-savvy to keep pace with the market.

Due to the reduction in the size of the dealer network, there is a huge opportunity for profitable growth as the economy slowly turns around. Product shortages and reduced competition mean dealers can hold better margins.

There are positive signs that the powersports business is improving. In order to survive the ups and downs of this market, controlling inventory and expenses must remain a priority. Dealers must also pursue a customer-satisfaction business philosophy. It is vital to have the right people in place to maximize every customer opportunity. There’s no reason to have "B" and "C" players on staff when "A" players are out there looking for work.

Keep your team sharp by providing ongoing, high-quality training, including the Powersports Dealer Update Workshops held in conjunction with the 2010 SEMA Show, November 1–2, in Las Vegas. Dealer Update Workshops at the 2010 SEMA Show are open to all powersports dealers. Don't miss this exceptional opportunity to receive high-level training from industry experts.

Eight powersports dealer-specific education workshops will cover essential P&A, F&I, sales, service and dealership management topics. Registration also includes two industry keynote speaker lunches and a special state-of-the-industry powersports panel you can't afford to miss.

Register Now!

Advanced registration*: $99 by October 17, 2010
Onsite registration*: $149 after October 17, 2010
*Includes lunch. Does not include required $25 SEMA Show registration fee due October 17, 2010 ($75 after October 17, 2010).

For more information, visit www.SEMAShow.com/PowersportsDealerUpdate.

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