Motorcycle and Motor Scooter Dealers Depending on geographic region and climate, powersports dealers carry ATV’s (all-terrain vehicles), personal watercraft, or snow-mobiles, as well as motorcycles and motor scooters. Primary Categories of Two-Wheeled Vehicles Industry Overview • According to the Motorcycle Industry Council (MIC), 13,688 retail outlets sell motorcycles and related products in the U.S. There are two categories of motorcycle and motor scooter dealers: franchised and nonfranchised. Similar to the new and used car industry, franchised dealers are authorized to sell new motorcycles from the leading motorcycle OEM’s -- or original equipment manufacturers (the largest are Harley-Davidson, BMW, Honda, Kawasaki, Suzuki, and Yamaha). Most popular are on-highway motorcycles (“street bikes”), which are certified by manufacturers as being in compliance with the Federal Motor Vehicle Safety Standards and designed for use on public roads. This category includes cruisers (HarleyDavidson is the leading cruiser manufacturer), as well as standard street bikes; touring bikes, sport bikes, and dual bikes. • Next most popular are ATV’s (all-terrain vehicles), designed for off-highway use by one person. ATV’s have three or more low-pressure tires, a seat the rider straddles, and handle bars for steering. ATV’s have an overall width of 50 inches or less. • Off-highway motorcycles (“dirt bikes”) are not certified by the manufacturer to be in compliance with federal vehicle safety standards. Big with younger riders, they are commonly raced in elaborately designed events. • Dual-purpose (or dual-sport) bikes, as the name implies, are certified to be in compliance with federal safety standards and are designed for use either on the highway or for off-highway recreational use. • Scooters are small on-highway motorcycles manufactured and specifically designated as scooters. Some models do not require a motorcycle license, because of their lower speed. (Vespa, the popular Italian scooter, is sold through Vespa-only “boutiques” in the U.S., along with trendy “lifestyle gear.”) Most franchised dealers also sell accessories, apparel, and parts -- and they typically perform maintenance and repair service. Some franchised dealers have usedmotorcycle departments; when motorcycle owners want to trade in their current models, they use their old models as trade-ins, which then go into the dealers’ inventory of used motorcycles. Nonfranchised dealers do not sell new motorcycles and scooters, but sell used and rebuilt vehicles, as well as parts, accessories, and riding apparel. Non-franchised dealers typically derive a significant percentage of their revenue from their service and repair centers. • • Franchised dealers typically derive around two-thirds of their annual revenue from the sale of motorcycles, with the remaining one-third generated from the sale of parts, accessories, and apparel -- and from service and repair. Nonfranchised dealers typically derive around twothirds of their annual revenue from the sale of parts, accessories, and riding apparel, with the remaining one-third generated from the sale of used motorcycles, and from service and repair. While some dealers specialize in motorcycles (and some further specialize by carrying models from only one manufacturer), many others, both franchised and nonfranchised, consider themselves to be in the “powersports” business. Issues and Trends In the U.S, approximately 8.8 million motorcycles are owned by about 6.6 million people. The industry generated just over $9 billion in retail sales of new motorcycles in 2005. Sales of motorcycles, ATVs, and scooters have tripled in the last decade, and have more than doubled since 1998. The last quarter of 2005 saw particularly strong growth, with sales of highway motorcycles, including scooters, growing by over 16% -- and scooters alone jumping by 65% (MIC, “Statistical Annual 2005”; Chicago Tribune, June 23, 2006). © 2006 Profile America, Inc. All rights reserved. www.profileamerica.biz U.S. Sales of Motorcycles, ATVs and Scooters (Unit Sales, in Millions) 2.0 1.51 1.5 1.0 1.63 1.72 1.78 1.98 The traditionally dominant motorcycle icon HarleyDavidson has watched its market share shrink in recent years, and 2005 continued this trend, although it still ranks number two, as the following chart shows: U.S. Market Share of Two-Wheel Motorcycles 1.30 (% of Market by Manufacturer) 1.06 Harley-Davidson / Buell 23.7% Honda - 29.0% 0.5 0.0 1999 2000 2001 2002 2003 2004 2005 Yamaha - 16.3% Other - 4.4% Sources: Specialty Vehicle Institute of America, “Special Report, Summer 2006”; Discover Today’s Motorcycling, Press Release, February 17, 2006. Sales of motorcycles, ATVs, and scooters reached nearly 2 million units in 2005 -- an increase of 8.9% over the previous year. Strong growth is being driven by the following factors: Industry Growth Drivers • Rising gas prices. This factor is by far the most compelling reason behind the 2005 sales spike. The rising price of gas has made fuel efficiency highly desirable to consumers, and motorcycles use far less gasoline than passenger cars and light trucks. • The fun of riding. Fun and the love of the outdoors are other leading reasons why people gravitate to motorcycles and scooters. Also, owning a vehicle can amount to changing or enhancing one’s lifestyle and increasing social interactions. Many people join special clubs, where they enjoy riding in groups and participating in special events. • Low costs. As an alternate means of transportation, many people are attracted to the low purchase costs, in particular, for scooters. Also, the insurance cost is significantly less. • Commuting. These vehicles make commuting in urban centers efficient and easy. Scooters can easily navigate traffic jams and find convenient parking spaces. Sources: www.wkrc.com, Clear Channel Broadcasting, 2006; The Augusta Chronicle, May 11, 2006; sacbee.com, Metro/Regional News, May 28, 2006. Just as lower-priced, lower-powered models (scooters, in particular) have seen increased demand, so too have higher-end motorcycles attracted increased interest from growing numbers of aging “baby boomers” -- as well as women. Motorcycle manufacturers have been going “high tech” and are offering models with better comfort, increased safety, and added features (Wall Street Journal, June 23, 2006). Suzuki - 12.2% Kawasaki 9.7% BMW - 1.3% KTM - 2.1% Source: Motorcycle Industry Council, “Statistical Annual 2005.” Dealers have benefited from the substantial advertising placed by manufacturers to promote their brands, as well as from the free-spirited image associated with riding motorcycles. Dealers have also received encouragement and support from manufacturers as they undergo upgrades to their facilities or undertake rebuilding efforts. As a result, dealers are viewing their businesses as more than just outlets for selling vehicles. Accessories are becoming a significant source of revenue for dealers, and they’re attracting customers by touting accessories in their marketing and advertising programs. They’re also incorporating restaurants and coffee bars into their spaces. Dealerships are designed for traffic flow, moving customers throughout the store, with focal points such as interactive kiosks where employees can interact with customers. Vehicle flow into the facility is also important, like having a separate service entrance so customers can easily ride in and out (Dealernews, “Top 100 Yearbook 2006”). More dealerships are becoming sales centers for preowned bikes, which they obtain from auctions, trade-ins, and owners looking to sell. They are offering certified bikes and reconditioned motorcycles. Some dealers are putting their own brands on used and reconditioned motorcycles (Dealernews, December 2005 and May 2006). Motorcycle and scooter dealers are making greater use of the Internet as a sales and promotional tool, in addition to using the more traditional media such as newspapers, the Yellow Pages, direct mailing, and radio. Having a website is an excellent way for a dealership to maximize its revenue from aftermarket items or accessories, which itself is over a billion-dollara-year industry. A well-designed website draws in new © 2006 Profile America, Inc. All rights reserved. www.profileamerica.biz business, and assists in building relationships with customers (Dealernews, February 2006). The Internet is used in other ways by dealers. For example, they go to manufacturers’ sites to order supplies. One new Web-related development is that a dealer will soon be able to use his or her dealer management system (DMS) to order parts from suppliers who are Powersports-Standard-Protocol (PSP) enabled (CRM Magazine, May 2005; Dealernews, February 2006). spend around $6 million annually on motorcycles. If a motorcycle dealer generates $1 million annually, his or her market share would be 6.03% -- a baseline against which future performance can be measured. Critical Success Factors CSFs for Motorcycle Dealers Factors mentioned in the advertising placed by motorcycle and motor scooter dealers are intended to motivate customers to contact the dealerships. “Confidence factors” and “convenience factors” are designed to appeal to consumers’ desire for reliable products and services. Examples of each follow: • Engage customers who visit the store by telling them about your store, including how many awards each department has received, how the business is involved in the community, the mission statement, and upcoming events. • Put in place strategies for encouraging business from women, such as hiring one or more female staff, addressing the woman always when a man and woman come in, accessorize a bike in the showroom with parts favorable to a woman, and congratulate her after she has purchased a bike. • Offer bike appraisals to build up the pre-owned inventory and sell more items. • Sustain a relationship with the customer. Follow up by phone 24 hours after a sale, send a thank-you card or email, have the store manager or department manager call the customer and thank him again, send the customer’s spouse or significant other a small gift if her approval was critical to a sale, and/or send a gift card or certificate. • Have demo bikes available for customers to take a test ride, on pavement or dirt roads. Equip the bike with attractive features. • Take the time to explain to the customer how the bike works, and go over the maintenance basics. The customer is likely to return if you spend time educating them. • Change merchandise displays on a regular basis (accessories, particularly), and even change the store layout a few times a year. • Offer training classes for new riders. • Hire a website professional to build a site for the dealership, and include high-quality images and as much information as possible. The quality of product presentation has a big effect on the satisfaction of customers visiting the site. Confidence Factors Mentioned In Ads Complete Parts Inventory Written Repair Estimates “Customer Service Dept.” Size of Selection / Inventory Latest Diagnostic Technology Brands “5 Star Certified” Hog Chapter Sponsor Licensed Service Center Authorized Dealer Years in Business Guarantee / Warranties Source: 2005 Comparative Ad Analysis Survey, Norbert J. Kuk & Associates. Convenience Factors Mentioned In Ads Credit Cards / Financing Delivery and Pick Up Multiple Locations / Appts Days / Hours Invitation to Visit Website Parts Locator Hotline Location Data / Maps Same Day Tune-Up Secure Online Ordering Website / Email Address Tires Mounted While U Wait Shop Online for Great Deals Source: 2005 Comparative Ad Analysis Survey, Norbert J. Kuk & Associates. Value of Products and Services in the Industry Prices of motorcycles vary dramatically, beginning at $2,400 and ranging up to $65,000 to $100,000 for custom-built bikes. Prices of scooters usually range from $2,000 to $9,000 (Associated Press, February 21, 2005; Toledo Blade, May 4, 2006). Average household spending on motorcycles is $80.36, calculated by dividing $9 billion by 112 million households. Average spending helps determine market potential and market share. For example, in an area of 75,000 households, it is safe to say that consumers Sources: Dealernews, December 2005 and May 2006; Dealernews Top 100 Yearbook 2006. Industry Resources Motorcycle Industry Council, 2 Jenner Street, Suite 150, Irvine, California 92718-3812; 949-727-4211; www.mic.org. Dealernews, 201 East Sandpointe, Suite 600, Santa Ana, California 92707-5761; 714-513-8400, www.dealernews.com. © 2006 Profile America, Inc. 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