Monday, August 23, 2010

Response to state-of-the-scooter-union-the-great-depressurization

Response to state-of-the-scooter-union-the-great-depressurization

I strongly believe theScooterScoops recap this past weekend was probably the best write up on the state of the US scooter industry I have seen in ages.

In the interest of full disclosure I am a friend of the writer and we do disagree on many things, but we agree on one thing and that’s giving stores ideas on how to survive the downturn. It turns out I was correct in many of my predictions in 2008 that I wrote for Motorcycle Product News. You can see my articles and predictions that came true here:

There are some main lessons going forward and I predict we will need to see some of these implemented for dealers to survive 2011. I’m not going to cover what happened in the timeline since Steve pretty much broke it down, nor will I comment on SSTAM which in my opinion is one of the best shops in the country – They are also a top MRP dealer so I ask that everyone support them as they restructure. Peter was a close friend and I think that his legacy goes far beyond simple unit sales. Any distributor that signs a GE agreement knows what they are signing and they are known as “Get’s Everything” for a reason. Because when you make a deal with the Devil sooner or later you end up paying hence why I stated in my articles – STOP BUYING BIKES AND FOCUS ON PARTS. The dealers that understand this point make money and survive and the dealers that don’t close. Simple it is the first law of Arakis “Adapt or Die.”

Let’s keep the industry going. There are lots of companies out there – some have done wonders for the business and bringing in new riders. I don’t agree with everyone’s policies, but I can praise and appreciate much of what they have done. I can also complement and support companies that do the right thing by dealers, who always set a higher standard and would rather fail in attempting greatness than to settle for mediocrity and I can say that much about companies like Kymco and much of what I am about to say comes from what I hear from dealers and about what I have seen them apply in the last two years.

Things aren’t all doom and gloom certain Piaggio dealers are buying all the returned units and making a huge profit. A lot of dealers are offering in-house consumer financing, some dealers are starting rentals and tours. They are making MONEY in a bad economy. However many dealers continue to do business the same way they did business last year, you can’t just cut expenses you have to change the way you are thinking. I saw this thread on 2stroke buzz and I think Steve addressed it correctly there are a lot of positives happening and for all we know if gas prices go back up things will get better. Still you have to behave like if gas prices won’t go back up and plan accordingly. The main thing is visit your local shop and buy something, and if you can (I am biased on this – buy some racing parts from MRP) simply put I don’t want to sell them to you directly; I want you to buy them from that store so that we can keep the industry alive.

If you want to see a good example of this check out Scootertronics. They adapt by repairing everything and enforce the golden MRP rule – The Vespa shop that closes goes out of business because they refuse to repair other Italian brands or a Kymco only making a store like Scootertronics bigger in the long run. A lot can be learned from this.

In the meantime for everyone else here are my predictions and what I think needs to be done for 2011.

1. The Industry needs more consolidation. Do we really need 49 distributors of bikes? Most of these companies need to close. ZNEN still has 7 distributors in the USA. Some companies like FlyScooters have woken up and realized if the Chinese have no loyalty why they should represent them, but these small regional bike distributors and dealers buying by the container need to go away. For companies like Kymco to do well we need to end this.
2. Do not give companies deposits – PERIOD. I have seen several dealers loose thousands to companies about to liquidate or with units that are stuck in Customs – you’re a fool to fall for this. Pay only for the bird in hand. The units won’t get released until next year or something will happen. There are some companies on the verge of closing calling dealers asking for deposits with the names of customers on them. Then they either contact the customer or they fail to send you the bike – don’t fall for it. If you pay for a Benelli and seven weeks have gone by without a bike you are likely not to get it.
3. If you find out the distributor no longer has a parts warehouse – that’s a good sign you’re bike isn’t going to have a warranty next year. PARTS = MONEY FOR YOU AND THE DISTRIBUTOR SO IF THEY DONT HAVE THEM YOU NEED TO FOCUS ON THEM - WE CAN HELP YOU WITH THIS - ITS THE KEY IF NOT YOU WILL PASS UP BUSINESS

4. BE SMART – Don’t offer warranties on new units if the importer closed. I have said this time and time again to people like DAELIM – if Daelim closed and that new Daelim is still on the floor the only person on the hook is the Dealer – We can help you with some parts but be smart.

5. My prediction for 2011 – Only companies that have a vested interest from the factories and are direct subsidiaries will survive companies like CFMOTO, KYMCO (only one of two joint ventures in the world for the $700 million dollar company that is Kymco) these guys have the funding to continue even if it gets worse others will stop paying warranties, backtrack on promises, and screw dealers before they literally burn. So make sure you are dealing with a brand that is well capitalized and can go for it long term. I know this because I’ve sold over 10,000 units in ten years, I worked with several brands and I have been offered the distribution again for several companies and I have passed on them because given all the market indicators it’s almost impossible for big brands to make it unless they are part of the factory. These are the guys that will not just survive but come out on top.

6. EPA and NHTSA need to do their job. The rules started getting enforced late in the game, but let’s play fair. Put the owners of Roketa in jail but make sure you don’t cut them a deal if they violated $2 million dollars worth of rules. More than one company went broke trying to live up to all the rules and comply meanwhile tons of Chinese companies got rich violating dealer state laws, EPA, warranty laws, etc…. let’s make it an even playing field.

7. Stores need to repair everything = PERIOD. Vespa only boutiques don’t work. Piaggio USA needs to expand its range of mom and pop stores and stop focusing on car dealers and Arctic Cat shops that have no business selling scooters. Set up more mom and pops. It will lead to more sales overall. In the meantime Set up an MRP account and advertise brands like TNG, MALAGUTI, CFMOTO, DIAMO, ITALJET – we purchased 7 companies in the last 18 months when you add up all the CPI scooters, Cubik, private label QJ – Vento units there are over 100,000 units out on the US roads. If only 50% are still being ridden then you need to advertise that you repair these brands like UNITED MOTOS and get their business. – That’s how you make money.

8. Build the destination shop. Obviously new unit sales aren’t generating store traffic. So focus on clothing – TRY ARMADILLO, Focus on Accessories, add an espresso bar, ice cream, put in a couch and a TV, make it a place you want to hang out not just buy oil – Look at our other articles on this.

9. Alternative Financing. = CF MOTO has the best FINANCING Program in the country right now. Contact them If you can’t get GE you need in house financing. Any dealer not taking advantage and working with a company like CF is putting their fate in the hands of GE.


10. Focus on four to three brands. I call for an end to the 12 brand scooter shops. All they do is hog the market. I've talked about this before dealers with seven brands who are a terrible dealer for all the distributors only stock one or two models per line and sell from a catalog, basically holding up a territory and not doing a good job, this ruins the sales for the distributor and ties up a market. This type of store is a thing of the past. Pick up a brand like CF and carry the full line. Kymco alone can fill up a shop with all their models.

11. Stop supporting the dealers that work out of their garage or moms basement. Dealers, distributors, need to wake up. You do the industry a disservice by selling from your mom’s basement. Be it parts or accessories go rent a retail location.

12. Establish a strong referral program. This is a surefire way to generate cash, repeat customers, and stop relying on advertising. Reward your loyal clients and they will come back again and again. The age of selling 40 scooters a week and financing them is over.

13. Work with companies like KYMCO that have some of the best consumer financing out there – Check the video link below. CONSUMER FINANCING IS KEY just as important as the CFMOTO dealer financing this is a two front war.


14. Implement a Drop Marketing Program – A good way to promote your business and stay ahead of the competition. Also do trade INS – swap used for used and used for new. A lot of dealers were hesitant to do this before. Do it NOW!
15. In 2011 – Leadership will come from unexpected places. As more brands close companies like KYMCO will shine because they actually pay labor and the dealer that doesn’t get warranties will close, the guy that thought they could survive by selling cheap brand X that only gave them free parts will close, and consumers are getting smarter.
16. The auction bikes will come back for parts be they CPI, SYM, Genuine, or Chinese. Those bikes will hit the road and need parts – FOCUS ON THEM don’t hate the player – embrace the game. It’s a game of numbers and these scooters will all go back to dealers for parts and only dealers that can get parts will benefit – HINT – MRP has 12,000 parts in our system right now.
17. STOP BUYING FROM CHINESE DISTRIBUTORS THAT COMPETE WITH YOU DIRECTLY – I always hear from the small dealer that says “ the internet sales don’t affect me “ guess what they affect everyone even the guy hiding under a rock. The Internet is the world now. The failure of the system lies exclusively on the dealer base because the internet be it SHOPATRON or DENNIS KIRK is half the industry now. Why do I say this? Because they fail to enforce the rules of fair play, if anything they collectively make it worse. I put this on the same level as the US government allowing Chinese companies to take ownership in big US corporations that later makes a financial contribution to someone running for office who later fails in his duties to protect us. As Hillary Clinton once put it “How do you argue with your banker?” If you buy from a distributor whose primary goal is to sell retail and wholesale is an afterthought once your entire store is dependent on them how do you keep you business? Every time you sell their scooter the end user gets a catalog in the mail or a coupon by email. Those dealers are to blame when that same distributor lowers prices, sells the same item retail on EBay or on their site below dealer cost.

The small lawn mower shops could care less. Scooters are an after-thought to them. However, the serious scooter shop, the guy who has seen the ups and downs of the past decade should know better and in many cases they don’t. They are in it out of passion and fail to see the long term over the short end. The long term is the distributor will grow and you will keep working in your small shop because you buy from someone who drop ships units directly to the end user.

This is made even worse by the dealers that know this before hand and still buy from the Chinese importer that has no regard for EPA or Warranty Laws. By buying from distributors that don’t comply with the laws you set back everyone in the Powersports Industry. All the dealer groups, all the associations that for 30 years have passed laws to help dealers survive. If dealers would stop buying from these companies others would have a chance at survival, but the current economic climate have made many dealers buy more. To focus on the $699 scooter instead of focusing on the discounted quality Taiwanese scooter.

Let’s keep the industry going. Support your local shop, support the racing scene, and support the guy that works out of a real location not his mom’s basement. Stop buying scooters on Ebay and even if it costs you a dollar more buy the oil at the local shop. That’s as much as I can say for today.

A mad thank you to Steve for his article and thanks for the mention in there.

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