Thursday, March 10, 2011

Why Single Line Stores don't work case studies

Back in 2001 there was a trend started in the scooter industry by Piaggio Group. This was the boutique idea. I could go on and on about the reasons why this didn't work, but more often than not someone would come to the office and say "I just got turned down for a Vespa franchise I want a Malaguti boutique," Chris and I would look at each other and ask can this work?

Malaguti Moto tried this in Milan so we checked it out - Here's a picture from the Malaguti single shops in Italy at the time. It was the trend Aprilia tried it as well in Italy and the USA. Needless to say things didn't work out to well for Aprilia not that anyone remembers this, but it's true.

So we opened single line shops starting in Puerto Rico, California, and in other locations. Below San Juan, Puerto Rico.

Then finally the biggest one in Atlanta. Where the most enthusiastic and nice investor I ever met named Rick Fine helped push the brand further than I had ever thought possible. Rick really gave it his best shot, even before Youtube existed he was streaming the Malaguti videos online at a cost of $30,000 a year, did viral campaigns, hired students to ride around on Malaguti's, spent money on radio and TV ads. He really pushed and opened a second location.

Last time I went to Italy I stopped by a shop that was a single line store in Milan and it still had the Vespa/Gillera signs outside, but to survive they had started carrying some Chinese lines, they also became a service center for SYM, Kymco, and was working with the local Chinese only place for assistance. The stores made more on service of the Chinese bikes than they did on the sale of the new units. I also visited the Honda shop. The Honda store is self sustaining because it's primarily motorcycles. Honda being the number one brand worldwide also has the diversity of product, so it wasn't exactly a "Scooter Shop", but much like the Vespa store they were also repairing everything on two wheels to stay in business.

So when the economy was in full swing and the motorcycle industry was on this up up and away mentality the Single line "BOUTIQUE" was an amazing concept. It sounded great, it looked great, but in reality single line stores 9 times out of 10 fail. Usually when I say this people stop me and say "what about Ducati or Harly shops?" The truth is many of these are subsidized by the OEMs especially the European ones, this has been cut back in recent years so the shops that actually do well carry multiple European lines like Aprilia and Ducati or they specialize in Vtwins. Harley stores don't make a living off the bikes themselves. They make a living off selling T-shirts, mugs, and accessories. In a bad economy that percentage has even gone up. Now HD might say oh we only closed 30 dealers in the USA, but let's be honest it's more like 70 when you count the "Satellite Shops" These are stores that belong to a dealer put in malls, airports, high traffic areas like a car mega-mall dealership etc... Vespa does this in Europe. When its convenient companies will count the "Satellite Shops" as real dealers, in a bad economy they don't because it makes investor letters look like crap. So if you noticed the local HD t-shop closed that might have been what we call a "Satellite location."

Back to our story. When it comes to Scooter Stores you need both a Tier One brand like Vespa, Aprilia, Malaguti something Italian and you should always carry a Second or Third tier brand. Meaning you need a price point brand. Just take a look at the Vespa map and ask how many of these stores have lasted longer than ten years? How many are the original owners from 2000? I've personally known three owners of Vespa Miami over the course of ten years. So it went broke twice got sold and the new owner owns three locations. When one location is doing terrible the other two maintain it, but the majority of shops don't have that luxury. The Miami Beach location says "Vespa Miami," but it sells mostly Genuine scooters now to stay alive.

I often comment to everyone in the industry Piaggio needs a Chinese scooter priced like the Chinese, but I doubt they will do so. They should also make the multi-line store more about all the brands Gilera, Piaggio, Aprilia, Vespa. Why? Because the brands are global now. - Oye Martinez esto es para ti! - Some Advice for the New Piaggio Group of Americas President. Sounds crazy? Well we live in a Global Market and re-badging a Gilera as a Piaggio is a dumb idea. Same goes for re-badging a Derbi as an Aprilia. Americans read UK magazines, we watch MOTO GP on Dish, we used to buy 2,000 Derbis a year from Cycle Imports before Piaggio took over and if you visit Key West or Miami Beach you still see a ton of them in rental fleets. If they could make up for all the original agreements before the Aprilia takeover you could get away from towns where you have one Aprilia guy and a different Vespa guy. What makes sense is a multi line store with different price points.

The truth is in America the consumer recognizes the fact that Vespa is basically the word Scooter in their mind. I think Vespa should just charge for use of the name Vespa and get it done with. Seriously calling your shop "Kymco of, SYM of, Genuine of," just doesn't carry the same weight. Even Malaguti couldn't carry a boutique shop which is one of the reasons I started importing SYM from Taiwan. You absolutely need a value scooter to get the store going.

High quality scooters also do better when you put a lower priced point unit next to them. You can point out the differences. You will always have the consumer that's "cheap" and "doesn't care" nor will they buy a helmet or a jacket, that's fine. However, you shouldn't loose that sale to the guy working from his house or a U-Haul facility because you won't sell a $799 scooter.

So when a dealer tells me I don't know about single line Scooter Stores. The truth is I care more than I should, and know more than anyone should. I know that a single line shop unless you have the margins to sustain them year round, unless you can sell as many T-Shirts as Harley Does ( Only Vespa can do that ) and that you absolutely need to fix, sell, and help people with Chinese third tier brands to survive. The gas price increase came just in time to save many Vespa single line boutiques, but it might not last. When they tell me money is tight, or what can I do to fix my shop. Well maybe you should start by looking at the last ten years and learning from history.

The shops that diversified survived.

Adapt or die it's the first rule of Arrakis - Frank Herbert.


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