Thursday, September 13, 2012

Dealer News Story and an analysis of Gainesville, Florida

This would appear to be a story or press release about a store dropping the Vespa franchise.
I have a few issues with the story that first ran in the Great Falls Tribune in Montana.

A couple of points:

1. This is Montana, not a year round state, not a state known for scooters. Any dealership that picks up Vespa and doesn't do Chinese or Taiwanese scooters cannot survive as a stand alone franchise.

2. It should be pointed out that as I have learned over the years a Vespa dealership needs to be flexible in the cold states. Americans are not like Italians, we don't ride in the snow or rain. I can find a new Vespa on craigs list from 2003 with 100 miles on it. We are recreational riders. We react to problems and rush to buy scooters when gas is over $4. Moment it goes below $3.90 everyone could care less about EV scooters and Gas scooters.

3. This is not an uncommon story. Vespa franchises in the USA change hands all the time or close and there is no mention of it in the industry press. At one point in 2008 we had something close to 400 stores and many Arctic Cat dealerships already tried this experiment. See my past articles on what makes a real Vespa franchise.

4. A Vespa franchise does not guarantee success. It can only work in America as part of an overall strategy. The only real successful shops are those that created a scene (be it Vintage or modern) and spent a lot of money and time building up the brand (look at Sportique in Denver or Motorsport Scooters in San Diego) many of these companies struggled for years, lost money, or went unpaid just to make the scene a reality. These stores stay in the game when gas is cheap and when there is a boom in scooter sales. Vespa can only add to the company it shouldn't be your only source of revenue.

Even if they are Chinese only they should put a Vintage bike in the Window and stop calling your Chinese bike VESPA LIKE.

5. If the money is in parts and service which is what the article is really saying, then we should focus on why a scooter shop is profitable if run correctly. I was on the phone yesterday with several of the biggest Chinese dealers in Gainesville, Florida. This market is strange in the summer they should be making money, but they are weak in December and in early summer. Why? Because the market is student dependent. The stores don't make money because not a single store in the town sells online and they are all focused on a niche market. All the stores are so concentrated on their segment they're not as profitable as they should be.

An Analysis of a Top Ten Market in 2012

Store #1. Sells only cheap bikes making an average margin of $300 to $500 per unit. They can discount since they are the importer. No real accessories shop. No online drop shipping, no service for the Italian, Taiwanese, Japanese bikes. Missing out on the majority of the repairs.

Store #2. The Honda/Yamaha dealer doesn't service or market to Chinese/Taiwanese scooters. Scooters less than 5% of the store sales and revenue so they are in the corner. No online sales of scooter parts except for the traditional Powersports Network website of OEM parts.

Store #3. Repairs everything (good job), turns away unknown brands. Doesn't sell everything only used. No online sales.

Store #4. Only sells and services four Asian brands, turns away all Japanese and European bikes. Far from campus, uses its flagship brands to attract clients, but cannot service 50% of the market since the employees can't buy Japanese or Italian parts.

Store #5. Focused on the students that don't have a lot of money so its picking the least expensive brands from the bottom of the Chinese barrel. Issue here is that the store lives off service, not accessories, not support, not year round rentals or leases. Its surviving off $700 scooters and has to real brand name units. This makes it extremely season. Also no website or online sales.

Store #6. The most profitable of all six.
Having second record year sells Italian, Taiwanese, Chinese scooters and services all makes and models. Only downfall  no website, no online sales. Dead in the Winter and late summer. Still, of all the shops this one has outlast 4 other stores that have closed. Why? Because unlike the store in today's dealer news article it services everything and doesn't drop Vespa because of fewer sales. If anything Vespa brings in clients that buy the Chinese scooters. They also don't resort to the VESPA like ads some of the competitors use. So there is room for growth here.

So what is Gainesville Florida missing? I have seen a dozen or so stores in the Ocala / Gainesville area over the years. Some of these have staying power, but others seem more like hobbies than actual shops because they are not thinking long term. Life goes semester to semester for some of these shops.

Besides the Honda Franchise few can last the test of a decade. Even the largest store 5 years ago isn't there anymore as Vespa of Gainesville closed and the franchise passed on to the new dealer. So its not a question of money its a question of servicing every brand, every unit, having accessories, not being seasonal. Plus you need to offer the clients (mostly students) SERVICE. Unparalleled service.

Honestly, besides websites and tech savy stores they are missing mobile repairs. There is pickup, but students don't buy the way they should and don't want to spend for towing a scooter so the towing should be free.

They need something along the lines of Rolling Wrench.

Back to the article, yes there are markets like Montana where scooters are not year round. This would not be a top market. I just read the article and I see whats wrong with the picture. The store didn't service Chinese or sell a under $1,000 scooter which they should have. Where is the online revenue? Where is the accessories section. A Vespa franchise DOES not guarantee any form of success, it just gets people in the door.

Its what you do with it after the Vespa light turns on that counts.

Q: What was your business initially and how did it evolve?
A: We started a motorcycle repair business with a small accessories store in front, at 800 10th Ave. S., across the parking lot from Hastings. It gave us good visibility at first as a new business, though I now realize drivers don’t really window shop on 10th.
I started selling Vespa scooters in 2008, and had a fairly good year. Gas prices reached $4 a gallon that summer and we sold about 35 scooters. But the novelty wore off the next year, when gas prices dropped.We had a lot of people stop by and ‘kick the tire,’ but scooter sales dropped drastically, to eight vehicles. Great Falls residents realized they could get used cars or motorcycles for the $4,000 to $6,000 they paid for new scooters. By mutual agreement, I ended the franchise agreement with Vespa.

Scooters out, used bike sales and service in at Montana shop

Publish Date: 
 Sep 12, 2012
BELT, Mont. - Metzger’s Cycles and Accessories is coming full circle. Jason Metzger, 37, cashed out his 401k plan to start the business as a repair shop in 2007. Then as gas prices climbed, he took on a Vespa franchise in 2008 and did well selling scooters – well enough to move and triple his space in 2009.
But lately, with scooter sales down, the repair business is rebounding, and used bikes are the key to profits.
The move was the best thing I could have done. With the additional space, I can do more cycle maintenance, so my profits increased,” he told the Great Falls Tribune. “I also started selling used motorcycles. I go to San Diego regularly and buy a variety of used motorcycles and all terrain vehicles at auction. My cycle sales have been good the last couple of years, an average of a couple a month.”
Metzger gave up his Vespa franchise because customers were opting to spend the same amount on used bikes. Now he wants to bring in more ATVs.
My sales are better in the summer, spring and fall. People generally don’t buy bikes when there’s snow on the ground. I’m going to stock more ATVs and side-by-side vehicles this winter,” he said. “They can be used to snow plow and for recreation.”

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