Bidding for a bigger industry presence – June 5, 2006
June 5, 2006
Filed under Features
EAST WINDSOR, CONN. — For Jon Plankey of The Toy Club, Swanzey, N.H., it’s a possible inventory lifeline for his growing small shop that relies on an increasingly difficult commodity to find — used motorcycles.
To Frank Montero, Ramp Motorcycles, St. James, N.Y., it’s a chance to reach a different clientele, one that could initially increase sales volume and perhaps provide more profitability in the future.
For Steve Pighetti, MotorSports International, Auburn, Mass., it’s a reliable way to turn more new inventory.
“It,” in this case, is Eastern Powersports Auction, and what dealers are using the still relatively new business for can vary dramatically. But even with different expectations, the dealers do share a similarity — a growing interest in the monthly wholesale event. In the company’s 2nd anniversary event on May 17, more than 200 dealers bid for 300-plus vehicles. That’s in stark contrast to what occurred just two years earlier when a handful of dealers vied for just nine vehicles.
At this latest event, bidding in the form of quickly raised hands, barely noticeable nods or dismissive shrugs ran on for more than three hours. Bidding also was conducted online. When all was said and done, 76 percent of the vehicles — from motorcycles and quads to snowmobiles and PWCs — switched owners.
Other powersports auctions also are citing growth in the business. A Manheim official said they’ve seen a 10 percent increase in the past year in the number of powersports dealers attending and a 60 percent increase in sales at their speciality auctions, held over 20 sites across the nation. An official at ABC of Indianapolis Powersports Auctions said they’ve seen a 50 percent increase in dealers’ attendance since 2004.
Reasons for the growth
The size of Eastern’s auction is not the attractor itself. After all, other auction companies offer larger facilities and more expansive vehicle selections.
But the convenience of having an auction facility within driving distance of their dealerships is attracting dealers throughout the northeast. MotorSports International’s Pighetti is one such example, having become a regular at Eastern rather than “getting on an airplane, staying in a hotel, and then not buying anything because the prices might be too high” at another auction.
Besides convenience, dealers interviewed by Powersports Business cited Eastern’s professionalism and reliability — sellers leave the auction with checks and buyers with titles so their newly purchased vehicles can quickly be put on sale.
The increase in dealer interest has Eastern owner Larry Tribble planning an expansion of the facility. The powersports auction building lies on a sprawling, 300-plus-acre facility that spans both sides of Route 5 in East Windsor, Conn. Most of the facility is made up of parking lots and buildings supporting Southern Auto Auction, another growing business that has been in the Tribble family since its inception in 1947.
The auto auction’s roots are not so different than the powersport beginnings — in each case a member of the Tribble family took advantage of a need in the marketplace. Larry’s father, L.G. Sr., purchased cars from the South and then transported them to an area starving for automobiles that weren’t corroded from winter months of driving on salted roads. More than 50 years later, Larry Tribble recognized a need for a powersports facility after attending an auction in the South that featured vehicles that had been transported all the way from up north. Tribble couldn’t help but conclude that his family’s site, located within a day’s driving distance of the New York and Boston metro areas, would prove popular with northeast dealers.
“Dad picked a great spot,” said Tribble, smiling as he looked upon the site of the family’s first car auction, a brick building that, size-wise, looks like it could hold little more than a minimart. The brick building once contained two dealer lanes — mini roads that led in and out of a facility and provided dealers a chance to inspect the vehicles. The small brick building is now dwarfed by Southern’s current car auction site — an 18-lane facility.
The powersports facility, located on another part of the Tribble acreage, is housed in an indoor facility that took a year to renovate. Currently, the all-indoor powersports auction takes up only about a third of the existing building. Tribble plans on doubling that 100,000 square feet of auction showroom in the coming months.
Tribble also is hoping to double the number of available vehicles per auction, to 500, next year. Since the company relies heavily on dealer consignments to fill the auction showroom, Tribble and his staff will continue to persuade powersports dealers to accept more trade-ins and take advantage of the wholesale market.
Tribble and the Eastern staff have been surprised to find how many powersports dealers do not take trade-ins — a practice that was once commonplace in the auto industry decades ago.
“I found that almost unbelievable,” Tribble said of dealers who refuse to take trade-ins. “It’s part of the commodity business.”
“What Eastern Powersports Auction is doing is helping the industry change its business model to mirror that of the car dealer where they have opportunities to buy used vehicles and retail them,” said Jim Dodd, Eastern’s marketing manager.
Dodd points out the wholesale market is not designed to be an additional revenue stream for dealers. Instead, it offers them a reliable trade-in option that could be the difference-maker in new inventory turnover.
Jay Eugair, general manager of Central Vermont Motorcycles, Rutland, Vt., could testify to that. More than a month ago, Eugair took in a relatively inexpensive BMW bike as a trade-in for a new Honda Gold Wing. After the BMW did not sell for a month, Eugair unloaded it at Eastern’s May 17 auction.
“We knew it would do well there,” said Eugair, adding that he thought the dealership would not only recover what they paid for the BMW, but also potentially make money on the sale.
In fact, whether vehicles were selling for inflated prices was an issue brought up by several dealers.
“They sell at this auction for more or what I was asking retail at my shop,” said Lody Jiskoot, CBC Motorcycle Sales, Colchester, Conn., “and I’ve also seen people come in here, these car guys from next door, and pay more than the bike sold for new last year on the floor.”
Eastern’s Dodd said a minority — about 10 percent — of total sales are from auto dealers bidding at the powersports auction. Another small percentage of sales comes from dealers who sell both autos and powersports vehicles. But the overwhelming majority of powersports auction sales, about 80 percent, represent purchases from powersports-only dealers.
Dodd also said auctions often serve as an education to what the retail value of vehicles really are.
“The auction is a market maker,” he said. “History basically tells you the value of a vehicle based on its selling here. That’s one of the things you haven’t had before. Because if I was a wholesaler and I told you it was worth $3,000, if you didn’t go to three other wholesalers to see what they would be willing to pay, then it’s only worth $3,000. When in fact it may be worth $4,000. You don’t know that unless you’re in a competitive, open market, and that’s what we do.”
And it’s a market that serves different purposes for different dealers.
For Montero, the business manager of Ramp Motorcycle, the wholesale market provides a chance at reaching customers that the largely custom cruiser store doesn’t reach — the lower-end buyer.
“By having a large preowned inventory, you can attract more people to your store” and the dealership will then have a shot selling the used bike or up selling to a new Saxon or Triumph on the showroom floor, Montero said.
For Plankey of the small New Hampshire store, The Toy Club, it’s a chance at becoming a bigger player in the industry.
“We originally opened as a consignment store and realized in a month that we were going to have to start buying our own inventory because we couldn’t get the (bikes) fast enough,” he said. “If the prices are right, this will be gigantic. This will be the difference between us being an OK store and us being a big retail outlet.”
According to Pete Scott, The Toy Club’s mechanic, Plankey ended up successfully bidding for about 10 bikes.
Keeping pace with the trends
If fears about keeping up with the changing preowned market is making you think twice about attending auctions, then Eastern Powersports has a potential solution: its monthly market report.
Each month Eastern mails out a list of what vehicles were sold for in the previous auction. The report breaks down the vehicle by brand and year of the model.
“(Dealers) can actually look at the market report and know what that product is doing on a wholesale level. And that’s critical,” Dodd said.
Steve Brown of Brown Enterprises, South Londonberry, Vt., said he uses the market report as a “barometer for some of my trade-in activities. You get an idea of what you can get at an auction, if nothing else.
“Every tool helps,” he said. “Nobody depends on this, but this is helpful.” psb