Some dealers may lose Honda PWC – September 25, 2006
September 25, 2006
Filed under Features
A number of Honda Aquatrax dealers who initially signed on to carry the brand’s personal watercraft line are reaching a critical juncture in their relationship with the company.
According to dealers and Honda officials, when the watercraft line was first offered, it came with a catch. To qualify, dealers had to agree to pursue an all-Honda concept in their dealership or commit to Honda as their lone PWC offering. Should they not comply with the terms of the agreements, which depending upon the dealer are due in either January 2007 or January 2009, they would no longer be allowed to carry the Aquatrax line.
According to Honda officials, roughly half of the dealerships that carry the Aquatrax line are Powerhouse dealers, and thus won’t be affected by the deadline. But about 40 dealerships, the first to commit to Honda’s PWC line, are reportedly affected by the agreement. American Honda said the company recently sent out a letter reminding these dealers that they need to let Honda know their intentions.
“The letter that has just been sent out has been sent to all 40 of those dealers, regardless of whether they are exclusive or not, reminding them of the upcoming deadline for that five-year period,” said Jon Row, manager of American Honda’s Powersports Press Department.
“We’re looking to find out where they are with their changeover” to become Honda Powerhouse or exclusive Aquatrax dealers, he said. Probably half of these dealers either were or are currently exclusive dealers. We have an anticipation that there will be some small percentage that will not complete the requirements of the agreement, and if that’s the case, then the sales agreement will be non-existent.”
Ron Seidner, owner of Bert’s Mega Mall, whose multi-line dealership is looking at a 2009 deadline, isn’t surprised Honda is enforcing the PWC deadline. “I guess they have to because other dealers have gone and done what (Honda) wanted, and spent all the money on their stores to make them Powerhouse stores,” Seidner said. “If they didn’t enforce it, I’m sure they would have a lot of lawsuits from these dealers who would say, ‘Hey, we spent $300,000 on our stores, and you’re still letting Joe Schmo carry it.’”
One dealer facing the January 2007 deadline is Riva Motorsports, one of the largest multi-line PWC dealerships in North America.
“Five years ago we took on the Honda Aquatrax line with the intention of looking into the possibility of opening a standalone Honda facility,” said Dave Bamdas, owner of the Pompano Beach, Fla., dealership. “Unfortunately, we were not able to secure the proper location to meet the terms of their dealer agreement that requires Honda exclusivity. As per our contract, our Honda Aquatrax dealer agreement is being canceled Jan. 1, 2007.
“Our main concern is losing the ability to service our customers who purchased Honda Aquatrax units and honoring their warranty. As of the 2007 Honda Dealer Show, ideas were still being discussed, but it appeared Honda had no clear exit plan for dealers and customers’ service and warranty issues.”
“The company will have to be judicious in how it approaches that, because it has to be fair to everybody,” responds Honda’s Row. “And I think you can expect that from us.”
According to Honda, the Powerhouse concept has numerous levels that can vary between dealers. Although Honda would not specify each Powerhouse level, Row said “they really are on a case-by-case basis. Honda’s definition of exclusive has been provided to all dealers in several formats. Any Honda dealer who has questions about specific plans or interpretations should be directed to their district sales managers.”
As Bamdas sees it, he must secure a separate property, a challenge in pricey South Florida, then construct and staff an entirely separate facility, from sales to service, to become a Powerhouse dealer.
Seidner, however, believes there is the potential to make the Powerhouse concept work within his admittedly massive existing property.
“There are different levels of Powerhouse,” said Seidner. “It’s not like a one way-or-the highway type of deal. There are different avenues for dealers to get to those levels if they work with Honda, from what I understand.
“We are going to work with Honda to come up with some type of level of commitment,” said Seidner, noting that he’ll be keeping an eye on the market to make sure the Honda Powerhouse concept is a smart move for his dealership. “My plan is to hopefully conform to what they’re asking, if it’s in the budget and fits our business mix at the time.”
Working the Powerhouse concept into a multi-line dealership’s overall retail space, however, presents a challenge.
“In our store, we need to really come out with a new creative type of way to do it, because they want their product separated,” said Seidner. “We’ve got 140,000 square feet. If we’ll keep your Honda watercraft and ATV way over here, and a customer has to walk 250 to 300 feet to see the other units, it’s hard to be successful in that area.
“They (Honda) have a lot of good concepts, but in some stores, unless they’re single line, it will be very difficult to do it, to merchandise properly for the consumer and make it easy for them.”
Good Business Sense
The situation also begs the question whether it makes smart business sense for Honda, a company who still has a relatively small presence in the overall PWC market, to consider removing the Aquatrax line from a number of high-profile showrooms.
“From strictly increasing their personal watercraft business, it doesn’t seem to make sense in the short run,” said Bamdas. “But their ultimate goal is to grow the Powerhouse network, and this is part of their corporate strategy. And they’re doing exactly what they planned to do. They’re not going to sell more watercraft in the next few years, but ultimately they feel it will lead to more Powerhouse dealers in the long run. And I guess we’ll have to see if that actually happens.”
“I think Honda has to do it,” said Seidner. “They are already so far into this, and there are a lot of agreements out there. I think Honda has to in order to save face with their network. They need to honor the deal they made with people. Does it make business sense? Probably not, but I’m not Honda.”
Average-size dealers, like Decatur, Illinois’ World of Powersports, admit they’ll likely just drop the Honda line if and when push comes to shove. “If I had to make the decision today, I just couldn’t justify it,” said World’s Steve Crowe. “We sell Sea-Doo and Honda, and we sell a good bit more Sea-Doo than we do Honda. So for the cost to go out and staff and build a Honda-only watercraft store, I don’t think it would be justified. I think that’s what Honda would like to see happen, but I don’t think that’s in the real world yet. I guess some of these Powerhouse stores have done well, but I know in our area you just couldn’t survive.”
For Honda, the goal appears to be to create more Powerhouse stores in the long run, rather than focus on the Aquatrax line’s short-term success. “It’s really up to the dealers,” said Row. “We just want to know where they stand and what they’re doing.
“But our intention is to have Aquatrax PWC marketed through an exclusive environment.” psb