Tackling the preowned market – December 4, 2006
December 4, 2006
Filed under Features
Rick George, co-owner of Two Brothers Honda in La Crosse, Wis., has decided to put more emphasis on the preowned market in 2007 by devoting more showroom floor to used motorcycles.
That could become an industry trend in the new year as a survey conducted for Powersports Business shows a majority of dealers not only see that part of the business growing, but also more profitable than new bike sales.
The preowned market, of course, has its own challenges, including obtaining the necessary inventory.
“We always seem to be short,” George said.
Like most dealers, George takes trade-ins and watches newspaper and other media for classified ads on used bikes. “We’ll watch ads and see if they don’t sell them and then offer” a price that allows the dealership to eventually return a profit.
Beside trade-ins, George boosts his preowned inventory by offering a consignment program where the bike owner pays an upfront cost and a certain percent of the total sale. George also is required by Wisconsin state law to perform a safety inspection on the vehicle, which can result in the replacement of parts, at the seller’s expense. If the seller agrees to the charges, George later places the used bike on his showroom and advertises it on his Web site.
The entire consignment process can mean extra work for the dealer, George said, but also additional sale and service profits.
Another way to bolster inventory is using auctions, an option that most dealers don’t currently do, according to the Irwin Broh & Associates’ nationwide dealer survey conducted for Powersports Business. Of the 150 dealers surveyed, only 24 percent sell or buy at auctions.
However, that number is much higher for dealers that have a higher-than-average preowned sales percentage. Almost 43 percent of dealers that have a selling ratio of 3 new bikes to 1 used bike use auctions to augment their inventory. The number is even higher (nearly 48 percent) for dealers that have a 3 to 1 ratio and sell more than 50 preowned vehicles per year.
“I feel the adoption of auctions by the dealers on the powersports side is probably 15-20 years behind where the car guys are, in general. But I think they’re going to be quick to adapt,” said Karen Braddy, the powersports director for Manheim, the largest car auction company in the world that also offers powersports auctions.
“A healthy portfolio is important for any business owner and he should have multiple ways of getting inventory and selling inventory. And auctions are just another part of the sales cycle in general, one that can be developed quicker (by powersports dealers) than the car guys.”
Why don’t more dealers use auctions to boost their preowned inventory?
The No. 1 reason by dealers surveyed was location — 33 percent said an auction facility was too far away. Twenty-six percent said they had access to enough inventory and thus didn’t need an auction, 15 percent said vehicles bought at auctions cost too much, 8 percent said they didn’t have enough staff, time or resources to attend an auction, and 5 percent were concerned with getting stuck with a vehicle that needed costly repairs.
The Internet offers a possible solution for dealers who are either too far away from an auction facility or don’t want to spend the resources or time in attending an auction. Powersports auctions, like National Powersport Auctions and Eastern Powersports, offer online bidding. There also are companies, like godealertodealer.com, that concentrate soley on online auctions.
Using the Internet
The online bidding is relatively new to dealers and few so far are using the technology, according to the survey.
Harold Levesque, owner of TSI Harley-Davidson, Ellington, Conn., is one of the dealers that do bid online.
“We’ve had some decent experience with them,” he said of online auctions, noting he only deals “with reputable auction houses.”
The Internet offers another potential bonus for the preowned market — marketing.
Mark Campbell, general manager of Vanwall Motorsports, said the Perry, Iowa dealership saw a boost in its preowned sales this year after it starting advertising its preowned units on its Web site. “And we promote our Web site wherever we can, via print, radio, everything,” Campbell said. “That’s been one of the biggest aids” of increasing the dealership’s preowned sales.