May 14, 2007 – Why the metric dealership isn’t as good of an investment
May 14, 2007
Filed under Uncategorized
I have had several contacts in response to my recent column regarding Chinese products and whether established dealers should add them to current Japanese offerings.
Other than comments about E-ton, I have had no positive responses. At a just-completed sales management conference, attendees had nothing but horror stories to tell. There was not one sales manager who was happy with Chinese OEMs, other than with E-ton. If anyone has had a positive experience, please let me know, and I will be happy to share it.
The key point for established dealers to remember is that your customers have been spoiled by the high quality of Japanese products and the level of support they receive. You, as a dealer, will have to meet those same expectations, whether or not you get any support from that new Asian supplier. Do not bet on the come if you do not have to.
BUYING A METRIC DEALERSHIP?
I also have had a number of inquiries from metric dealers regarding the sale and acquisition of dealerships. It seems that many of my old friends have felt slighted that all our focus seems to be on Harley-Davidson dealerships.
Many good operators are generating record level profits in metric dealerships. It’s clearly a good business opportunity for hard-working, astute operators who can control the showroom and not get buffeted by the swirl. But a good business opportunity is not necessarily a good investment opportunity.
The value of a metric dealership is held down by the continued shoddy distribution process. Many changes and improvements have been made in the way of dealer relations and support, and things are certainly a lot better than in the past. However, we still are confronted with a seemed dictum of “if you shove enough down their throat, it will eventually come out their ass.” In my opinion, Honda is currently the worst offender by doing everything they can to load up their dealers. All sales managers I talk to who have Honda and another line are selling around Honda because the price has been eroded. Such practices absolutely diminish the value of the retail dealerships.
If you are looking to buy a metric dealership, pick the right store in the right market, in a state with good franchise laws, and you can make a good living, provided you are strong enough to say “No” when OEMs try to shift the burden of inventory to the retail segment.
The plain facts are that Harley-Davidson dealers make up less than 10 percent of the franchised dealers and collect, by my estimate, 60 percent of the total revenue. This naturally draws the attention of investors to those opportunities and away from the metric stores. What we seem to have is 80 percent of the people seeking to enter the retail motorcycle business gravitating to Big Orange. So 90 percent of the sellers are trying to attract 20 percent of the buyers, so the price is less.
For all of the design and manufacturing acumen that the Japanese OEMs clearly demonstrated, they have totally failed to recognize the value of having a profitable dealer body. Until they do, a franchise with such a manufacturer will carry little resale value in the marketplace. As the “Asian Invasion” progresses — and it will — there is more doubt regarding what value there is in a metric franchise.
STILL MONEY TO BE MADE
Please do not allow any comment I have made regarding the sales value of your metric dealership to in any way imply that there is still not a good income to be earned. It’s just harder.
Creative operators can stand out, and we have learned ways to make price much less of an issue with buyers.
There are still far more people wanting to buy than the industry is reaching, and we work with good metric dealers who do it every day. The best and most profitable operators are out looking for inventory, when they need it, and not looking at inventory they do not need.
And, never forget that in the history of our industry, no dealer ever went broke because of what they didn’t buy. Cheers, Ed. psb
Ed Lemco has been involved with the powersports industry for more than 30 years. Lemco, the former owner of Lemco Management Group, is the founder and executive director of the National Council of Motorcycle Dealer Associations. Lemco currently operates a call center for dealers in St Croix.