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U.S. survey shows a dealer dividing line

April 22, 2008
Filed under Uncategorized

By Neil Pascale
Editor
Slightly less than 40 percent of U.S. powersports dealers are extending their retail sales presence to the Internet, a new national study finds.
Of those dealers that possess an online outlet, most of them said their e-commerce business is doing something that new unit sales did not do in the United States last year: grow.
Almost 60 percent of dealers with online sales said their Web revenue was either up substantially or slightly compared to the prior year. Less than 15 percent of dealers described their 2007 online sales as down substantially or slightly from the previous year.
The survey of more than 200 dealers, taken in late March, was conducted for Powersports Business by Irwin Broh & Associates, an Illinois-based marketing research firm.
The survey shows a huge disparity in dealer emphasis for e-commerce, both in terms of how much they’re profiting from it and how much staffing they’re directing at it.
The disparity in e-commerce is not something unique to the powersports industry, says Chuck Lewis, the co-founder and managing partner of Channel Blade Technologies, a provider of online marketing, lead management and sales education programs in the marine, RV and powersports industries.
“It’s the same situation” in the RV and marine markets as in the powersports industry, Lewis said. “It is disparate.”
On a national retail level, e-commerce continues to weather the economic storms, growing in both percentage of total sales and overall totals in the past four quarters alone. In the United States, online sales totaled more than $36 billion in the 2007 fourth quarter, according to the U.S. Census Bureau. Compared to the prior year period, that represents an 18 percent increase, which is nearly four times the rate of overall U.S. retail sales growth.

New business
There is at least one similarity found in e-commerce traits in powersports dealerships. Dealers report most of the purchasing done online represents entirely new business, consumers who have yet to step in their physical retail location.
That’s just the case with Wheels Motor Sports of Toms River, N.J. Owner Tom Cleary, whose online sales are up slightly over last year, says Texas and California shoppers represents his two biggest online customers. “New Jersey is way down the list,” he said.
Cleary, however, is seeing the benefits of an online presence extending to his local buyer.
“More people are going to the Internet first and then coming to the store, even if they’re a regular customer,” he said. “A lot of these people are guys I’ve probably sold five bikes to. But instead of calling me, they go to our Web site and look at what we have.”
Despite the extra attention that Web sites draw, dealer personnel are not updating their online pages more often than last year, the survey found. Roughly 70 percent of dealerships update their Web site either daily or weekly, a number nearly identical to last year’s national survey. That means the other 30 percent of dealers are only updating their sites monthly or even less often.

Lack of value
Why do the majority — 60 percent, if not more — of dealers stay away from retailing online, even if many of their stores already have Web sites?
The national survey posed just that question. The most common reasons were dealer concerns regarding staffing and shipping and about whether the e-commerce effort was worth the net gain. Other dealers said the initial cost of setting up e-commerce or the time it would take to handle that part of the business was just too great.
Jim Jensen, the powersports brand manager for Cycle Trader, says the technology itself can be a big hurdle to overcome.
“Some dealers are intimidated by technology,” Jensen said. “When you start to talk to them about putting a Web page up, which is the simplest of tasks, that’s not terribly daunting. Seventy five-80 percent of them are going to do it.
“The people who are going to [take their Web site to] the next level and offer products online, that opens up a whole other set of technical skills that they have to acquire or they have to know who they have to talk to get those things up and running. And that sometimes is a daunting procedure.”
Another reason why dealers sometimes don’t pursue e-commerce, according to the survey, is the amount of discounting online, especially for parts and accessories.
However, John Miller, owner of Marienville Power Sports of Marienville, Pa., says the presence of discounters doesn’t have to affect e-commerce business.
“You don’t have to give the stuff away, that’s just a fallacy,” said Miller, whose online sales increased in 2007. “People are going to look at convenience” rather than just price as a reason to buy online.
Cleary of Wheels Motor Sports does minor discounting on some of his products but says he still ends up making a good margin. And he attributes his growing online sales to last year’s boost in his store’s total parts and accessory sales. The rest of his business, Cleary notes, fell below the prior year’s totals.

What’s selling
Exactly what dealers are selling off their store’s Web sites varies dramatically.
New unit sales made up 29 percent of dealers’ online revenue while preowned sales made up 28 percent. Parts sales accounted for 25 percent and accessories made up the remaining 18 percent.
It’s key for dealers to carefully consider how much parts and accessories they’re placing on their Web site, notes David Hogge, an executive vice president of 50 Below, a provider of online solutions for manufacturers, distributors and powersports dealers.
Hogge says national retail surveys have shown that “if you have a physical store and an online store, you can expect 80-90 percent of the sales end up happening in the physical store, not online.” Meaning, mostly consumers are using a retail store’s Web site for “window shopping,” Hogge said. So if dealers do not have their entire in-store selection online, then it’s possible the consumer will think the store doesn’t carry the brand or product they’re after and move on to another online destination.

Staffing
Most of the time, dealerships do not have sales people who handle online opportunities as their prime job, the national survey found. Only 45.5 percent of dealerships have online sales specialists, a number that is virtually unchanged from last year. Of those who have regular salespeople handling online sales, only 16 percent are planning to change that, the survey found.

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