Dealer Profit on New Bikes

[bigjohnsd]

I wasn't a good salesman, can't count the number of mothers I talked out of buying 600 cc Sport Bikes for their 14 and 15 year old boys. Yes, 14 and 15 year olds can get a MC license in South Dakota.

One of my Mantras has always been, "Just because you can, doesn't mean you should!"

 

[wetwolf]

I've seen more than one younger folk trade in a 125 or 250 scooter for a 600. Lots of times the bike and rider never made it to the 1st service.

The harley shop i worked at had a "Chrome Consultant", not sure if that was actually the title, but pretty close. Gotta remeber, Harley is all about the Look, the Sound, and the Feel. 1st thing you learn at Harley 101. I've worked at dozens of bike shops, mostly as service manager, but also parts guy, tech, etc.. I don't sell people things they don't need. Shit, I will tell a custoer that they don't need one of my jetski farkles for their application. Better a happy customer then one that isn't satisfied.

If it don't go, Chrome It!!!

Da Wolf

 

[El Toro]

This thread reminds me of the camera industry too. Not the the safety aspects, but the margin aspects.

The mom 'n pop shops used to rail against the fact that the big city discounters could sell new gear below their "dealer cost" from Canon or Nikon.

Canon and Nikon insisted that the price was the same to all dealers.

The upshot was that the camera body invoices were all the same, but if you bought enough bodies, you would "get in on" the free or absurdly discounted "other stuff." Free bodies, lenses, flash systems, etc.

It may not be like that today, but that's how it was 20 years ago.

 

[BkerChuck]

One of the major problems Harley dealerships faced in the '90s and early part of the '00s was just how deep the mother company kept hold over what a dealer could and could not do. I started off working for a small family owned dealership that handled Harley, Buell, and Triumph. Harley came in and informed them if they didn't "segregate" their model lines they could lose their franchise. Owners added on to the building making a slightly separated showroom for the Triumph line. Next Harley wanted them to build a whole new, bigger, better showroom or get pushed out. They sold out after being in the business for more than 20 years rather than go further in debt.

New owners bought them out but had to sign a contract with HD giving them 18 months to purchase land and build a glorious new show palace, without the Triumph line. Real estate where Harley wanted them to locate is pretty premium so it took longer but Harley did give them extensions. Next, Harley had to approve your building design. New owners had a great floor plan in mind that they'd designed themselves but had to fight tooth and nail for HD to approve it. Finally sticking to their guns the owners built what they wanted and after seeing the finished result Harley sent people in to photograph the shop and add their design elements to what they wanted other new dealers to shoot for. Finally after the new building was complete it took a week to clean out the old shop and move into the new one. We laid it out with different model lines each having their own display area. Sportsters with their related accessories in one corner, Dyna family in another, Softails, Touring bikes and V-Rods likewise. We put a bike in front of a wall and arranged the appropriate accessories behind them fro back to front like how we had placed the bikes. In this way an unfamiliar customer could see where the part would fit and make their shopping experience easy.

Two months later and sales are strong, Harley sends in their "Retail Environment Group" to see how we're doing. They make us completely rearrange our entire shop! They want parts arranged in neat vertical columns based upon the size of the packaging. WTF? How does this have anything to do with where it fits on the customers bike? Doesn't matter. If we want to get our full allotment of bikes for the year we have to dance to their music.Needless to say we do as we're told and to no one's surprise the customers are not happy. It went from being easy to shop to a complete clusterf...It's only gotten worse in the following years after the recession and since with an eye on corporate profits. I must admit I used to love working there even though I never bought into the cruiser mentality. My Buell was as close as I'd ever get and I'm sure most of you know how Harley handled that.I have literally tons of stories I can tell you about my time there but that's for another thread maybe.

Business has to make profit to keep the doors open and I certainly can't begrudge someone who invests their life savings into their dream from wanting it to work out. I guess I'm just trying to give some of you a little insight into the things I witnessed and the politics that may come into play.

 

[BigOgre]

Just saw this today and after reading some of the posts in this thread thought it might be a good place to tack it on. Don't think anyone here will find it surprising though.

Harley Davidson's Earning Report Might Be Worse Than You Think

 

[El Toro]

I've been pricing 2018 Goldwings with the high volume "pirates and discounters" that my old boss used to rant against. You know ... the guys like D&H who every dealer hates, but who forums contend are the place to spend your money.

In any event, I was talking to a salesman at the dealer that bills themselves as the "Largest Honda Powersports dealer on the Earth" after having spent some time on the phone with folks at the dealer that bills themselves as "Willing to do anything to earn your business."

I was told that Honda kicks back different levels of rewards to the dealers depending on their volume. If you sell enough Goldwings, for example, Honda will give you X dollars a piece for having done so. X can be a large number, with 3 or more digits.

I was told that on some models they will price at invoice and just take the kickback as their profit. Goldwings, for example.

So ... this is very similar to the camera industry. Theoretically, everyone gets the cameras for the same wholesale price. And they are supposed to sell at the same msrp. But if you buy enough of something, you may get other stuff, including cash, back.

Everyone may be invoiced the same price for the same bike ... but like the auto industry, the invoice doesn't tell the whole tale. The kickbacks are an important part of the equation at dealers who are big enough to see them.

 

[Geezer]

The same is true for automobiles. If you walk in to buy a new vehicle and pay more than dealer invoice you are paying a premium. Many dealers will show you the invoice so you know what 'they paid' for the vehicle. They make their profit on other incentives from the manufacturer.

 

[bigjohnsd]

The "kickbacks" you refer to see called "Dealer Holdback". Dealer Hold back in both the automobile and POWERSPORTS Industries is not "Profit". The way it works is this:

Dealer orders unit, dealer is billed unit cost, transportation charge and approx 3% surcharge. The Surcharge is the Holdback. When the unit is shipped to the dealer the dealer is billed for the sum of the three. Most dealers can't afford to pay cash up front for their inventory so they "Floor" it. The credit branch Of The parent company pays the manufacturer and the dealer owes the Credit Branch for the unit. The manufacturer still holds the 3% the dealer paid him. When the unit is sold and warranty registered the Credit Company gets paid by the dealer. Depending upon the manufacturer, the hold back gets credited back to the dealers parts account on a monthly, semi-annual, seasonal, or in some cases, annual basis. This guarantees the mother company that the dealer can pay his parts bill. The manufacturer earns interest in the holdback money he retains, the dealer never received any of that interest. So, let's say the dealer carries $1,000,000 in inventory. 3% of $1,000,000 is $30,000. A significant chunk of change. Enough to find at least one semester of the Dealers daughter's college every year.

Most dealers won't get into the hold back to sell a unit unless it is over 1 year old. Why? Because most Of the manufactures Credit Companies recognize that a unit that has had a birthday may be new but isn't worth what the dealer paid and is carrying it in his books for so they make him pay some principle on that unit. There are frequently Manufacturer programs which rebate money to the dealer for selling old model units. This often enables the dealer to sell below factory invoice. Sometimes the details of these factory programs are available in industry magazines or on the web at died like Edmunds, Kelly, Motorcycle Industry News etc.

 

[El Toro]

I would not touch floor plan under any circumstance.

Its a great model if the stuff moves in 90 days.

Its a way to go bankrupt if the market stalls and youre holding bikes from one season to the next.

The dealers that do the best are ones that hold their own destiny in their own hands.

 

[bigjohnsd]

Joe, most dealers do not have the financial wherewithal to self finance sufficient inventory to run a profitable operation. To compete in today's marketplace one needs to have one of every color of every model ready to sell. Few dealers have the cash, not would it be a good place to park said cash if they did have it. With interest rates as low as they are it makes little sense to own your inventory.

 

[El Toro]

I agree. Most dealers do not have deep enough pockets to avoid floor plan.

I am risk averse and would never sleep if I was in for what many dealers suffer through.

Its a tough business, and the high volume discounters make it harder still.

I bought that leftover 2016 F6B Deluxe from a local guy. I almost bought it last fall, but he would not get close to the prices offered at Southern Honda Powersports or Rockingham Sport Cycle.

After another year of sitting, with Rockingham and Southern both out of the Deluxe model, for some reason he broke and stuck a sign on it priced as the discounters.

So I bought it from him.

You should have heard the sales manager whining about the beating he was taking.

The owner is a friend so I told him that he should not sell it to me if it would hurt the business .

Then he started in on how hard it would be on him to take two bikes in trade and give me cash back.

So I told him again not to sell it to me if it would hurt the business.

Know what? He did sell it to me.

Its a tough business.