Posts Tagged ‘economy’

The next customer boom

April 1, 2011

At the time of this writing, oil prices were uncomfortably hovering a hair above $100 a barrel, and premium gas on the West Coast had settled in at about $4 a gallon.

The ongoing conflict in the Middle East (isn’t that redundant at this point?) assuredly means that these prices would likely go up before they’d go down, or so says the analysts.

In fact, federal energy officials say there’s a 25 percent chance those gas prices will average $4 a gallon or more throughout the summer driving season.

Smells a bit like 2008, the last time oil prices were this high. Another flashback moment? How about some of the news headlines starting to pop up across the Internet. This one could have been ripped straight from a 2008 newspaper: “As Gas Prices Rise, So Do Scooter Sales.”

If you’ll remember, scooter sales that year jumped 66 percent the first half of 2008 and eventually settled in at 41 percent higher than 2007. Many OEMs had to play catch-up to meet the demand of all the new two-wheeler commuters. It wasn’t uncommon to hear that dealers just plain sold out of certain models.

That was the year many first-time riders got a taste of two-wheels. Piaggio alone reported that its sales were up about 75 percent the first quarter of 2008. Former CEO Paolo Timoni would later report that many of these new riders had no interest in riding motorcycles, that they were fine on their Vespas and Piaggios.

Of course, with every boom there is a bust, and we all know what happened after the scooter market crashed. One could make a good guess that there’s a metric boatload of noncurrent scooters — from all OEMs, even the new Asian entries — sitting in storage waiting for gas prices to drive people back out of their cars and onto the seats of those waiting machines.

Well, it’s been a long strange two years since the oil and gas spike and attendant scooter rush, but here’s something to think about: If you were one of those dealers who catered to that huge bloom of new riders, what did you do to keep them coming back into your store? Did you convert them into regular customers or did they travel back out the door they came in, and back into their cars after gas prices dropped down to partially ridiculous levels?

So, if the analysts are correct and gas prices continue to inflict pain on most drivers at the pump, there’s a good chance many of those folks will make the switch to two wheels. And not just scooters. High gas prices could likely get people out on motorcycles as well. (It’s odd wishing for high gas prices, isn’t it?)

The question is, if sales do take a jump and more people start riding, are you prepared to service those new customers? What will you do — this time — to keep them coming back into your store? And how do you reach out to potential customers to let them know you’ve got something that can help ease their petrol pain?

It’s conventional wisdom that getting new customers through the front door is one of the most difficult tasks of running a business. Now, with gas prices giving them a little nudge, it’s your chance to welcome them into the powersports family.
Let us know if you were one of those dealers who converted those 2008 scooter riders into loyal customers. Also, drop us a line if you’re cooking up plans to win over the next group of new riders. Send your comments to editors@dealernews.com.

Dennis Johnson
Editor in Chief
dennis.johnson@dealernews.com

This story originally appeared in the Dealernews May 2011 issue.

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2011 Doesn’t Look Much Better than 2010

October 18, 2010

The U.S. Economy Is In a Flatline Mode.
Consider the Situation When You Vote Next Month

Last January, I attended a dealer 20-Group meeting and offered my outlook for the year. In a nutshell, I told the dealers not to expect a flood of excited customers in the spring; it just wasn’t in the cards. And, in my view, they would be better off planning for a slow season rather than hoping for a heavy increase in floor traffic. I was roundly criticized by one successful dealer for being too negative.

Unfortunately, traffic did not pick up in the second and third quarters and this quarter doesn’t look too hot, either. Now, looking ahead, I don’t think there is much hope for a big improvement in 2011. I’m basing my initial forecast in part on what I’m hearing from a number of sources, and in part on an excellent analysis that appeared Oct. 12, 2010, in the  New York Times. The lengthy report carries the gloomy headline, “Across the U.S., Long Recovery Looks Like Recession.” I suppose I could stop right here; you get the point.

The bottom line is that it’s going to take years to recover from this recession, the downturn that’s been the worst for this country since the Great Depression. Consider the situation as you build your 2011 business plan and as you stand in the voting booth next month.

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Two More Pieces of Positive News

May 3, 2010

Signs of an Improving Job Picture

Two bits of news today suggest that the job picture may be improving, a situation that could lead to increased consumer spending on discretionary products this year, possibly even for powersports equipment.

A report in today’s Wall Street Journal indicates that corporations are spending more on raises and bonuses than they have in the recent past as a means to keep their key employees at home. “They are feeling more confident about how 2010 will shake out,” David Smith, an executive with Accenture, told the newspaper. The moves, he said, are an effort to ward off employee poaching by competitors.

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Consumers Starting To Spend Again

April 29, 2010

We’ve talked in this space recently about indications that consumers might be getting tired of their frugal ways and could be itching to spend some of that money they’ve been saving. There are more indications in the news that could be happening.

First quarter profits for several retail companies— from Polaris Industries to Target and Royal Caribbean Cruises— have been encouraging.

Even though unemployment still nearly 10% nationally and the housing market is mixed, at best, consumers seem ready to spend on discretionary items.

“They’ve saved some money, they’ve paid down debt, and at a certain point you just get bored eating frozen pizza and watching cable TV on Saturday night,” Barry Ritholtz, head of the financial research firm FusionIQ told the Associated Press.

Consumer spending has increased for the last five months and retail sales have climbed for the last four months, according to AP research.

But don’t get me wrong. I don’t think we’re out of the woods yet, not by a wide margin. Dealers are still going to have to work hard to build traffic and they’re going to have to work even harder to convert that traffic into sales. But there does seem to be more reason for optimism today than there was six months ago. JD

Contact me with news tips and story ideas
at 952/893-6876 or joe@dealernews.com

Bank Lending Will Improve— Slowly

February 22, 2010

Says Chamber of Commerce Economist at Dealer Expo

INDIANAPOLIS — If you’re looking for working capital for your small business, don’t count on getting it from your local banker any time soon, says a leading economist. Martin Regalia, chief economist for the U.S. Chamber of Commerce, told a gathering of business executives at the Dealer Expo here it will take about six months for banks to return to “normal lending practices.”

Martin Regalia

Speaking at the annual meeting of the Motorcycle Industry Council (MIC), Regalia said that it will take time for banks to define the risks— financial and regulatory— before they feel comfortable lending again.

“The biggest factor in getting banks lending again is time,” said Regalia. “Banks are in it to make money like everybody else, and contrary to what the president says, you cannot run a free enterprise system without risk.

“Risk is what we all take. It’s what we all manage, and it’s why we make the money we do. Without risk, there is no return—nobody pays you for certainty. So, banks are in it to manage risk. As time goes on a little bit, they will get a better feel for that risk, and they will begin to lend, and they will probably, at some point down the road, overshoot again and under price and over lend to the risk. But that takes time.”

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Don’t Look for Big Improvements in 2010

January 7, 2010

Personal, Business Bankruptcies Increase

Despite the Increasingly upbeat talk from Washington, I don’t see turnaround in 2010. And neither do a group of economists surveyed in January by the Wall Street Journal (WSJ) newspaper. The consensus: The U.S. economy will perform as poorly this decade as it did during the last one which marked the worst performance since the 1930s. The recovery seen by some in the last half of 2009 was driven in large part by government stimulus programs, which will be cut back this year. And as cautious Americans are saving more, they’re spending less on big ticket toys such as motorcycles.

“It’s easy to be dismal about the U.S. economy,” said one economist, whose outlook was seconded by another: “We’re not likely to have robust growth anytime soon.” The one bright spot cited by several economists was strength in places such as China and India, which could stimulate U.S. exports. Unfortunately, I don’t see that helping the U.S. powersports industry much, expect for OEMs like Harley-Davidson and Polaris, which have made moves in both those countries. BRP also could stand to benefit from growth outside the U.S. because of its strong international base.

The turbulence that began in the powersports industry in 2008 continued last year and will drag on through 2010, I believe. The same problems that existed last year— lack of sufficient consumer and business credit, weakened consumer confidence, a languishing housing market, lack of any meaningful new powersports products, excessive non-current inventory at the dealer level, and increased fumbling by the federal government— will continue in 2010, dampening any hope of a substantial recovery in our industry this year.

In a nutshell, I see more of the same lackluster performance for our industry in 2010 that we saw last year, and I don’t look for any real improvement in the problems that plague consumers and small businesses until 2011 or perhaps 4Q 2010, at best.

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Can You Make Money Selling Electrics?

December 2, 2009

This story originally appeared in the Dealernews December 2009 issue. 

When Polaris Industries introduced its electric golf cart a few months ago, the move took many in the powersports industry by surprise. Electric power in a combustion engine business? Not likely, many said.

Even Polaris managers say that its electric Breeze vehicle won’t be sold initially through powersports dealers. The company is looking at a different market, one made up largely of nonpowersports riders living in southern retirement communities.

“We’re going aggressively at new markets,” Polaris CEO Scott Wine told a reporter, “but we’re also using this as a test-and-learn type of trial.” Analysts and others in the powersports industry haven’t been too excited about Polaris’ plans in this segment, Wine continued.

That’s understandable, because the appeal and the customer are very different from what powersports dealers are used to working with. But the margins — close to 25 percent on many machines — can be a lot more attractive than what dealers normally get on combustion-powered machines.

Mike Tomberlin, head of the Augusta, Ga.-based Tomberlin Automotive Group, is one of the most aggressive of many small companies developing electric on-road vehicles. A powersports dealer himself, Tomberlin also produces and distributes a line of combustion-powered ATVs, motorcycles and scooters through his diversified dealer network. He knows the difference between marketing gas and electric (more…)

Ready for the Rebound?

October 1, 2009

Note: the following is the “From the Editor’s” column appearing in the October issue.

Here’s an exercise: Enter the words economy and rebound into Google’s News search function. You’ll get some interesting results.

The day I’m writing this column, I perform this very search. The first story to pop up by relevance is a Wall Street Journal article, the lead paragraph of which reads, “The U.S. economy and financial markets are improving, but are still shaky and are vulnerable to further shocks, Federal Reserve Bank of Atlanta President Dennis Lockhart said.”

I’ve been curious what the policy wonks across the country are prognosticating for a very specific reason. In the course of researching and reporting a handful of stories recently, I’ve heard a phrase with a common theme running through that sounds something like this: “Making sure we’re doing everything we can to brace for when the economy turns around.”

The first time I heard talk about the economy turning around was last year, and it sounded a bit more like pie-in-the-sky hopefulness than what I’ve been hearing lately. And thank goodness for that doubt — this was before things really augured into the ground in September (more…)

Beemer Shop Owner Tells It Like It Is

March 12, 2009

The other night on The Story, a radio program that runs on one of our local NPR stations the host interviewed Ted Porter, the owner of Ted Porter’s BeemerShop. It’s an independent BMW shop up near Santa Cruz, Calif.

The show itself is simply long-form interviews with (mostly) ordinary people whose livesbeemer intersect with current issues. With Porter, the obvious hook was the economy and its effect on the motorcycle industry. During the interview with host Dick Gordon, Porter talked about his business and laid out one of the most compelling descriptions of running a motorcycle business that I’ve ever heard.

Porter’s tale was like a primer on doing EVERYTHING right, an approach that he said centered around that Business 101 basic — customer service. He explained in great detail why he ties the success of livelihood to this simple business concept (which doesn’t seem so simple for some shops). He also gave a ground level view of just how scary it is to be a small-business owner right now. Here’s a snippet from The Story’s website:

Ted Porter runs a motorcycle repair shop in California. He used to be a tinkerer. He fixed bikes on the weekends and worked a day job. But when his “hobby” grew a waiting list, he took the plunge and opened his own shop. These days, though motorcycle dealerships in his area have gone under, Ted’s business is thriving. He tells Dick Gordon about the one business decision he made that was crucial to his success in this wavering economy: staying true to the ideals of customer service he learned from his dad.

I highly recommend giving this interview a listen. It’s available as a podcast by going here or by looking it up on iTunes (search American Public Media: The Story).

ABA, NRF Expect Economic Rebound Late in 2009

January 27, 2009

The economy fell at the sharpest rate in nearly three decades in the fourth quarter of last year, and the Economic Advisory Committee (EAC) of the American Bankers Association says it believes the economic downturn will continue through the first half of 2009 before rebounding in the second half. It’s a perspective the National Retail Federation (NRF) apparently shares.

Bruce Kasman, EAC chair and chief economist for JP Morgan Chase, New York, says the committee believes the first half of ’09 will be marked by consumers continuing to retrench, saving more, spending less, and further weakening demand for goods and services.

The NRF, in its 2009 economic forecast released today, says it sees more challenges ahead as consumers continue to shift their spending priorities.

Read a full report here.