Store shot, Doug Douglas Motorcycles.
Danny Manthis, owner of Doug Douglas Motorcycles in San Bernardino, Calif., reflects back on 2010.
“By the end of 2010 our total business revenues will have increased by over 12 percent and total units by more than 25 percent. The bad part was that net income will likely decrease by over 15 percent in a year when we decreased overall expenditures by over 7 percent. It appears we focused way too much attention on unit sales, hoping it would automatically increase PG&A and service, instead of trying to make those more profitable areas grow. Motorcycles, especially new units, has too much price competition in our area. I’d say that came as more of a mistake and less of a surprise on our part and something we’ll focus on changing in 2011.
“Knowing the economy was bad and would likely remain so throughout 2010, expense reduction was paramount. Flooring was one of the biggest components in our expense reduction strategy. We know that employee cost comprises a major component for most companies, but we are small, and our belief is that we can replace inventory a bunch easier than we can a quality employee, and so we decided to turn units. Our market is one of the most competitive in the nation, and so to move units we may have mistakenly done so through discounting. This strategy had a two-fold intention. The first was to keep in the good graces of the manufacturer. The second was hopefully a tag-along effect of having increased parts, accessory and service sales that are less competitive. The latter didn’t occur. We sold as many bikes out of our local primary marketing area as in. As a result, many of our new customers choose not to come back for accessories or service when they could go to dealers in their community. In our defense, penetration into our area was minimal, the company turned a profit, and we laid nobody off. Profitability may not have occurred if we would have focused on sales strictly on our area, which was one of the hardest-hit counties in the state for foreclosures and unemployment. The original intent with the discounting was not to penetrate other areas, but to stimulate local sales. It appears, however, that areas out of our local area were either better off or more willing to make vehicle purchases, or that locals make less use of the Internet for this purpose? …
“Maybe we should have spent some more money on local advertising. Because cost-cutting was important to us, our unit sales focused on inexpensive or free Internet advertising. The problem is our area is either less accustomed to using the Internet for shopping or the market doesn’t exist currently. While we should have spent more on local media, it may have backfired, and unit sales may have been stagnant along with PG&A and service.
“Final thoughts: I’m sure we could have done things better in 2010, and improvement should always be a priority. It’s been a learning experience since the recession began in 2007; however, in looking back, we’re basically pleased with our efforts, especially the efforts of our staff, the best in the business, in my opinion. Being a discounter is not the right way to be a powersports retailer, but in extreme conditions? In our world we are one of the smallest motorcycle dealerships in our state, 3.3 miles away from the largest dealer in the nation and 60 miles from probably the second largest. It’s David versus Goliath every day, and to me any time you can walk versus being carried away from a fight, it was a good one.”