Dealers: Think Inside the (Big) Box

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It’s no secret that it’s been a tough year for the powersports business. I’d like to think that next year will be better, but honestly, I don’t think it will be. Unusual times call for unusual ideas, and maybe it’s time for us to start thinking inside the box instead of outside. The box I’m referring to is Costco.

I’m sure most of you have been to a Costco warehouse store. It’s that place you go to buy toilet paper and then walk out with $300 worth of merchandise you didn’t know you needed. I take an occasional pass through my local Costco, and usually I check out every aisle just to see what’s on sale. The store changes 25 percent of the items in its inventory every month. It’s amazing what you can buy there. There’s the stuff you expect to find in a warehouse store, like food, wine, tools, housewares, furniture, toys, clothing, books, CDs, DVDs, drugs, glasses and so on, but as you walk out the exit, you’ll notice that it’s lined with kiosks offering things like garage doors, cell phone plans, insurance, remodeling services and cars.

You can’t actually buy a car at Costco, but you can buy a car through Costco, get a smokin’ deal and do it with less hassle than going to a dealer. I know this because I did a stint as a Costco “secret shopper” a few years ago. Anyway, it occurred to me that if you can get a referral to buy a car, why not a motorcycle or an ATV, or a PWC?

Why couldn’t you make a deal with Costco, display your products and see what happens? With 40 million-plus cardholders, there’s bound to be a couple of hundred thousand who own or are interested in a motorcycle, ATV or PWC.

While some of these people are already your customers, most are not. The issue here is exposure, and the fact that you go to them and they don’t have to come to you (at least initially). While Mr. Wannabike may not be able to get Mrs. Wannabike to your store, if the bike’s right there in front of them, it sure makes part of the selling process easier.

The typical Costco store, depending on location, has between 40,000 and 200,000 members who shop there at least once a month. I think I read somewhere that the average customer makes three visits a month. Costco members are a pretty interesting group. Their median age is 53, and more than 50 percent are between 23 and 54. According to the latest MIC Owners Survey, the prime age demographic for a motorcycle purchase by a male rider is 43. Wait, it gets better: Their average household income is more than $59,000 per year, versus a national average of around $50,000. This kind of shopper would be welcome in anyone’s store.

An article published last April in Automotive News claimed that Costco generated about 650,000 referrals for its participating automobile dealers, and that 40 percent of those bought a vehicle. According to my calculator, that’s more than a quarter-million cars!

For years, automobile dealers have been exhibiting and selling their products at various Costcos across the nation and doing quite well at it, from what I can tell.

Here’s how the deal works. You go down to your favorite participating car dealership, show them your Costco membership card and tell them what car you want. You can even special order one. You’ll then buy that car for a price that’s some percentage above or below the dealer’s invoice. The price you’ll pay is determined by several factors: popularity, dealer incentives, flooring — you know all this stuff. But it’s an agreed-to price between the dealer and Costco that the dealer shows you. No fuss, no muss, no hassle.

I’ve been told that several OEMs have been approached to participate in a program, but so far there are no takers. That’s something that I don’t understand given the current state of traffic and purchases in our industry. It seems to me that putting your products in front of people with money — who are spending it — is a smart thing to do. It’s certainly at least worth trying.

I’ve also learned that Costco is currently experimenting with a motorcycle dealer-direct program and has one dealer set up in Northern California and is working with additional dealers in other parts of the country.

Obviously, Costco is not looking at our market from a charitable point of view. It expects some money in return for access to its customers. Every dealer has a different marketing budget, and frankly, I don’t know how this program would stack up against traditional advertising in terms of cost, but if your advertising isn’t generating any traffic anyway, well, what the heck, try something different.

A good thing is that typically the display, or “road show” as they call it, is brand-specific, which means that on a given weekend, yours would probably be the only brand on display.

Interested? Send me an e-mail, and I’ll aim to get it to the proper party.

This story originally appeared in the January 2010 issue of Dealernews.