This story originally appeared in the Dealernews August 2010 issue.
New unit sales have been in the tank long enough now that many dealers have already looked for (and found) new ways to keep the doors swinging and the registers ringing.
Parts and accessories sales. Added service offerings. Social marketing. Online sales. Anything and everything.
But there’s one area of the powersports retailing world that has long been a reliable — and often overlooked, if not ignored outright — source of revenue when new bike sales are down: the pre-owned market.
Even the late, great Don J. Brown said back in January 2009 (oh, we all remember 2009) that used motorcycles are the secret of more sales in tough times and that dealers need to concentrate on how they merchandize and sell used bikes if they want to improve profits. He repeated himself again in June of that year, saying, “I’ll say it again: When the economy sinks as it has recently, it’s the used bikes and accessories that can help make the difference at your bank!”
The retailers, apparently, were listening. In a recent survey of Dealernews Top 100 dealers, respondents reported that used bikes account for 34.4 percent of all vehicle sales in their stores. And, on average, these same dealers are seeing a 19.7 percent margin on pre-owned bikes, with some reporting that they’re getting more than 25 percent. In that same survey, 41.2 percent of the respondents say they get their used bikes at auction.
Justyn Amstutz of National Powersport Auctions knows numbers like these very well. According to Amstutz, current pre-owned market conditions are extremely lucrative for dealers — those buying and selling.
“A majority of successful powersports dealerships that are performing in 2010 attribute their success to pre-owned unit sales,” says Amstutz, a principal in the San Diego-based company. As the leading auction house for the powersports market, NPA plays a significant role in this end of the market. In 2009, about 100,000 pre-owned units were moved through the company. NPA also handles OEM and factory sales for Ducati, Harley-Davidson, Kawasaki, KTM, Suzuki and Yamaha.
And now, the company is expanding its business to include RVs and watercraft, and in July launched the Scratch-and-Dent sale, an auction aimed at parts suppliers, builders, franchised dealers — or any business interested in buying rougher units. The company currently holds live monthly auctions in Atlanta, Cincinnati, Dallas and San Diego.
Whereas RV and watercraft auctions are typically the purview of the automotive world, Amstutz believes that these two segments have much more in common with the powersports world than with the car market. Amstutz says that the new offerings come at a time when dealers are becoming increasingly sophisticated about buying and selling at auction, and about the pre-owned market in general. The company’s live auctions, simulcast sales, eSales auctions and OEM business are all growing, he notes.
“From the [earlier] lack of sophistication to where we stand today, it’s grown by leaps and bounds,” he says. “Either the dealers needed ways to find revenue for their stores or to create additional margin, or they were forced to look at the pre-owned segment because of the heavy discounting that was going on and the lack of available [units] when manufacturers decreased production and manufacturing numbers.
“The level of sophistication has increased exponentially and the reason why it happened … is inconsequential, but the fact that it is happening means that the thinning of the herd is turning out to be a good thing for some dealers.”
EMBRACE THE AUCTION
With the pre-owned market continuing to grow, Amstutz says that the number of people buying and selling at the auctions is increasing. The dealers and auction attendees who are generating the most revenue for their stores are those bringing in wholesale purchases, unwanted trades and aged inventory to sell at auction, while buying the desired units to help fill the sales floor. The company will help dealers tailor fit a consignment program to their particular market.
While auction attendance has seen steady, continued growth, there are still a number of misconceptions about the auction process, as well as dealers who are intimidated by the whole operation, Amstutz says. For these dealers, he recommends that they try their hand at the eSale auction, which is kind of an entry-level auction environment.
“If guys are skeptical about the auction and they’re scared about the pace of the auctioneers and they’re scared about signing on in simulcast and not understanding it, they can go through the eSales process,” he says. Dealers can preview the condition reports for any of the units NPA offers through its various sales and then bid on the units over a two- or three-day period during the eSale.
For further hand-holding, Amstutz suggests that dealers call NPA and let the company walk them through the process.
Dealers not located anywhere near NPA’s four locations can sign on to those live auctions through the company’s simulcast feature and bid online alongside the others in real time. These sales are subject to the same terms and conditions as regular auctions, with an additional $25 simulcast fee for any units purchased online.
Additionally, dealers located in recessed areas where retail financing is hard to come by can use NPA’s Value Guide (see sidebar) to help with purchasing units at wholesale. They can then send these units out for sale at auction to add a new bit of profit margin to their dealerships, Amstutz says.
Once the units are purchased, NPA works with a large transportation network to move vehicles back and forth across the country to all 50 states. The company recommends 15 transportation companies on its website and says it can also help with import/export and container services. But what’s the difference for a dealer buying two units or 20 units? Not much, Amstutz says. “NPA provides a standard buy fee schedule regardless of how many units are purchased,” he explains. The fee schedule is published on the NPA website and in its auction catalogs.
“We don’t sell more pre-owned units than any other company in the world because we are complex or do bad business,” Amstutz says. “There is a profit opportunity for every dealer (franchised or independent) in this country with NPA. If a dealer truly understands the value-added services that NPA can provide, he or she will do business with NPA in some capacity.”
National Powersport Auctions works with two major lenders to develop retail financing and flooring programs for dealers, in addition to the partnerships it has with Harley-Davidson Financial Services and Honda Financial services for its OEM/factory sales segment.
However, given that retail financing has been in short supply for the past year or two, Amstutz suggests that dealers go out and forge relationships with local lenders and credit unions. And those who have been in business for a while should use that history as a local business as leverage in working with lenders.
For example, Nick Rank, the owner of this month’s cover dealer, Road, Track & Trail in Big Bend, Wis., found himself in a difficult spot when his main financing resources dried up. Instead of backing off, Rank put on a suit and went knocking on doors to find local sources. Now, he says, he has a selection of lenders that allow him to work with customers with credit scores of as high as 800 or as low as 400.
“If dealers don’t think there’s a way to have retail financing out there today, they most certainly have become complacent or lazy,” Amstutz says. “I know it’s difficult, [but] the credit union space has picked up double-digit market share over the last year and a half. How many of these dealers are actually taking their time as a dealer principal, not sending their sales staff or GSM or GM out, but are going out and sitting down with their local credit unions?”