Mike Vaughan Ponders the Numbers

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The number of sales per dealer depends on the number of dealers selling. Or something like that.

vaughan theorum sales number selling

THE MEMORABLE OPENING lines to Charles Dickens' A Tale of Two Cities, "It was the best of times, it was the worst of times," might be applied to what's going on in retail. Most of the dealers I've spoken with have told me that sales so far have been as good or slightly better than they were in 2008. At least two dealers told me that January was their best month ever.

I know that there are dealers out there swinging over the abyss of failure — though to tell you honestly, I've not spoken to a single dealer who would admit that was the case. One dealer did tell me he was cutting back significantly, but didn't attribute his woes to the general economy.

Whatever is going on in the world of motorcycle sales is hard to figure out. Is it something like the 9/11 aftermath? I was CEO at Triumph then, and lots of people were predicting the collapse of our industry. Triumph's sales went through the roof in the following months, soaring 65 percent in November 2001. As you'll recall, the entire industry continued to march to new sales heights in the following years.

Trying to crystal-ball what was going to happen in 2009, I began fooling around with some numbers. I was trying to figure out whether there was some correlation between the number of dealers who are authorized to sell new motorcycles, and the number of motorcycles actually sold. This path didn't lead me, as hoped, to a moment of enlightenment, but it did reveal some interesting (though probably mostly useless) facts, which I will now share with you.

AMATEUR CALCULATIONS

Let me admit straight out that I'm a lousy mathematician. My wife is in charge of the numbers side of our relationship. I usually just stand there stupidly and agree to whatever she concludes. That being said, with today's modern devices — PCs and percentage calculators and other convenient programs that can figure damn-near everything, like the conversion of Newton meters to foot pounds or pound feet — I feel I can conquer any mathematical mountain.

I looked at motorcycle sales year-by-year back to 2002. Then I looked at the number of authorized motorcycle dealerships, according to the Motorcycle Industry Council (which sources its data from industry magazines such as Dealernews), for the same period, although in this case I only had statistics to 2004. (Hey, you work with what you've got.) This is what I found;

  • From 2004 to 2005 sales increased by 4.8 percent, and from 2005 to 2006 sales increased by 1.3 percent. As you may recall, 2006 was the best year for motorcycle sales. Then, in 2007 motorcycle sales declined by 7.2 percent, and then again by 7.2 percent in 2008.
  • The number of dealers, meanwhile, went as follows: up 11 percent from 2004 to 2005, up 4.2 percent from 2005 to 2006, and then down by 13 percent in 2007 and 10 percent in 2008.

My next logical step was to determine how many motorcycles Mr. (or Ms.) Average Dealer sold during that five-year period. I think the number might surprise you: The average dealer sold only 143 units a year. What's even more surprising is that the most units Mr. Average Dealer sold in a single year was 149, and that happened twice, in 2004 and 2008, the first and second highest-average sales years out of the five. Mr. A.D.'s worst year was 2006, with only 135 units sold on average by a dealer the year that the industry peaked.

WHAT'S THE VARIABLE, KENNETH?

So what can we conclude from this? Well, the one that seems perfectly obvious to me is that it doesn't make much difference how the overall market performs; the average dealer will sell about the same number of units per year, in good times or bad. The big variable is the number of dealers in the pool.

I presume that lots of folks saw the motorcycle market growing back in 2004, and decided to grab onto the tail of that comet and take it for a ride. From 2004 to 2006, with more than a 1,000 new dealers jumping into the pond, sales per dealer fell by 10 percent on average. In the following year, 2007, close to 1,000 dealers got out of the pond, dropping the number of active dealers pretty close to the number that existed in 2004. In 2008, an additional 641 dealers wandered off to do other things, and sales per dealer popped back up to 149.

Its almost as if the industry has a kind of bilge pump built into it. The larger the number of units the industry sells, the more the dealer base expands. When unit sales drop, marginal dealers bail out, but the number of units sold per dealer, doesn't seem to vary by too much. So what does this all mean? Well, I'm not sure, but as I said, it's kind of interesting.

Mike Vaughan is the former publisher of Dealernews. You can reach him at mvaughan@mikevaughan.com or via editors@dealernews.com.