Plenty for dealers to keep an eye on in 2011

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There will be enough changes this year to keep you on the edge of your seat, but don’t look for a big boost from the economy. If you’re a dealer, your opportunities might improve as your competitors continue to drop by the wayside. The industry lost about 1,140 dealers who sell new machines, or 17 percent, between 2007 and 2009, according to the MIC. That’s a rough estimate, but I found about the same number of net losses in snowmobile dealers over the last three years, as well. Here are some other things to look for this year.

U.S. ECONOMY. Slow growth, yes, but not enough to matter for powersports retailers. Consumers still will be pressed for disposable income.

When Fed Chairman Ben Bernanke says it will take four or five years to get the nine million people back to work who lost their jobs during the Great Recession, you know it’s going to be a long haul. And that doesn’t factor in the possible layoffs that nobody wants to talk about as state, county and municipal governments struggle to balance budgets that are woefully out of whack. One obvious tool is cutting payroll, which will put more pressure on unemployment numbers. Unfortunately, housing will continue to be a problem, and there’s really no rebound in sight.

REAL ESTATE. Here’s another negative economic factor to consider. Many motorcycle dealers who built Taj Mahals, those grand dealership monuments to their success, over the last few years may be looking for a place to hide this year. One banker says many dealers used seven-year balloon mortgages to finance their new buildings. Many of those balloons come due this year. Look for a lot of commercial real estate for sale this year in our industry as well as others.

ELECTRICS. Look for more electric products this year, ranging from small cars and neighborhood electric vehicles to motorcycles and bicycles, ATVs/UTVs and even snowmobiles. (There’s a sled under development by a group in Finland that includes BRP.) Are you going to take advantage of this new product category? There will be increased sales demand, but probably only for on-road vehicles — concerns about range off road haven’t yet been adequately addressed. Who wants to get stuck out back with a dead battery, especially in winter? At the same time, there will be needs for service and parts and accessories. The availability of lithium for batteries could drive up prices and make availability a problem.

DISTRIBUTION CHANNEL. Look for continued changes in the way powersports products are brought to market. As major distributors continue to add house brands, aftermarket manufacturers will step up their efforts to profitably bypass these distributors and sell direct to dealers. A new company launched in December by former Tucker Rocky executives is just one example. Direct 2 Manufacturer (D2M), will provide sales and marketing services as well as logistics and warehousing services for manufacturers.

You’ll also see distributors continuing to use more digital media to help dealers and consumers learn more about products. And OEMs will continue to get into the game led by Yamaha’s aggressive push with its P&A distribution business under the leadership of distribution pro Mo Murray. The interesting strategy here is that Yamaha distributes third party parts in addition to its own branded equipment. “We’re a big aftermarket distributor,” Murray says. Bottom line here is that dealers will continue to be offered more alternative supply sources, and major distributors will continue to change the products and services that they offer to dealers including more house brands and more and better training about products and business operations.

EICMA/ANCMA. There will be changes this year at the Italian Trade Commission, one of the biggest exhibitors at Dealer Expo. Last year, Constantino Ruggiero, the man who headed Italy’s motorcycle industry for 25 years, retired and was replaced as head of the industry’s trade association for two-wheel vehicles (ANCMA) and EICMA, the world’s largest motorcycle show. Ruggiero’s successor comes from the bicycle side of the business, so there could be a significant change in the way ANCMA does business in Italy, the U.S. and elsewhere. The second EICMA-CHINA motorcycle show is scheduled for Beijing in July, and it will be interesting to see what changes show up there and at EICMA in Milan next November.

CHINESE PRODUCTS. Manufacturers will continue to struggle in this market, as they attempt to deal with federal regulators at the EPA, CPSC and Customs Bureau. CFMOTO-U.S. has undergone a major restructuring, dropping many sales reps and bringing in additional Chinese management. Baja, a U.S. company that sources most of its powersports products in China, also has undergone a major reorganization and now is controlled by TTI (Techtronics Industries, Inc.), a $3.2 billion diversified manufacturer based in Hong Kong that has major manufacturing operations in Anderson, S.C. It COULD BE a player in the U.S. this year as it adds management expertise and TTI’s resources in production, finance, R&D and sourcing.

REGULATION. Government folks will continue to cause problems for our industry. California’s noise law could well serve as an example in other states, and the CPSC still hasn’t found any answers to the “no lead” provision in the Consumer Product Safety Improvement Act of 2008. Meanwhile, the CPSC is preparing to begin enforcement next month of the new consumer complaint database that’s certainly not going to help manufacturers and retailers. At the same time, the agency is working on developing tough new safety regulations for off-road vehicles that could seriously hamper SXS sales. Industry reps from MIC are working diligently to soften the impact of these new regs, but it’s anybody’s guess what might come out of the CPSC. Perhaps the new Republican Congress can make some changes.

POLARIS INDUSTRIES. Look for this company to continue its hot streak in 2011. Polaris kicked off the year with the launch of its RZR XP 900, the SXS that is expected to be a big seller, especially in the Southwest where dealers are licking their chops waiting for delivery of the hot-handling machine. It’s pricey at $15,999. The suburban Minneapolis company posted some excellent numbers last year, increasing net come by 62 percent to $92.6 million for the nine months ended Sept. 30. Nine-month sales of $981.8 million were up 33% over the same period in 2009. (I don’t have total 2010 numbers as I write this.) Polaris 2009 performance was reflected in the appreciation of its common stock price. Polaris common moved from $43 on Jan. 4 to $78.02 at the close on Dec. 31 last year, an increase of $35.02, or 81.4 percent. Not a bad ride. Look for Polaris to make at least one acquisition this year.

Let me wrap up: 2011 might not be a pleasant year for powersports businesses, but it’s certainly going to be another year of frequent and substantial changes.

This is the full version of an excerpt that ran in the Dealernews February 2011 issue.