But when the Great Recession hit, it became obvious that he couldn’t make it with Honda alone, even though he was near the top of Honda’s special PowerHouse program which provides advantages to those dealers who agree to run a Honda-only operation.
THE BIG DECISION
Unfortunately, no matter how hard Seltzer worked, he wasn’t making it. He just couldn’t sell enough Honda products to generate enough revenue for the store.
Seltzer was a Tier 4 exclusive Honda PowerHouse dealer (Tier 5 is the highest) and as such he enjoyed a 60/40 split on co-op programs and was able to place orders monthly — a nice competitive advantage.
But if Seltzer took on another line — and gave up the exclusive Honda position— his co-op split dropped to 55/45 and he wouldn’t be first to get the new models. As a Tier 3 dealer, he knew he wasn’t going to get the new stuff if there was a shortage.
These were his choices: Take on other brands to round out his product mix and give up some co-op dollars and a chance to get the new Honda models as soon as they were available; or stick it out selling only Honda products, an approach that just wasn’t working in his market.
Here are some three important points Seltzer derived as he made his decision to switch from a single line to a multiline operation:
- Don’t add lines just to say you’re a multiline dealer.
- Look at the other things you sell. Seltzer also sold a number of other Honda lawn and garden products. And it was important to get franchises that had products which fit into the Honda line to give the dealership a complete package — no holes in the lineup.
- Be careful in picking your new OEM. Ensure all of your products fit together.
- Make certain there is a good business reason for making the change. “We didn’t change just to make the change,” Seltzer says. “We had to do it.”
- Don’t move away from your single line OEM. Consider it your base and add to it — build upon it.
“It was an easy decision [to drop the PowerHouse program],” Seltzer says. “A Tier 4 dealer stocks the entire Honda line, and we still do that. If Honda makes it, and has it, we have it. We still believe in having the product, even though we’re not required to do it. Maybe we get a little less co-op and maybe we don’t get the product first, but we get it about the same time as everybody else. There’s not much practical difference between a 3 and a 4.”
Seltzer likes Honda products, and he points out that it was a lot easier to be really good at selling only Honda. (continued)