Crisis accelerates evolution. In 2019, buying a vehicle meant negotiating on price with a sleazy salesman, followed by long waits in a side office with lending applications, extended warranty pitches, and endless paperwork. Even after signing the deal, you often had to wait on bike setup. If you were lucky, a couple of days later you walked out of a dealership and rode away on a new bike, smiling ear to ear following an otherwise painful experience. In 2020, this process was miraculously reduced to a series of text messages, and I’m told maybe an hour visit to sign papers and pick up your vehicle (at least for cars). What happened?
Life got easy
When confronted with evolution or bankruptcy, savvy entrepreneurs discovered how to streamline the bloated, archaic retail processes to get goods into the hands of eager consumers. The world essentially took advantage of the available technology and jettisoned obsolete sales tactics, much to the celebration of customers. Buying motorcycles became a faster and more pleasurable experience.
On a different end of the consumer experience, buying motorcycle stuff got a lot easier too. With retail outlets adopting severely limited operating hours or completely closed to the public, internet retailers were all the rage. Some shops got smart and figured out how to manage orders via text and e-mail, set up pick-up times, or even “drop ship” parts directly to the customer. With a little extra jingle in our pockets from limited travel and stimmy checks, we built the bikes of our dreams thanks to modern conveniences.
Related to an article about motorcycle financing, recent world events had a massive impact on supply chains. In 2019 we had 24-hour convenience stores, fully stocked shelves at local grocers, and motorcycle showrooms with almost any model you’re looking for. Since that time, we’re all overwhelmingly familiar with empty sales floors and long waits for replacement parts on backorder. As a result, today every consumer has a very vivid understanding of how supply chains are like a bullwhip; the smallest change in the input has a stunning impact on the result.
Without stepping in a pile of politics, let’s suffice to say that supply chain interruptions led to limited parts and inventory available for buyers. With more money to spend and less stuff to spend it on, consumers were competing against one another, and the prices rose to match the heated demand against the shrinking supply. Supply and demand are obviously concepts most of us are familiar with, but I bring this up to highlight a recent trend that has upset a number of consumers: mark-ups and fees.
As a guy that never stops surfing the used bike ads, I’m pretty put off by the asking prices above retail pricing I’ve seen. In the used market it’s an individual seller with an individual identity, and their own perceived value of the item they’re selling. When that item becomes a replicated commodity sold against the backdrop of identical models, like at a motorcycle dealer, folks seem to get a little testy about increased costs. I’m as frugal as the next guy, but we need to pause a moment and consider this unique situation from the other side of the counter. What has this experience been like as a shopkeeper?
In March 2020, retailers around the country were told to close. Like most of us, many of them weren’t sure where their next paycheck would come from. Many of these retailers had loans on “floor plan” motorcycles they had to pay, combined with continued overhead costs. Fortunately, when they adapted to the new sales conditions, anything remotely outdoorsy was selling like gangbusters. Until the showrooms emptied.
Brick-and-mortar stores went from fully stocked to nearly depleted inventory on all kinds of things, and likely everything, just at different times. For you and me, when we don’t know when we’re going to find our next meal, we start rationing. When dealers are unable to get more stuff to sell, they’re forced to increase prices to cover the gap between the sale of the last item to when the replacement finally arrives. Obviously, this doesn’t happen all at once. When the reality of supply starvation started to set in, dealers realized they could easily collect the full asking price, if not more, along with freight charges, documentation, and setup fees. Jacking up the sticker price of the vehicle, despite highly limited supply, potentially exposes the dealer to conflict with manufacturers who set the retail price. Thus retailers are more inclined to find other methods to collect cash to cover their next meal.
The last time I bought a new bike, I was a bit miffed by things I considered junk fees. Fortunately, the bike I wanted was in overwhelming supply everywhere, so a local dealer essentially ate the excess fees to give me the “out the door” price I wanted. In a buyers’ market, dealerships have all kinds of creative ways to reduce fees or take a haircut on list price as a means to get the customer into the monthly payment they can afford. One way or another, the total cost paid is a lump sum, despite whatever is listed on the receipt, and the manufacturer isn’t overly upset so long as their invoice is paid in full. Unfortunately, most of us motorcycle consumers aren’t familiar with the inverse of this formula, at least most of us shopping since 2008.
Just as things were heating up in 2021, I released a podcast about the future of brick-and-mortar retailers. This idea had been rolling around in my head for some time as online retailers were making it vastly more convenient to buy motorcycle farkles versus waiting on parts to be delivered to a dealership and making multiple trips. The landscape has evolved considerably in that time. When confronted by companies like Carvana, and especially Amazon, providing anything and everything consumers want delivered to their door, many companies figured out how to duplicate the success of online retailers. So much so, those before-mentioned companies are now struggling by comparison. As a consumer, I see this as a good thing, I can now get high-quality products shipped direct from the retailer to my house. This situation puts increased stress on the middlemen. When it’s a faceless distributor, most folks don’t fret. When it’s a personal friend, trying to make a living selling you the toys you both love so much, it’s a different story.
I said privately back in 2020, the pandemic propped up power sports businesses that were already failing. Everything outdoors was gold and money was easy. When the bullwhip cracks, interest rates reach the moon, and the consumer base shrinks, the dealers that have failed to evolve with emerging technology and the whims of the customer may not be the only victims. The market forces of both limited supply and a potentially shrinking customer base may put insurmountable pressure on retailers that were until recently keeping their heads above water.
I fear this story gets worse as I suspect manufacturer politics will force a degree of corporate cannibalism among dealerships. In the automotive realm, there’s been much gnashing of teeth between the mothership and the dealers over price markups. The brands are concerned that in a receding market, their reputation will be tarnished by “greedy” salespeople. There’s an argument about the manufacturer’s hands being tied by politics and supply chain challenges, but this doesn’t change the fact that working folks at the dealership still need to be paid, especially if business is less than consistent. The very uncomfortable truth is that, despite searing prices, there were folks still foolish enough to pay them. This of course doesn’t change the fact that competing dealerships will be heavily at odds with one another, along with manufacturers depending on how this plays out. Brands may decide to slow output in preparation for a recession, putting more pressure on retail establishments. Equally problematic, if manufacturers attempt to resume 2019-era inventory, they could be forcing overstock conditions onto dealers. Conflict is brewing between the two parties, and I fear the manufacturers are the most likely victors.
This is unfortunately an ugly story for sales folks handing out business cards. However, all uncomfortable situations are also opportunities to excel. Dealerships facing inventory challenges will be forced to focus on customer relations, improving customer experience, enhancing their service department, and building a riding community. Reduced inventory means folks will have to sell the “value-added” factors and building customer loyalty. These facets, combined with yet-to-be-discovered sales innovations means more appreciation for the customer. The most successful businesses aren’t built when things are good, they’re built in the hard times.