During late December and early January, Power Products Marketing conducted a survey on behalf of Powersports Business among 100 snowmobile dealers across the Northern United States and Canada.
These 100 dealers collectively accounted for slightly fewer than 5,000 snowmobiles sold through December of the 2005 season. We estimate these dealers represent about 5% of the total market to date.
We asked these dealers specific questions pertaining to their snowmobile sales, inventories and other trends. We also supplemented this research with recent reported industry information obtained from several knowledgeable industry sources.
YEAR-TO-DATE 2005 SALES
According to our survey and recent industry reports, total year-to-date North American snowmobile sales through December are running approximately 3% behind last year’s pace.
Mother Nature has not been friendly to many key snowmobiling areas. Many popular riding areas, such as Tug Hill in New York and the Central areas of Minnesota and Wisconsin have had only brief periods of snow cover or worse. The St. Paul-Minneapolis area of Minnesota set a record in January for going the longest period without getting more than one inch of snow.
Snow in the Upper Peninsula of Michigan and the far reaches of northern Wisconsin has been excellent. Trails in Eagle River Wis., home of the World Championship Snowmobile Derby, opened on Dec. 1. According to dealers in the area, this early opening has lead to banner sales.
While many dealers in the Midwest have pushed non-current models to boost sales, dealers in the Eagle River area said 2005 models are their “hot sellers.” One dealer in the area said that there are great deals on non-currents models, but for them, the 2005 models are where the action is.
Although our survey sample was too small to accurately show regional trends, indications are that sales in the Northeastern United States are running significantly behind last year, while the Midwest, which accounts for close to 60% of U.S. total sales, could be down an additional 8%-10% compared to a year ago. Snow in and around the Great Lakes has been better than average, with dealers in those areas reporting strong sales gains.
Snow in the West has also been good, with industry sources speculating positive year to date sales in that region. Conditions in Canada were reported to be good, despite a sales decrease in the range of 3%-4%. The economy in western Canada has definitely helped snowmobile sales, according to Ed Klim of the International Snowmobile Manufacturers Association.
Several dealers contacted for our survey noted that they are having some success selling non-current sleds acquired during the off-season. These snowmobiles are acquired at discounts large enough for dealers to make good margins on resale. Dealers in low snow areas say that they have a steady stream of people coming in looking for rock bottom pricing, and offering non-current models acquired through this channel satisfies their customers’ desire for a low priced sled while letting the dealer make a good margin.
The only downside appears to be that non-current sleds are sold in groups and dealers have to take several less desirable models as part of the group in order to secure the better selling non-currents. This practice seems to be most prevalent in the Midwest and may have driven Midwest non-current sales slightly above what would have been expected for year to date sales.
CURRENT/NON-CURRENT SALES RATIO
During the 2004 season, dealers were swamped with non-current models and had to scramble to clear them out.
The good news is that most dealers were successful in clearing out non-current models. During the 2004 season, non-current sales were 35%-40% of total sales, an increase of 20% over the 2003 season.
For the 2005 season, many dealers report very low non-current sales with non-current sales in the Northeast downright scarce. Our dealer sample stated non-current sales as a percentage of total sales through December was approximately 15%, although dealers in the Midwest reported non-current sales at a relatively higher rate.
According to our survey of 100 dealers, inventories through December were up approximately 8% from previous year’s levels. Considering inventories fell in the range of 30% during the previous season, this slight increase in inventories does not seem to worry many. Several of the manufacturers reportedly increased production for the 2005 season, creating a larger base to begin the year.
We have asked dealers several times in the past to segment their inventory into current, last year’s models, and models over two years old. While the ratio did not change much during the past season, the lower carryover inventories seems to have had an effect on the average dealers’ inventory makeup.
Inventories by Model Year:
November 2003 - 71%(current)...24%(last two)...5%(older)
April 2004 - 71%(current)...23%(last two)...6%(older)
December 2004 - _(current)...11%(last two)...3%(older)
Dealers in the Midwest reported the highest levels of non-current inventories, while dealers in the Northeast and Western regions report low non-current inventory levels
YEAR END FORECAST
Ed Klim, executive director of the International Snowmobile Manufacturers Association (ISMA), an organization representing the
four snowmobile manufacturers, is optimistic about the remaining part of the 2005 snowmobile season.
Klim says that PG&A sales are up across the country and machine sales could end up positive by the end of the year as well.
Klim also notes that snowmobile sales appear to be drifting towards the later parts of the season. Several years ago most snowmobiles were sold during spring snow check and fall promotions, although recently more sales volume has been experienced in the last two to three months of the season. PSB
Greg Boeder is senior partner for Power Products Marketing, a market research firm based in Minneapolis, Minn. PPM (www.powerprods.com) specializes in the power products and components, powersports and marine industries. Boeder may be reached at 952/893-6870 or at email@example.com.