Jun. 14, 2010 – Preowned-only store continues to grow

Even before the new-to-used motorcycle sales ratio began to change so dramatically, a Southern dealership group sought to expand its foothold in the preowned market.
That was in 2007 when new unit sales for on-road motorcycles were near what volume-wise could stand for years as the industry high-mark.
Two years later, the Southern dealership group, Cycle Central, is just as pleased with its decision to buy an adjoining property and turn it into a preowned supercenter.
“We genuinely saw and believed, and still believe, that that’s as good as any franchise as you can have,” Cycle Central President Grey Mackey said, referring to the preowned business as a franchise.
“There’s no flooring cost. There’s no (OEM) rep coming in every month demanding an order. It’s buy what you buy and sell at a higher profit margin than you can a new one.”
That’s not to say the dealership group has not had its growing pains with the used market.
The company turned its Honda-only franchise in Jacksonville, Fla., into the Honda Jacksonville Preowned Supercenter by purchasing a former furniture store. That building, which sat right next to the dealership, was remodeled to provide a 10,000-foot showroom for preowned models plus a larger warehouse area for new unit storage.
When the addition was completed, business picked up immediately and then grew steadily, as the dealership group saw double-digit percentage growth every month.
However, the dealership group has had to change its used unit purchasing habits as last year’s decline in values for many motorcycle models ended up eating heavily into profit margins. The dealership group also used auctions to wholesale units that were slow moving or could not be moved in the current market without a loss.
“We feel like we’re back,” Mackey said. “We feel like this spring 95 percent of our inventory is close to real wholesale value.”
What hasn’t changed in terms of the store’s inventory is its personnel. Mackey says the dealership group from the start of the project hired a preowned bike buyer. The dealership provided the buyer with a truck and trailer and then he was tasked to buy inventory, using a wealth of area sources, including newspaper classified ads and online sources, like Craigslist, as well as auctions.
“We knew if we were going to make this size of a commitment we had to get some inventory,” Mackey said, noting the real decision wasn’t just hiring personnel but committing to the necessary cash flow.
“You definitely have to have some cash available to go out and get serious about buying (used units),” he said. “If you’re going to have a couple hundred preowned units of inventory, then you better have some cash.”
Was there concern that the amount of space and staff dedicated to preowned models would take away from the company’s new unit business? Mackey says the dealership group thought the considerable preowned stock would actually do just the opposite — create more business for the new units. And in fact, Mackey says that’s what’s happening now as many consumers are coming in looking for used units and discover that the current finance deals allows them to consider purchasing a new unit in the same price range.
“We thought it would enhance it,” he said, “and we still believe that.”
So two years later Mackey says the only real change is the fact that the dealership group has become a little more conservative in what used units they’re purchasing. psb