Units are selling faster than dealers can get them in stock
Honda refers to its latest phenomenon as “Grom-o-mania.” It’s the craze that began the moment the OEM took the wraps off its $2,999, 125cc motorcycle, the Grom.
As soon as enthusiasts saw the first photos of the bike and read up on its specs, they were sold. Deposits began pouring into dealerships before the Grom even hit U.S. showrooms.
“Dealers pretty much have them pre-sold as they’re getting them out of the crates and putting them together,” said Jon Seidel, assistant manager of powersports press for American Honda.
Though the Grom is flying off dealership showrooms, attracting a variety of customers, the excitement around the bike has been somewhat hampered by low supply and small dealer profits. But Honda and others in the industry are confident that with the right attitude and marketing, this new machine can propel aftermarket sales and turn buyers into Honda and dealership loyalists.
When Jason Ennis, general manager of Central Florida Powersports in Kissimmee, Fla., first laid eyes on the Grom, he was pleased with the potential he saw.
“I was very excited because I saw it kind of being the next craze, like the mini motos,” he said, comparing the bike to the CRF 50 and the KLX 110.
His customers followed suit with their enthusiasm for the machine. Central Florida Powersports had taken 10 deposits for the Grom before the dealership had even one of the bikes in stock. The dealership has already sold five and kept one as a demo unit.
“I’ve delivered five, and I’m looking at my log book right now. I have those five initially and a group of seven more [deposits],” Ennis reported.
Honda is seeing the same trend across the country, with many dealerships sitting on deposits, simply waiting for bikes to be delivered to fill those requests.
“It’s been a hit from the moment it was revealed,” Seidel said.
The excitement has been spurred not only by the uniqueness of this small, value-priced motorcycle, but also by attention given by national media.
“This isn’t just about the motorcycle industry. I mean, we’ve had outside media — USA Today, The New York Times — all of these outside media outlets they look at this, and they’re curious about it,” Seidel said.
Drawing that media attention has been a goal of Honda’s with a number of units they’ve released over the past 24 months, including the CBR250 and other entry-level bikes.
“Really our media message, the message that Jon and … myself have been really touting to the media is we want to take this pie and make it bigger,” said Bill Savino, Honda’s manager of motorcycle press. “We’re trying to bring new people into the industry, and that’s good for all of us, not just Honda.”
Though the excitement and deposits following the initial launch have been great signs for sales, the demand has also greatly outpaced supply, leaving dealers and customers in wait. However, Honda reports this is normal for a new vehicle.
“With a bike release, it takes a while to build levels or build inventory,” Savino reported.
Supplies have been so low that Honda employees haven’t even been given the green light to purchase the units directly from the manufacturer. Instead, some employees are turning to dealerships to get their hands on one before the intra-company release. And many Honda employees are jockeying to borrow one each weekend.
Honda knew the units had appeal. But what the company didn’t anticipate was just how much of a hit the Grom would become.
“We thought ‘What a cool little bike,’ but, again, you just really don’t know until the public sees it, and it goes through the dealers,” Seidel said.
For Ennis, the lack of inventory has been frustrating because he’s lost some customers, who orginally left deposits with him, to other dealerships that had unclaimed models available before him. He asked Honda for 10 Groms per month as a starting point, and he was lucky to receive three on his first shipment.
“I would say we would have sold a lot more of them if Honda had produced them,” Ennis said.
Savino reports that Honda is always keeping a close eye on production, and they’ll do the same with the Grom.
“We’re always looking to adjust to fit the needs of what we need to do, and we now have the ability to do that with having the plants we have all over the world,” he said.
Another point of frustration for dealers is the low-dollar margin on the bikes. Though the margin percentage is the same as a Gold Wing or any other Honda motorcycle, the dollar amount salvaged by the dealership is low due to the $2,999 price tag.
What’s still making the Grom worth selling, however, is that Grom customers are already starting to spend big money on parts and accessories, and once a customer forms a bond with Honda and the dealership, they’re likely to return for future purchases, which of course could include larger, more profitable bikes.
On the accessory side Two Brothers Racing and Yoshimura have leaped into the Grom market immediately. Brent Calliger, sales director at Two Brothers Racing, said he expects the Grom to follow the Ruckus in terms of the modifications and accessories that riders will add.
“It was very appealing to us, so we jumped on it, and we feel there’s going to be very strong sell-through and kind of a cult following for sure,” he said.
So far, Two Brothers offers a full exhaust system, a fender eliminator kit, Pro Taper bars and a smartphone handlebar mount for the Grom. Billet foot peg mounts are in the final stages of R&D, ready to move into production, and more products are likely to be added to the lineup.
“As we have Groms here and take them out to lunch and find out what they need, we’ll add more products as necessary,” Calliger said.
Two Brothers Racing expects engine performance enhancing products to be the most popular, as riders will be looking to surge toward the 65 mph mark.
“This bike really gives people the opportunity to make it what they want,” Calliger said. “You can make it an off-road kind of enduro; you can make it a fast street-type racer machine; it can be a little grocery getter.”
He advises dealers to keep Grom parts and accessories heavily stocked, so they can squeeze extra profit out of each sale.
“At this price point and such a fun little machine, it’s easy to throw a couple grand at it and really take it to the next level and really make it your own and make it cool,” Calliger said.
Honda purposefully designed the Grom to be the type of machine that people would want to customize. One of its own employees has even started modifying his to perfection.
“One of our employees here has bought one, and he’s already ordered plastic from Japan, and he’s already spent several thousand dollars,” Seidel said. “It definitely is almost already getting that cult status like Ruckus. People are customizing them left and right.”
Aftermarket manufacturers are clamoring to get their hands on the Grom, but Honda doesn’t even have enough in house to loan to industry companies. Nearly all of the imported models have been loaned out to the media or delivered directly to dealerships. Two Brothers Racing was lucky that employees knew someone who had bought a Grom that they could borrow for measurements.
To maximize his profit margin, Ennis was quick to add parts and accessories to his showroom. One of his parts employees was savvy enough to order accessories for the MX125, which is the overseas version of the Grom.
“We started bringing in aftermarket accessories before we even had the bikes,” Ennis said.
Central Florida Powersports was so ahead of the pack that the dealership has started selling a solid number of Grom parts online to customers across the country. So far Grom buyers have been attracted to aftermarket exhausts, fender eliminator kits and carbon fiber parts.
Ennis prefers adding accessories to a sale, rather than adding fees. Some dealers, he said, are adding up to $1,000 per bike in fees to make extra profit. Central Florida Powersports has chosen not to go down that road, as high fees can significantly raise the cost of a value-priced model.
“We’re lower on the fee side with that, but we hope to just gain those customers and hope to sell some volume on these things,” he said.
That customer loyalty is important to Central Florida Powersports, as Ennis expects the Grom to be an addition to the buyer’s bike stable, rather than the lone bike in the garage. And for those who are buying the Grom as an entry-level bike, he expects the trade cycle to be around six months, as it has been for the Kawasaki Ninja 300 and the Honda CBR250.
“I’m more excited about bringing more people into the dealership and gaining new customers,” Ennis explained.
“It sets the stage. Hopefully 10 years from now, you’ll hear kids say, ‘I started on a Grom,’” Savino said.
Honda’s goal is to become a part of a customer’s life for the long term. The thought is once they’ve fallen in love with a Grom, they’ll begin moving up to larger Hondas, hopefully leading to a Gold Wing purchase in the future. And if riders become familiar with the brand, they may also be inclined to purchase a Honda automobile, lawn mower or generator.
“It’s all about getting that customer and hopefully keeping that customer by offering them great products they can move up on,” Seidel said.
A wide demographic
Though the Grom was originally targeted at young adults, Honda has seen the bikes sold to customers from 16-80 years old.
On the entry-level side, the Grom offers a low, unintimidating stance, a short seat height and just the right amount of power for a beginner. The bike is so ideal for this crowd that Honda plans on rolling the Grom out at training centers in the future.
The market among Ruckus owners is also apparent, as those enthusiasts are beginning to trade their aging scooters for the Grom.
“My first probably five or six customers are from the local Ruckus club,” Ennis reported.
At the top of the age range are many riders who are drawn to the Grom because it reminds them of the Mini Trails of their childhood.
“It resonates a note. It brings them back to something that they either had as a kid, or they wanted it if they couldn’t have it,” Savino said.
A 75-year-old father of one Honda employee even received one from his wife recently, and he’s been riding it every Saturday, Savino reported.
Though most of his buyers have been 18-30 so far, Ennis has also seen interest from RV owners looking for something to zip around on campgrounds. Even more, his wife, who isn’t a frequent rider, gave it a thumbs up.
“I’m 37, almost 38, and some of the guys that I ride with are interested and are actually on the deposit list,” he said.
On top of the low price point and the ability to customize the Grom, the fun factor definitely plays in. “The all-new 2014 Honda Grom 125 is a fun little machine,” Rider Magazine’s Greg Drevestedt wrote; “small, slow and tons of fun” is how USA Today described it; “pure fun” raved a recent Cycle World cover.
And they’re not the only ones getting giddy over the bike. Even Savino and Seidel couldn’t keep their excitement in when talking about the Grom.
“It not only hit the target, but it just excelled in a way that it’s just really fun for everyone,” Seidel said.
When Honda staff has taken the bike out, people often walk past $15,000 bikes just to find out what the Grom is, where they can get one and how they can get a license to ride it. Ennis has noticed the same thing as he occasionally rides the dealership’s demo unit on his 14-mile commute to work. He’s had people give him thumbs up and even had one driver follow him for a mile to get a better look at the bike.
Ennis recommends dealers keep at least one Grom on hand if they can, for a showroom display and demo unit.
“People want to come see them and sit on them and touch them,” he said.
“Hopefully it’s like other bikes we sell in that it introduces people to the industry that maybe haven’t ridden before. I think there’s potential in that being an entry-level machine,” he said.
Once production meets demand, Ennis expects to be selling five or six Groms per month out of Central Florida Powersports. Calliger anticipates a two- to three-year run in which the bike is flying off showroom floors.
No matter the length of the craze, it’s clear the Honda Grom is a winner, and its excitement appears to have some legs.
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Copyright 2013 Powersports Business