EDITOR'S NOTE: During April, Power Products Marketing conducted a survey on behalf of Powersports Business among 150 snowmobile dealers across the Northern United States and Canada. These 150 dealers collectively accounted for nearly 7,500 snowmobiles sold during the 2005 season, which is an estimated to be about 5% of the total market.
The dealers were asked specific questions pertaining to their 2005 season sales, carryover inventories and orders for the 2006 season. This research was spplemented with industry information obtained from knowledgeable industry sources.
2005 Season End Sales
According to our survey as well as informed industry sources, total North American snowmobile sales for the 2005 season, which concluded March 31st, declined approximately 7% from the previous year.
This marks the eighth consecutive annual decline for the North American market from a peak of nearly 240,000 sled sales in 1997 to our estimated 2005 level of 147,300 units. Going into the 2005 season, many in the industry were optimistic, given low inventory figures and a general sense of optimism in the market. In retrospect, the decline in North American sales is not surprising given the poor snow conditions in Central Minnesota, Central Wisconsin, and the East Coast, but the lack of non-current inventory tuned out to be a double edge sword.
During the 2004 season, non-current sales represented nearly 40% of sales. For the 2005 season, non-current sales are estimated to have fallen back closer to their historical average of 25%. One industry contact stated flatly that lower non-current sales was the principal reason snowmobile sales declined in 2005. Dealers reported lower late season traffic and a rapid drop off in year end sales due to the low number of heavily discounted non-current models.
Another potential explanation for the trend of declining new unit sales is a healthy market for used machines. Several industry sources suggested that the poor snow conditions in recent years have created a large supply of late model, low mile machines available to the used market.
According to other research conducted by Power Products Marketing, 35% of enthusiasts who recently purchased a snowmobile purchased that machine used while up to 50% of general snowmobile riders who recently purchased a snowmobile purchased that machine used.
On the positive side, industry contacts suggest lower non-current sales increased the average price per unit sold. These contacts additionally state total revenue from snowmobile machine sales in North America increased despite lower volumes. Dealers in areas that experienced good snowfall reported excellent sales of both new machines and PG&A.
Sales in the U.S. market continue to be weaker than sales in Canada. Canada has for four years declined less than the US market, and now represents 31 percent of the North American market. In the year 2001, Canada represented only 25% of North American sales.
We reported in our January Trendline analysis that year-to-date 2005 North American sled sales through December were estimated to be running 3% behind the previous year's pace. As can be seen from the rapid drop in sales towards the end of the season, snow did not come early enough to keep buyers shopping for new machines.
PG&A Sales and
One positive aspect of the 2005 season was strong PG&A sales. According to several sources, industry wide PG&A sales for 2005 were up approximately 15%. It appears that while some enthusiasts were reluctant to purchase new machines, they were anxious to upgrade their existing machines with clutches, tracks, and other accessories. Garment sales were also strong.
One feature of the snowmobile market is that enthusiasts are willing to drive great distances to find snow. Several of the regional tourism associations reported record tourism revenue based on snowmobiling this past year.
Snowmobile related expenditures in Northern Minnesota, Northern Wisconsin and the Upper Peninsula of Michigan were at or near records according to reports to the International Association of Snowmobile Manufacturers.
According to additional research conducted by Power Products Marketing over 90% of snowmobile owners own a snowmobile trailer. In addition, 69% of enthusiasts take two or more snowmobile related trips per year, while 30% take 5 or more trips.
Current VS Non-Current Sales
Last January, we reported that towards the middle of the season, non-current sales were running below 20% of annual sales. While our annual spring survey indicates that final non-current sales were not below 20%, non-current sales represented a much smaller portion of the overall market in 2005. Low non-current sales may have lowered the overall size of the market, but higher average prices per machine helped to soften the blow for snowmobile dealers.
Most manufactures increased production for the 2005 season and despite a better current/non-current sales mix, inventories across North America are estimated to have increased approximately 10%.
One area of concern voiced from several dealers is that while inventories remain low from a historical comparison, a larger supply of 2005 model inventory could cut into orders and sales for 2006.
From the sample of 150 dealers contacted for this survey, estimated orders for 2006 were off by 2%. This compares with an estimated increase in orders of 8% for the same period last year.
Industry contacts suggest that most manufacturers are taking a cautious approach to 2006 production runs after increasing production in the double digit range for 2005.
Consumer Snow Check spring sales reported by the dealers we spoke with were on average slightly off last year'8s pace. Some manufacturers seem to be following a continuing strategy to de-emphasize spring sales and focus their efforts more towards fall and early winter promotions.
- 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. Crocker may be reached at 952/893-6870 or at firstname.lastname@example.org.