Feb. 13, 2006 – More products, but not much more profit, dealer survey finds

Even in the face of low profits margins, dealers are continuing to increase their accessory inventories and floor space for gear and apparel, according to a survey of nearly 160 dealers from around the nation.
The Power Products Marketing survey, which was conducted for Powersports Business, also looked at holiday sales, the used motorcycle market, new bike inventories and dealer confidence in new vehicle sales in the coming year. The results, from about 10% of the market, show:

  • the amount of accessories and apparel items dealers are storing keeps increasing. In 2005, it went up 7.1%, trending close to 2004 (7.9%) and 2002 (8.8), but down in comparison to 2003 (nearly 18). In ‘05, only seven of the 159 dealers surveyed decreased the number of apparel and accessories;
  • the amount of floor space dealers are providing for motorcycle apparel and accessory items increased by 2.5%. That’s the lowest increase in seven years, according to previous surveys;
  • the rate of profit margins inches along, with the overall increase rising by 1.1%. That number is in line with the past three years, but more dealers reported their margin staying the same (74) than increasing (60);
    n?holiday accessories and apparel sales did increase by 0.7%, but its the lowest mark in at least six years, according to previous surveys;
    n?inventories of new bikes show dealers have about 3.47 months on hand;
    n?dealers are extremely confident about potential sales of new bikes in the new year.
    Dealers also must be confident in accessory and apparel sales even though profit margins have yet to eclipse the 2.0% mark since 2001.
    “With all these other alternative mass retailers and Internet-type marketing that are available to consumers out there, it’s really difficult for these guys to show” significant increases in profit margins, said Dave Crocker, senior partner for Power Products Marketing.
    Still, only two dealers surveyed in January said they decreased floor space for accessories and apparel, 48 increased it and 103 dealers kept it the same.
    The increasing floor space doesn’t surprise Bill Carter, Tucker Rocky’s vice president of marketing.
    “I still think it’s booming,” he said of the apparel and accessory part of the industry.
    Carter said street apparel really took off when the powersports industry followed the sporting good industry, which has for years devoted a significant space to apparel.
    The shift in the powersports industry, which started several years ago, was dramatic at first among some retailers, Carter said, and is now starting to slowdown.
    “There is more fine-tuning what they have,” he said. “So I still think it’s growing, but certainly not as much as it grew three or four years ago.”
    Part of the continued growth that Carter sees is in the casual side of apparel.
    “Individual consumers are getting into the lifestyle of the brand,” he said. “It’s just not can I wear that jacket to ride my motorcycle?”
    Instead, it’s can the consumer wear that jacket or T-shirt casually as well so they can be associated with the brand, he said.
    What doesn’t appear to be growing is holiday sales. Nearly 60% of the dealers surveyed reported either decreased or flat sales for the Christmas season.
    That surprised Tucker Rocky’s Carter, who said he did not hear any negative reports from dealers about the holidays.
    Still, the survey indicates that this is the second consecutive slow holiday season. Dealers reported a marginal 0.7 increase in 2005 and a 2.0 hike in ’04. That’s a far cry from the previous three years when increases twice hit nearly 9% and never dropped below 3.9%.
    Sluggish holiday sales haven’t taken the confidence away from the dealers, however. They expressed supreme confidence in the potential growth of sales of new motorcycles next year, believing their vehicle sales could go up in double digits in ‘06.
    Crocker of Power Products Marketing believes that confidence rate is overly optimistic and predicts a single-digit — if any — growth in new motorcycle sales.
    One concern Crocker sees in the survey is the amount of inventory of new bikes that dealers currently have — 3.47 months. That number is in line with previous years but represents a possible concern for OEMs, which might have to consider cutting production if that number continues to rise.
    The survey also gave a glimpse of used motorcycle sales. Dealers have on average about 1.92 months of inventory in used bikes on hand. They also sell about one used bike for every five new bikes. That ratio is in line with numbers reported in the past two years. psb

    Dave Crocker 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 dcrocker@powerprods.com.

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