By Glenn Hansen
Dealer principal Andy Kent is part of a group of Jacksonville, Fla., dealers that have begun discussions on a sensitive but unfortunately timely topic — dealership mergers.
“I think the community can seriously support about five dealerships,” he said. “So before one of us seven loses our ass in this economy, a few of us are talking about mergers that would keep us in business before the worst happens.”
In many ways, the worst has happened in Florida, one of the motorcycle industry’s most prominent markets. On-road motorcycle sales fell nearly 60 percent in this year’s prime selling season compared to 2008, according to sales registration data provided to Powersports Business by R.L. Polk. That data — a comparison of January through July — shows Florida, among the top three on-road motorcycle markets in the United States, as substantially worse off than many pockets of the country. In fact, the R.L. Polk data shows a loss of more than 17,500 on-road motorcycle retail sales this year compared to 2008. To understand the severity of the loss, consider that he fourth largest U.S. on-road market, New York, during that 2008 time period only had a couple thousand more sales than Florida lost this year.
What impact has that massive sales downturn had on the Florida dealer network? Joe MacGuire, president of the Florida Motorcycle Dealer Association, said the group does not have an exact number of closures. However, industry officials have said the percentage of dealership closures in Florida and another huge on-road motorcycle market, California, are higher than other states.
“So many dealers grew so fast beginning in about 2000,” said Rod Lopusnak, national sales manager for American Suzuki’s motorcycle division, “and some became very dependent on dealing in large volumes.”
As that volume base became difficult to maintain with the nation’s economic crisis, businesses began to suffer, no matter how strong their business plan. “That’s the saddest part of this,” said Lopusnak. “So many of these dealerships are run by good business people who simply couldn't handle a huge percentage decrease in business that quickly.”
The past six months have been especially trying, according to a metric manufacturer that examined its Florida dealership closings in 2008 and through this year. Of those closures, 70 percent have occurred in the past six months. The youngest dealerships are often the hardest hit, according to the manufacturer. More than 70 percent of these dealer closures in Florida have been in business less than five years.
That’s not to say every dealer has been hit hard.
MacGuire, the Florida association president, said business is “fairly good” at his Euro Cycles of Tampa Bay dealership, which sells BMW, Triumph, Ducati and MV Agusta. “I believe we are not affected as much by the slowdown as are dealers carrying Harley-Davidson and Japanese motorcycles,” he said. His customers are mostly repeat and referral buyers, and they’re more inclined to purchase a motorcycle regardless of the economy. “No BMW dealers are closing in the state of Florida,” he said.
But the data provided by R.L. Polk shows some of Florida’s largest counties have been the ones most affected by the sales downturn. The south-Florida counties of Miami-Dade and Broward have seen sales volume decreases by nearly 65 percent compared to a year ago. That amounts to a retail sales downturn of more than 3,000 motorcycles.
Florida’s economy as a whole is a big part of the difficult retail situation.
A 2008 report in Inc. magazine entitled “What are the best cities to do business?” shows the state’s rise and fall as an economic wonderland. Florida had been a “standout state” in Inc.’s popular best of list rankings. That changed last year. The combination of a mortgage finance crisis and a crash in the construction industry led to Florida’s fall. That fall is indicative of the “best cities” rankings. Ft. Lauderdale dropped from No. 3 among the large metros to No. 27. West Palm Beach fell from No. 6 to No. 41. Smaller towns, according to Inc., suffered even larger downturns. The Fort Myers-Cape Coral area ranked No. 1 in the mid-size category in 2007 and plummeted 42 places in 2008. Lakeland-Winter Haven (near Orlando) fell 45 spots on the list, and motorcycle-friendly Deltona-Daytona Beach plunged 49 places. The list details even worse declines for Palm Bay-Melbourne, Bradenton and Naples-San Marco Island resort area, which fell the most of any metro in the survey.
And all this was reported before the worst of the economic news hit the nation in October of 2008. Since then, the bubble-bursting real estate market has had a devastating impact on Florida. Both Florida and California lead the nation in foreclosure activity, according to RealtyTrac, which provides foreclosure data to a number of media outlets.
On top of that, Florida’s overall jobless rate hit 11 percent in September, according to media reports from the state labor department. That’s the highest unemployment rate since 1975, representing more than a million Floridians out of work. Miami-Dade County reports unemployment at 11.3 percent.
It’s numbers like these and their impact on the on-road motorcycle market that are causing dealers, including Kent of Jacksonville, to reassess their situation.
“We had a competitor near the North Jax store who closed down about four months ago,” said Kent, “and we’ve seen a small increase in service and walk-in business because of that.”
But instead of waiting to watch their neighbors and competitors fail, Kent and a few area dealers are beginning merger discussions that “would be better for us, better for the local economy and better for our customers,” he said.
Kent says a well-designed union of certain dealerships in the area would reduce facility expenses for everyone, and nobody would lose a manufacturer franchise. The discussions have just begun, but Kent is hopeful his neighboring dealers can come to agreements for a quick resolution to a difficult situation.
Nov. 2, 2009 – Florida: Coping with 17,500-plus fewer sales
By Glenn Hansen