Cost savings message key to a 2008 repeat

By Neil Pascale
Editor
It doesn’t happen often in business where a vital part of an industry will change its message to consumers a year after seeing phenomenal retail growth. But in many ways, that’s what is happening in the scooter segment.
A year after preaching mpg benefits amid spiking gas prices, much of the scooter industry will be relying in the months ahead on a message where gas mileage is but a part of a much larger equation. The message in its entirety — that a change in transportation can mean dramatic savings in a dire economy — is aiming to allow dealers to duplicate the retail sales volume success they experienced in 2008.
“We have a very compelling proposition in today’s economy given that scooters are an alternative, low-cost transportation vehicle that can provide many families substantial savings,” Paolo Timoni, CEO of Piaggio Group Americas, said in describing the U.S. scooter market.
Fueled by gas prices that eclipsed $4 per gallon nationally in 2008, scooter retail sales surged more than 41 percent higher in 2008 than a year ago, according to the Motorcycle Industry Council (MIC). What’s more, most manufacturers believe that percentage could have been greatly higher if inventory in large portions of the United States did not dry up in the early summer.
Whether those types of retail sales numbers can be duplicated this year is one of the industry’s biggest questions heading into the prime spring and summer selling seasons. How consumers react to what would be a dramatic lifestyle change — not to mention how dealers can feed that line of thinking — will go a long way in determining whether the 2008 sales surge will be repeated, or become merely an asterisk tied to the volatile oil industry.
“However you want to look at it, there are a lot of people who are willing to dress warmly and travel from point A to B in a really simplified way,” Philip McCaleb, owner of The Genuine Scooter Co., said, noting the general interest in the U.S. consumer base of joining the growing scooter rider population.

What’s at stake
Just how large the U.S. scooter retail sales market was in 2008 is a debatable matter. The MIC-reporting companies sold more than 76,000 new units last year in the United States. However, the MIC recently estimated the true U.S. scooter market was approximately 222,000 units. That number, what the MIC terms an “early estimate,” is partially based on the sales survey results of approximately 150 non-MIC reporting brands plus the 76,000-plus total.
Officials close to the scooter market have different opinions on whether that 222,000 number is accurate. If that estimate proves to be true, the scooter segment would now be the second-largest two-wheel segment in the United States, behind on-road motorcycles (600,000-plus sold last year) but ahead of off-road motorcycles (146,000-plus in 2008.)
McCaleb of Genuine Scooter believes that 222,000 number is on target, noting he knows of a number of non-reporting MIC companies that sold 6,000-plus new units last year plus another set of Chinese distributors that sold 3,000-plus units in 2008.
Steve Lazoff, the sales director for KYMCO USA, however, views that estimate as too high. Lazoff believes the total U.S. retail number “is certainly a higher number” than the 76,000 reported by MIC-reporting companies but “I don’t think it came anything close to 200,000.”

The sales pitch
There are different marketing approaches attempting to change U.S. consumer behavior but the question boils down to: Can the typical family switch from a garage featuring two vehicles with eight tires to two vehicles with six tires?
That’s a subject Piaggio Group Americas CEO Timoni has examined closely. What he has found is 70 percent of U.S. households have two or more cars, according to a report by AAA, the auto insurance agency.
“Every family needs one car because they need to take the kids to school,” Timoni said. “But the second car is not really a necessity. In most cases it’s used by one of the two parents to commute to work.”
The difference between keeping that second car or switching to a scooter in terms of monthly expenses is potentially huge. The 2008 AAA report found the cost of driving a car ranges from approximately $4,232-$6,901 per year, depending on the size of the car and the amount it’s driven. SUVs ($6,930 per year) and minivans ($5,728) are potentially more costly.
A scooter, on the other hand, could range from $1,667-$2,212 per year depending on the amount it’s driven, according to Piaggio Group Americas’ calculations. (Those partly assume the cost of a scooter is 25 percent of a medium-sized sedan.) The bottom line for all those calculations: Having six wheels rather than eight wheels could save a consumer anywhere from $2,500-$5,000-plus per year.
“In today’s economy, that’s a lot of money for a lot of people,” Timoni said. “Therefore we are confident that we will continue to see significant interest from people in buying motorscooters.”
KYMCO’s Lazoff also is confident the cost-savings message can bring about the same level of interest from consumers that the gas price spike did last year.
“I think it not only will equal it, I think it will actually exceed it,” he said. “Because of the
$4 gas and the decline in the economy, two-wheel travel in general is just seen as more of an acceptable mode of transportation in the United States where it has not been in the past.”
If this change in transportation philosophy can materialize, it could have significant, long-lasting effects on the industry, notes Rick Pawelka, director of marketing for KYMCO USA. “The growth will be more consistent because the people who get into the industry for that reason will have more of a tendency to stay in it and buy up,” he said.
Pawelka believes that change in consumer attitude can happen because of what KYMCO USA saw last year. KYMCO USA had retail sales rise in every engine-displacement category last year but the biggest came in its 125-150cc segment.
This is notable because consumers throughout the United States have to obtain a state license to ride these vehicles. In other words, overcoming the additional driving regulations did not deter them from choosing an alternative transportation, Pawelka said.
“I do think we will continue to advertise to that segment as scooters being a viable means of transportation and certainly a low-cost alternative to cars,” he said.
McCaleb of Genuine Scooter also has seen a rise in sales of larger-displacement scooters. “The larger portion of the business is in the lower displacement bikes,” he said, before adding, “the smaller, but growing piece of the business is 250cc and up.”
That can only help the entire segment try to duplicate the success of 2008.
“We’re not going to be disappointed because we’re not geared to have unreasonable expectations in this climate,” he said of the company’s 2009 retail sales goals. “But so far, knock on wood, dealers are selling product.”