While the country is slowly emerging from the effects of the pandemic, the powersports industry started 2021 with a bang! So, what should powersports dealers do now to prepare for the coming months?
According to composite data from more than 1,650 dealerships in the U.S. that use the CDK Lightspeed DMS, revenue from new and pre-owned Major Unit Sales continued to rise 46% in the January 2021 period vs. January 2020.
There are several factors contributing to continued strength in powersports sales. Temperatures are warming, vaccine distribution is rolling out, and COVID-19 cases are trending down across much of the country. A third round of stimulus checks plus income tax returns will hit consumer bank accounts in coming months. Potentially flush with cash and improved consumer confidence, there is a good chance for steady traffic – both online and in the showroom. But will you have what these customers are looking for?
The Q4 2020 Powersports Business/BMO Capital Markets Dealer Survey reflected some early inventory concerns. Continued manufacturing delays with both domestic and foreign ATV OEMs could hamper availability of new units in showrooms for the critical spring selling season. Other dealers expressed concerns about OEMs flooding the market with less popular units, forcing owners to ‘sell what you get’ and even presell most of their incoming inventory. Parts availability also continues to be a concern for units relying on overseas components or higher-end electronics. Finally, a more dynamic demographic with greater interest in youth products, new riders, or recreational demand could impact dealers who do not carry a wide selection.
Available used inventory also remains a challenge for dealers with pricing for used bikes remaining high. Many auction houses struggled to pivot to an online model and cash-strapped consumers retained their older bikes in 2020. According to BlackBook analyst Scott Yarbrough, until both the manufacturers and the remarketing industry can supply more units, prices are likely to remain elevated for all powersports models.
Prepare to Spend Wisely
So where should a powersports dealer spend some of the revenue generated in 2020 to prepare for continued profit in 2021? A few ideas come to mind:
- Evaluate your F&I product mix
- Build pre-owned inventory
- Invest in the staff, infrastructure
- All of the above
Certainly, for a dealer with enough cash on hand, ‘all of the above’ is the answer. Strategic bets on each option would give a savvy dealer the flexibility to course correct in the event of a major market revision.
With the seller’s market in the powersports industry, it’s all too tempting to front-load the price of a vehicle. After all, consumers don’t feel they have the upper hand when it comes to the negotiating table. They can take it or leave it, and the next consumer that walks through your dealership could take it.
The problem with this is two-fold. First, it leaves quite a bad taste in the customer’s mouth. It’s definitely not quality customer service. Second, by focusing on maximizing the upfront price of a single unit today, you could end up losing multiple repeat sales tomorrow, as well as referral business.
Rather than selling for today, strategic powersports dealers prepare for the long game. They are keeping their unit prices competitive, increasing profit on the backend with consumer protection products, and cultivating long-term customer relationships.
When evaluating your F&I product mix, make sure your protection package options match your customer base. Much has changed in the way of powersports protection products and consumers in the market for a new bike may not be aware of the offerings that add instant value.
When building your pre-owned inventory, be sure to include pre-owned protection packages to immediately increase the value of the unit. Powertrain and pre-paid maintenance protection can be strong selling points to a customer leery of purchasing used.
In order to be successful with these new protection packages, your staff must be trained on their features and selling benefits. Whether working with customers in the showroom, online or both, the effectiveness of your team delivers a strong return on investment.
However you choose to spend your hard-earned 2020 revenue, make sure it is a strategic investment that will keep your dealership – and your customers – prepared for a great 2021.