For powersports dealers, 2021 is shaping up to be another banner year, mirroring the record setting gains made in 2020. Regardless of continuing inventory issues caused by pandemic supply chain bottlenecks, units continued to hit the road. While on-road unit sales repeated their decline, off-road and personal watercraft unit sales increased exponentially. Powersports has proven to be a balm to ease consumers’ pandemic malaise.
Will the good times continue? For 2022, demand for off-road and personal watercraft vehicles is expected to remain high. Once manufacturers begin producing more units at scale, dealers can expect the 30-point margins enjoyed during the boom years to begin to decline as supply chain issues resolve. For some, it will be tough to wean themselves from those lofty profits. Dealers who pay close attention to market pricing – and adjust accordingly – will continue to show strong sales and market penetration. Dealers who cling to those margins may find themselves priced out of the market, even though consumer demand remains high.
The key to a successful 2022 will be based on implementing a consistent sales model at prices the market can bear, with a focus on creating long-term customer relationships. Training for all staff members on financing and protection products will also be key to boosting revenue as the sales process evolves to incorporate more online resources. Savvy dealers know there is more than one way to generate profit from a sale. Adopting a more ‘full service’ approach within the dealership will keep those customers coming back.
Overall economy trends support continued success
The past two years may have felt like the powersports industry was operating in a bubble that could burst at any time. In reality, the economy is actually experiencing a ‘rubber band’ effect. The U.S. economy struggled under constrained consumer spending at the peak of the 2020 pandemic. After a significant pull back, the economy sprang forward in 2021 with such velocity that demand for goods overwhelmed global supply chains. Businesses struggled to ramp up in the face of several stops-and-starts, labor concerns, and changing consumer demand.
Moving into 2022, the shortage of semiconductor chips is expected to continue to impact OEMs inventory, stretching well into the year. Other materials sourced from overseas suppliers will struggle to creep through supply chains as suppliers find alternative methods of delivery. A lack of used inventory will also likely persist, but will improve as new inventory comes on the lot and consumers trade-in for newer models. Supporting those older units through an internal service department is another option for additional revenue in 2022. According to same store sales data from CDKGlobal, service revenue has been on an upward trend for several months, increasing 6.2 percent in the most recent August data.
Adopting a different type of sales model may prove beneficial for dealers. Consumer willingness to pre-order units with the option of financing could mean the difference between a sale or a miss. Additionally, the line between online and instore sales continues to blur. Allowing a consumer to buy a unit online, with delivery at a future date, could set a dealership apart and increase buyer loyalty. Offering service contracts to keep an older unit in top operating form should be considered standard operating procedure. Between vehicle pre-orders and a hybrid sales model, a new road to the sale is emerging. This will require new training models and a different set of skills for sales professionals. Strengthen skills across all job functions through cross-training. Specifically, make sure your sales team is proficient in F&I and includes the right products into the sales discussion.
EFG’s proven team of advisors can assist dealers navigate the new opportunities in 2022. We’re more than an F&I provider, we’re your business partner with years of expertise in the powersports industry. We bring a wealth of industry expertise, business acumen, and tools to drive value for our dealer clients. Contact us today to learn more about our profitable solutions that can drive success for your business in 2022.