(I just got out of Dr. Buzz’s lecture on the scooter business and it was harsh.)
During my dreadful pondering and languid contemplation of exactly how to address the current state of the scooter industry; longtime scooter industry guru, father and creative-type who would likely drink free at Comic-Com for being confused with a famous cartoon creator, Bryan Bedell, laid it down on his site 2StrokeBuzz.
I read his piece and I have to say right now things in the scooter biz are as bad as Bryan makes them sound… maybe worse. Yes, I admit that I’m known for being overly optimistic (foolish?) at times, in the hopes that I can influence the world by sheer will and positive thinking, but the reality of the situation right now is grim and the future of the scooter market in the USA lies in the hands of the distributors and shops that can manage to stay afloat on a shoestring budget for the next couple of years.
Imagine you owned a distributorship, let’s call it Gensymko. You’re proud of the high quality products you import from overseas. You’ve invested millions of dollars in scooters, parts, warehousing, employees and all the requirements that go along with that. You do your best to keep your customers (the Dealerships) happy and hope that support reflects on their customers (scooter consumers). A happy scooter consumer comes back for parts, accessories, gear and service. You count on your sales people to grow your dealer base, you count on your dealers to market and promote their shops and you also count on them to do their best to project their sales for the year. Why? So they can place advance orders with you and you’ll know what to order from your manufacturer so that you aren’t stuck with a warehouse full of aging scooters. And, what’s the fuel that keeps this cycle moving? Financing. Consumers need it to buy stuff, Dealers need to to stock their showroom floors, and distributors, like you, need it to stock their warehouse. The way this “fuel” keeps things moving on the business side is through the power of interest or “juice”. Your dealer is “inspired” to move scooters because every month a financed (floored) scooter sits in the store the amount of money they make on that scooter is diminished until at some point, the dealer is upside down; paying juice on a scooter that is taking up space and depleting their income. If your dealer isn’t selling, then they end up backing out on the advance orders they placed with you and your warehouse is stacked to the rafters with dusty crates. The thing is, you NEED those things to be gone before August if you want to get in your 2011 models.
Imagine now, the perfect storm of rotten luck for your company Gensymko.
* Sky-high gas prices make 2008 a stellar year for scooters. Consumers don’t know what they want and don’t care. They just want to buy something that gives them 100 MPG, end of story. If you nailed a couple of wheels to a weedwacker, they’d buy it. You move so many scooters through your warehouse that you end up begging your manufacturer to send more container loads ASAP before the season ends.
* A dealer frenzy begins. Optimistic dealers take note of their success and begin placing large pre-orders for 2009.
* Smelling the “blood” in the water, new and inexperienced dealerships spring up from everywhere. Your two dealership town now has six. Competition is getting fierce. Dealers are grabbing up every brand they can get and scooter consumers are taking them home as soon as they hit the floor. Dealers are actually collecting deposits on expected shipments!
* Your backup containers finally come in just as the 2008 season is cooling and you quickly whisk them off to your dealers who are happy about their sales for the summer, but feeling a bit pensive as gas prices begin to slide and our Titanic economy heads straight for the iceberg of shady financial trading.
* 2009 spins up and you’ve got your 2009 models in the warehouse or on the water. Dealers are fully stocked. The “juice” clock is ticking and your sales people are having a tough time selling to your existing dealer base. Fortunately for you, there are still some late coming opportunists sprouting up dealerships, but they are entering the game with caution because they are new and they want to see this “scooter frenzy” in action before they really jump in.
* CRASH! The economy is going down and taking all of your customers with it. Gas prices are almost half what they were the previous summer. The frenzied scooter consumer of 2008 is already posting their purchase on craigslist, low miles and cheap. Very few people are visiting their local dealerships because gas isn’t as scary any more. There are those who are pissed off at the shocker that oil prices gave them last year, but the banks won’t lend them money to buy a scooter. What do they do? Lowball the multitudes of craigslist sellers. The dealers? Are scared.
* The new dealers with the flimsy, clone scooters are packing up and going home. They got ‘em for cheap, marked them up 300% found out why they were so cheap and backed out. Their leftovers are hitting the auction block by the hundreds and now your well established dealers are having a hard time selling your quality Gensymco’s. In this economy it’s hard to compete with craigslist and these dirt-cheap auction scooters. The consumer who was once interested in a scooter is buying some of these ’cause they’re as cheap as your dealer’s freight and prep charge!
* Early summer 2010 nearly half of your well established, seasoned dealerships can’t take the strain any more. They’ve got 2009’s and 2010’s on their floors and the juice is killin’ em. Your warehouse is fully stocked with 2009’s and 2010’s. Sales are almost non-existent and August is approaching quickly.
* Your competitors in the distribution game are changing up their strategy in strange and desperate ways… selling directly to consumers, auctioning off all their 2009’s or pulling out of the game completely, leaving their dealers high and dry, dumping all their scooters onto the auction block and offering up their parts to MRP.
* NOW comes the hard part… When your dealers go down they have to ditch their product and you know who has to buy it back? You… at full price. Remember those late shipments in late 2008? Remember how your dealer’s floor was completely stocked for the anticipated, blockbuster 2009? Yeah, well you’re gonna need to find some space in your full warehouse because you’re about to get a $#!+load of 2008’s and 2009’s to go with your 2010’s JUST IN TIME for your 2011’s to start arriving.
* Sound bad yet? Well, Gensymco… consider yourself lucky. Some other distributors have it even worse as they battle with a suspicious EPA who have come to the game a bit late. Don’t they know those dirty, cheap scooter companies have already flown the coop? It doesn’t matter. Dry dock fees are expensive and adding up daily as these “inspectors” do their best to insure their job security during these tough times.
So, what’s my advice? Well, if you’re a dealer, you’ll need to keep your belt tight for a bit longer. Let this flood of auction bikes wash over the consumers, support your loyal customers and pray that the Rich Oil Barons (the people who run this place) crank up the price of oil. If you’re a scooterist, be there for your local shops… get a service done, buy a toy scooter for your office desk and a copy of Scoot! Pick up some winter gear. If you’re a distributor who is not funded by publicly traded stock and is still in business, hang in there brother. You know how to best steer your ship. Maybe consider doing what Honda did in with the Ruckus for 2010… they didn’t make a 2010 Ruckus, they just sold carry over 2009’s. In Japan, model year doesn’t mean anything… there’s not a reason for it to mean anything here in America other than to encourage people to upgrade to the latest model.
If you’ve got some ideas you’d like to share, now would be a good time to do it. We’re all listening.
24. August 2010
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