Are multi-dealerships good for the customer?

The motorcycle industry has changed substantially over the past decade with multi-dealerships and most of it has been in favour of the customer, writes MBW contributor and former motorcycle dealer Marty Thompson:

I have been involved in the motor industry since 1987 and seen it change significantly, mostly for the benefit of the customer. These changes started in the car trade, but have in the past 10 or more years filtered into the motorcycle trade.

When I started riding, most motorcycle shops were basic affairs: A tin shed; a brick building with a glass frontage; bikes lined up inside in a row; concrete floors; accessories hung on a white peg board on the wall; workshops covered in grease and oil stains; and old rusting dead bikes out the back in the weather.

And all these dealerships were owned by people who were essentially enthusiasts. They could be called mum-and-dad businesses. They operated on small volumes with higher margins in order to make the business profitable.

However, the landscape has changed, albeit slowly. Now we see fewer bike “stand alone” shops.

Today one company will own more than one and often multiple sites. No longer is it the enthusiasts who own the majority of bike shops. It is business people, pure and simple.

Why has this happened?

Since the dawn of the internet with its almost infinite amounts of information buyers have shopped around for the cheapest price.

While costs of living and inflation have increased markedly, the number of weeks a consumer has to work to buy a new accessory, item of clothing, helmet, or bike has fallen dramatically.

Consequently, profit margins have also fallen.

Retailers now need to sell volume to make enough profit to sustain a business and to increase volumes, multiple sites are needed.

Who benefits?

The benefits of multiple sites are in economies of scale. Accounts, administration and management can be centralised into one location or department.

The other benefit is in buying power. The higher the volume of purchase, the lower the purchase price can be negotiated.

In the bike trade, one of the first to do this was a well-known Melbourne bike retailer. I saw this in the early 90’s as a rep for one of the wholesale companies. They were able to place an order that was as large as almost the combined orders of all the other individually owned bike shops in Melbourne metro.

Of course, with this came a huge saving in the purchase price of each item, allowing either higher margins, or as was the case, smaller margins and higher volumes of sales. Naturally, the consumer was a winner as prices of clothing and accessories dropped.

Who loses?

The downside, was that the smaller shops increasingly found it more difficult to make a profit from their low volumes and higher purchasing costs. Why the smaller shops never got together to form buying groups still astounds me.

The only thing which really was not affected in terms of buying power, was the initial cost to a dealership of the new bikes.

However, larger dealer groups were able to counter this with an increased volume of sales.

While there are still many independently owned bike shops who still manage to eek out a living, the numbers are falling almost daily.

Some might be fooled into believing that this arena of multiple sites owned by one owner has reduced competition for bike sales.

However, each bike salesperson and sales manager in every dealership, regardless of ownership, still only gets paid on how many bikes they sell. So the competition is still there and still ruthless, even among dealerships owned by the same company. There is competition to not only keep the sale within their site, but also within their group.

So my suggestion is that if you are going to shop around for a deal on a bike, cross shop with an independently owned dealership.

Most importantly, try to develop a relationship with your local bike shop, regardless of who owns it. It’s still the best way to secure a fair deal on anything.