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supply, demand, market, production

Business Management

Are You Ready for the Cycle of Change?

I was talking to a fellow dealer recently, and he’s rubbing his hands together because he is doing amazingly well. I asked him what he will do when it all changes. What will happen when the manufacturers catch up with the demand — and will in all likelihood — overbuild? We’ll have too many units for a smaller demand. The cycle will begin again. He figures that it will be a while before that happens. Right now, he is riding the wave.

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He may be right. Or not. I hope that I’m Chicken Little, but I’ve seen this before. Things are going well, then one or another of the original equipment manufacturers (OEMs) decides it wants a larger market share, it overproduces units, or there’s a recession, or interest rates climb, or everyone finds out that sub-prime doesn’t work or … well, you get the picture. We, as dealers end up paying the price.

We buy units that are not selling because they are “such a deal,” or the market gets saturated, or a model or style of bike that was doing well just stops selling. Just look at cruisers. Look at sport bikes a few years ago. Look at the bikes that first started it all in the ‘60s and ‘70s. Each type of bike suddenly stopped selling, but there were lots in the warehouses. Bikes in the ‘80s sat for years. In 2009, we couldn’t give bikes away for a while. Conditions change, and we end up with units that just sit, and sit and sit. Once a unit has sat on the floor for 18 months, you will never make money. Guess who pays for the privilege of storing them?

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I’m hoping the adventure touring market doesn’t collapse any time soon. It looks like these machines are here to stay, at least for a for a while. Right now, we cannot get enough. COVID, supply chain difficulties, microchips — all of these things have been attributed as part of the problem leading to lack of product.

Here’s another condition that may impact certain models of motorcycles — the crazy gas prices. Does this mean high fuel economy bikes will start flying off the showroom floor? Will the technology for electric motorcycles finally mean they may be a valid form of travel in the real world?

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We are still, however — at least locally — selling more than we were in the previous few years. The difference is that we have far fewer units on the floor for people to sit on. Customers may have to wait — maybe for months. They may get unhappy waiting, but once the unit arrives, all is forgiven.  

Right now, profits are up and sales are great, but that will all change. It always changes at some point, and it will again. Maybe not this year, maybe not next year, but it will happen.

The point of all this is: Will you be ready? Will you put some money in the bank? I opened an account where the company invested in blue chip stocks. It’s done well. Buy yourself a building for your shop or for an investment. Buy some land. I bought a parcel that was fairly large and close to where developers were buying, subdividing and building. They eventually started to knock on my door. I did very well with that.

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Invest in your shop as well. Get it humming at full efficiency. Know all of the numbers: profit levels and sales figures going back years. Make sure your staff is happy and working well. Does the shop look good? Maybe a renovation is in order? Update your displays. Get the staff some more training. Don’t be the cheapest shop around — just be the best. Maybe there are some accessory deals you can get for cash?

When things change, and they will, you can be ready. It might take six months or six years before the market falls again, but it will happen. Be ready.

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