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Have You Added One Brand Too Many?

Think twice or even three times about adding additional brands to an already successful dealership.

Last month, I wrote about whether or not to open a second location (don’t do it, unless you are a masochist). Another mistake many of us dealers have made is to add an additional line of ATVs or motorcycles to a business that is doing well. Raise your hand if you have ever regretted adding another brand and wished you’d ignored that desire. I know mine would have to be raised — several times.

When I purchased my shop, it was a small one, but it was Yamaha ATVs and motorcycles, and I did very well, increasing sales exponentially. Yamaha is what I would call a top-tier or an “A” brand. There is a local shop that has always been all Yamaha all the time and done very well. You’d think that I would have taken a lesson from that, wouldn’t you?

Apparently not. I decided I needed snowmobiles. Yamaha sleds weren’t available, so I settled for a brand that I now realize is a “C” brand, and while I sold a few, I probably lost $1,500 a unit by the time the dust settled. Every year, I ordered more to get the free floor plan for the summer. It was madness!

No one in my shop rode them. We knew nothing about them, and while I went out a few times, I realized that they were not my thing. I now understand that you have to be a real enthusiast’s shop to do well with sleds. Lesson learned. Or maybe not. I was saved by another local shop that wanted to be the local “C” brand’s dealership and had the money to buy me out. I felt like a boat owner when I saw the last of the sleds and their parts and accessories leave. That dealership went under within a year.

Yamaha sleds then became available. Unfortunately, it was just before sled sales tanked, as they tend to do from time to time. It just takes a year or two without snow. Also, we were still not an enthusiast’s store. Finally, we sold out of units after two years and did not re-order. On the good side, I only lost $1,000 a unit this time.

Then, I decided that a line of Chinese ATVs and scooters would be a great way to go. Remember: masochist…. This time, it all went fairly well, until the company distributing them seemed to run out of parts and the amazingly high warranty claims rate was very slow in getting paid. I bought back a few units that were just falling apart and shipped those units back to the manufacturer. I finally gave up. The last time I cleaned up my warehouse, there were two kid’s ATVs hiding in the back that we had used for parts because we were unable to get any. That company is long gone now.

I then invested (and I mean invested: the cost of entry, tools, computers and training was very high, not to mention the shop displays and renovations I had to do) in a European brand that I was very enthusiastic about. We did all right with it, but there are too many dealers around, and we are all fighting over the same customers. I still like the brand, but it will never be as profitable as Yamaha.

There are some brands that go together: Kawasaki and Suzuki seem to work well together. It might work if you got a couple of the bigger Eurobrands in one shop. Maybe? Honda seems to work well with Yamaha in one building. But, Honda is a brand that everyone wants. The brands that are easy to get are usually hard to sell.

There are lots of variables one would have to consider if you’re thinking of adding a brand. Who else is selling them? How many dealerships are nearby? Are they discounters, or do they want to make a profit? Is the brand doing well? If it isn’t, why not? Often, it is because of a poor dealer network. It may or may not get better. Often, it’s just because no one wants what that brand wants to offer. Are the used versions worth anything, or is there no value in them?

In the final analysis, if you have a brand that works for you and your shop is profitable, maybe expanding the number of brands is not the way to go. Just be the expert and the guy to go to for your one brand. You don’t necessarily need to expand. The grass is not always greener on the other side.

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