How’s your crystal ball doing these days? If you’re like me, some of the readings were mixed for 2021. While the country continued to struggle in certain areas, other markets, such as consumer finance, appeared to be strong. 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 — should 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, a shortage of semiconductor chips is expected to continue to impact new inventory, stretching well into the year. Other materials sourced from overseas suppliers are expected to struggle to creep through supply chains as suppliers find alternative methods of delivery. A lack of used inventory is also persisting but should 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% in the most recent August data.
Adopting a different type of sales model may prove beneficial for dealers. Consumer willingness to preorder units with the option of financing could mean the difference between a sale or a miss. Additionally, the line between online and in-store 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 preorders 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.
While I don’t foresee the same record sales experienced in 2020, I do believe there is a strong case for optimism in 2022 for powersports dealers who focus on customer service and capture good value through F&I contracts. As your partner in F&I, we wish you and yours a peaceful, healthy holiday season and a prosperous New Year.
Glenice Wilder is the vice president of powersports at EFG Companies.