For the last few years I have been arguing that the powersports industry would be better, and dealers would be stronger, if only we didn’t have free flooring.
Free flooring is like crack for powersports dealers. Once you get hooked on this “benefit”, it’s hard to break the habit.
So why is it bad? Here are a few key reasons
– It provides dealers the opportunity to be bad inventory managers. Instead of actively managing stock, all they have to do is order a few extra models so that they can look at them on the floor for a longer period of time.
– Old and excess inventory often reduces profitability. Dealers, under pressure, sell at reduced margins.
– OEM’s pay the floor plan lenders for the flooring costs during the “free” period. They pay drastically lower rates than the dealer, but it’s still money that would be better spent on other activities that actually drive sales, ones like marketing, training, and financing.
– Any discounting reduces the long term intrinsic value of a brand. Premium products sell at retail. You don’t negotiate for a better price on a new Rolex.
– Dealers who are overstocked run a higher risk of failure during industry downturns.
What do you think?
#dealership #motorcycles #powersports #dealers #flooring #floorplan