RE: New ST Options

[Eric Sheley <eric@xxxxxxxxxx>]

At 05:08 PM 09/21/1999 -0700, Retherford, Martin wrote:
 >Eric,
 >	What's your take on tire costs?  $100 for the tire and $30 for the
 >install labor and $7 and change for tax.

Not sure I understand your question. I think tire costs suck. Ever compare 
dollars per mile of life expectancy between your auto and bike ?

 >	If the bike retails for 10,250 then I estimate that dealers pay
 >somewhere between 5-7k for a plain ST.  There is freight and setup costs
 >which the manufacturer pays.  I do understand that they may not be getting a
 >huge amount for setup but after the first 5 STs it doesn't take as long to
 >set one up either.
 >	There net profit on the bike if they sell it at sticker would range
 >from 25-50%.  30-40% is standard for a company making money on any product
 >unless they do volume work.  So the bikes pay for themselves in my scenario.

In your scenario, you're right - the bikes do pay for themselves. However 
Triumph (and many other bike dealers) deal with a 10%-15% margin. For 
Triumph the freight and setup is passed on to the dealer - not paid for by 
Triumph. Some of the Japanese players offer a 3-4% holdback like you find 
in the automotive industry. Last time I checked, Triumph did not offer its 
dealers a holdback, but did have an incentive program on a quarterly and 
yearly basis that could recoup a few points. But as I understand it, the 
program is performance based so less than 50% of the dealers see this 
money. So when you buy a discounted bike, you can eat into and through any 
profit margin really quick.

 >Now the merchandising kicks in.  200-400% profit on low dollar items.
 >Moderate level items get between 50-100% mark ups depending on volume and
 >High level items 10-50% mark ups.

Parts department operates with an average of around 30-35% on Triumph 
accessories. You are correct that smaller items typically have a higher 
margin, but I am sure that there is not much comes in over 100%.

 >	The only costs for service that a dealer I can see will pay is for
 >his service personnel of course a manager which should also be a service
 >person, insurance, the cost of service screw ups, tools, and training.
 >Tools and training are one time occurrences essentially so that leaves
 >insurance and screw ups.  Utilities and location overhead would be covered
 >on the sale of bikes.  So that identifies the three departments that make up
 >at least my dealer, sales, parts and service.  In my scenario all three
 >areas are profit centers.

Typically a shop will divide the costs of rent and utilities across the 
departments based on square footage usage. This allows the owners to see 
the performance of each department as a separate entity. All areas should 
be profit centers, but it is easy for service or sales to fall to low (or 
negative) numbers.

 >	That is the standard model for retail I have been exposed to.  I
 >don't see them varying this very much unless it is the owners hobby or hard
 >times exist.  Without this type of business model the average business owner
 >is wasting his money on a business like this.  So there is some reason why
 >your average shop is still open.

You are correct - the average owner is "wasting" his money on this line of 
business. There are many businesses that they could change to that would be 
much more profitable, which gets back to the original statement that I made 
that it is surprising to see some of these places stay in business.

When you get right down to it, you will find that a lot of your smaller (or 
rural) dealers do it because they really love the sport. Sounds strange I 
know, but I know a couple of dealers personally and this is one of the 
reasons they give for sticking it out.

- - Eric


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