RE: RE: New ST Options

["John Fitzwater" <johnfitz@xxxxxxxxxxx> (by way of Eric Sheley <eric@xxxxxxxxxx>)]

Below a response from John Fitzwater, a dealer in New Zealand. For those 
not familiar with John from the other Triumph list, he is one of those 
dealers that most of us only dream about encountering. He freely gives of 
his time to help and advise those in need and from what I've been told, 
also runs one awesome motorcycle touring company. He is also the person 
that was directly responsible for my early decision to buy the ST.

- ---------Original Message-----------------

Hi Eric

 > John,
 > Could you add some comments in the text below that I could forward to the
 > list?
 > Thanks
 > - Eric

Sure, I'm all for debunking the myth that motorcycle dealers print their own
money.

 >  How much is the dealer
 > paying for the
 >  >ST itself?  Anybody know?
 >  >	If the bike retails for 10,250 then I estimate that dealers pay
 >  >somewhere between 5-7k for a plain ST.

My dealership is not in the US, but if the figures suggested above were even
close, EVERYONE would be selling motorcycles.
Generally the dealer margin is around 15-18%, before pre-delivery
costs/dealer set up. It doesn't vary much worldwide. It's certainly not over
20% anywhere.

 >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.

Again, I'm not sure of the deal in the US, but the Dealer pays for setup.
Freight is sometimes, but not always, paid by the manufacturer.
A sore point for a lot of Triumph dealers is that they don't even come with
engine oil in them.
The Dealer pays for that too. (Unless he can charge it on to the purchaser -
Ho Ho Ho...)

 >  >	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.

Ummmm. A Dealer might make 25-50% on a helmet.... but a bike? In his soggy
wet dreams...
Recompute the figures on a 15-18 percent margin. After haggling and "doing
the deal" he might hang on to 10% of that. From that 10% he has to pay the
bike set up staff, flooring, rent, insurance, levies, licence fees blah blah
blah. I recently computed the true break even point for a motorcycle
dealership with 10 employees. For new bike sales the dealer needs to get a
10% margin just to stand still. Of course, this depends on the number of
bikes he's selling - I took a non-metropolitan dealership in my example.

 >  >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.

Fairy tale stuff. 50% margin on products under $20 is about right... Above
that the dealer is lucky if he's getting a margin of 33-40%.
A 400% profit on a part that cost him $25 would see him selling it for $125.
No way, Jose.

 >  >	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.

Errmm, there's a few million other expenses overlooked here, but I dont have
4 pages or the time to list them.

 >  >Tools and training are one time occurrences essentially so that leaves
 >  >insurance and screw ups.

Training is a one time expense? What about when Triumph went to Fuel
Injection...? The Service Tech isn't familiar with the new system, so it's
off to school again (training accounts for 7% of total Service Department
chargeable time, and it is a major income leak.)

Tools a one time expense? When Triumph come up with a new Parts fiche, parts
books, sales pamphlet or a new tune to download with The Gameboy, the Dealer
gets charged. An saying " No thanks, I don't want it" isn't an option
either. This isn't peculiar to Triumph - all manufacturer's work this way.


 >Utilities and location overhead would
 > be covered
 >  >on the sale of bikes.

Very true. It comes out of that 10% he's managed to hang on to....

 > 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.


Actually, this misses the major profit centre for many dealerships.
Financing and Insurance.
Again, I can't speak for the US market, where you have a booming and
relatively cash rich society (as compared with other OECD nations), but the
_average_ dealer makes a little money on the Parts Dept, loses money on
Service work, makes a little on new bikes, and does  a little better on
used. At the end of the year, the profit from these 3 centres generally
_just_  covers  the typical dealers costs and makes him a little net
profit, but not in a way that gives him a decent return in his investment.
If he is earning money from financing commissions (usually in the form of
"recourse finance" where he is ultimately the purchaser's guarantor), this
often makes all the difference. Many dealerships work hard at breaking even
on other departments and treat income from F&I as their real profit centre.


 >  >	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.

Yes, there is. But generally it's not profit. Most motorcycle dealerships
are owned by motorcycle enthusiasts who would rather die in a ditch than
give up.
The average motorcycle dealership doesn't have a licence to print money.
There are good and bad operators in any marketplace. Find yourself a good
one, and pay his price. If he's any good at all, he'll know all about
win-win and you'll both benefit.

'Course you can ring around and haggle and haggle until you get the lowest
price....but ultimately it's a Lose-Lose deal...

If you could walk a mile in your average common or garden motorcycle
dealer's shoes, you'd not only pay his asking price, you'd throw him another
tenner to buy a beer with...

- ------
Thunderbike Powersports Ltd.
PO Box 674, 82 Achilles Avenue, Nelson, New Zealand.
Tel: +64 21 969 071 (mobile)  Fax: +64 21 218 0394 (mobile)
E-mail: mctours@xxxxxxxxxxxxxxxxx
Tours Home page: http://www.thunderbike.co.nz/nztours/nzindex.htm
Tour Bookings:  http://www.thunderbike.co.nz/booking.htm
Rental Bookings:
http://www.thunderbike.co.nz/nztours/booking_rentals.htm
Win a free tour:   http://www.thunderbike.co.nz/anzmtr/survey/survey.htm
"NZ is the best place on Earth to ride a motorcycle." (BIKE mag, UK Feb
97)
- -------










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