Jan 23, 2012

What Kills Local Dealers?

All Rights Reserved © 2012 Thomas W. Day

I was wrapping up a Basic MSF course a few weeks ago, telling the new motorcyclists about the 10% discount they'd receive on gear at local dealers by showing the completion card when one of the students asked, "Where do you buy your gear." Somewhat dishonestly, I named the usual suspects without thinking much about it. And I do try to buy locally whenever possible, but it's harder to make that possible all the time.

First, my favorite local dealer, Kline Motorsports, closed its doors last fall. Jim Kershaw, Kline's parts manager, went above and beyond my expectations for customer support and I, in turn, went way beyond my usual routine in making sure that I bought all of my V-Strom parts from him. When I was getting my gear ready for a 2007 trip to Alaska, I'd heard stories about how easily bad gas could wreak the V-Strom's fuel pump and I was all ready to buy a backup pump for the trip. When I explained my plan to Jim, he said, "Don't worry about it. I'll order one and, if you need it, we'll drop ship it to where ever you are." From then on, I bought everything from spare screws to gloves to repair parts from Kline. I didn't even go on-line to compare prices. I bought several hundred dollars worth of stuff from Kline every year and usually placed my orders over the phone. They didn't ask for advance payment and always delivered what I ordered within a few days.

My experience with two other local dealers goes back to when I first moved to the Cities, in 1996. I was riding a Yamaha TDM at the time and neither dealer stocked any parts for that bike, neither could get parts in less than a couple of weeks, and both required that I visit their parts room with a credit card before they'd order anything for me. I can do better than that on-line, without the hassle of dealing with the arrogant parts counter kids. Honestly, I sometimes think my usual on-line supplier is personally more interested in my business than the local guys demonstrated. Unlike most Americans, I have a long memory: "Burn me once, shame on you. Burn me twice, shame on me." Almost 25 years later, I still have a more personal relationship with Beach Yamaha in California than I've managed outside of Kline. It didn't hurt that the service manager and I both rode XTZ550's (his was a way cooler Canadian white version), but that store actually bothered to take customer names and worked to maintain that database.

Recently, I ran myself through the local service cycle to see if anything had changed. I needed an air filter for my WR Yamaha and I wanted it fast. I called the local dealers. Nobody had a filter in stock or knew how long it would take to get one and everyone wanted a credit card number to order the part. I called my neighborhood store for an aftermarket replacement and . . . again, a credit card and an undetermined wait and the kid wanted me to call the order line because he was too important to transfer the call. I went across town, got a counter guy who claimed to be able to get the part in a couple of days. I coughed up the credit card and waited. A week later, I called about the filter and was told it was coming from the other end of the country and I'd be notified when it arrived. There was no option to cancel the late order or inclination to call to tell me the two day delivery wouldn't happen.

My favorite on-line supplier had it in stock and could have delivered it next-day if I'd have paid the extra freight. So, while it would be hip and community-oriented to always buy locally, it's often the hard way to go.

The problem is that local dealers aren't all that interested in local customers. Their employees are mostly Boomerang Kids who have been convinced that living in mommy's basement and working at a motorcycle shop makes them cool. They don't need the job, or any job, and don't give a damn about the store's customers or the store itself. The store owners are disconnected from their customers and their business processes. Yamaha doesn't do it's dealers any favors either. Yamaha's "Greater Twin Cities Yamaha Dealers" site lists six dealers, including dealers in Belle Plaine, St. Bonifacius, and Forest Lake. The Hitching Post, Delano, 61, or Starr Cycle weren't even listed.

I, clearly, have some habits to break if I want to buy locally. First, I have to give up entirely on the dealers who have been useless in the past, regardless of how close they are to where I live. Starr Cycle, for example, has been incredibly helpful in the past but the 90 miles to Mankato is an obstacle. The same goes for Delano Sports Center, 45 miles from my home. Two to five hours of road time is hard to call "local," but you do the best you can with what you have.

A depressed economy doesn't just weed out the weak and incompetent. According to some reports, Suzuki lost almost 30% of its US dealers in 2008-09. A lot of good businesses have failed in the last four years and a lot more are on the edge. It's almost impossible for a working class dealer to overcome competition that is backed by a substantial trust fund. The good dealers need all the support they can get, but it may not be enough to overcome a stagnant economy. Going through the maze of chaff to find the good dealers is enough to drive anyone to the internet (where we search for the dealers in the first place). This is exactly what kills local business.


Chris said...

interesting to read about your experience with kline. I guess ever place is both great to some and aweful to others.

kline was the first moto service place I ever used when we bought our GZ250. they broke our clutch lever and blamed us. then forgot to put the bolts holding the side panels on. when I pointed it out. they put the wrong bolts in (lost originals) and snapped the plastic tabs off. oh, and they took ten days to replace the ignition coil when they had the part in stock.
almost $400 for all the destruction. we never went back.

T.W. Day said...

I wish I were surprised. I have never used any local dealer's service department. I never hear anything good about dealer service, from anyone who knows what they're doing. Mechanics are the low guy on the dealership totem pole, regardless of the huge effect they have on the dealership's public image. The sales guys have all the clout, though. They have the spare time to politic with ownership and from a shallow perspective, it looks like they are the ones who move product and make money.

The Vulture said...

When I was in the business - a sales manager - our dealership saw the sale of the bike as the beginning of a relationship with a customer.

It was up to the rest of the establishment to continue building customer confidence which led to customer retention and ultimately repeat sales of motorcycles, repeat service, parts, and so on. Find the business, get the business, keep the business.

Keeping the business is crucial to a low volume brand like BMW - we did well at that and attracting riders from other brands. The shop is a top ten dealership in the BMW family as the result.

Doing that takes hard work, constant focus on the customer, and it takes good employees, and skilled managers. Good employees who will make a shop successful don't come cheap however.

The master technicians, the training of technicians to get them to master level status, training of all other employees to get them as good as they can be takes lots of money. It also takes expert management to retain them and keep them motivated. Service, and customer service on parts and equipment are the backbone of a dealership, not bike sales, and employee costs are the biggest cost a dealership has.

The motorcycling community sometimes gripes about the cost of BMW service but isn't aware we give them loaner bikes while theirs are being serviced, often find ways to get warranty to cover out of warranty conditions, provide overnight demo rides if they needed it to sell a spouse, and so on.

What kills local dealerships is the opposite of what I described, and that you have pointed out with your experiences. I think a business model based on low margin, volume sales may do OK when the economy is hot but the model does not provide revenue, in austere times, to train and retain skilled employees.

I needed a fuel pump for my WR250R and, of course, I wanted it yesterday - so I called a number of dealers in my region who all said 7 to 10 days.

Frustrated, I called an Internet resource who said I could get it drop shipped to my house overnight from Yamaha; have I called a local dealer? I explained my experience to date and was told to call the one shop I had not called.

The parts guy there asked when do I need it, Fed Ex OK?, done deal. Five minutes on the phone.

Of course that dealership now gets my Yamaha business. Either the other shops didn't care, or they didn't know, and my hunch is on the latter. I doubt the other shops trained their folk to offer this service, if they even knew it existed.

Something else that kills local dealers is Internet sales. Buy a device from an Internet resource that can be acquired from the local dealership and save on sales tax, perhaps even with having to pay for shipping. Makes sense, and if it is cheaper that's a bonus. The downside is the dealership trims inventory to avoid having stock that does not turn in a reasonable time. You and I need a thing pretty quick and the only resource available is the Internet - my WR250R fuel pump experience is an example.

Anonymous said...

I agree. Internet sales are killing local dealers of all stripes. I have to wonder why the manufacturers don't cull the bad dealers themselves, to preserve the good ones. Most people aren't as diligent as you. They get an unreasonable response from one or two dealers and they are off to the internet. I'd be curious who your "internet resource" was. Someone from Yamaha?

The Vulture said...

zedAnonymous: The Internet resource was a mid western Suzuki/Yamaha dealership that comes up on Google when you search for Yamaha parts.

Dealerships are independent businesses - about all the manufacturer can do is threaten to end the business relationship they have with a dealer. My guess is that relationships end mainly when the financial relationship becomes overly strained.

Keep in mind a dealer buys inventory from the manufacturer to have available for sale in their store. So, they don't have to care if the dealership is marginal - or so it would seem based on the dissatisfaction that gets spread around the net. Fundamentally, they just need the dealers to stay viable so they will buy more inventory. That's why you see special factory financing, or specials on certain models etc.

Obviously Harley, BMW, Ducati, et al do care about their reputation and do what they can to ensure it isn't tarnished by a lousy shop - but if the shop is that bad they go out of business anyway methinks.

The Internet is a legitimate challenge to brick and mortar business. Some dealerships do very well selling on the net, but it is a demanding business managing inventory levels, adjusting prices based on the market, managing returns and warranty issues, and so on.

The larger Amazon.com type outfits that benefit from economies of scale are making a big impact and it is helped by not having to collect state sales tax unless they sell inside the state where the Internet business is located. To date, Congress has refused to level the playing field on the sales tax issue.