Here's Why the New Trend of Motorcycle Dealership Consolidation is Inevitable and Important

Here's Why the New Trend of Motorcycle Dealership Consolidation is Inevitable and Matters … It follows the Auto Industry.  

Harley-Davidson Dealer-Operator discusses the pattern of consolidation as it relates to the motorcycle industry. The Industry is truly following the good business practices of others.  

“Auto Remarketing Magazine�?? reports that the landscape of the auto industry has changed drastically in the last five years. Independent dealerships and even small auto groups are being acquired at unprecedented levels.  The first-generation dealers are moving on. Their priorities are different, and often the appeal of providing their families with lifelong financial security is too great to resist.  The glory days have come and gone.  As little as 10 years ago, having a strong franchise was essentially a license to print money. Unfortunately, this is no longer the case.  With increased competition from larger groups and better operators, the old-school independent dealers are being forced to reassess the way they operate.  Higher operating costs are also fueling consolidation.   The cost of real estate alone has nearly doubled over the last 10 years.  Everything from the office furniture to software has escalated in price. 

Kevin Gordon, co-founder of Convertus notes that what we're seeing with the automotive industry is just Darwin's famous theory. The strong, growing stronger and evolving faster. Most dealerships that are being purchased by auto groups are underperformers, often with aging and complacent ownership. Groups bring in fresh blood, better processes and modern tools. It's not uncommon to see an underperforming store completely turn around months after being acquired by a larger group/better operator.

In response, Baker Tilly’s “Insight�?? reports that the US auto dealer M&A market has ramped up significantly over the past two years, as 2015 dealer acquisitions (470 according to The Banks Report, which tracks car retailing M&A) increased 40 percent over 2014, which followed a 60 percent increase in 2014 over 2013. The US auto retail market has consolidated from approximately 22,000 car dealerships in 2005 to 18,000 in 2015, which represents a twenty percent reduction in individual owners. We expect industry consolidation to continue, driven in large part by an aging dealer owner population.

The US auto dealer market is an industry that benefits from consolidation synergies including centralized selling and general and administrative functions. Approximately 10 percent of the acquisitions during 2015 were generated by large publicly-traded dealer groups such as AutoNation, Inc. Larger dealer groups are expected to remain acquisitive and leverage their scale, and there is a plethora of smaller dealer acquisition targets.

Automobile related retail industries likewise is consolidating at fierce rates.  Icahn Enterprises bought Pep Boys–Manny, Moe & Jack in February.  Icahn is proceeding with plans to merge Pep Boys with its Auto Plus parts business.  Monro Muffler Brake Inc. added 65 stores in 2016 via acquisition, including 56 in two major purchases — Clark Tire & Auto Inc. (26 stores in North Carolina) and McGee Auto Service & Tires (29 stores in Florida).   TBC Corp. added 14 stores via acquisition of independent dealers or by taking over former auto repair or tire retail locations.

Still further, Telecom, Media, Automotive, Airline, Pharmaceutical, Shipping.  What do all of these industries have in common? One thing, consolidation.  This is a rapidly-increasing global trend, but why?

With ever-increasing demand and record sales, consolidation in many industries simply makes sense.  And the motorcycle retail industry is no different. A collective dealer group is not only able to offer more options, lower prices, accessible locations, and a varied staff of expertise, but they also have lower costs on the back-end when it comes to things like employee health insurance and administrative staff. Rather than viewing it as a way to eliminate/take over small businesses, consolidation is indeed actually the key to saving the entrepreneurial spirit and ensuring that small towns throughout America continue to support their local dealerships.

The Windy City Motorcycle Company is also following in this new direction, with the consolidation of multiple Harley-Davidson dealerships (http://www.dhbusinessledger.com/article/20170215/business/170219693/) throughout the Chicagoland and Southern Wisconsin markets.  In doing so, the Company has become a life-raft for struggling small dealerships and in the Heartland of America with Ozzie Giglio, Dealer-Operator at the forefront of this financial trend.

Originally, Giglio and his wife Jill began with just one Harley-Davidson location in Villa Park, employing 14 people. But in the last 16 years, the Windy City Motorcycle Company has grown to 10 dealerships (and three retail stores) that employ more than 400 people, including its most recent acquisitions in Woodstock, McHenry and Lake Geneva, Wisconsin.

"Our company has helped to breathe life back into the Harley-Davidson brand by transforming struggling Harley locations back into flourishing businesses. Acquisitions are a win-win-win for everyone involved. They keep prices low for riders, keep quality standards high, ensure highly trained staff to deliver a professional experience to customers, reward single dealer operators for their time in building the business, create efficiency of operations and ensure that customers are never far from a location, even when they are on the road.

From the perspective of a small dealership owner, this new trend of dealer acquisitions is also a benefit, as it means that owners have interested buyers and financial options when they decide they want to sell their company,�?? says Giglio.

That being said, Giglio doesn’t believe in acquiring dealerships just for the sake of it. “We are only interested in adding locations to our company that can meet our high standards. We firmly believe that our success is due in large part to the fact that we are here to serve the rider community, and because we want to serve the community as a whole. By transforming underperforming dealerships into busy hubs of commerce once again, we create jobs, ensure storefront stability and contribute financial strength to struggling areas."

Giglio is certain that dealership acquisition is one the most important ways that the motorcycle industry can continue to remain viable in difficult economic conditions and in the future just as consolidation is occurring in the sister industry of auto retailing.   And that a larger, stronger dealer-operator will likely be able to invest more heavily in infrastructure, operations, employee training and the customer experience.

“Having a network of stores means that customers have freedom of choice, rider convenience and a strong commitment to value throughout the Midwest. Whether they are a new rider seeking lessons, are looking for a place to store their bike through the harsh winter months or want access to the largest used inventory in the Midwest, The Windy City Motorcycle Company has completely revolutionized the way that Harley-Davidson fans buy, ride and enjoy their motorcycles.�?? And just like the other industries, consolidation by the premium operators will be the foreseeable trend for the future.

Giglio can reveal further information on this topic, including insider information on how he successfully grew his business and his plans for the future.

For more on this topic or to speak to Ozzie Giglio, please contact me.

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