Can someone explain the dealer thing to me?

[Modman]

First off - this isn't a bashing thread about the 2 dealers in question. I have no skin in the game so to speak, just looking for some input from some dealers in the industry who are willing to show a little transparency as to why the MANUFACTURERS do this.

So, Pro Am is now a cat dealer, made public knowledge by their own thread, no biggie. Fine by me, have heard lots of good things, have bought bike parts there, good guys, no issues. Ralphs previously was the only one in town (if you don't include AGRO historically). Fine by me. Bought some stuff there, good guys, no issues.

So previously this year, we saw AC close a dealer in the US for shipping material goods across the border into another dealers "territory" (please excuse my terminology if I'm not using the correct ones). Since that issue can be read about elsewhere on this forum, lets leave that dead horse alone.

Now we are seeing AC opening another dealership in the same city.

My question is therefore (understanding that obviously dealer agreements carry specific terms so I'm asking more in a general sense): Why would a manfacturer create competition with itself? Is it just as simple as it seems - In hopes of selling more product? With respect to AC and events earlier this year - Isn't opening additional dealerships in the same "territory" doing exactly what they punished another dealer for - competing with another cat dealer? Was that simply an isolated/unique incident because of the border

I need someone to explain this to me as its confusing me. Is this a dealer specific thing? How does this affect pricing if one dealer is willing to go $5 below on every part? What if one dealer was willing to go $15 below MSRP just to get the sale? Are they allowed to do that? Do dealers have a specific volume they must sell annually? Is the sales area based on geography or population figures that dictates the size of the sales area? How can Edmonton have 4 dealers? As a dealer, what motivates you to sell that product then? In a monopoly there would be a greater chance for increased profit to sell the product that is in higher demand, generally not the one available on every corner, no?

Not trying to bash anyone (not even Cat), just curious about trying to wrap my head around it. Help me out here guys.

 

[moyiesledhead]

You're gonna give yourself a nose bleed trying to figure that one out!

 

[Pistonbroke]

First off - this isn't a bashing thread about the 2 dealers in question. I have no skin in the game so to speak, just looking for some input from some dealers in the industry who are willing to show a little transparency as to why the MANUFACTURERS do this.

So, Pro Am is now a cat dealer, made public knowledge by their own thread, no biggie. Fine by me, have heard lots of good things, have bought bike parts there, good guys, no issues. Ralphs previously was the only one in town (if you don't include AGRO historically). Fine by me. Bought some stuff there, good guys, no issues.

So previously this year, we saw AC close a dealer in the US for shipping material goods across the border into another dealers "territory" (please excuse my terminology if I'm not using the correct ones). Since that issue can be read about elsewhere on this forum, lets leave that dead horse alone.

Now we are seeing AC opening another dealership in the same city.

My question is therefore (understanding that obviously dealer agreements carry specific terms so I'm asking more in a general sense): Why would a manfacturer create competition with itself? Is it just as simple as it seems - In hopes of selling more product? With respect to AC and events earlier this year - Isn't opening additional dealerships in the same "territory" doing exactly what they punished another dealer for - competing with another cat dealer? Was that simply an isolated/unique incident because of the border

I need someone to explain this to me as its confusing me. Is this a dealer specific thing? How does this affect pricing if one dealer is willing to go $5 below on every part? What if one dealer was willing to go $15 below MSRP just to get the sale? Are they allowed to do that? Do dealers have a specific volume they must sell annually? Is the sales area based on geography or population figures that dictates the size of the sales area? How can Edmonton have 4 dealers? As a dealer, what motivates you to sell that product then? In a monopoly there would be a greater chance for increased profit to sell the product that is in higher demand, generally not the one available on every corner, no?

Not trying to bash anyone (not even Cat), just curious about trying to wrap my head around it. Help me out here guys.

Most times, another rooster in the hen house results in a higher number of baby chicks. ;-)

 

[snopro]

First off - this isn't a bashing thread about the 2 dealers in question. I have no skin in the game so to speak, just looking for some input from some dealers in the industry who are willing to show a little transparency as to why the MANUFACTURERS do this.

So, Pro Am is now a cat dealer, made public knowledge by their own thread, no biggie. Fine by me, have heard lots of good things, have bought bike parts there, good guys, no issues. Ralphs previously was the only one in town (if you don't include AGRO historically). Fine by me. Bought some stuff there, good guys, no issues.

So previously this year, we saw AC close a dealer in the US for shipping material goods across the border into another dealers "territory" (please excuse my terminology if I'm not using the correct ones). Since that issue can be read about elsewhere on this forum, lets leave that dead horse alone.

Now we are seeing AC opening another dealership in the same city.

My question is therefore (understanding that obviously dealer agreements carry specific terms so I'm asking more in a general sense): Why would a manfacturer create competition with itself? Is it just as simple as it seems - In hopes of selling more product? With respect to AC and events earlier this year - Isn't opening additional dealerships in the same "territory" doing exactly what they punished another dealer for - competing with another cat dealer? Was that simply an isolated/unique incident because of the border

I need someone to explain this to me as its confusing me. Is this a dealer specific thing? How does this affect pricing if one dealer is willing to go $5 below on every part? What if one dealer was willing to go $15 below MSRP just to get the sale? Are they allowed to do that? Do dealers have a specific volume they must sell annually? Is the sales area based on geography or population figures that dictates the size of the sales area? How can Edmonton have 4 dealers? As a dealer, what motivates you to sell that product then? In a monopoly there would be a greater chance for increased profit to sell the product that is in higher demand, generally not the one available on every corner, no?

Not trying to bash anyone (not even Cat), just curious about trying to wrap my head around it. Help me out here guys.

I was told the other day Modman that Ralph's is building a new store back out Beiseker way. This would create a problem for Cat in that they would not have a dealer in the confines of the Calgary city limits. Maybe this is why the new dealer? Dealers can sell product for whatever they want just not out of the country. They are given volume targets at the dealer meeting and at least with Doo are required to hit 1 of 3 targets. Level 1,2 or 3. Incentives to the dealer are made for reaching there target and the incentives are sweetened the higher the level. BRP will not accept a target lower than 3 and will discourage you sternly at a level 3 target. Incentives may be free freight on parts, better dating terms on all product and better discounts on PAC ordered. The only incentive on units is a meager discount on paying for your units ahead of delivery by paying cash. Not really worth it. Usually when a dealer is added to another dealers territory it is for a reason. The manufacturer feels 2 dealers will sell twice as much or they are not happy with the existing dealer and his numbers. Hope that helps?

 

[Marley]

Don't want to take this off topic too far but why isn't there a Ski-Doo dealer in Fernie? Popular sled area. Long way from the next closest dealer etc...

 

[the_real_wild1]

More dealers is usually a good thing imo.

 

[Trashy]

Don't want to take this off topic too far but why isn't there a Ski-Doo dealer in Fernie? Popular sled area. Long way from the next closest dealer etc...

JMHO..... Fernie is a SKI town, and I would guess that is why?

 

[snowrideadventures]

Dealers are the manufacture's customers, the public are the dealer's customers. More dealers = more customers for the manufactures.

 

[snopro]

Don't want to take this off topic too far but why isn't there a Ski-Doo dealer in Fernie? Popular sled area. Long way from the next closest dealer etc...

Not sure on territories for that area. I believe Lethbridge to the east and Golden to the west would be the closest. BRP likes to have a substantial territory for there dealers. Maybe the right guy with the right $$$$$$ hasn't applied yet? It costs alot to start a dealership now. The 1st priority it seems now is the building. My thoughts would have been the passion for the sport but not so much anymore it seems.

 

[pistoncontracting]

It costs alot to start a dealership now. The 1st priority it seems now is the building. My thoughts would have been the passion for the sport but not so much anymore it seems.

It seems all Manufacturers are going this route, look at John Deere, Case, GM and the like. I've often wondered how a building can have that much influence on sales.

 

[neilsleder]

Not to familiar with Calgary address wise, but are these two dealers on different sides of the city? If they are maybe cat wanted a dealer say on the north and south side of the city. They could lose some potential customers that don't want to drive across the city to buy a cat when there's a Polaris or doo dealer right there. Just my way of thinking!


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[snopro]

It seems all Manufacturers are going this route, look at John Deere, Case, GM and the like. I've often wondered how a building can have that much influence on sales.

When I go to my Deere or Ford dealer I deal with people, not there building. My Ford dealer has a new building which is very nice but not the reason I continue to deal there.

 

[Pistonbroke]

Not to familiar with Calgary address wise, but are these two dealers on different sides of the city? If they are maybe cat wanted a dealer say on the north and south side of the city. They could lose some potential customers that don't want to drive across the city to buy a cat when there's a Polaris or doo dealer right there. Just my way of thinking!


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These two dealers will be no more than 10 minutes apart from each other.

 

[pistoncontracting]

When I go to my Deere or Ford dealer I deal with people, not there building. My Ford dealer has a new building which is very nice but not the reason I continue to deal there.

Totally agree.
I would think unstead of investing millions into the appearence of a building, they would rather invest in bettering service, and staff.

The best service ive recieved is generally from the smaller shops anyway.

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[neilsleder]

These two dealers will be no more than 10 minutes apart from each other.

There goes my theory! Lol


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[Modman]

I was told the other day Modman that Ralph's is building a new store back out Beiseker way. This would create a problem for Cat in that they would not have a dealer in the confines of the Calgary city limits. Maybe this is why the new dealer? Dealers can sell product for whatever they want just not out of the country. They are given volume targets at the dealer meeting and at least with Doo are required to hit 1 of 3 targets. Level 1,2 or 3. Incentives to the dealer are made for reaching there target and the incentives are sweetened the higher the level. BRP will not accept a target lower than 3 and will discourage you sternly at a level 3 target. Incentives may be free freight on parts, better dating terms on all product and better discounts on PAC ordered. The only incentive on units is a meager discount on paying for your units ahead of delivery by paying cash. Not really worth it. Usually when a dealer is added to another dealers territory it is for a reason. The manufacturer feels 2 dealers will sell twice as much.... Hope that helps?

That is tremendously helpful, thank you.

So would a dealer be bordered geographically first, or by population?

I understand that more dealers = more potential customers, but I'm sure its not a linear relationship (2 dealers does not = double the customers...at least not immediately). If Joe rides Polaris and wants to upgrade, he's going to buy from Dealer A or B, not both. So you're stealing from Peter to pay Paul a little. With the increased competition, its expected prices would drop or remain stable maybe at least (for immediate future, and then increase with inflation), which means both dealers actually need more than double the customers to realize the same amount of profit.

Hopefully not the truth maybe about Ralphs, although with square footage rental and property values in the city where they are, can't blame them.

Mm

 

[snopro]

That is tremendously helpful, thank you.

So would a dealer be bordered geographically first, or by population?

I understand that more dealers = more potential customers, but I'm sure its not a linear relationship (2 dealers does not = double the customers...at least not immediately). If Joe rides Polaris and wants to upgrade, he's going to buy from Dealer A or B, not both. So you're stealing from Peter to pay Paul a little. With the increased competition, its expected prices would drop or remain stable maybe at least (for immediate future, and then increase with inflation), which means both dealers actually need more than double the customers to realize the same amount of profit.

Hopefully not the truth maybe about Ralphs, although with square footage rental and property values in the city where they are, can't blame them.

Mm

BRP has PMA's for each dealer( personal market area) The theory is they would like you to sell only in your own market but we all know that is impossible as the consumer will deal wherever he wants and you certainly can't blame them. It makes sense population wise to have 2 dealers in Calgary as BRP does, Polaris does and not sure on Yamaha now that Walt shut er down. To have them 10 minutes apart doesn't make sense to me but then we are not privy on why they are doing it. As far as Peter stealing from Paul you are correct. It seems the only way to drive riders to a competitive brand is with a superior product. If things stay the same peeps will just price the 2 same brand dealers against each other.

 

[imdoo'n]

BRP has PMA's for each dealer( personal market area) The theory is they would like you to sell only in your own market but we all know that is impossible as the consumer will deal wherever he wants and you certainly can't blame them. It makes sense population wise to have 2 dealers in Calgary as BRP does, Polaris does and not sure on Yamaha now that Walt shut er down. To have them 10 minutes apart doesn't make sense to me but then we are not privy on why they are doing it. As far as Peter stealing from Paul you are correct. It seems the only way to drive riders to a competitive brand is with a superior product. If things stay the same peeps will just price the 2 same brand dealers against each other.

my choice would likely lean towards the dealer with the tastiest doolaid, but thats just me.

 

[Modman]

BRP has PMA's for each dealer( personal market area) The theory is they would like you to sell only in your own market but we all know that is impossible as the consumer will deal wherever he wants and you certainly can't blame them. It makes sense population wise to have 2 dealers in Calgary as BRP does, Polaris does and not sure on Yamaha now that Walt shut er down. To have them 10 minutes apart doesn't make sense to me but then we are not privy on why they are doing it. As far as Peter stealing from Paul you are correct. It seems the only way to drive riders to a competitive brand is with a superior product. If things stay the same peeps will just price the 2 same brand dealers against each other.

Great info. Thanks for the insight.

 

[Pro-Am Chris]

Our location was not ideal for Cat in the fact that we are so close to the current Ralph's location but they are moving north of the city. That being said we have a lot of other things going for us that they we very interested in having us join the Cat family. Obviously our current location cannot handle the lines we already carry but our new location will be a great facility for both sales and service!! If anyone knows of a Cat Master Tech looking for a bay in Calgary please send them my way.