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Scooter Superstore
and the Beginning of the End

August 20, 2010

On July 27, Scooter Superstore of America, a Ft. Lauderdale-based chain with several dealerships in Florida and Georgia, filed for bankruptcy. While many shops have closed their doors lately, and individual importers have faced some unique problems, SSTAM’s trouble could be–pardon the tired idiom–the straw that breaks the industry’s back.

Court documents reveal SSTAM owes about $5.3 million to GE Commercial Distribution Finance Corporation, a division of General Electric Capital. They’re the company that provides dealer financing for PiaggioUSA/VespaUSA and most other scooter distributors. When a new scooter goes to a dealer, the importer generally marks it “sold.” At that point, unless the dealer pays for the bike outright (which is very rare in the scooter industry) the dealer enters a contract with GE Credit, paying interest to “floor” the bike. GE holds the “MCO” (Manufacturer’s Certificate of Origin) until the bike is paid for (usually when it’s sold) then sends the dealer the MCO so a title can be ordered. A bike sitting on the dealer floor for months can start to accumulate so much interest that it simply can’t be sold at a profit. Dealer margins on scooters are low to begin with, usually $200-500 per bike depending on the manufacturer and model, so interest can erase that profit quickly.

When a scooter shop closes, the bikes that are being financed are returned to the finance company, who has an agreement with the importer that the importer will buy them back. In good times, it’s no big deal, but when an importer is short on cash and sales are flat, the importer can’t afford to buy them back. That leaves the finance company to work with the importer to warehouse and/or auction the bikes. Remember, these scooters had already been considered “sold” by the importer, so the redistribution of these bikes — at auction prices — cuts into the manufacturer’s sales and the financier’s profit.

Last week, PiaggioUSA claimed a 75% drop in 1H2010 sales. At the same time, they substantially discounted many models, (further cutting into their industry-low dealer margin). Piaggio’s dealer expansion practices of the last couple years have, as predicted by many observers, come back to haunt them. Too many dealers had too many bikes, and when they started closing, already-“sold” bikes came back on the market and decimated PiaggioUSA’s current sales.

If PiaggioUSA had problems before SSTAM’s bankruptcy, this news can’t help. Scooter Superstore is holding a lot of Piaggio product. An industry source tells us that SSTAM is PiaggioUSA’s biggest customer, and may possess more than 1000 Piaggio scooters and motorcycles. (The same source tells us PiaggioUSA sold only 3000 two-wheelers — Vespas, Piaggios, Aprilias, and Moto Guzzis — in the first half of this year.) PiaggioUSA surely doesn’t want these scooters back, even if they can afford them, and GE will not be excited about the prospect of selling them off, especially in this deflated market. Piaggio has abandoned the U.S. market before (a few times) when the going got tough, this could spell the end again.

Sound dire? That’s just Piaggio. It gets worse. Aside from (all Piaggio products) Scooter Superstore also sells Genuines, Kymcos, SYMs, TGBs, and Adlys. Most of these brands are facing hard times, but for a few, there are additional issues.

Carter Brothers/SYM-USA is recovering from a devastating arson that destroyed their headquarters/warehouse. Aside from the obvious problems of losing 3000 bikes, parts, and accessories, the fire has compromised their ability to communicate with dealers and supply spares (SYM Canada is filling in temporarily, and by most reports admirably). SYM-USA has also been waiting for months for California Air Resources Board approval of a few popular models, which finally came through this week. Now that it’s the end of the selling season, scooter sales are down, and thousands of bikes were lost in the fire, that may not be much consolation. 110 presumably-returned SYM scooters are up sale in an upcoming auction. If SSTAM is holding a large cache of SYMs and they end up being sold at a discount to dealers and consumers, that could fracture Carter Brothers’ arguably-fragile partnership with SYM, and even frighten away a new would-be importer. Who wants to import new SYMs if dealers are overstocked on bikes bought below dealer cost?

SYM-USA is not the only big distributor facing import problems. After years allowing thousands of non-compliant scooters to flood the market, U.S. Customs now seems to be overcompensating by clamping down on respectable importers. Genuine Scooter Company is waiting for government re-approval on a boatload of highly-anticipated 4-stroke Stellas that were pre-approved a year ago and should have been on the showroom floors months ago. This delay, combined with bike returns from closing dealers and flat sales seems to be straining Genuine; they, too, have just announced they’ll be dropping retail prices.

These developments also affect staffing (Piaggio has cut several sales staff positions over the last year) and delay development of new products and accessories. And it’s the same issue for parts and accessories manufactures and distributors. SSTAM sells lots of riding gear and accessories. Some of this “P&A” comes from giant distributors like Tucker Rocky and Parts Unlimited, but their site lists products from smaller scooter-industry-specific manufacturers and distributors like Corazzo and (likely) Scooterworks Direct. Losing a big customer like SSTAM would be bad news for a company tied to such a specific market, especially if SSTAM’s invoices aren’t paid up.

While cheap bikes may sound great to consumers, the most direct impact of a scooter shop closing is on the local scootering scene. Scooter Superstore organizes events, sponsors rallies, and gives scooterists a place to meet. And obviously their service departments keep scooters on the road. Any dealer will tell you that customers out riding scooters are the best advertising for a scooter shop. Having scooters parked all over town brings in more customers. As those customers lose interest and the bikes fall into disrepair, the local scooter scene slows down to a crawl.

Scooter Superstore entered the market with a bang just as the scooter market in the U.S. peaked. At Amerivespa 2008, they handed out hundreds of t-shirts, keychains, and other gear. SSTAM had plans to expand nationwide and compete with independent dealers in key markets. Chapter 11 bankruptcy is designed to allow a company to continue operating while repaying creditors. Trustees will meet on September 15th to decide if such a path is possible, or if assets will be liquidated to pay off creditors. If the company ultimately shuts down, it could set off a chain reaction that may bring down other dealers and importers.

2strokebuzz has predicted the end of the current boom to anyone who would listen, since the 2008 gold rush. Most of our favorite dealers and importers are familiar with the cyclical nature of the industry, so we took comfort in knowing that they’d respect the market and act responsibly, be prepared for anything, and survive through the dark ages ahead. But the situation might be worse than anyone expected. The scooter industry in 2012 may very likely look like the scooter industry of the early 90s, just a handful of shops and parts distributors supplying a small cult of scooter enthusiasts, with only Honda and Yamaha selling new (and outdated) scooters. We’ve said it before, but now more than ever, it’s important for scooterists to promote scootering to friends and family, support local shops, and support the companies that support scootering in America.

Comments

21 Responses to “Scooter Superstore
and the Beginning of the End”

  1. AtlScooterChickNo Gravatar on August 21st, 2010 10:22am

    So basicly you’re saying that the entire scooter industrys future rests on scooter superstores shoulders? I visited one of their stores recently and they said they had to close down a few underperforming stores and combine inventory. the place was busy with customers buying scooters and it didn’t look like anyone was closing down anytime soon.

  2. BrookeNo Gravatar on August 21st, 2010 1:19pm

    I think that would be an incorrect over simplification of what he wrote. The industry is contracting and the somewhat bleak situation extends from the border to the financier to the distributor to the retail outlet. I’m sure any shop wouldn’t share information that they may not be around to service their sales if they wanted to sell anything. Hopefully they haven’t thrown in the towel and will be able to restructure their debt and come back and serve those stronger markets well.

  3. rattbike_23No Gravatar on August 21st, 2010 4:58pm

    You know what that means – HUGE SALE???

    I dunno, I see SSTAM as being a dominant dealer in Atlanta. Chapter 11 only means a restructuring as long as the debtors are in agreement. Piaggio, SYM, Genuine would be fools not to agree to a repayment schedule. I wouldn’t want to take back all those bikes if it were me. I’m betting on them turning this around

  4. illnoiseNo Gravatar on August 21st, 2010 5:54pm

    Right, Brooke. As I said, it’s a “straw that broke the camel’s back” sorta thing. Any one of these issues (the SYM fire, Customs problems for an importer or two, a large dealership chain failure, etc.) would be easily balanced out by the rest of the industry in a good market. Without these specific issues, the slowdown in the market would be easy to survive with foresight and a little luck. My point is, everyone’s had bad luck, some of the big players did NOT have foresight, and so it’s looking pretty grim for everyone now. SSTAM’s potential closing is just one of many factors in this situation, but as I watch these events unravel, it seems to me that their potential closing could mark the point of no return. It’s about timing. It’s not a judgement, and I certainly don’t intend to BLAME them.

    This story may be melodramatic or pessimistic, but my contacts (at importers and dealers and in the media) are very nervous about the state of the industry right now. 2SB readers know I can be pessimistic and negative, but they also know that nobody wants to see the scooter industry succeed in America more than I do, and I certainly wish things were better. I think if the industry is honest about the problems facing it, and works together in each others’ interest, there’s hope, and I wish SSTAM the best. I know that everyone in the industry wants to see them succeed and pull out of this.

  5. BrookeNo Gravatar on August 21st, 2010 7:24pm

    Melodramatic for sure!

    I don’t see anything in a market as a point of no return. There is trend in reporting/blogging about modern consumer products. It’s often said that someone came ‘too late’ to market with item A or item B. It’s as if people reporting or commenting on trends believe there is some deadline, finish line or ‘point of no return’ in something that doesn’t have a finite life span or irrefutable expiration date. The markets for scooters, video game consoles, cars and smartphones have no date at which people will have chosen all they will buy for a lifetime and are stuck with their decisions. I’m not sure if this phenomenon is a result of a contest mentality or trying to find something remarkable where there’s just everyday life and everyday progress. It’s like a trend in lower birth rates. It really should only be alarming when people stop having sex. THAT is something to worry about. As long as you have the cause, there will be an effect. A cyclical trend is just that. Things will come and things will go, but as long as there’s a demand, someone will deliver. If people bank on indefinite exponential growth and try to pass that off as reasonable then they deserve to fall on their face a bit. I don’t think people didn’t buy scooters between 1986 and 2001 because there wasn’t a great product. It was because not too many people wanted one. When people started to want them again, salesmen and saleswomen showed up with product in hand.

    I’d like to think that there is a critical mass of suppliers, existing customers and demand that shops that are well run will survive, if on a different scale than 2008. In 1985 there were Honda, Yamaha and a fleeing Piaggio. I remember quite a few Sprees and Elites ridden by 15 year olds but that’s about it. Now there is a significant number of adults riding for fun, to commute or for a lifestyle. It’s a different situation than the last scooter ‘boom’. Hopefully it will help importers stay in business, if only bringing in a sensible, solid line up of one model per displacement category.

    (did I hide my hidden agendas well enough?)

  6. illnoiseNo Gravatar on August 21st, 2010 8:38pm

    “Cyclical” is certainly the key word, and we’re not nearing the end forever, but it looks like we’re near the bottom of the sine wave of scooter sales in the U.S., and things may sink lower than anyone expected, even wise people with low expectations. Melodramatic or not, it’s really the perfect storm of bad news for the scooter industry right now.

    “I’d like to think that there is a critical mass of suppliers, existing customers and demand that shops that are well run will survive,”

    Exactly my reasoning for years, but my fear now is that even this small critical mass of well-run businesses might get taken down and we’ll lose some longstanding beloved resources.

    There IS a bit of good news, maybe I’ll write a follow up about that.

  7. rattbike_23No Gravatar on August 21st, 2010 9:04pm

    Brooke, my hat’s off to you. very well written and just about sums it all up. I especally like your point about suppliers having one model per displacement. I am a frequent customer of SSTAM, and one location in particular had my head spinning on the 50cc selection alone. One manufacturer I will call “Brand K” has SEVEN scoots in the 50cc category. And the most recent news of SYM (before the inferno) and Genuine dropping their prices, as well as the recent “Rebate” programs from Italy only tells consumers exactly how much margin was integrated into their product to begin with. It’s no wonder the China products looked so inviting – WE know that they are cheap, because THEY know they are cheap. And so the line in the sand is drawn, but a very thin line all the same because it appears that even the “Mainstream” brands are having select models manufactured in China in order to keep costs down. Sure, China DOES have the ability to put out Vespa-esque Quality, but why bother? we are driven in that direction anyway with the economy being what it is, and a $699 scooter will always look more inviting than one that costs a couple of thousand.

    but as for SSTAM and a recovery, perhaps they will (actually – we certainly HOPE they will) come back and not have to shut down any stores. Depending on how the economy plays out, combined with the reduction in MSRP from a lot of the manufacturers (and presumably a reduction in PROFIT as well for the retail stores), it is obvious that they have quite an uphill battle ahead of them, as well as any “Mom and Pop” scooter store nationwide. If you are an avid fan of Scooters, or simply have a mild interest in them, please make a trip down to your local store, if for anything else than to show your support for the trade and the future of Scootering. Even if you don’t ride, there are several lifestyle items (shirts, keychains, etc.) that you can purchase to show your support.

  8. BrookeNo Gravatar on August 21st, 2010 10:09pm

    I think those well run ones will only be well run ones if they adapt as quickly as they expanded. And by adapt I mean come to terms with making less money without looking for ‘growth’ in areas where it’s just wishful thinking. Service, aftermarket upgrades and selling used bikes will have to take over for new sales. Relying on new sales to turn around and ‘recover’ I think is a mistake (there’s my drama).

  9. rattbike_23No Gravatar on August 21st, 2010 10:41pm

    agreed, but more for the “Adapting to making less money” on some of the mainstream scooters to get them on the roads (I was shocked to see that the MSRP on some models was reduced by over $1000 – that revealed a formerly gluttonous attitude in the industry) . The payback will come with repeated business, as well as a word of mouth advertising. Unfortunately the used market is full of cheap junk and dangerous bodges to try and forge any kind of good customer relationship.

  10. Professor MatthewNo Gravatar on August 21st, 2010 11:20pm

    Something that might also be a factor in this story. The original owner of SSTAM passed away earlier this summer. I wonder if his heirs are restructuring and fighting over the business in some way, shape or form.

  11. illnoiseNo Gravatar on August 21st, 2010 11:29pm

    I dunno, I agree with Brooke that the used market and vintage bikes are going to save some dealers. Phil Waters said as much in another thread. There are a schload of scooters bought in 2008 and already forgotten, next spring those’ll all be on the market, and honestly, a warranty doesn’t look as attractive when you can buy a bike with 400 miles on it for $2000 less than MSRP (even if MSRP is reduced by $1000.) And I bet most of the new scooter sales these days are people trading in a 50 or 125 for a 250 or 300, which brings in trade-ins.

    And I see potential in the Chinese market too. All those bikes are eventually going to end up with kids and/or little brothers, who will take ‘em to a dealer and be told “this is junk.” It may well be, but it’s FREE junk to them, and they’ll be willing to invest in piecemeal upgrades. There are some dealers that say “This is junk, but how much money is in your wallet? I sorta see that as being the next wave of scooterists, and a Chinese rat/custom scene developing over time. It makes us all cringe to think about, but they don’t care what we think, do they?

    As long as the dealership can absolve themselves of liability…

  12. BrookeNo Gravatar on August 21st, 2010 11:57pm

    I don’t see anything of value from the junk and I don’t think the low prices of it will affect the business any differently now or in the future than it has in the past. Some folks may only want to pay for junk and that’s what they’ll get. It’s universal.

    I don’t even see the junk as part of the used market. It’s just a collection of sad tales on craigslist (helmuts included).

  13. HarveeNo Gravatar on August 22nd, 2010 1:12am

    Professor Matthew, its funny you should mention that. I’ve known Peter Warrick for many, many years; I’ve seen him build his empire from meager roots in the fast food industry, to a massive legacy including properties, businesses, collections of all sorts, and of course his love for all things Vespa. We mourned his passing in May, all the while knowing that an estate as vast and widespread as his will take months, if not years, to untangle and settle. He left behind so many accomplishments, and yet so many things left to be sorted out. In the meantime everything is on hold until the probate courts do their thing, and the chapter 11 will help keep Scooter Superstore running until everything can get settled.

  14. urdNo Gravatar on August 22nd, 2010 7:32am

    As a customer and occasional fill in employee of one of the sstam shops, they are working to sort things out. From what little I have come to understand, Peter did not have a good plan in place for the event of his passing. Therein lies much of the issue. It does not help that the industry itself is hurting while they transition. That may give the court the fuel it needs to make bad choice. I would guess that we will have a good idea of where things are going come the end of September, but until then…

  15. bermshotNo Gravatar on August 23rd, 2010 10:11am

    As an employee of the Adly importer it is my understanding that SSTAM only filed Chapt 11 on two stores and this does not affect the other stores operations as they are operated as separate corporations. I don’t think or at least hope that the entire organiztion is closing. I do not see the mass return of product to GE Capitol unless the entire company folds because you just can’t pick and choose what you are going to return without it affecting your entire vender list.
    I never got to meet Peter but there is no doubt he put his money and heart into getting scooter promotions & sales in a better light.

  16. bermshotNo Gravatar on August 23rd, 2010 10:46am

    I may have spoken too soon as the GE Capitol report says something different. I will not comment again unless I know it is fact. I do not think they can treat vendors as separate on returns, they have to return all the floorplanning for all vendors as I understand it.

  17. BrookeNo Gravatar on August 23rd, 2010 10:56am

    Can you just file on some of a company’s outlets? The docket linked above just refers to it as “Scooter Super Store Of America, Inc.”. If you can that’s pretty slick and it would seem that the demise of the business was better planned than the estate.

    Any bankruptcy experts out there?

  18. illnoiseNo Gravatar on August 23rd, 2010 11:07am

    I was unclear on that too, bermshot, though the company was listed as a whole on the filing. Strangely, the website that originally posted the entire filing has taken it down, so I don’t have it to look at now.

    I believe they had 8 locations, and two have closed in the last couple months (Jacksonville Beach and Gainesville?). Of the remaining six, I’ve heard Atlanta and Norcross may be owned/run differently than the others. Maybe someone can clear that up.

    Still, that volume of debt to GE, whether it’s two, four, six, or eight stores, indicates a lot of scooters in the balance, right?

  19. urdNo Gravatar on August 23rd, 2010 6:24pm

    Ok, I can give a little information, though most of it is inferred, not information that I have learned from seeing the paperwork.

    Several of the SSTAM locations where other scooter shops prior to joining Peter’s empire. I am fairly certain that at least two of those where left incorporated under the prior names. One of those I would suspect is at risk, less because of the merchandise or sales issues but more because their lease is near it’s end, and if they don’t have the capital to move, they may have no option nut to shutter.

    What I would guess is going on ( bear in mind tht my primary job is IT for bankruptcy trustees, chapter 11 is not my bailiwick however ) is the following:

    Peter always carried a significant inventory and rarely discounted. Because of that when he passed the stores had a huge chunk of inventory, and though sales at several of the stores have been strong in comparison to the other dealers in the area, they haven’t been up to the 2008 numbers. Now add to that the complexity of a multi state estate, in two notoriously difficult states with regards to probate, Nd you have nasty situation. Chapter 11 allows for the company to work with the creditors through a transition. I would expect that the new ownership, is already in negations with the creditors. The creditors Re in the same boat, they cannot afford to walk away either right now. The problem with an 11 is that the judge could still make the choice to liquidate, but if the creiditors and the debtor reach agreements prior to the confirmation hearing, there is a good chance they could emerge form bankruptcy and probate S a stronger company than they went in.

    I am totally guessing based upon what little information I have on hand and knowing many of the people and the direct history of three of the stores. I do not think I am too far off of what is going on, but it could all still go to the crapper if the judge chooses.

  20. scootermikeNo Gravatar on September 12th, 2010 12:28pm

    When the main person who’s passion it was in the beginging passes most places do not last long after. Peter Warwick’s passion drove the Scooter Superstore long before it was mentioned on these pages way before 2008. Everyone keeps ridding on this 2008 stellar year, my scooter biz had stellar years from 2005 – 2008 only when the greedy larger distrubtor notice the success of something they never thought of did my business start to go down. I watched dkscooters copy and fold already. There are many more going to fold. There was an industry and market created by some where there was none and when distributors noticed they now go direct to consumer. No one dropshipped anything scooter till one or two us started with our own product in 2003, which I have stopped as of 2006 but the larger distributors continued and even picked up all the product they do not have any experience in and can not even right the correct description and still guessing.

    The local shop will continue to serve local customers. In the I want it now generation you must stock all product not just GE backed scooters. You must repair all. I never knew there was a difference in what money looked like whether you fixed a Vespa or chinese scooter till now.

    They say its Chinese junk, is the Piaggio Fly 50/150 Chinese Junk, its made in China

    The biggest problem is the scooter industry as with any industry is GREED by a few who know nothing but numbers. Peter had passion, it will take years for his passion to die. I met the man and had a personal tour of his place in Hollywood FL I was certainly crushed that day, I had hoped to continue to see him for inspiration.

    Thanks God for SSTAM and Peter Warwick I will always make a living at what I love.

    SSTAM had plenty of chinese scooters under its roof, I saw them first hand maybe not on sales floor but he moved them also.

    If you do not like the state of the scooter biz GET OUT let us who have passion do what we do and help those who ask for it and if you do it for numbers GET OUT NOW

    I ride, race, repair, sell, sell parts, design products, invent markets, start trends, I started using the GY6 name in 2003, I started using the name 139QMB in 2003, 40QMB in 2003 long before those who grace these pages now.

    Michael Milstead
    scootertronics.com

  21. BrookeNo Gravatar on September 13th, 2010 7:21am

    I would never paint Chinese scooters with a broad brush that says Chinese = Junk. But I would go as far as to say Drop-Shipped clone scooters from anonymous factories with no support = very bad decision that only benefits the greedy seller. I don’t know if I would be so proud of being among the founders of that part of the industry.

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