Friday, March 07, 2008

Opinion: Piaggio Posting Profits or Numbers Dont' Tell the Whole Story

Just posted on, Piaggio has posted 2007 year profits of 10.8 percent in comparision to the 2006 year. The numbers were based on Core Profit, which apparently, is earnings before tax, depreciation and amortisation. That number totalled an upward rise of 226.1 million euros or $384.4 million dollars. Net sales rose 5.3%. Sounds like nice work, but is it honest?

Now while any profit looks promising, I think it's important to note that this rise in "profits" is probably directly related to Piaggio's method of opening dealerships and the campaign of which it was based, especially in 2007.

Anyone with a direct history with Vespa KC from a number of years ago will recall that we were one of 15 "boutique" locations in the U.S. We were special in the fact that we were standalone locations that specialized in and only in Vespa and Piaggio products. Kind of like walking into a Ferarri dealership of yesteryear; you'd only see Prancing Horse Ferarri cars, not Lambos and Aston Martins together in the same dealerhship.

Piaggio's stance, at the time, was that there would be no oversaturation of the market, meaning that only a few cities had access to Vespas, and production would be semi-limited. So, if you could find one, a Vespa was a very rare machine to see, was sold at a premium, and held it's resale value for a very long time. In KC, when we first started reintroducing Vespas, the scoots became instantly collectible.

Times change and during the end of 2006, Piaggio decided that the path to selling more scooters was making them available to a larger audience. Now, personally, I totally agree with that statement; how can you sell more machines if folks have no access to them? The problem with the execution on the idea was that Piaggio opened up dealerships to ANYONE who wanted them. Sure, there were qualifications that had to be met, but that didn't stop the influx of new dealers popping up all over the country. By summertime of 2007, over 110 new dealers had appeared in the U.S.

More dealers means more scooters right?

Well, maybe not. A lot of these new dealers, out to make a quick buck, weren't and aren't as passionate about the scoots as the original boutiques. So while Piaggio was able to sell the new dealers more of it's scooters and post these high profits, time will tell if these new dealers are actually selling the scooters. I have a feeling that a lot of the new dealerships didn't quite understand what the Piaggio and Vespa scooters were; that is being premium market vehicles. So, while a carwash may have rights to sell scooters, would you go to a carwash to buy a $4300 dollar scooter that goes 65mph? An expensive toy a Vespa may be to the uninitiated, but for a lot of folks finding Vespas and Piaggios at grocery stores, car washes, and car dealerships, they're more like and expensive joke.

Even worse, the sudden competition has proven to be rather cut-throat and has forced a number of the original boutiques to either move (hi!) or even worse, close doors altogether. I have yet to mention the vast wave of cheap new Chinese imports into the market as well...

I think it's unfortunate and it tarnishes the grand history of the machine a little bit, but over time, it might possibly prove to be better for Piaggio and the scooter scene as a whole. Perhaps, more folks will discover Vespa for the first time through the numerous neo-dealerships, do a little research and sell themselves on what will become their new, lifestyle changing form of transport. I think that the next two or three years will tell a lot on which way the situation turns; for good or for bad.

As Kansas City's first and best Modern Vespa dealer, I'm not too worried, but I'm still keeping a keen eye on the event as a whole. You can count on us to do our part in promoting Vespa and help make those "profit" numbers as honest as possible.
If you're in the know, send me a shout and let me know what you think about the situation.

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