Let’s make it a two-way street on 2010 boat orders

My May blog, “It’s a dealer’s market now, especially with 2010 dealer agreements,” generated several responses, mostly from dealers but a few from boat reps. I think it is also a “dealer’s market” when it comes to placing orders for 2010 boats. But it is equally important that we make sure the whole process is a “two-way street.”

As one boat rep wrote in response to my article, “Certainly in today’s environment it is important for dealers and manufacturers to work as a team to promote the brand of boat represented. Manufacturers must participate in inventory management not only on a dealer-by-dealer basis but nationwide. It is harmful to the industry as a whole for one dealer to have all new product, while another dealer in another state is sitting on old inventory being sold at rock bottom prices.”

He went on to say, “Perhaps manufacturers need to cooperate with floor plan companies on moving old product (on a consignment basis) from a stagnant market to a dealer with low inventory that is located in a market with more demand. Chain stores for retail consumer goods do this all the time. If a dealer can sell some boats while preventing the manufacturer from a buy-back situation and prevent another dealer from drowning in old product, everyone will win.

”We have all worked hard for many years to build our businesses and reputations. Dealers selling the same brands need to cooperate along with the manufacturers to manage inventory according to demand. Supply and demand is very simple, folks!

Another boat rep wrote, “Manufacturers dictate terms, inventory, related programs, and kickbacks in the form of rebates for dealers who perform to the level they want. If you don’t play the game, you can’t be competitive; if you do play the game, you risk losing it all in a down economy because you’re stuffed full of non-current inventory and paying insane floor plan costs.

“Also, builders get desperate because one dealer has been stagnant for a little while and they jump ship on him or stack him with another dealer. These are examples of the ‘bad apples’ on both sides of the business, and they will be gone. I have also quit builders that treat my dealers like crap, and the dealer agrees he cannot take it anymore from the builder, and then over $200 per boat, that same dealer out of greed stays and takes the abuse. If the dealers would quit buying from the crooked builders out there, and the builders would quit selling to price-cutting, in-one-day and out-the-next-day dealers, we can purge this business and get it healthy again so that we can all make money. But now is the time to come together and have some type of fairness. Remember, check the builder out, know your rep, do your due diligence. Relationship, Relationship, Relationship!”

The bottom line is this: Manufacturers need to sell boats to stay in business. And they need to keep production as level as possible throughout the year. However, they should not try to accomplish this by going down the same old one-way street. They cannot and should not insist on dealers buying a quantity of boats that they do not need, especially in this economy, with so many dealers still sitting on a lot of non-current inventory. And most certainly builders should not–I repeat–should not try to muscle dealers by threatening cancellation if they don’t place big orders for 2010 product!

A two-way street

So the two-way street should first involve manufacturers working more closely with each of their dealers to help them move old inventory. They [manufacturers] should ask them to order only the quantity of new boats that their businesses can support in the current economy. And to the extent that they can, manufacturers need to help dealers with getting decent floor plan arrangements and perhaps even consigning some boats for a short period of time. Or perhaps set up some regional warehouses so dealers could draw from that inventory.

The dealers’ part of the two-way street should involve working closely with their major boatbuilders and trying to order as many new 2010 units as they can without stocking so much they harm their businesses.

In summary, one of the dealers who replied to my May blog made the point very well that I want to make in this article. He wrote, “I define winning this way: all parties involved must gain adequate value having their needs met or you really did not win…at least not long term. Suppliers must win, manufacturers must win, dealers must win, employees must win, customers must win and anyone involved with the process, yes…all must win.”

He added, “We all must be concerned that everyone in our chain of business is having their needs met. Dealers must be able to win if manufacturers have any hope of winning; hopefully the manufacturers that violate this concept will understand this going forward.”

As I pointed out in my May blog, I think we are currently in what I would call a “dealers market,” especially with regards to dealer agreements. This also applies to orders for 2010 product. It needs to be a two-way street, with both dealers and manufacturers winning by working together and understanding each others’ problems.

About Ben H. Sherwood

Ben H. Sherwood is a marine industry veteran and a marketing consultant who operates Sherwood Marine Marketing in Pleasant Prairie, Wis. For more info, click About on the main menu.

13 thoughts on “Let’s make it a two-way street on 2010 boat orders

  1. It is time for more manufacturers to adopt the program we set out 7 years ago. Create reasonable expectations for your dealers, give them large territories, demand that they service what they sell. Buy on as you sell one program. This has worked well to keep inventory levels low. Dealers also have access to any dealers inventory so they can sell the whole line while only 3 or 4 in stock. We will build 2010 boats beginning in August. Inventory levels in the field are at a historic low. We have only lost one dealer.

    1. Pete:

      Glad to hear you have only lost one dealer. It’s a tough market out there as you know. What you write sounds reasonable to me.

  2. You are absolutely right that it must be a win-win situation. In the past manufacturers wanted the dealers to carry more inventory than was appropriate. Turnover ratios of 1.5 to 2.0 were considered adequate. Because GE knew that ratio was to low they made manufacturers sign repurchase agreements. The manufacturers signed them thinking there was no problem. I would guess there were no manufacturers who put reserves or any form of contingent liability on there financial statements. When the fan was slowed by that age old brown by-product, manufacturers were sent reeling from all the product they had to repurchase then sell at a discount. I have always tried to operate in the 4.0 to 6.0 range. 6.0 is probably too high and demand is not met especially in late spring but around 4 is very sustainable. I believe manufacturers will never again load up dealers when they have given a guarantee to the flooring company. There are some simple tools to put into place that will manage the risk from manufacturer to consumer. Everyone will win if we think clearly. Bill Baker, Bake’s Marine Center, Issaquah, WA

    1. Bill:

      I hope you are right that builders won’t try to load up dealers in the future. If they do, both dealers and builders suffer when there is a downturn like we have now.

      1. Ben,

        It will take the dealer understanding how to read a financial statement and knowing when to say when also. I tell my sales reps to come up with ways to spend money to help the store and my bookkeeper ways to save money. It is my job to know which way to lean. (I am not always right…) Manufacturers should try to “sell” boats to dealers and the dealers need to know when it is right time to buy. Thanks for bringing in a dose of reality.

        1. Bill:

          Sounds to me like you have your act together in running your business. Spending money effectively in the right way to help sales while controlling expenses and cutting where you can is good. And certainly knowing when to buy is important.

  3. I have been on both sides of the fence now, most recently on the manufactures side. I can say that most, if not all, of the positions filled by senior management dont get it. They cannot relate to the dealer. I had hoped, that my input from being a ex – mulitmillion dollar dealer, would carry some weight, but after awhile it fell on deaf ears. I knew what both sides needed to do. I was advised to keep my head down for the most part, which I did not do, and when my position was eliminated ,(go figure) 2 parting comments were, keep the fight up, and you were better at retail then you were at wholesale. That really says it all. The 2nd comment came from a 15 year vetern of the manufactures side who had no business in the position he was in. If the manufactures continue to fill positions with suits, like GM as done, the results will be the same.

    1. I agree that executives in the manufacturing arena should have some knowledge of the retail end of the business. When I hired a sales trainee when I headed up sales for Johnson and Evinrude, part of their training was to spend some time working for a dealer for a few weeks. It gave them a better insight of what life is like at the retail level.

  4. Ben,

    I appreciate your agreement with my senitments and theories by reprinting them in your article. Do note: I am actually a dealer not a rep, also I am a “she” not a “he” (although there was no way for you to really know that since I don’t believe I included my name in my posting).

    I do agree with Bill Baker on his philosphies. I think we are experiencing a “thinning of the herd” and the strong, smart, (not necessarily the largest) dealers and manufacturers that are customer centered and consider quality over quantity will be the ones left standing. Hopefully with larger territories and a healthier balance sheet…much like the thinning of the car dealers we are seeing now. Let’s learn from their mistakes!

  5. I have listened to numerous dealer friends talk about current dealer inventory financing from the “shallow pocket” viewpoint where most operate. While it makes sense in the long run for the dealer to have a deposit in the inventory (as well as the manufacturer, I think), most dealers can’t make the change in the current financial climate. They might be more able to in good times.

    GE, and, I suspect, other floorplaners, want more “skin in the game up front. If builders were to cover the up-front floor plan costs as a loan or partial consignment to dealers for now, they would only be committing part of profits. They would get their cost of goods and some profit back right away — increased sales and production volume, too.

    I think most builders will tell you that one of the biggest industry problems is that most dealers can’t order boats under the present financial conditions and lender regulations. It seems reasonable for builders to take dealer orders with part of the profit coming after retail sale, just to get things rolling again. The first manufacturer that comes to his dealers with a scheme that works with the banks will be the first back up on the horse and riding.

    I’ve seen one manufacturer’s dealer buying offer that is close. Hopefully others will follow.

    As a by product of the current unpleasantness, I hope dealers and manufactures both will commit to reduced inventories with better turnover (at least 3+ times a year). Higher mobility of product between dealers and even small manufacturer inventories would be a big help.

    It would be great to see really sane balance sheets in our industry compared to others.

    John Underwood

  6. WOW, what a great find…I just tuned in today (Thanks Ben). You all, in different ways are saying exactly what I have been thinking.

    How about this? We all try to spec out the business model that has the best chance to work after the forest fire goes out and the black mess is cleaned up….whatdayathink?

    Let’s start with this:
    “Why do we need Floor Plan anyway?”
    The floor plan concept was invented not because dealers needed it…because manufacturers must “level” the production in the plant (when it is cold) and (US) buyers dont buy until it’s warm.
    If the manufacturer made product available WHEN a dealer needed it, he could write a check for it, right? SOOO why doesn’t manufacturer make it available WHEN a dealer needs it?

    Several years ago our industry leaders (Yes, your companies, Dusty and Irwin) fell asleep and allowed other outside companies with ther own operations, (and therefore their own capital needs) become the only sources we had to make our system work. Now we sit powerless while consumers want to touch and to buy boats that dealers cannot stock, and factories are forced to close.

    How bout this? Manufacturer makes good boats, picks good dealers, puts them on his floor and when the dealer sells it..he pays for it!…?

    Let’s call this manufacturer “NBC”..New Boat Company. New business model!

    When we were kids we could pretend…and it was fun…let’s pretend.

    Who knows? An angel may be watching!

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