The word on the street, which I have heard from sources all around the country, is that some former sales executives from the boating industry are starting a new website that will be publishing dealer costs for all brands of boats and motors. Huh?? What are they thinking?
I called one of the guys who I heard was involved in the website project and asked him for more information on it. He told me it would be a consumer research website very similar to Edmunds.com and Kelley Blue Book in the auto industry. He said the website would feature boats, motors, motorcycles, ATVs and (later on) RVs. But manufacturers would not be able to sell their products directly to consumers. Consumers, however, will be able to search the website by product or brand. Consumers would also be able to locate a dealer and request a quote on the product they are interested in.
He also said that the website would have two prices on the boats and motors and other products they feature—the MSRP and dealer invoice. He added that some dealers they have contacted don’t like it, but others do. (I can’t imagine why a dealer would like it.)
My feeling is this—It is tough enough out there in the boat manufacturing and retailing trenches without some former execs trying to line their pockets at the expense of the industry. Here we are, struggling in the worst economy since the Great Depression, with an estimated 25% or more of dealers now out of business and predictions that another 20% are still in business but no longer selling new boats. I’ve also heard that those developing this website are claiming that publishing dealer costs will help the industry. As I said earlier, “Huh?? What are they thinking?” It is almost like WikiLeaks—potentially very damaging.
As mentioned above, those behind this website say that it will be no different than automotive websites like Edmunds.com and Kelley Blue Book that publish dealer costs on cars and trucks. Well, as a former Chevy dealer, let me say there is a huge difference! For starters, there is a big difference in volume between the automobile and the boat business. In boom years, there have been as many as 15 million or more new cars and trucks sold in the U.S. market. But the volume of new boats sold in the U.S. is a mere fraction of that number. Plus, I would guess that 80% to 90% of new car and truck sales involve a trade. That was the ratio at my dealership. As a new car dealer, I didn’t care if a consumer knew my invoice price on cars and trucks for a couple of reasons. First, in the negotiating process for the trade of a used car or truck for a new one, the issue of my invoice price got lost and didn’t matter. Second, I received a dealer “holdback” of 3% of the vehicle’s sticker price no matter what. It was credited to my account by Chevrolet when the car or truck was delivered to my dealership. Even if I sold a car at invoice price (which I rarely did), I still made money ($750 on a $25,000 MSRP new car). And most car dealers consider the holdback “sacred” and will not tap into it to make a deal. So even if the customer knew what my invoice price was on a vehicle he wanted to trade his used car for, we still managed to often gross $2,000 or more (once in a while even as much as $5,000) on the deal. And that didn’t include the potential extra dollars that could be made on the deal with F & I. Then there is the factor that selling new cars and trucks is a twelve-month business, not seasonal like boats.
Arming a consumer with marine-related dealer costs is far more dangerous than publishing automobile invoice prices. The marine industry doesn’t have the built-in safety net of a holdback. It is small and dealers have, for the most part, operated on minimal margins. And, as a result of this tough economic downturn, far too many dealers have ended up undercapitalized and can ill-afford any further reduction in margins.
One large, long-time dealer with two locations told me recently that only about 15% of their new boat sales involve a trade. So it will be harder to negotiate the sale price of a new boat rig and make a decent gross margin when the customer knows your cost and there is no trade involved… and no holdback like in the car business to add to the profit.
Another large and successful dealer had this to say about this rumored new website he had heard about: “This is not a positive development for boating consumers, manufacturers or dealers. It is self-serving and the only positive to come from it will be the enrichment of the website promoters at the expense of the industry.”
He went on to say, “It represents a difficult challenge to the present way we do business in the industry. It would seem to me that the best resolve is for the manufacturers to refuse to cooperate and instead, maintain the confidentiality of dealer pricing.”
Another long-time and well-known industry veteran said, “I am strongly opposed to this rumored website because it will cause complete pandemonium at this season’s boat shows. People are going to come to the shows with a list of dealer costs for boats that they printed from the website. Dealers have enough problems to deal with and don’t need this to further complicate their businesses.”
So what should dealers do if this alleged website becomes a reality? I don’t know. But here are some thoughts that I would consider if I were a boat dealer:
- Encourage my manufacturers not to get involved with the website or to provide them with any dealer cost information. (I have heard that some dealers are saying that if their boat and engine suppliers provide unit costs and advertise in this alleged website, they will look for other supply sources.)
- I would not provide the website with my dealer cost on the boats and motors that I handled. If manufacturers don’t provide the cost info, the website promoters will probably try to get it from various dealers that they have worked with when they were executives in the industry.
- If a customer came into my boat show exhibit or my showroom and told me he or she knew the cost that I paid for my boats and motors, I would ask them where they got the info. Then I would point out that the information on the website is incomplete as it does not include many costs to bring the products into my showroom. I would also point out that I sell at fair prices that allow me to stay in business and provide my customers with the best possible service on what they buy from me.
Hopefully 2011 will be the start of a rebound in boat and motor sales. So let’s hope that the people behind this website decide not to publish dealer costs for boats and engines…or that the whole website idea goes away and the execs promoting it find another way to make money without hurting the boating business.
If any dealer has further thoughts on this topic and how it might impact you, I would appreciate an e-mail to firstname.lastname@example.org with your comments.
Happy New Year to all!