Get an adult beverage first if you like, then speculate with me a moment on what a boat dealership might work like in future – say the year 2015 or so. As long as we are just having fun, we might solve as many of today’s problems as we can. Here is what I see making life most difficult for boat dealers at the present:
- The industry has had a large, stagnant inventory that grew like an evil weed when the economy slowed. We are likened to the car industry, but their inventory is normally turning on the order of every 60-90 days. If it grows, car production and deliveries shift pretty quickly. They still got into trouble, but they are getting out faster than we are. I know that when the economic climate gets gritty, we may see our holdings go well past a full year’s needs – just when we can least afford to carry it.
- The recreational marine product mix is so diverse that even in good times, some niches will remain vegetative. A Mercedes and a Jeep are a lot more alike in use than a bass boat and a motor yacht.
- Our inventory monster has been low on location efficiency for years. We have minimal means of mating products in one locale with demand in another – used or new. Some boat builders have tried to help with this, but most just wanted to build another boat. Boy, was that short term thinking.
- When we guess wrong on stock, we have to dump it at poor or negative margins to stay alive. It seems we have guessed wrong on a lot recently – particularly quantities. This creates an expectation in the minds of the buyers still around and makes them pretty resistant to “normal” pricing.
Note that I wrote out this list for a similar article in 2002 and I repeat it here with minimal need for changes – mostly verb tense. It’s time we started learning from our problems. Even if they did not get our attention in 2002, surely the recent carnage does.
Manufacturers and bankers are just as afraid of our inventory albatross as we dealers are. Unfortunately, no one seems to want to “own the problem.” It’s reflected in most dealer-manufacturer-lender contracts, and dealers don’t write many of those. Nobody wants inventory that hasn’t sold. Yet, we dealers (until recently when the blood flow exceeded the cash flow) continued to buy so much of it and commit to it so far in advance. Maybe there is a better way.
My imaginary 2015 dealership, Boats R Y’all (I’m on the Georgia Coast), has representative inventory on hand never exceeding 8% of my combined territory sales of the product for the last three years (24% of average) – a quarter of my annual projected sales for a new dealer. My manufacturer-partners and I have carefully and jointly chosen what will be included to show off the boat lines well. They are careful, too, because we are true partners, owning the inventory together. On each of our balance sheets resides a figure around 12% of sales as finished inventory. (In my imagination, I juggle these figures back and forth, but everybody needs a stake in holding inventory in check and current.)
Boats move pretty well, because in addition to the advertising the manufacturer does directly and with me on co-op, the industry has finally gotten heavy positions on TV, Internet and even more modern media (not specified in my imagination) extolling the romance of the boating dream. On the water is the place to be – with your family. (We briefly had this, and maybe we can get it back.)
When a customer comes in, he makes a bee line for my glittering and renowned Mostly Float line that he lusts for (JD Power #1 selection four years running) and chooses the 25-foot walk around cabin model. So far the deal sounds pretty clean, but then the old retail shuffle kicks in. This one is white and his wife wants mauve or maybe magenta. This one has a 250 HP Turbo Scoot engine by WeedWhacker Marine Industries, and his buddies have told him to accept nothing less than the 275 HP Twin Turbo Scoot.
To his amazement, because he hasn’t bought a boat in a few years, I say “no problem.” “Here’s the price adjustment” (modest – up or down). “Let’s spec out the electronics, choose a trailer and get the deal rolling” (with a contract and deposit). We aren’t likely to modify the boat in the show room, unless we see a significant model change coming – not just a calendar year, which nobody pays attention to any more. It stays right there for the next looker. My manufacturer-partner takes over the next procurement step while I locate financing and electronics. Finance shopping is all electronic, covering a plethora of financial institutions for the best customer deal, which is also the one best for my F&I profit center. (Note that plethora mans a lot more that we have right now.) Electronics, still a fast changing area, is all just-in-time supply from factory or distributor stocks. All of it is plug-and-play to the latest NMEA and industry interface standards.
The boat manufacturer can take a boat meeting the specs from a dealer anywhere in the country (and, of course, replace it ASAP), or he can custom fill the order from his highly adaptive plant. When I get it, I complete electronics installation, test all systems and deliver with my usual relaxed, customer pleasing, Marine Industry Certified flourish. The champagne in the refrigerator is cold. If he goes for the hard stuff, the martinis are shaken, not stirred. Obviously, the more mundane equipment is perfect. He’s waited 2-4 weeks from date of order, but he knows that’s the price for getting a legendary Mostly Float, customized to reflect his dreams. We and the manufacturer have been e-mailing regular progress reports (glowing, of course – to keep his dream in overdrive). In the old days just after the turn of the century, he would have his boat “sort of like he wanted it” and only a little sooner – maybe. It would be modified to his specs as best we could – with predictable results.
He can travel and shop other dealers for Mostly Float, but he delays gratification needlessly. We all operate on more modest boat sales margins (10-12%), because we have eliminated much of the inventory risk and the capital needs. Boat sales get people in the game. For steady income, we offer great (and profitable) service in our Marine Industry Certified boat yard (certified so he knows we are good). All us good guys in the dealership business are Marine Industry trained these days. We are up to level three which pretty well guarantees customers will be raving fans. I hear level four may include dancing girls – or guys – customer choice.
We also have a good stock of fast moving parts and saleable accessories in the store (and many more on user friendly video display). Our customers will logically buy from us as the local dealer, because they want the stronger service connection. Finding a dusty, two year old version of his dream boat that a distant dealer is desperate to move is no longer an option. They don’t stay around, and price variation is modest, even in our free market.
If he wants to haggle and/or take delivery today, he needs to step over to our Previously Enjoyed department where we display factory and locally refurbished Mostly Floats at good prices (and higher margins). This department also accommodates his trade-in needs, wholesaling craft inappropriate to the area to where they will thrive. There are no obstacles to the buying process. Of course, we can get (or give) a wide variety of craft with interactive video and the help of the MRAA dealer network.
Ever the skeptic, you ask, “What happens to non-currents at year end?” These hardly exist. The inventory moves around the markets freely under the manufacturer’s necessarily benign control and back hauls in his delivery system. He is not going to allow it to build up at Boats R Y’all while another dealer’s inventory stays clean and current. He isn’t going to start making 2016 models (if they are even recognizable as such) until dealers are pretty low on 2015 counterparts, and he makes the model change (if there is one) when the market is slowest – like at the industry dealer meeting and training session in December. Since he makes running improvements and new model introductions all year, the year model doesn’t mean so much to the consumer, anyway.
Again the skeptic asks, “What about manufacturers changing dealerships, who gets stuck with the inventory?” Nobody! The manufacturer is highly motivated and capable of moving it into his pool and giving me back my of half the money, in full and in a short time. He has sales all over the country (or maybe the world) to help. I am only out the interest I’ve used from working capital for my half. And, I’ve got my new Always Floats line on the way – same deal. My contracts read kind of like the old 1960’s California wedding vows:
“We promise to love, honor and cherish each other until death do us part – or until the going gets gnarly.”
Nobody gets hurt. The industry gets better, and that tedious old legislation squabble about inventory is just a faint memory.
Yeah, I know there are a few rough spots in my plan, but I (had) a dozen years to work them out (now only a half dozen). Maybe somebody else will do the hard part. How about you?
1 thought on “The Boat Dealer Future – Dimly Seen”
Mr Lockwood’s article is insightful and eloquent, but mostly it is common sense basics and right on target! Frankly, I’m at a loss to understand why the bright people building our boats haven’t realized this a long time ago
While we are dreaming…how about this?
This current situation causes a few industry savvy people to seize the opportunity to create a New Boat Company…NBC rises from the ashes.
Read about NBC in a post here..coming soon!