What would I do in 2010 if I were a marine dealer??

planningI have been asking myself that question often as I have pondered the current economic mess we are in and how it has hurt both dealers and manufacturers. In trying to put myself in a typical dealer’s shoes, my thoughts reflected back to when I became a dealer, buying and operating a new car dealership in the Peoria Illinois market after retiring from OMC. The U.S. experienced a mild recession while I owned the dealership, but nothing like what dealers and manufacturers have to contend with today.

So what would I do if I were a marine dealer today? What would I recommend dealers do in 2010 and beyond? Every dealer’s situation is different and it’s hard to come up with a silver bullet that works for all. However, I did come up with a list of things that I would do if I were a marine dealer heading into 2010. This list is based on my experience as a new car dealer along with my corporate life of knowing and working with marine dealers all over the U.S.

What I would do in 2010 and beyond

1. Expenses

At this point, I assume dealers and manufacturers alike have done all they feel is possible and practical to reduce expenses. I certainly would have if I had my new car dealership today. And I would personally be spending a lot more time on the sales floor and used car lot and less time in my office. I would also be looking for some sharp retirees who would be interested in working part time – say 20 to 25 hours per week. There would be no expense for benefits for these part time employees. I often hired retirees at my dealership to drive used cars to the auction and sometimes to other dealers when we did dealer trades on new cars.

But we all know that you can only cut expenses so much without affecting customer service and satisfaction. Customers will still expect high quality service and a good inventory selection.

2. Inventory

I have heard many dealers comment that they are going to reduce their number of boat lines and focus more on niche markets in their areas. I would certainly review all of my boat and motor lines and decide which brands can be dropped. I would go for greater turnover with fewer boat lines. With the smaller market that I think we will be facing for a few years, it doesn’t make sense for dealers to tie up more capital and floor plans to handle multiple boat lines that are similar and overlapping. Focusing on fewer brands will help your sales and service people and make for a better partnership with your boat builders.

I wouldn’t stock large quantities of each model but would focus on models that will give the highest turnover. Dealers should no longer let boat building partners load them with too much inventory like what has been done in the past. I would be looking for quality boat builder partners that would not try to load me with more boats than I wanted or needed. And I would look for a niche market to focus on instead of trying to be everything to every boater. Specialize.

3. Service, Parts & Accessories

I absolutely would not cut back on training for service technicians. This is critical to maintaining high quality service. I would work hard to build a quality service reputation. Service revenue can cover a significant portion of the overall dealership overhead. In the auto business, there is a term, “Service absorption rate.” That is the percent of the overall dealership’s overhead that can be absorbed by profits from service and parts. In a well-run car dealership, the Service absorption rate can run from 70% to over 90%. We all know that with a seasonal business like the marine industry, such percentages would be extremely difficult to attain. It does make a good goal, however, to build the service and parts business to absorb as much of the dealership’s overhead as possible.

And I also would not reduce my parts and accessories inventory. Service and accessory sales are paying the bills for countless dealers today. Many engine manufacturers and independent aftermarket distributors can provide dealers with a printout of what parts and accessories they bought over the past year including quantity and how often they were ordered. A great tool in planning your inventory. I would look closely at the spring dating programs offered by engine manufacturers and distributors and take advantage of them to stock up on parts and accessories I know I will need for the spring of 2010.

I would start now to think about a spring tune up program and make sure I had the right parts and accessories on order. And in the fall, I would promote winterizing and storage which can keep cash flow going in the off-season.

4. Entry-level boats

On the subject of entry-level boats, I want to speak to dealers and boat builders alike. This industry needs more entry-level boats! Used boats, frequently sold by consumers, have often become entry-level products because there are not enough new rigs in the lower price range.

I have often heard builders say that their margins are not high enough on entry-level rigs, so they build bigger, fancier, tricked-out boats that provide a larger margin. What they are overlooking is that if a new buyer is happy with the lower priced rig… they will very likely consider the same brand when they trade up to a bigger boat. One just has to look back many years ago to when Orin Edson started building Bayliner boats packaged with low-tech outboard engines. The Bayliner styling was attractive as was the lower, entry-level pricing and brought a lot of new boaters into the sport of boating. And Edson managed to make good money with his entry-level boats…and even more money when he sold Bayliner to Brunswick.

5. Used Boats

As mentioned above, used boats are often good entry-level offerings, especially when you compare the pricing to much more costly new rigs. If I had used boats on the lot, I would make sure they are detailed, repaired and promoted. Every used car that I took in at my dealership got detailed and run through the shop for needed repairs. It paid off in increased margins on my used cars. I usually grossed more on used than on new (not counting the F & I revenue on new unit sales.) And if a used car didn’t sell in 30 to 60 days, it was taken to the auction. The detailing again paid off by getting higher auction bids. I see that auction companies are now promoting their services to the marine industry. This is something to consider.

I would buy good used boats when possible. Then they would be detailed and promoted. And I would promote that I handle used boat sales on a consignment basis.

6. Dealer Trades

No matter how many new cars were in my inventory, we frequently had a customer who wanted a particular model with a color and/or options that we didn’t happen to have in stock. So we headed to the computer to quickly learn which dealers near us had that particular model in stock. We would then contact one of them and work out a dealer trade. They would pick a car from my inventory that they could use. We would then have one of our retirees drive it to their dealership and bring back the car our customer wanted. Neat! Boat builders should work with their dealers to develop a similar program of dealer trades on new rigs. If I were a dealer, I would push my builders for such a program. On a few occasions we even did a dealer trade on a used car that a customer wanted to buy.

The above are what I would do as a marine dealer. If you have any ideas that I haven’t thought of, let me know.

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.

6 thoughts on “What would I do in 2010 if I were a marine dealer??

  1. Ben,

    Do you have any additional info on auction companies offering services to the marine industry?



  2. Ben-Excellent comments. I agree with all that you have written. The one idea I have met with the most resistance as you can guess is purchasing less new boats but that was to be expected. One item I think you should have mentioned was the use of online sales. While it is a difficult department to add during a recession, we have enjoyed strong growth in our online parts business. In fact it has been our largest growth segment in the past year. We have negotiated specials with vendors in order to be most competitive in our niche segment.

    1. Thanks for your response. Good point about online sales. There’s “gold in them thar hills” as they say. I am glad that your focus on parts sales is paying off.

  3. Ben. Of course you are “spot on” when it comes to your recommendations and hopefully many of us, if not most of us (dealers) have taken these appropriate steps and have “survived” as a result.
    There are three other key items I would like to add: 1. The dealer management team needs training too – and sometimes we dont recognize it, being too busy on the job just managing or maybe doing the ‘hands on’ work, or not realizing there is a lot available in the way of education & training. There are numerous great consultants in our industry, most available for a fee. There are 20 groups, Spader, Parker, and others, some sponsored by our manufacturers. These educational services are a must for any dealer that wants to ensure survival through the bad times and a share in the prosperity during the good times.

    2. As a start on the path towards management education and training, look into becoming a Marine Industry Certified Dealer, a process that is geared to start your business on a path towards success.

    3. Arrange for your ticket to the MDCE NOW. The Marine Dealer Conference and Expo. is the annual conference of the Marine Retailers Association (MRAA)and is capably produced by Boating Industry, a partner in this endeavor. THIS IS THE DEALER EVENT OF THE YEAR, this year held in Orland,Fla. Log onto MRAA.com or boating-industry.com for the details of a dealer conference that will change your (business) life forever. It is chock full of all the info. you must have to go forward, survive & thrive (the Conference theme is “GPS” which stands for Growth, Profitability and Solutions, which is exactly what we all need NOW.).
    I do admit Im prejudiced – Ed Lofgren, Chair, MRAA.

  4. Ed:

    You bring up excellent points about management training and becoming a Marine Industry Certified Dealer. All dealers should strive for that. Thanks for your input.


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