The Marine Industry is Changing… Do you need to as well?

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Henry “Skip” Hegel

Wow! What a series of events has occurred over the last 12 -18 months, changing our economy, our financial system and to a great degree our beloved marine industry. Looking back at the prosperity the marine industry has enjoyed over the past decades makes it difficult to get one’s arms around the course of action each dealership might need to follow in order to remain (or get back) on track as the U.S. and world economies begin their slow recovery.

We are all searching for solutions, as are the elected officials we sent to Washington to deal with and (hopefully) prevent these economic issues from occurring in the first place. Did they? As a result, we must now move to prevent further decline and shore up any weaknesses in our individual businesses.

The marine industry has lost many dealerships and boat builders over the last year. The capacity of engine manufacturers continues to exceed demand and, although modified by most recently, the requirement for minimum purchase and sales to retain an agreement creates pressure on the dealer to make choices. Question! Are those choices going to be as good for you as they are for your supplier?

Be careful! As you all know, the marine industry is built on discretionary dollars of consumers, and those dollars are virtually non-existent at this time. That is not to say that no one is buying, because they are, but they are cautious and looking for dealerships that can offer what they need or desire such as financing, technical service, professionalism, integrity, fair price, and quality product.

In the past, the industry was divided as to how dealerships operated and positioned themselves within the buying community. Some were volume-driven and sold at very low margins in order to increase their volume with their supplier, be it boats or engines. Some were service-driven and retained a customer base that stayed with them because they offered superior service after the sale though perhaps a more robust price for product at the purchase end. Some were a little of both and tried to compete at both ends, but without the volume purchasing power required to obtain the “best price,” they never were quite able to tip the sales side of the scale in their favor. Lastly, some have far too many boat suppliers and multiple engine suppliers. When times were good, these dealers could make a decent profit with all but in the current economy, still trying to maintain all of their suppliers, they struggle to meet the buying requirements of all since the retail side of the business has seen dramatic decline.

Who are you? Are you changing to meet the current times?

You are the best one to determine what is prudent and applicable within your dealership. Having said that, I believe it is important to consider how to best optimize the programs offered by boat or engine suppliers and determine if you are truly better off continuing to offer multiple brands and weaken your position with some suppliers, or concentrate on maximizing your purchases with boat brands and engine suppliers by reducing what you offer in each. In other words: Are you better off being a big dealer with two boat companies and one engine supplier, for example, or are you better off being a small or medium dealer with multiple boat brands and engine suppliers? This is an old discussion that today begs for another look.

Offering too many choices to consumers may weaken your dealership while your competitor down the road offers very limited choices of boats and engines and is better able to capitalize on the manufacturers’ programs, thus making him more competitive by reducing inventory costs, training costs, parts inventory and consumer confusion. His sales personnel actually know and sell the product rather than asking the consumer to make his choice. That dealership is better informed on fewer products.

Whatever your past business model has been, you must have been successful with it since you are still here! Going forward, since the economy has changed and consumer buying practices have changed, it is reasonable to consider how your business might need to change.

If you are service-only, then being the best should be, and most likely is, your goal. Should you change? Maybe! Perhaps the appearance of your facility or services you offer should be reconsidered! Service options like on-the-water, pick up and delivery, quick turnaround times, etc., should be reviewed and considered.

If you are strictly high-volume concentrated, you might look at your purchasing power with your suppliers (what is their best program for you?), and easy retail finance. Will the older model still work within the new economic market? Are you better off selling 45 models of one boat brand or 15 models similar in three different boat brands?

If you are a dealer with too many brands of boats and engines, you might consider scaling back and becoming much bigger with fewer suppliers, thus enabling you to better leverage yourself within their programs. Obviously, suppliers offer graduated programs because they want more of your business, and they want to take that business from their numerous competitors. You need to assess how that can best work for you within your market area, and whether a more concentrated offering gives you greater rewards with your supplier while making you more competitive than your competitor down the street with multiple offerings, who is paying higher prices to his suppliers for the same product or like product.

The point of these thoughts is to stimulate you to reassess your past and current business position and determine whether you need to alter that position in order to move forward and grow. Do not be complacent and assume things will return to normal and all will be the same… they will not!

Think about your future. Survey your customers to determine their likes, dislikes and expectations! Review your product volumes and determine if it makes sense to retain multiple engine brands and similar boat styles from multiple suppliers. All of this increases cost to your business but does it truly bring greater profit? You need to review and decide!

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About Henry H. "Skip" Hegel

Henry H. “Skip” Hegel, former marine dealer, has held sales and service management positions with OMC and Mercury Marine. He lives with his wife in Pinehurst, NC. For more info, click Contributors on the main menu.

7 thoughts on “The Marine Industry is Changing… Do you need to as well?

  1. Hi Skip, great piece, and very timely. Your question asking the dealer is your choice going to be as good for you as it is your supplier, is a question a lot of dealers need to be asking themselves. The dealer is the life blood of the industry. The mfg. needs this distribution network unless they are prepared to build 100% perfect boats and motors that require no service and sell direct.
    Again great article,
    BF

  2. Skip: Good comments, and great to hear from you again, even if only in print.

    I am older than dirt, so judge my comments accordingly. I have seen one-line dealers dropped and others left hanging by manufacturers going out of business. Neither circumstance is a comfortable place to work. If I were to go back into the dealer business, I could see some merit in limiting sources, as you do. I don’t think I would ever limit them to less than three on boats and maybe 2 on motors. After my early days, I always avoided lines with aggressive volume discounts. I suspect many programs in our industry’s past would not stand rigorous Robinson-Patman scrutiny, and they certainly proved to be poor business practice.

    One can never account for the sudden whims of policy making managers in other companies, and it’s dangerous if they act capriciously. Many have not been through the wars while meeting a payroll, and their seniors (who presumably have) don’t always counsel them enough.

    I would feel better with a strong service department (which I control), a decent balance sheet (which I control, a good parts and accessory department, which I control and, of course, a carefully selected few of the best product lines I can possibly get.

    As you may remember from our first meeting, when a dealer is new to the business, the best lines he (or she) can possibly get may be the only ones he can get — but one needs to get past that situation ASAP. Fortunately, I was eventually able to.

    Personal regards, John Underwood
    Lockwood Marine 1987-2007

  3. Hello Skip, Well stated.
    My company has pretty much become the dealership you suggest
    Over the past two years we have paired our boat lines from 4 down to 2 and engine brands from 6 to 3. It’s working just fine.
    Surprising how close our numbers are year over year.
    All your reference points on training, parts, and qualifying programs are spot on.
    Good post.

  4. Hello Skip;
    Nicely written and right on the money. I have always believed that a dealerships most important product is it’s service.
    Good hearing from you.

    Best regards, Pat Davis
    TriTownMarine

  5. Always good to hear from you Skip. I’m afraid my dirt is even older than John’s, but here goes.Thanks for saying what many of us dealers have been focused on the past 24 months. Getting a plaque for buying the most boats or motors each year isn’t really worth much in the long run.

    Our signage here at the marina states “The Sales Dept. sell the first boat. The Service Dept. sells the rest.” Great products are nice, but great service is the answer, and the salvation in a purchasing downturn like this one. I look forward to hearing from you and Ben in the future. Thanks.

    Jeff Thurston and family
    Thurston’s Marina.

  6. Skip,
    Well put. I have always respected you opinion in the business, Skip. Times are a changin and we all have to change with them.

    IMO, just one of the hurdles from the dealers perspective will be for them to take that ‘good look in the mirror’ and see what they see and can change…and then decide to follow through on these changes.

    But rom a perspective of 25+ years in the marine business on both sides of the equation I would say the BIGGEST hurdle of all in the Marine Industry will be for the major marine power and boat builders to realize that the marine dealer is their Primary Customer and to not loose sight of that when things start to change for the better.

    The relationship between the power and boat manufacturer and the marine dealer HAS to be one of mutual benefit. If it is not mutually benefical, and the manufacturers continue to dictate the volume a retailer must buy and force inventory on the marine dealers, and the retailers ignore what they need to do improve, nothing will change (and boy have we seen this over the past economic cycles).

    The relationship between the boat builders/marine power builders and the marine retailer/dealers has to be MUTUALLY BENEFICIAL TWO WAY RELATIONSHIP. If it is not, we are doomed to continue to repeat the whole cycle and see more manufacturers and marine retailer/dealers fail.
    Larry

  7. Hello Skip, great post!. Though I am a very young dirt, I am from a 40 year old company dealing with marine electronics. Although, its afar from boats and engines, we cover everything else related with electronics. I agree with the comments of Senior John Underwood based on solid experience.
    I see that only the best service can give a dealer an edge over the competotors when all are on the run for discounted deals!

    Best Regards

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