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I know I am going to regret responding to this thread, but I am pissed!!!! I am/ was…. A new boat dealer, and have been in my own business for 16/17 years, and was a....
PA - I think you missed the intentions... Certainly can understand why you are pi$$ed in general, the economy sucks, and you are taking the brunt of it. I think at least my point was, something has to change to help you pay your employees, and hopefully make a few bucks for yourself as well. I may be wrong, but the model of having you to have to take on huge floor plans, for something that is not selling right now, does not work unless you can get a sizable margin. I think most get that. On the flip side there is no way Grady, Parker, or who ever can think about selling what they have in the past, without some type of dealer support. Who knows what this will look like in the future, but there has to be some in between. Maybe they provide a few boats to you on consignment for demos and such so you dont have to lay out the cash you have in the past and give you a reasonable amount of money for each order. But I would suspect (don't know) if you offer decent service without a huge floor plan as overhead, which I assume you do- you could make a good go at it.
At the end of the day we need you guys to provide a much needed service for our addiction... no one wants you to go away
Everyone should own their own business at least once. It is murder in a good economy to make a profit. I have been in the boating industry for 25 years and have never seen it as an easy way to make money. The mfg do only slightly better than the dealers. Overhead? Try 1 million dollars for a mold to produce a new model of boat. The average boater has no idea how little money most boat dealers make....
All I was saying is things have changed in the market and buyers will look down upon a 3K wash and wax when its called dealer prep. Sorry but if the boat business is so tough why would you get into it? Don't cry to me because its tough in this economy, join the club. As far as million dollar investment to produce a boat, once again nobody is twisting your arm to build that boat, its your own desire to make a ton of money. Don't BS people saying its for the love of boat building, its for the love of money. Nobody invests millions unless they plan on a return in multiple.
I know I am going to regret responding to this thread, but I am pissed!!!! I am/ was…. A new boat dealer, and have been in my own business for 16/17 years, and was a mechanic before that. I started in a 2000 sq foot shop, by myself, and grew it to a three location dealership in two states employing up to twenty one full and part time employees. My dealership was the forty second in the nation to be NMMA certified… witch I found means NOTHING to most of you… and we held an average of 97.5% CSI rating with our customer feedback, according to Monterey, and higher with Everglades’s owners. So, I feel that I can talk with some type of expertise in this field. This kind of naïve and hostile attitude towards dealers is unbelievable. What side of the argument are you on nausetlight? “If they were to cut out the 25% dealer mark up and the $3000 freight and prep BS, maybe they'd sell a few more boats.” Then you say: ““I understand the dealer has a huge overhead, also safe to say that if that same dealer can't survive on service and small item sales” Then you say IN THE SAME PARAGRAPH: “Time to refocus the business to survive on service and bringing in repeat customers to buy whatever they can sell, life jackets, flares, whatever”
You obviously have NO IDEA what it takes to stock, maintain boats for sale, organize boat shows, move product, pay health benefits, keep mechanics certifications current, …. I am going to stop now because I feel my anger getting the best of me. I would ask everyone before they post opinions about something they have no idea about to look in the mirror. Ask yourself what it takes to run your place of work? For anyone who owns their own business they will know what I am talking about. For the rest of you think about it. Right now some of you are in your cubical reading The Hull Truth. Someone is paying you to read about your hobby right now. Look at your coworkers and imaging paying for them? Imagine paying for the lights, the coffee, the pens, paper you use. Now imagine someone who has no idea what the hidden cost are, telling you that you need to work for less. Hey Nausetlight, I think if you were to work for free your boss would sell more products also. After all, your expenses are all just “prep BS”… right?
I agree with you that there is a lot of ignorance out there about the business model and economics of boat dealerships. People expect you to do like the auto dealers do - sell at cost, collect some mystery kickback that makes them actually make a small profit, and make their money on service. They don't have an appreciation for floor plan costs, dealing with leftovers and heavy discounts, seasonality, and all the dedicated fixed overhead involved with selling boats.
I come at this from a Strategic consulting perspective, with a few assignments in this industry under my belt. Let me see if we can engage in some constructive dialogue on this, and I promise to keep it civil if you do.
This industry has gone through business cycle challenges in waves roughly every 7-10 years. Weak dealers got purged after overextending themselves in the boom, and manufacturers increased capacity and wasted a lot of money on R&D and product development just because they had the cash flow, even though it inevitably put them in risky positions for when the market inevitably contracted. There is an extremely high amount of leverage in this industry.
But this time is different. There is a real shift in the long term ability of people to afford luxuries like boats. The political reasons behind that are better left discussed in the bilge, but it is happening. In addition, the population is getting older so there are fewer families moving through the upwardly mobile phase to drive demand. Most of the population growth is in the lower income groups. The average size of boats being sold can’t increase like it had, nor can features make them more appealing, so the trade up market is drying up. Fuel costs are permanently higher, and will only increase. Leisure time is less, because it is more difficult for people to make ends meet. Due to all of the above there is a glut in used boats. Those that might have increasing disposable income are going to be asked to close the gap on federal budget deficits. None of these are just short term problems.
What all that means is that there is much less money on the table to support all the participants in this industry supply chain. Something is going to have to change. You can’t just have fewer dealers selling fewer boats, because at a certain level of reduction, people won’t live near their dealer – meaning the whole appeal of buying from a local dealer and getting support becomes weak.
Now you mentioned all the costs involved with supporting your new boat sales. What would happen if you made an objective compilation of all of the costs that would disappear if you no longer sold new boats, and compared that to the gross margin that you make on new boat sales? You would probably find that the margin barely covers your incremental cost of selling the boats. But the buyer is paying for all of those costs and your very small net margin, and getting no incremental value for that. That is the part of this whole equation that will have to “give” in order to keep the industry healthy.
The big losers are the finance companies. The manufacturer has to pick up some of the distribution costs, but will have 20%+ of retail price on the table as a cushion – most of which will go back to the customer to spur demand. Dealers lose that small incremental net margin, but the manufacturers will need to ensure local support, so can take some of that cushion and spread it to the (service) dealers network. Buyers have to make arrangements to see and test the boats outside of the dealer network, but that just changes the way they shop. They can look at used versions to narrow it down, and make a factory trip to close the deal. Manufacturers of smaller boats will likely become more regional – a CT buyer isn’t going to fly to California to sea trial a $75k boat.
Change can be painful, but in this case it is inevitable – those that adapt survive.
Seems to me the problem that every boat dealer talks about is the floor plan cost and leftovers, that was the old days. there will no longer be floor plan problems because nobody will stock boats, which also solves the leftover issue....... Let me ask all of the dealers out there, how many stock boats are you ordering from the factory this fall? You probably won't be ordering many , if any at all, so your inventory will not be as huge an expense as it was in the past. No sense in carrying 10-20 boats if you can't sell one now is there. Dealers will really feel the hit this year, maybe the wall street is doing better, that doesn't mean Main street is. Boat financing is tougher than ever, unemployment is as high as we've seen in decades, and people are being very cautious with they're spending.
Dealer will either adapt or be gone, sad but true, If all you did was sell new boats in the past and neglected the long term service customer shame on you.
As far as my line of work, profits on new installations are virtually nonexistent (try competing with company the size of Otis Elevator) , the money is made over the next 10-20 years by keeping that customer happy with quality service. The long game.........
Everyone should own their own business at least once. It is murder in a good economy to make a profit. I have been in the boating industry for 25 years and have never seen it as an easy way to make money. The mfg do only slightly better than the dealers. Overhead? Try 1 million dollars for a mold to produce a new model of boat. The average boater has no idea how little money most boat dealers make....
Manufacturers need to stop chasing the product line Holy Grail, and get it right the first time. The only way to make money on a boat that a customer can afford is to have long multi-year production runs so the up front costs can be absorbed into more units.
I got the impression from my walk through the industry that they act more like hobbyists than companies, and a lot of where they spend their resources is done primarily to justify their individual existences/jobs.
This thread has taken a very interesting turn. I made a leap of faith into the marine industry many years ago leaving an engineering job that bored me to tears. I’ve done everything from sales, finance and general management. Two things come to mind. One, servicing a new boat is not a profitable venture for at least the first year, probably two. When consumers pay what they perceive to be a premium for a new boat, the expectations for “free” service is huge. It may not be instantly obvious, but there are distinct costs for doing warranty work that is NOT reimbursed by the manufacturer (mobile service, haul out, confirming repairs via sea trial, flat rate times that are based on build time and not field repairs etc.). Second, margins are not at all what consumers think. The average net margins are more typically under 10%. The selling price may very well be close to 20% above original invoice but there are so many other DIRECT costs for each new boat that are real and cannot be avoided (freight, prep, interest expense etc.).
All that being said, about 14 months ago I made another leap of faith and opened a used / brokerage boat dealership with mobile service. Since that time we’ve already opened a second location. The business plan has been very simple. I buy boats as inexpensively as I can from banks or private owners, put REAL MONEY into them making them look great, run great and offer them with warranties. This presents a transaction that is very close to a “new boat” feel for consumers but still offers pricing under retail with no excuses. I also take trades on used or brokerage boats, which creates a unique situation for a lot of buyers. Very few buyers don’t have a trade. This industry is not creating new buyers; we’re simply recycling the buyers that have existed for some time.
What I did not anticipate was the massive upswing in the $ people are willing to spend on their existing boats. Discretionary income is still being spent, but instead of trading in, boat owners are upgrading or servicing their existing boat. While other dealers are making excuses and being lazy, we’re gaining market share quickly and making a lot of new friends. There is however, one irrefutable fact that remains to this point at our current size. There is no way service alone could keep us in business.
I don't think traditional dealers are going away any time soon. If anything, the true full service dealers, like Skipper Bud's in the Midwest, Boats Inc. in CT, Russo Marine in MA, Hanckel Marine in SC, among others, will grow even larger and thrive when the economy turns around.
That so called auction that Russo ran a few weeks ago? It was not "bank ordered", it was just a marketing tactic. Was it successful? Well, it looks like some of the boats on their web site are now marked "Sale Pending" so I guess it got a few boats to move to make way for 2010 inventory.
Now, more than ever, consumers want the reassurance of buying from a full service dealership. People have limited leisure time and even more limited dollars for recreation and they don't want to be bothered by down time or maintenance worries.
Successful full service dealers are not selling boats, they are selling a lifestyle. That lifestyle includes the product, financing, maintenance, service and support, storage and other aspects of boat ownership; not just the initial sale of a boat.
We have regular readers here who have purchased boats direct from Bluewater, Dusky and Yellowfin in Florida and have taken them back to New England, the Midwest and Mexico. Those buyers are the exception and those brands have a well defined niche that they target. The industry as a whole will not be moving in that direction and I seriously doubt if Parker or Grady White would ever move towards that type of model.
Let's remember, the boat owners here at The Hull Truth represent a tiny fraction of the boat buying public. In general, our regular readers are more knowledgeable buyers, largely do-it-yourselfers and - it would appear - notoriously stingy.
I have been here since the very beginning of THT and I applaud the fact that a few boat dealers and manufacturer reps do post here regularly. Considering the abuse that is typically heaped upon them, I'm not sure why any would return!
I don't think traditional dealers are going away any time soon. If anything, the true full service dealers, like Skipper Bud's in the Midwest, Boats Inc. in CT, Russo Marine in MA, Hanckel Marine in SC, among others, will grow even larger and thrive when the economy turns around.
Not sure if you are aware, but the huge sportsman island/hanckel marine venture with Scout has closed and Hanckel has moved all of their operations back to the old location. The Hanckel signs have been removed from the new building and it is now empty, so I can only assume that they will not be returning.
I don't think traditional dealers are going away any time soon. If anything, the true full service dealers, like Skipper Bud's in the Midwest, Boats Inc. in CT, Russo Marine in MA, Hanckel Marine in SC, among others, will grow even larger and thrive when the economy turns around.
That so called auction that Russo ran a few weeks ago? It was not "bank ordered", it was just a marketing tactic. Was it successful? Well, it looks like some of the boats on their web site are now marked "Sale Pending" so I guess it got a few boats to move to make way for 2010 inventory.
Now, more than ever, consumers want the reassurance of buying from a full service dealership. People have limited leisure time and even more limited dollars for recreation and they don't want to be bothered by down time or maintenance worries.
Successful full service dealers are not selling boats, they are selling a lifestyle. That lifestyle includes the product, financing, maintenance, service and support, storage and other aspects of boat ownership; not just the initial sale of a boat.
We have regular readers here who have purchased boats direct from Bluewater, Dusky and Yellowfin in Florida and have taken them back to New England, the Midwest and Mexico. Those buyers are the exception and those brands have a well defined niche that they target. The industry as a whole will not be moving in that direction and I seriously doubt if Parker or Grady White would ever move towards that type of model.
Let's remember, the boat owners here at The Hull Truth represent a tiny fraction of the boat buying public. In general, our regular readers are more knowledgeable buyers, largely do-it-yourselfers and - it would appear - notoriously stingy.
I have been here since the very beginning of THT and I applaud the fact that a few boat dealers and manufacturer reps do post here regularly. Considering the abuse that is typically heaped upon them, I'm not sure why any would return!
You are right on - who ever if is left will be bigger and perhaps better when things turn around. But fundamentally the business model needs to change. The credit markets need to change dramatically for them to float the floor plans they have in the past. I can't see that happening anytime soon. Without the financing available for floor plans, if manufacturers want to sell boats, they are going to need to do something for their dealers. There are buyers that will buy direct from the factory,but I think you are talking about a minority of boaters.
This thread has taken a very interesting turn. I made a leap of faith into the marine industry many years ago leaving an engineering job that bored me to tears. I’ve done everything from sales, finance and general management. Two things come to mind. One, servicing a new boat is not a profitable venture for at least the first year, probably two. When consumers pay what they perceive to be a premium for a new boat, the expectations for “free” service is huge. It may not be instantly obvious, but there are distinct costs for doing warranty work that is NOT reimbursed by the manufacturer (mobile service, haul out, confirming repairs via sea trial, flat rate times that are based on build time and not field repairs etc.). Second, margins are not at all what consumers think. The average net margins are more typically under 10%. The selling price may very well be close to 20% above original invoice but there are so many other DIRECT costs for each new boat that are real and cannot be avoided (freight, prep, interest expense etc.).
All that being said, about 14 months ago I made another leap of faith and opened a used / brokerage boat dealership with mobile service. Since that time we’ve already opened a second location. The business plan has been very simple. I buy boats as inexpensively as I can from banks or private owners, put REAL MONEY into them making them look great, run great and offer them with warranties. This presents a transaction that is very close to a “new boat” feel for consumers but still offers pricing under retail with no excuses. I also take trades on used or brokerage boats, which creates a unique situation for a lot of buyers. Very few buyers don’t have a trade. This industry is not creating new buyers; we’re simply recycling the buyers that have existed for some time.
What I did not anticipate was the massive upswing in the $ people are willing to spend on their existing boats. Discretionary income is still being spent, but instead of trading in, boat owners are upgrading or servicing their existing boat. While other dealers are making excuses and being lazy, we’re gaining market share quickly and making a lot of new friends. There is however, one irrefutable fact that remains to this point at our current size. There is no way service alone could keep us in business.
Kudos to you for spotting an emerging market opportunity and prospering in it.
Your model on the service side is similar to the model that new boat manufacturers would need to develop. You build the cost of warranty into the price as they currently do and either arrange for service or perform it yourself. I assume you are selling to people out of your area as well in order to be successful matching buyers to boats.
But bear in mind that the world is not static. While a dealer may not be able to make money on service alone under current reimbursement arrangements, and the need to do freebie goodwill work, if that previous 20% margin is transferred to the buyer and manufacturer, then the profit at the servicing dealer can be increased to make it work, and the manufacturer will be more on the hook for the freebie goodwill work - taking the burden off of the servicing dealer.
I contend that there is enough money on the table to make this work, and the real net margin on sales under the old model on a fully allocated incremental basis is so slim that it can't be essential to profitability, and can be made up with adjustments to the service model.
Kudos to you for spotting an emerging market opportunity and prospering in it.
Your model on the service side is similar to the model that new boat manufacturers would need to develop. You build the cost of warranty into the price as they currently do and either arrange for service or perform it yourself. I assume you are selling to people out of your area as well in order to be successful matching buyers to boats.
But bear in mind that the world is not static. While a dealer may not be able to make money on service alone under current reimbursement arrangements, and the need to do freebie goodwill work, if that previous 20% margin is transferred to the buyer and manufacturer, then the profit at the servicing dealer can be increased to make it work, and the manufacturer will be more on the hook for the freebie goodwill work - taking the burden off of the servicing dealer.
I contend that there is enough money on the table to make this work, and the real net margin on sales under the old model on a fully allocated incremental basis is so slim that it can't be essential to profitability, and can be made up with adjustments to the service model.
This model is built on capitalism, our illustrious governmet wants to do away with that....Let me ask you all one simple question, as bad as it is now, when it doesn't seem that it can get any worse....what do you think will happen if cap and trade passes? What will happen if healthcare passes and the boating manufacturer's and the boat dealers and everyone that supplies their parts has to pony up to the table for healthcare for those that are unemployed and the government will fund?.....You think it's bad now?....
Sorry, I know it's not funny, boats are a luxury item to most....my son is in private school, every year they go on a trip somewhere...usually costs 800-1200 bucks.....this year was a big one, ....no goes....so they change it to a lower cost trip...600.00......guess what no takers....they needed 35 kids to make it happen, they got 20......never happened before....people are not going to spend money unneccesarily because they are unsure of the future, why?....look at dc, repubs and dems....mostly progressive doo doo heads......
It would not surprise me to see the top line manufacturer's go direct, with their less expensive models, because those can't afford the mark up right now, and probably for the foreseeable future......
I think everybody has to bare in mind that new boat sales are down approximately 90%. There are not many companies that can survive that kind of down turn for very long.
When it comes to price, I'm as tough as they come, but we need to have some empathy for the new boat industry.
Not sure if you are aware, but the huge sportsman island/hanckel marine venture with Scout has closed and Hanckel has moved all of their operations back to the old location. The Hanckel signs have been removed from the new building and it is now empty, so I can only assume that they will not be returning.
Great news, possibly they will have lost the arrogance that organization is well known for.
Actually ours is a Sou'Wester but Linwood made it in the metal shed behind his house. We effed up and let moisture build up in the bildge and had to re-do our deck a few years ago. We didn't even check with Parker though. Not sure where you are but I know a good glass man just down the road from Parker. He actually used to work for them.
Billy Dupree is building some beautiful boats, OBX in that same shed. I saw 3 32's and a 30 in there when my friend was having his built.
This thread has taken a very interesting turn. I made a leap of faith into the marine industry many years ago leaving an engineering job that bored me to tears. I’ve done everything from sales, finance and general management. Two things come to mind. One, servicing a new boat is not a profitable venture for at least the first year, probably two. When consumers pay what they perceive to be a premium for a new boat, the expectations for “free” service is huge. It may not be instantly obvious, but there are distinct costs for doing warranty work that is NOT reimbursed by the manufacturer (mobile service, haul out, confirming repairs via sea trial, flat rate times that are based on build time and not field repairs etc.). Second, margins are not at all what consumers think. The average net margins are more typically under 10%. The selling price may very well be close to 20% above original invoice but there are so many other DIRECT costs for each new boat that are real and cannot be avoided (freight, prep, interest expense etc.).
All that being said, about 14 months ago I made another leap of faith and opened a used / brokerage boat dealership with mobile service. Since that time we’ve already opened a second location. The business plan has been very simple. I buy boats as inexpensively as I can from banks or private owners, put REAL MONEY into them making them look great, run great and offer them with warranties. This presents a transaction that is very close to a “new boat” feel for consumers but still offers pricing under retail with no excuses. I also take trades on used or brokerage boats, which creates a unique situation for a lot of buyers. Very few buyers don’t have a trade. This industry is not creating new buyers; we’re simply recycling the buyers that have existed for some time.
What I did not anticipate was the massive upswing in the $ people are willing to spend on their existing boats. Discretionary income is still being spent, but instead of trading in, boat owners are upgrading or servicing their existing boat. While other dealers are making excuses and being lazy, we’re gaining market share quickly and making a lot of new friends. There is however, one irrefutable fact that remains to this point at our current size. There is no way service alone could keep us in business.
I figure the factorys will start to hire people like yourself to Rep for them direct to customers. The dealers that are able to stay in business will make this change in time.
You will have a number of people who boats you can use for sea trials for customers. The days of new boats lined up outside a showroom are gone. New boats will be bought from the factory using reps. No floor plan, no new boats sitting around catching dust for months.
This solves many of the problems that dealers have now, and solves the problems that boat makers have. A bunch of there new boats sitting and not selling for months. They will build to order in the future. Only big box stores will have cookie cutter boats.
I figure the factorys will start to hire people like yourself to Rep for them direct to customers. The dealers that are able to stay in business will make this change in time.
You will have a number of people who boats you can use for sea trials for customers. The days of new boats lined up outside a showroom are gone. New boats will be bought from the factory using reps. No floor plan, no new boats sitting around catching dust for months.
This solves many of the problems that dealers have now, and solves the problems that boat makers have. A bunch of there new boats sitting and not selling for months. They will build to order in the future. Only big box stores will have cookie cutter boats.
The big question is in the transformation and the acceptence from yesterday til tomorrow? Who will be strong enough and smart enough to make the changes needed? both the boat manufacturer and the retail rep or store front have to make it work and accept change?
I figure the factorys will start to hire people like yourself to Rep for them direct to customers. The dealers that are able to stay in business will make this change in time.
You will have a number of people who boats you can use for sea trials for customers. The days of new boats lined up outside a showroom are gone. New boats will be bought from the factory using reps. No floor plan, no new boats sitting around catching dust for months.
This solves many of the problems that dealers have now, and solves the problems that boat makers have. A bunch of there new boats sitting and not selling for months. They will build to order in the future. Only big box stores will have cookie cutter boats.
That's very interesting that you say that. I'm currently working with a couple manufacturers to do almost that exact thing. My thoughts are twofold. First, the manufacturers still need their product in front of consumers or they will no longer exist. Second, in the current climate I refuse to go in debt or I will be in exactly the same situation as the new boat dealers are right now. The answer is to share the burden on costs like transportation and prep but in a brokerage type arrangement so I'm not drowning in floor plan costs and ultimately the manufacturer can decide if they want to accept a deal or not. They are the ones that really know the production cost and how badly they want to build another boat. I truly believe there needs to be massive change in the boating industry for long term survival. It will require people working together for a solution that ultimately is profitable enough to sustain the industry. I for one am up for the challenge.
