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Sorry Joe, it just doesn't add up despite your best efforts. If it did, then GM would be selling direct right now. They're not. Less boat dealers? Sure, that is happening right now and the strong ones will survive as always. I know of no dealer in our area losing money on used boats---heck that's what is selling best right now!
I am not saying used boat dealers will go away, the issue is with pricing and affordability on new boats, and there is not as easy an alternative in the used market - no 25% markup on the table.
Now if a new boat dealer is successful in the used market, and has profits to absorb overhead related to selling new and used boats, then the equation changes. The point is that every dealer will be different, and the industry won't change in lock step.
GM dealers don't have that margin to give up now, and the pricing and buying process aren't conducive to a manufacturer direct model.
A lot of good posts here despite the conflict between some dealers and some consumers. I particularly agree with the basic premise set forth by joenew61 - boats are too expensive, especially in today's new market. Job losses that will take a long time to work out, excess inventory (new and used), home prices presumably returning to normal (small) annual increases in line with what the population can afford, increasing fuel prices, baby boomers facing an inadequately financed retirement, and the like have changed the market for a long time to come.
Somehow, the manufacturers will have to reduce the cost to the customer or the boating market will not come back. It doesn't matter that the cost is driven in part by the increasing cost of materials and labor. If the product is too expensive, there won't be a demand. Manufacturers will need to take a substantial amount of costs out of the manufacturing process and the dealer side. I happen to be a loyal customer of my dealer and want them to make a reasonable profit and stay in business, but that doesn't mean they won't have to help with reducing costs somehow if they are to maintain a large enough market to earn a reasonable living.
For what little it is worth in this discussion, a large portion of the cars sold in Japan have historically been sold via a system where a dealer only has a very small (or no) inventory and takes brochures to customers for order. Boat manufacturers may need to adopt (in part or whole) a similar approach to reduce financing/carrying costs in the system and be prepared to deliver out of a centralized stock of inventory. Similarly, the US auto manufacturers let the dealer base become independently owned and the people with whom I have spoken in the industry regret that fact - the automakers had to live with a dealer base that typically wasn't very responsive to the customers (not that the product didn't have many problems of its own) and the franchise laws restrict the manufacturers' ability to fix perceived problems.
I tend to agree with PA Boat Dr. that the manufacturers are a large part of the problem and they certainly will be the drivers of any solution. The loss of smaller dealers (not well financed) and replacement with larger chain dealers (better financed, although perhaps not well enough) may very well prove to be a problem for both manufacturers and consumers over the long haul. Time will tell.
Nobody said you have to buy a production built boat anyway. Virtually all of the downeast boats like mine are custom built and finished without a dealer anywhere in sight.
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Quote:
Originally Posted by nausetlight
Surprising how the Downeast builders continue in this day and age without an NMMA certified dealer to check the builders work!!! I can't understand how they could ever sell a boat without a dealer adding a 25% margin.........Next boat will be a downeast, custom built, no dealer needed. Of course most dealers will be extinct by the time I order another boat ,but they will be NMMA certified
Downeast boats, like Carolina sportfishermen, etc are selling boats without dealers because they are niche players. Low volume, mostly high quality, and lots of custom work. This type of operation doesn't lend itself to dealer sales due to the amount of customer interaction necessary to finish the boat to the customers specifications. These guys will never be part of the larger, dealer oriented sales model. It's the high volume builders that rely on dealer networks to move product.
As for NMMA dealer certification, I think the point is that those with the certification meet a certain set of criteria. The program is intended to boost consumer confidence in the dealer, just as NMMA mfg certification should boost consumer confidence in the builder. My personal opinion the dealers and mfgs spend lots of money to become certified, that it generates a lot of money for the NMMA and the value is not appreciated by the consumer.
Quote:
Originally Posted by joenew61
There will be gives and takes, and service may even get worse at least in the short term until the players sort themselves out. But something has to change.
I don't see this as a great chance to take advantage of a new opportunity. I just see it as a necessary shift, where everybody in the chain gives up something, including the customer, in order to close a structural gap.
I see we agree on a few things. Service would undoubtedly go down if your model were implemented. Maybe it would only be short term, I can't say. But, given the already low marks consumers have for service in the marine industry, that would be like a stake through the heart.
Since it's not a great opportunity according to you, then that would lead me to believe there's not a lot of money in the system to make significant improvements and/or price reductions. No matter how you slice it.
What I think is happening is a shakeout of the status boater (the ones who are just keeping up with the Joneses) and the casual boater (those that like going out but don't really have a passion for it). The passionate guys will still seek out the niche players, just as they always have.
I believe there will always be a place for production builders and dealers, probably just at a lower scale than we've seen in the recent past. Customers need a certain amount of hand holding that production mfgs are just not equipped to do.
I think the mfgs and dealers are already giving up about as much as they can and still survive. I can tell you the customers that are left won't be willing to give up much. Who would? Boats over the last 20 years or so have become increasingly sophisticated. What was one a luxury is now a must have feature. A five gallon pail used to be the washdown tool of choice, now we have 50 psi pumps with retracting hoses. A VHF and Loran C is now a fully integrated chart/plotter tied in to the DSC VHF, radar, and autopilot. We used to condition our air by opening the hatches, now we've got center consoles with a/c blowing on the pilot.
With all that sophistication comes cost. Lose some of the systems, lose some of the cost. That's the consumers choice. Do you think they'll give it up?
Disclaimer: If you see emoticons, that means the above is written in jest. It is for entertainment purposes only. It is not meant to represent any actual persons, places, or things. It is the opinion of the poster that it is funny. Your opinion may vary. No animals were harmed in the typing of this post but a few egos may have been bruised.
Downeast boats, like Carolina sportfishermen, etc are selling boats without dealers because they are niche players. Low volume, mostly high quality, and lots of custom work. This type of operation doesn't lend itself to dealer sales due to the amount of customer interaction necessary to finish the boat to the customers specifications. These guys will never be part of the larger, dealer oriented sales model. It's the high volume builders that rely on dealer networks to move product.
As for NMMA dealer certification, I think the point is that those with the certification meet a certain set of criteria. The program is intended to boost consumer confidence in the dealer, just as NMMA mfg certification should boost consumer confidence in the builder. My personal opinion the dealers and mfgs spend lots of money to become certified, that it generates a lot of money for the NMMA and the value is not appreciated by the consumer.
I see we agree on a few things. Service would undoubtedly go down if your model were implemented. Maybe it would only be short term, I can't say. But, given the already low marks consumers have for service in the marine industry, that would be like a stake through the heart.
Since it's not a great opportunity according to you, then that would lead me to believe there's not a lot of money in the system to make significant improvements and/or price reductions. No matter how you slice it.
What I think is happening is a shakeout of the status boater (the ones who are just keeping up with the Joneses) and the casual boater (those that like going out but don't really have a passion for it). The passionate guys will still seek out the niche players, just as they always have.
I believe there will always be a place for production builders and dealers, probably just at a lower scale than we've seen in the recent past. Customers need a certain amount of hand holding that production mfgs are just not equipped to do.
I think the mfgs and dealers are already giving up about as much as they can and still survive. I can tell you the customers that are left won't be willing to give up much. Who would? Boats over the last 20 years or so have become increasingly sophisticated. What was one a luxury is now a must have feature. A five gallon pail used to be the washdown tool of choice, now we have 50 psi pumps with retracting hoses. A VHF and Loran C is now a fully integrated chart/plotter tied in to the DSC VHF, radar, and autopilot. We used to condition our air by opening the hatches, now we've got center consoles with a/c blowing on the pilot.
With all that sophistication comes cost. Lose some of the systems, lose some of the cost. That's the consumers choice. Do you think they'll give it up?
There will be a rebalancing between convenience, features, quality of support, etc. This happens all the time in every industry.
With few exceptions in certain peak years, selling boats has never been a high profit business. The fact that a path to make boats affordable enough to maintain some demand (i.e. the dealer direct model) is not a favorable business opportunity, does not mean it is not the best solution. The alternative, which you also alluded to is a drastic and permanent reduction in industry volume. You will see manufacturers make strategic changes before they just resign themselves to disappearing.
I always felt that Parkers "dealership agreements" were illegal, how can you deny a customer if they walk in and want to buy a boat? How can they legally obstruct your opportunity to buy from any Parker dealer that you want to.
In the land of the free and the home of the brave the government does not dicate to whom businesses must sell their products. Most businesses will sell to anybody, but they don't have to.
In the land of the free and the home of the brave the government does not dicate to whom businesses must sell their products. Most businesses will sell to anybody, but they don't have to.
Years ago when I was involved with a manufacturer that tried to act in the best interests of their dealers, there was significant discussion regarding this topic. There was a school of thought that the refusal of one dealer in a specific market to sell to an individual in another territory was in specific violation of anti-trust laws (specifically those related to competition or cartels). The way to get around that was to set pre-discounted prices and stick to them for people out if the territory. It removed the collusive (or refusal) aspect of the situation..... supposedly..... I'm sure there are attorneys around here that can chime in.
I am not saying used boat dealers will go away, the issue is with pricing and affordability on new boats, and there is not as easy an alternative in the used market - no 25% markup on the table.
Now if a new boat dealer is successful in the used market, and has profits to absorb overhead related to selling new and used boats, then the equation changes. The point is that every dealer will be different, and the industry won't change in lock step.
GM dealers don't have that margin to give up now, and the pricing and buying process aren't conducive to a manufacturer direct model.
Ok Joe P1--we make less than 25% generally on new, 25% won't work on used and frankly we do better than that most commonly--why? because we have no other choice. A boat dealer is at risk any time he takes a trade, and the good ones also totally recondition and warrant their trades to the buyer for at least 30 days.
P2 You think boat dealers have margin to give up right now? Please!
P3 Now we reach some like-mindedness Our industry changed during the Carter years; again in 90-92; again in 2000-01; and is changing again now. Once again, strong dealers will survive; others won't. Same goes for manufacturers.
When times are good, everyone gets in; when times turn bad etc etc.
Maybe a little worse this time, but we lost way more dealers in the early 90's than we have so far this time--same goes for manufacturers. Many lessons have been learned; and the ones that learned best go forward.
Ok Joe P1--we make less than 25% generally on new, 25% won't work on used and frankly we do better than that most commonly--why? because we have no other choice. A boat dealer is at risk any time he takes a trade, and the good ones also totally recondition and warrant their trades to the buyer for at least 30 days.
P2 You think boat dealers have margin to give up right now? Please!
P3 Now we reach some like-mindedness Our industry changed during the Carter years; again in 90-92; again in 2000-01; and is changing again now. Once again, strong dealers will survive; others won't. Same goes for manufacturers.
When times are good, everyone gets in; when times turn bad etc etc.
Maybe a little worse this time, but we lost way more dealers in the early 90's than we have so far this time--same goes for manufacturers. Many lessons have been learned; and the ones that learned best go forward.
You have to help me figure out where you are coming down on this.
Are you saying that you make less margin than I say, or more (gross margin that is)
My premise is the following in case it wasn’t clear. Gross margins (Sales price less purchase cost) on a typical non-stale or ordered boat is in the range of 20-25% markup. However, when you factor in all of the dedicated selling, required facility, operating, financing, depreciation, discount adjustments, and other costs to sell the boats, you are barely at break even on a fully allocated basis.
But if the dealer is out of the mix, most of the above will be a small fraction of what the aggregate dealer supply chain costs are in those costs, because 100 dealers (for discussion purposes) are consolidated into one. You have no net margin to give up....the gross margin will no longer have to be spent to maintain the local SALES presence. Those costs, which are passed on to the buyer, are squeezed out of the system and allocated to other value-added areas - getting prices at a level that induces sales, developing sales infrastructure at the manufacturer (partially by reallocating those who do dealer support) and re-calibrating the service model.
As for the trades, again, you have to factor in the support, infrastructure, depreciation, financing, and sales costs, and of course the risk of unsaleability. That is especially true in this market.
As for the business cycles you mentioned, this is NOT just another downswing on an upward sloping trajectory sine wave. For all the reasons I mentioned in my initial post, the market is not coming back the way it was. This is a tectonic shift.
Those inside with a vested interest like you are the last to see these shifts coming - this is a textbook case. I have seen this in a dozen industries with various root causes in three decades doing what I do.
I don't know if the players in the industry are going to move in this direction or not, but status quo is not an option, unless you are all willing to accept an industry that is 50% or more smaller permanently.
You have to help me figure out where you are coming down on this.
Are you saying that you make less margin than I say, or more (gross margin that is)
My premise is the following in case it wasn’t clear. Gross margins (Sales price less purchase cost) on a typical non-stale or ordered boat is in the range of 20-25% markup. However, when you factor in all of the dedicated selling, required facility, operating, financing, depreciation, discount adjustments, and other costs to sell the boats, you are barely at break even on a fully allocated basis.
But if the dealer is out of the mix, most of the above will be a small fraction of what the aggregate dealer supply chain costs are in those costs, because 100 dealers (for discussion purposes) are consolidated into one. You have no net margin to give up....the gross margin will no longer have to be spent to maintain the local SALES presence. Those costs, which are passed on to the buyer, are squeezed out of the system and allocated to other value-added areas - getting prices at a level that induces sales, developing sales infrastructure at the manufacturer (partially by reallocating those who do dealer support) and re-calibrating the service model.
As for the trades, again, you have to factor in the support, infrastructure, depreciation, financing, and sales costs, and of course the risk of unsaleability. That is especially true in this market.
As for the business cycles you mentioned, this is NOT just another downswing on an upward sloping trajectory sine wave. For all the reasons I mentioned in my initial post, the market is not coming back the way it was. This is a tectonic shift.
Those inside with a vested interest like you are the last to see these shifts coming - this is a textbook case. I have seen this in a dozen industries with various root causes in three decades doing what I do.
I don't know if the players in the industry are going to move in this direction or not, but status quo is not an option, unless you are all willing to accept an industry that is 50% or more smaller permanently.
You do present a well-worded, though misguided, notion as to how our industry works; or any builder to dealer to owner industry for that matter. Despite your sloping trajectories and tectonic shifts; understand this.
Those of us who always seem to be there when the smoke clears were evidently the last ones to see the shift coming in 73, 81-82, 90-92 and in 2000-01. The industry survived, we survived and nothing much changed other than the peaks and valleys.
You seem to be able to predict the future---I'd rather have some good stock picks from you in that case as opposed to business advice--or maybe even winning lottery numbers if you would be so kind.
Nonetheless, buy a builder, use your plan and prove to all of us how well you business model works; or better yet, give us a good example of a similar business that is doing what you describe right now. Can you?
You do present a well-worded, though misguided, notion as to how our industry works; or any builder to dealer to owner industry for that matter. Despite your sloping trajectories and tectonic shifts; understand this.
Those of us who always seem to be there when the smoke clears were evidently the last ones to see the shift coming in 73, 81-82, 90-92 and in 2000-01. The industry survived, we survived and nothing much changed other than the peaks and valleys.
You seem to be able to predict the future---I'd rather have some good stock picks from you in that case as opposed to business advice--or maybe even winning lottery numbers if you would be so kind.
Nonetheless, buy a builder, use your plan and prove to all of us how well you business model works; or better yet, give us a good example of a similar business that is doing what you describe right now. Can you?
I wish I had a dime for every time I heard your general insider's view expressed..."How our industry works"...just before the industry stopped working that way.
I know how the industry works, since this is one of a handful industries where I have consulted AND am an avid long term participant in the industry as a customer and user. But my skill set goes beyond looking at the way things ARE from the standpoint of day to day living INSIDE the industry as you have.
I also have the advantage of being grounded in economics long before I worked in business, and that gives me an historical perspective on life cycles of industries as well as business cycles. And I am telling you that this is not just an economic downturn - there are demographic, political, policy, federal budgetary, and global forces at work now that go far beyond a simple economic contraction. The long term prosperity of the country is under extreme duress. And for all the reasons I mentioned, this industry will take it on the chin and then some.
In the face of a permanent reduction in discretionary income and upward mobility, you tell me how the industry will get back to being affordable enough so that demand recovers. If you want to debate whether my premise of the trend in wealth creation and prosperity is valid, then we can do that elsewhere. But assuming that the premise is valid, the industry can not recover volume without a change in the cost structure.
As I said earlier, either volumes will settle a bit above where they are now and stagnate, or boats have to become a better value than they are somehow, and the only significant money on the table is distribution costs.
Again, I don't think this model will turn the industry into a money maker, and there will always be dealers that have a regional or product niche that will still be viable.
As to comparables, probably the most appropriate parallel in other industries would be in aviation.
I wish I had a dime for every time I heard your general insider's view expressed..."How our industry works"...just before the industry stopped working that way.
I know how the industry works, since this is one of a handful industries where I have consulted AND am an avid long term participant in the industry as a customer and user. But my skill set goes beyond looking at the way things ARE from the standpoint of day to day living INSIDE the industry as you have.
I also have the advantage of being grounded in economics long before I worked in business, and that gives me an historical perspective on life cycles of industries as well as business cycles. And I am telling you that this is not just an economic downturn - there are demographic, political, policy, federal budgetary, and global forces at work now that go far beyond a simple economic contraction. The long term prosperity of the country is under extreme duress. And for all the reasons I mentioned, this industry will take it on the chin and then some.
In the face of a permanent reduction in discretionary income and upward mobility, you tell me how the industry will get back to being affordable enough so that demand recovers. If you want to debate whether my premise of the trend in wealth creation and prosperity is valid, then we can do that elsewhere. But assuming that the premise is valid, the industry can not recover volume without a change in the cost structure.
As I said earlier, either volumes will settle a bit above where they are now and stagnate, or boats have to become a better value than they are somehow, and the only significant money on the table is distribution costs.
Again, I don't think this model will turn the industry into a money maker, and there will always be dealers that have a regional or product niche that will still be viable.
As to comparables, probably the most appropriate parallel in other industries would be in aviation.
Don't let your so-called "economics advantage" cloud your thinking by making wild assumptions about my career and my experience, since you know little of either. You wish for all of us to assume you are some sort of economics guru and it's nice you have such a high opinion of yourself.
What I said about our industry holds true for most similar industries.
And thank you for not answering my request for a valid business model comparison--you pointed out a non-comparable, invalid industry that has no close relationship to ours and has failed repeatedly in the past due to over-zealous lawyers and government intervention.
You assume much and speak in flowery wild generalizations. Many may think you make some sense; I see only nonsense for the same reasons I have previously espoused. Enough of our conversation, we agree to disagree and nothing will be proven by futher discussion.
Don't let your so-called "economics advantage" cloud your thinking by making wild assumptions about my career and my experience, since you know little of either. You wish for all of us to assume you are some sort of economics guru and it's nice you have such a high opinion of yourself.
What I said about our industry holds true for most similar industries.
And thank you for not answering my request for a valid business model comparison--you pointed out a non-comparable, invalid industry that has no close relationship to ours and has failed repeatedly in the past due to over-zealous lawyers and government intervention.
You assume much and speak in flowery wild generalizations. Many may think you make some sense; I see only nonsense for the same reasons I have previously espoused. Enough of our conversation, we agree to disagree and nothing will be proven by futher discussion.
Well that was a suitably snotty answer from a frustrated industry player that has no answer for the problems in the industry other than to say things are the way they are and will return to normal somehow by magic.
You asked "give us a good example of a similar business that is doing what you describe right now". Small personal planes are sold direct from manufacturers, occasionally from brokers. Warranty service is through a virtual network, and in large metro areas there are more formal relationships. Long research, big ticket items, personal transportation vehicles for recreation. You tell me what is a better parallel.
I can assure you that I have the credentials and resume that is more than sufficient to opine on this industry. I don't need to know what you did before you started selling boats, and it is irrelevant to the discussion. Your refusal to acknowledge what is happening belies your lack of objectivity or the kind of broad perspective on things needed in this situation.
Well that was a suitably snotty answer from a frustrated industry player that has no answer for the problems in the industry other than to say things are the way they are and will return to normal somehow by magic.
You asked "give us a good example of a similar business that is doing what you describe right now". Small personal planes are sold direct from manufacturers, occasionally from brokers. Warranty service is through a virtual network, and in large metro areas there are more formal relationships. Long research, big ticket items, personal transportation vehicles for recreation. You tell me what is a better parallel.
I can assure you that I have the credentials and resume that is more than sufficient to opine on this industry. I don't need to know what you did before you started selling boats, and it is irrelevant to the discussion. Your refusal to acknowledge what is happening belies your lack of objectivity or the kind of broad perspective on things needed in this situation.
You still have provided no good example. I do not see small plane dealerships as I drive around the countryside; I do see plenty of boat dealers, both new and used. There is absolutely no comparison in the least between the two. Pure volume of sales and service alone totally ruins any small parallels there may be.
Your belief is your belief and that is fine; though wrong. Your credentials mean nothing to the fact that the industry is in recovery mode now, and will continue on that path as demand, once again increases. Will it be the same as 86-89? No industry will probably ever be that good again. Will it be increasingly better for the next several years--most definitely.
You stated earlier in the discussion that the boat business was never a very profitable business and that in itself proves you ignorance of our industry.
Snotty and frustrated? Hardly--you just hate to admit you are wrong and are an idustry outsider who pretends to understand the industry better than you do. We had a good, not great, but good year this year in sales, service, parts, and storage because we pay attention to what it takes to succeed in our industry. That has been the case for over forty years now; and will continue to be the case despite your best efforts to recite Psalm 23 over our industry.
Refuse to acknowleged what is happening? What is happening is that we are retailing and servicing and storing boats every day, at a fair profit for the buying public that we have served for a long time. That has been the only "broad perspective" we have ever needed and will continue to be the case going forward.
As to your resume; how nice for you that you have one; when your ego stops flying around with those airplanes you mention; come down and have a beer with the rest of us commoners.
You still have provided no good example. I do not see small plane dealerships as I drive around the countryside; I do see plenty of boat dealers, both new and used. There is absolutely no comparison in the least between the two. Pure volume of sales and service alone totally ruins any small parallels there may be.
Your belief is your belief and that is fine; though wrong. Your credentials mean nothing to the fact that the industry is in recovery mode now, and will continue on that path as demand, once again increases. Will it be the same as 86-89? No industry will probably ever be that good again. Will it be increasingly better for the next several years--most definitely.
You stated earlier in the discussion that the boat business was never a very profitable business and that in itself proves you ignorance of our industry.
Snotty and frustrated? Hardly--you just hate to admit you are wrong and are an idustry outsider who pretends to understand the industry better than you do. We had a good, not great, but good year this year in sales, service, parts, and storage because we pay attention to what it takes to succeed in our industry. That has been the case for over forty years now; and will continue to be the case despite your best efforts to recite Psalm 23 over our industry.
Refuse to acknowleged what is happening? What is happening is that we are retailing and servicing and storing boats every day, at a fair profit for the buying public that we have served for a long time. That has been the only "broad perspective" we have ever needed and will continue to be the case going forward.
As to your resume; how nice for you that you have one; when your ego stops flying around with those airplanes you mention; come down and have a beer with the rest of us commoners.
Again, read your challenge - "give us a good example of a similar business that is doing what you describe right now"
New plane sales are following exactly the model that I have proposed for this industry RIGHT NOW. Are you requesting an example of another business that is transitioning to this type of model right now? Tell me why that is relevant to the discussion as to whether the model has been proven to be feasible?
The operations that did OK this year are the ones that have sufficient cash flow from ancillary products and services, but net profit from new boat sales on a 50% or more reduction in new boat sales volume can't possibly be positive, given the historical margins, and the fixed costs to support those sales. You can rationalize that the sales are a loss leader, but manufacturers need volume, and that volume will not recover unless boats become more affordable - purchasing power is down for good.
You are either 1) denying that trends in market demand and purchasing power have been reduced permanently 2) Believe that losing money on new boat sales is a sustainable model, either in your operation or industry-wide, or 3) Believe that manufacturers will sit idly by as market volume stagnates where it is now. There may be another possible explanation that I am not seeing. But something has to change for things to really recover.
As hard as it may be to do, you need to stop projecting my clinical industry analysis as a manifest for how your operation will have to change. I have said several times that there is no single model that will work for every business, and that even industry-wide there are two broad paths. Either boats become more affordable to make volume bounce back or the industry shrinks permanently.
Frankly, based on past experience, of the three non-manufacturer-direct possible scenarios above, 3) is the most likely to end up being the case, because inertia and a lack of vision always accompany industry challenges, and there are too many manufacturers in this industry even for good times. Fewer players, boats returning to luxury status at much lower volumes, and the end of the era of the casual boater would be the result.
But there will be those that migrate to a different model.
If you would stop making this an indictment on who I am, and focus on the assumptions and analysis, this would be a lot easier to discuss, and if you can step out of your own operation and automatic sanguine expectations of imminent recovery, you will get an entirely different perspective.
This is starting to remind me of a certain boat company many years ago that decided to have the bean counters run the operation. The bean counters decided to buy odd lot resin for the boats. The engineers said no, it won't work. But it's nearly 50% less and that cost reduction will flow directly to the bottom line, said the bean counters. Yes, but it won't work, said the engineers. We're switching, said the owners, we need the money.
The outsiders telling the insiders how it should be.
Odd lot resin, for those of you who don't know, is the resin left over at the end of the run that won't make a full drum. It is mixed with other end of run resins so you end up with a questionable mash of material. The physical performance can vary widely.
To make a long story short, after about a year and massive warranty repair, the bean counters were no longer in charge and the boat company went back to the way things were and slowly recovered. The bean counters knew how to count the beans but they didn't know how to build the boats. I suspect they don't know how to sell them either.
The industry as a whole has suffered and will most likely continue to suffer for some time to come. Some businesses will survive and some will perish. Only wholesale change of business practices will allow the industry to survive? I hardly think so. Maybe we, as industry people, have our heads in the sand. Maybe we're just glass-half-full people. Or, maybe, having an intimate knowledge of the business will allow us to work through it.
This thread, as threads of this type always do, is starting to go in circles. I think I've made my points as clear as I can. I'll just bow out now as I don't think any more can be said that hasn't already been covered.
Disclaimer: If you see emoticons, that means the above is written in jest. It is for entertainment purposes only. It is not meant to represent any actual persons, places, or things. It is the opinion of the poster that it is funny. Your opinion may vary. No animals were harmed in the typing of this post but a few egos may have been bruised.
This is starting to remind me of a certain boat company many years ago that decided to have the bean counters run the operation. The bean counters decided to buy odd lot resin for the boats. The engineers said no, it won't work. But it's nearly 50% less and that cost reduction will flow directly to the bottom line, said the bean counters. Yes, but it won't work, said the engineers. We're switching, said the owners, we need the money.
The outsiders telling the insiders how it should be.
Odd lot resin, for those of you who don't know, is the resin left over at the end of the run that won't make a full drum. It is mixed with other end of run resins so you end up with a questionable mash of material. The physical performance can vary widely.
To make a long story short, after about a year and massive warranty repair, the bean counters were no longer in charge and the boat company went back to the way things were and slowly recovered. The bean counters knew how to count the beans but they didn't know how to build the boats. I suspect they don't know how to sell them either.
The industry as a whole has suffered and will most likely continue to suffer for some time to come. Some businesses will survive and some will perish. Only wholesale change of business practices will allow the industry to survive? I hardly think so. Maybe we, as industry people, have our heads in the sand. Maybe we're just glass-half-full people. Or, maybe, having an intimate knowledge of the business will allow us to work through it.
This thread, as threads of this type always do, is starting to go in circles. I think I've made my points as clear as I can. I'll just bow out now as I don't think any more can be said that hasn't already been covered.
Well, your analogy is perfect...except
1. I am not a bean counter - I deal in strategy and qualitative analysis not one-dimensional hatchet job cost-cutting
2. I am not an outsider
3. The resin that was being used was fine to begin with - there was no crisis
I still haven't heard a single thought on how this problem could be worked through by tinkering, or what might change naturally to spur a recovery, that wouldn't end up where I suggested it would - a much smaller more exclusive customer base.
I suppose wait and see is always an option - for the industry as well as this discussion topic.
Again, read your challenge - "give us a good example of a similar business that is doing what you describe right now"
New plane sales are following exactly the model that I have proposed for this industry RIGHT NOW. Are you requesting an example of another business that is transitioning to this type of model right now? Tell me why that is relevant to the discussion as to whether the model has been proven to be feasible?
The operations that did OK this year are the ones that have sufficient cash flow from ancillary products and services, but net profit from new boat sales on a 50% or more reduction in new boat sales volume can't possibly be positive, given the historical margins, and the fixed costs to support those sales. You can rationalize that the sales are a loss leader, but manufacturers need volume, and that volume will not recover unless boats become more affordable - purchasing power is down for good.
You are either 1) denying that trends in market demand and purchasing power have been reduced permanently 2) Believe that losing money on new boat sales is a sustainable model, either in your operation or industry-wide, or 3) Believe that manufacturers will sit idly by as market volume stagnates where it is now. There may be another possible explanation that I am not seeing. But something has to change for things to really recover.
As hard as it may be to do, you need to stop projecting my clinical industry analysis as a manifest for how your operation will have to change. I have said several times that there is no single model that will work for every business, and that even industry-wide there are two broad paths. Either boats become more affordable to make volume bounce back or the industry shrinks permanently.
Frankly, based on past experience, of the three non-manufacturer-direct possible scenarios above, 3) is the most likely to end up being the case, because inertia and a lack of vision always accompany industry challenges, and there are too many manufacturers in this industry even for good times. Fewer players, boats returning to luxury status at much lower volumes, and the end of the era of the casual boater would be the result.
But there will be those that migrate to a different model.
If you would stop making this an indictment on who I am, and focus on the assumptions and analysis, this would be a lot easier to discuss, and if you can step out of your own operation and automatic sanguine expectations of imminent recovery, you will get an entirely different perspective.
You asked for the personal indictment from the beginning with your habit of consistently overselling your qualifications--real or imagined. You say little with a lot. In simplest terms for you, the airplane industry is the same as it has always been--SMALL. No volume. It has always been that way, it has never changed; except for maybe when the attorneys got involved and caused Cessna to quit building small planes altogether.
Nonetheless, that industry still involves a builder, a dealer location and servicing facility--the airport, the dealer or broker and the buyer. Same as most any builder to buyer arrangement. People, for the most part, buy an airplane because they MUST fly due to business--very few people purchase a recreational boat other than for recreation.
You insist that the boat industry is "permanently" this or that. It has never been "permanently" anything. It is an industry that changes, like most industries, with economic fluxes as I have pointed out. We are actually nearing some weird agreement here.
Our industry will recover; and I believe make the same mistakes all over again as it has done time and time again. And so will banks and so will the stock market. It is simply called greed and that hasn't changed since the beginning of humanity.
Once again I say to you, the strong dealers and builders, with good business plans will survive. Builders are still making money---not all, but some--those that overbuilt are suffering. Dealers are still making money--not all but some--those that overbought are suffering.
But I assure you it will all happen again because that's what humans do and that is what greed creates; and so the cycle will continue-despite whatever you and I may agree or disagree upon here. And that for me is enough of this discussion.
At great personal risk , I suggest that you both are correct.
On one hand, I don't see how you can avoid concluding that a substantial portion of the boating market (both boats and related goods) will/has disappeared as a result of these economic times and alteration in the availability of credit, price of gas, etc. Is it 20% or 30% or 40% or some other percent of the regular annual sales of the past handful of years? Only time will tell, but I think we will find that it is a larger number as opposed to a smaller one.
Some manufacturers presumably will be able to sustain something resembling their prior market, but perhaps off by 10 or 25% or whatever, and maintain a distribution chain that is similar to today's model. They are the ones with a strong brand identity such as Grady, Parker, Whaler, Pursuit, Searay. Even so, I imagine they will have to reduce the cost of their product (maybe fewer boats kept at dealers, manufacturer financing, thinner margins, etc.).
Other manufacturers are going to be forced to take prices down substantially to remain in business. Some portion of the cost reduction will have to come through the distribution chain as joenew61 says, and the rest from the manufacturing side. The degree to which costs are reduced will determine how healthy the industry is in a decade. If costs stay too high, volume won't rebuild very much.
Overall, I don't think the industry is going to look anything like the past 5-10 years for a long, long time, if ever.
I also suspect that the market a manufacturer serves will have an effect on the success of its product line. Fishing (which I do almost exclusively) is becoming more expensive due to longer runs required to find fish, and less entertaining as fisheries are closed/bag limits decreased/size limits increased). It may be that a cruising market with some casual fishing will become more attractive and cause a reduction in the amount of time spent fishing over long distances.
