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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.
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.
You opened the line of questioning toward credentials with your post 151 on Oct 29 4 PM:
“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.”
And the point of my credentialed perspective on this is that it is common practice for the preponderance of insiders to inevitably cling to old models, and to deny the need for change until it is too late. I’d be happy to provide you with well-documented case studies on this, but somehow I don’t think you would read them with an open mind.
This is different than those business cycles, and I have made the case as to why it is. You can deny it to yourself based on wishful thinking, but the unfavorable domestic long-term macro-economic drivers are clearly in evidence.
The lack of a 100% similar parallel industry model has been a red herring from the start – I indulged your little distraction, knowing full well that it was both futile and irrelevant to this discussion. If the industry had 100% parallels, it would be the same industry.And the prevailing aviation model does not have a dealer involved on new product sales.
The permanence I speak of is a permanent ratcheting down of volume with no foreseeable drivers that can be expected to ratchet it back up again, and economic and demographic trends that will in fact work to depress volume further. You still have not provided any assessment as to how and why people can be expected to return to the same kind of buying pattern and aggregate demand that was evident in the previous few upcycles, other than to point out that it happened it the last few cycles.
Dealer responses to the cyclical and secular changes from the past two years will in fact range from tactical retrenchment, to lowering or elimination of inventory levels, and/or overall downsizing and cost containment, and many will disappear for good. But all of this will in fact work to lower the value of the dealer franchise and dealer markup to both the customer and the manufacturer. And the one thing that is a constant in economics and business is that every action produces a reaction or response both in the aggregate and on a business level.
When the value of anything is reduced, all else being equal, you inevitably get less of it. And on that basis, if dealers are not going to buy inventory and generate the revenue to the manufacturers in advance of the final sale, and the customers are not going to have the ability to see product locally, the value of selling boats for 25% over manufacturing cost diminishes greatly. That margin will be under duress, and the elimination of dealers from the supply chain will be the result. The only thing up for debate is the scale with which that will happen.
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.
Thank you for sharing. No argument from me on any of that, nor has there been based on previous posts.
You opened the line of questioning toward credentials with your post 151 on Oct 29 4 PM:
“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.”
And the point of my credentialed perspective on this is that it is common practice for the preponderance of insiders to inevitably cling to old models, and to deny the need for change until it is too late. I’d be happy to provide you with well-documented case studies on this, but somehow I don’t think you would read them with an open mind.
This is different than those business cycles, and I have made the case as to why it is. You can deny it to yourself based on wishful thinking, but the unfavorable domestic long-term macro-economic drivers are clearly in evidence.\
The lack of a 100% similar parallel industry model has been a red herring from the start – I indulged your little distraction, knowing full well that it was both futile and irrelevant to this discussion. If the industry had 100% parallels, it would be the same industry.And the prevailing aviation model does not have a dealer involved on new product sales.
The permanence I speak of is a permanent ratcheting down of volume with no foreseeable drivers that can be expected to ratchet it back up again, and economic and demographic trends that will in fact work to depress volume further. You still have not provided any assessment as to how and why people can be expected to return to the same kind of buying pattern and aggregate demand that was evident in the previous few upcycles, other than to point out that it happened it the last few cycles.
Dealer responses to the cyclical and secular changes from the past two years will in fact range from tactical retrenchment, to lowering or elimination of inventory levels, and/or overall downsizing and cost containment, and many will disappear for good. But all of this will in fact work to lower the value of the dealer franchise and dealer markup to both the customer and the manufacturer. And the one thing that is a constant in economics and business is that every action produces a reaction or response both in the aggregate and on a business level.
When the value of anything is reduced, all else being equal, you inevitably get less of it. And on that basis, if dealers are not going to buy inventory and generate the revenue to the manufacturers in advance of the final sale, and the customers are not going to have the ability to see product locally, the value of selling boats for 25% over manufacturing cost diminishes greatly. That margin will be under duress, and the elimination of dealers from the supply chain will be the result. The only thing up for debate is the scale with which that will happen.
We don't deal in wishful thinking; and yes, history does repeat itself and has many times over the years. Your textbook evaluations notwithstanding, smart dealers will maintain their margins--you dwell on 25%, but that varies departmentally and I can do a break down for you at any time in volume ad nauseum. Oh, and by the way, I do pretty well follow your condescending description of what a margin consists of--thank you so much for enlightening all of us "insiders". Another by the way--you say you are not an outsider, yet you base the success or failure of a dealer's income on what he sells in the way of boats alone. Our margin producing departments include the following: new boat sales, used boat sales, brokerage boat sales, wholesale boat sales, parts and accessories, service, fiberglass repair--not a part of service--canvas shop, rigging dept, finance and insurance, dockage and marina fees, and winter and summer storage. When one dept lags, the other will always increase-ie, when people don't buy boats, they repair their old ones, we profit either way.
What your textbooks fail to tell you is that a smart dealer will maintain his margins by adjusting his buying in order to do so--both with new and used in mind. And boat brokering will get more expensive--it has to due to the shear number of used boats involved and due to the lack of demand for new. After boat brokering gets more expensive for the consumer, which it already is; dealers will start--and most have started--buying up brokerage boats and reselling them at a much better margin than what brokerage would provide.
I don't call that clinging to an old model, nor do I call it short-sighted. Veteran boat dealers; again I say to you, will change with the times--but, the historic times will return due to the shear greed of business people in general and due to normal historic business cycles which I am sure you learned about at some point.
You dwell on economic dictates and textbook examples; I dwell on history and businesses taking care of themselves with smart practices. Admit we both have our strong points and lets reconvene in about 3 years--then if I am wrong, I'll be the first to admit it and I'll expect no less from you. Fair enough?
Last edited by erie skipper; 11-02-2009 at 04:16 PM.
We don't deal in wishful thinking; and yes, history does repeat itself and has many times over the years. Your textbook evaluations notwithstanding, smart dealers will maintain their margins--you dwell on 25%, but that varies departmentally and I can do a break down for you at any time in volume ad nauseum. Oh, and by the way, I do pretty well follow your condescending description of what a margin consists of--thank you so much for enlightening all of us "insiders". Another by the way--you say you are not an outsider, yet you base the success or failure of a dealer's income on what he sells in the way of boats alone. Our margin producing departments include the following: new boat sales, used boat sales, brokerage boat sales, wholesale boat sales, parts and accessories, service, fiberglass repair--not a part of service--canvas shop, rigging dept, finance and insurance, dockage and marina fees, and winter and summer storage. When one dept lags, the other will always increase-ie, when people don't buy boats, they repair their old ones, we profit either way.
What your textbooks fail to tell you is that a smart dealer will maintain his margins by adjusting his buying in order to do so--both with new and used in mind. And boat brokering will get more expensive--it has to due to the shear number of used boats involved and due to the lack of demand for new. After boat brokering gets more expensive for the consumer, which it already is; dealers will start--and most have started--buying up brokerage boats and reselling them at a much better margin than what brokerage would provide.
I don't call that clinging to an old model, nor do I call it short-sighted. Veteran boat dealers; again I say to you, will change with the times--but, the historic times will return due to the shear greed of business people in general and due to normal historic business cycles which I am sure you learned about at some point.
You dwell on economic dictates and textbook examples; I dwell on history and businesses taking care of themselves with smart practices. Admit we both have our strong points and lets reconvene in about 3 years--then if I am wrong, I'll be the first to admit it and I'll expect no less from you. Fair enough?
Deal...
Everything else has already been said, other than refuting most of what you posted above, which will do neither one of us any good.
So, I have been reading this with great interest because I want to see what the different people are doing with their play money and their hobbies. I have 2 hobbies, boats and motorcycles. I do both, on the cheap, relatively. I am a pretty educated buyer, and it seems most of the people in this discussion are educated buyers. There are similar discussions on the motorcycle discussion groups I belong to, with specific differences, mainly total cost. Now some of the racing motorcycle guys spend way more than the majority of boat owners, so the money discrepancy isn't much when you compare the truly devoted.
Anywho... the one thing I see missing from most discussions is the realization that most people having the discussion have knowledge and experience, well above and beyond the average person in this country. When individuals argue about what the general public is going to do, how they will react the individual forgets that he/she has intimate knowledge that the general public doesn't have. You have to remember, the average person doesn't have the same perspective as you do, when it comes to a passionate hobby or something you take great interest in.
Just something to think about when you discuss topics like this.
I've been looking at Parkers & Grady Whites for a long time. Always found them out of my financial reach. I would be nice to be able to by direct. How does the process work?
So, I have been reading this with great interest because I want to see what the different people are doing with their play money and their hobbies. I have 2 hobbies, boats and motorcycles. I do both, on the cheap, relatively. I am a pretty educated buyer, and it seems most of the people in this discussion are educated buyers. There are similar discussions on the motorcycle discussion groups I belong to, with specific differences, mainly total cost. Now some of the racing motorcycle guys spend way more than the majority of boat owners, so the money discrepancy isn't much when you compare the truly devoted.
Anywho... the one thing I see missing from most discussions is the realization that most people having the discussion have knowledge and experience, well above and beyond the average person in this country. When individuals argue about what the general public is going to do, how they will react the individual forgets that he/she has intimate knowledge that the general public doesn't have. You have to remember, the average person doesn't have the same perspective as you do, when it comes to a passionate hobby or something you take great interest in.
Just something to think about when you discuss topics like this.
Sounds like a politician or TV pogramer that assumes the general pulic is not too bright. I always thought the opposite and the internet has changed a few things, even for the no believers.
when the dust settles it'll be just like before just fewer dealers to compete with.....the problem with this thinking is a large portion of boaters are getting squeezed out by the economy and most will never return after getting out. Simple fact, what was gospel 5 years ago has no bearing on the future, no boater has ever seen an economy like this. Far from the bumps in the road over the past 30-40 years, this economy is truly a "game changer"........
Parker has just opened a new dealer in Morehead City NC Starling Marine. It will be replacing Crocker's Morehead Marine.
Grady White is soon to announce it's new dealer to replace Crocker's Marine and rumor has it that it is Park Boat Company in Washington , NC.
So back to the OP and the question, seems like the answer is no selling direct.
Does that mean most of this information on this thread can be transferred to another thread?
I talked with a friend of mine from Grady White this past weekend and he confirmed they are talking to Park. At that time he wasn't sure if that was going to work out. But, they are remaning a dealer network company.
__________________
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Sounds like a politician or TV pogramer that assumes the general pulic is not too bright. I always thought the opposite and the internet has changed a few things, even for the no believers.
I don't understand your post, but let me clarify.
The fact that most of the people on the discussion boards have a better understanding of the perspective boards topics than the average person is a fact. It doesn't mean the general public is dumb. For example, ask the average person what the term "red right returning" means and I am willing to bet that most will have no idea. Yet, if you ask most boaters, they will tell you it's associated with the markers when going up river. Does this make the average person "not to bright"? No. It shows that they don't know a basic boating rule. Without owning a boat or actively learning about boating practices, I wouldn't expect them to know.
I've been looking at Parkers & Grady Whites for a long time. Always found them out of my financial reach. I would be nice to be able to by direct. How does the process work?
You need to wait for one of them to decide to change their distribution model.
But I do thank you for surfacing as a real live example of what the demand and the mindset of the buying public is now.
Would you be willing to have a slightly to moderately more cumbersome shopping and customer support process to save 20-25% on the purchase price?
when the dust settles it'll be just like before just fewer dealers to compete with.....the problem with this thinking is a large portion of boaters are getting squeezed out by the economy and most will never return after getting out. Simple fact, what was gospel 5 years ago has no bearing on the future, no boater has ever seen an economy like this. Far from the bumps in the road over the past 30-40 years, this economy is truly a "game changer"........
Right - the industry either changes their game, or the economic game changes them - as in permanent contraction.
The fact that most of the people on the discussion boards have a better understanding of the perspective boards topics than the average person is a fact. It doesn't mean the general public is dumb. For example, ask the average person what the term "red right returning" means and I am willing to bet that most will have no idea. Yet, if you ask most boaters, they will tell you it's associated with the markers when going up river. Does this make the average person "not to bright"? No. It shows that they don't know a basic boating rule. Without owning a boat or actively learning about boating practices, I wouldn't expect them to know.
People don't need to understand how an automobile engine works to know how to drive. Making buying decisions are based on laws of economics, which people don't need to understand in order to operate under them.
Product A cost more than people are willing to pay; Cost has to fall in order to people to buy them or volume will fall. They don't have to understand anything about economics to behave that way.
When was the last time you bought something out a book that cost 50,000.00.
Great post Post50. I am small business owner and understand overhead very well. Some people will never get it.
I quoted your above statement because I sell $50K+ products all of the time "out of a book". I sell custom cabinetry and while we have a showroom, there is just too much offered to show everything. It is also "accepted" in the industry that it is this way. Thursday, I sold a $90K job- cabinets, countertops and appliances. The customer bought all of this from a door sample, some color blocks, and a few "similar" products on display.
I'm pointing this out because it can be done in the boat world too. Demo boats could be shared by dealers. Any boats that that would be "inventory" could be dealer traded as well. Another thought would be factory price setting. We sell Viking Range products this way. It eliminates low balling and lets the customer buy who they think is the better dealer or which is closer to them. Factories would have to have policies for discounting leftovers, etc.
My point is that it can certainly be done other ways. I'm not trying to bash the boating industry's way of business, just looking to give you another perspective.
On another note- Why are Yellowfin owners so loyal and defensive of their brand? Because of the way they do business. It's way different than the conventional system and it seems to work very well. It's a great example of how breaking the mold can really make a brand excel.
I am not trying to beat up a dealer to get a deal on an OB, I was simply asking what is the margin like on an outboard, how much room is there to work with? This is where the consumer is at a huge disadvantage, not having access to actual invoice pricing.
How is knowing the dealer's cost relavant? This is the car mentality and everyone I know hates the car buying experience.
I think consumers think knowing "invoice" gives them an advantage, but I just don't see it. To me it is the lazy consumer that shops this way. If all that you care about is the "best deal" than price it a few places and buy it where you get "the best deal". It's pretty simple.
By the way- How would you feel if you had to disclose what you make to your customers, co-workers, friends or neighbors? Pretty invasive if you ask me.
On another note- Why are Yellowfin owners so loyal and defensive of their brand? Because of the way they do business?
It's way different than the conventional system and it seems to work very well. It's a great example of how breaking the mold can really make a brand excel.
It is becuase you can almost eat off the bilage and you can almost be a certified electrician looking at the wirings. Not to mention the sexy bow flare. This is just the tip of the iceberg. There are many other goodies beneath the surface when it comes to a YF.
It is becuase you can almost eat off the bilage and you can almost be a certified electrician looking at the wirings. Not to mention the sexy bow flare. This is just the tip of the iceberg. There are many other goodies beneath the surface when it comes to a YF.
Yeah, that's all true too, but look at how highly regarded the company's way of doing business is as well. It's a big part of their success and brand loyalty for sure. The "package" seems to be working very well. It's something other manufacturers should be looking at closely.
, I suggest that you both are correct. 
