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How will the industry redefine itself?

Looking back, it was one year ago that our sense of financial security was shocked in the same way September 2001 shook our confidence in our national security. In September 2008 we were already experiencing a housing meltdown and a less-than-robust economy when . . . zap! The free fall of ’08 hit. Lehman Brothers tanked, AIG needed $85 million, Freddie Mac and Fannie Mae crashed, the auto industry and bank bailout plans were being rushed and massive amounts of Wall Street wealth disappeared with the nightly news.

We hoped most of that would be behind us by now. Unfortunately, a year later, despite a $700 billion TARP, a $1 trillion TALF, a $787 billion Stimulus Plan, $2.88 billion Cash for Clunkers among others, we’re still mired in the financial debris of rising unemployment, bank failures and bankruptcies.

But these are exciting times, too. We’re entering a period when we’ll redefine our industry and our position in the American life style. As we rebuild our economy, likely slowly and deliberately, we’ll have the opportunity to reset our marine businesses for future success. It’s predicted we’ll face a “new” America and, in fact, it’s already emerging. The free-spending, easy credit, caution-to-the-wind mind-sets of pre-2008 are gone. A leaner, meaner, frugal, tight-fisted generation is at hand and predicted to be with us for a long time.

For example, we’re suddenly saving in a big way. The savings rate has jumped from 2.6 percent a year ago to 4.2 percent and some economists expect a 6 percent rate soon. This is in spite of the fact that millions of people who’ve lost jobs or seen pay cuts are hard pressed to save anything. So, it’s obvious the majority still has disposable income but simply isn’t spending like they used to. They’re reducing excess, moving back toward basics, accepting the idea of living within their means and finding out life can still be satisfying.

Good business textbooks tell us there is no better time to reset and retool than during a recession. It’s the ideal opportunity to find things that don’t work or don’t sell and throw them out. Then, create and replace them with new ways to succeed. Sadly, our human nature reportedly prevents us from making major changes when things are go well. We get hung up with the old “if-it-ain’t-broke” thinking and we also fail to see the challenges or opportunities ahead.

So how will we redefine our industry? More specifically, how will dealerships be redefined? Sure, fewer manufacturers and dealers – that’s a given. But will the industry boil down to a few major production brands with all others more or less custom? Will the number of models be reduced? Will the race to build larger and larger models end? Will any manufacturers build affordable entry level boats to appeal to the new frugal spenders? Will dealers inventory more or less . . . small boats, large boats? Will single brand dealerships be more common? Will manufacturers go to just-in-time production – could they even survive doing so? Will builders sell direct? Will model years finally disappear? Will dealer agreements look more like franchise agreements? Will dealer territories be enlarged, clearly defined and guaranteed? Will consignment inventories become necessary? Will new credit sources and dealer floorplan programs emerge? 

Fascinating questions, all. And now’s the right time to explore ideas and answers.

Comments

6 comments on “How will the industry redefine itself?

  1. John

    We are already seeing fewer dealers and manufacturers and I expect the numbers to increase as the fall progresses. Seems a lot of dealer and builders are just hanging on and ever so hopeful that a more robust recovery would occur but my feeling is that is just not going to happen. As for smaller more affordable boats, seems the builders I work with are doing just that. They are concentrating on boats that are easy to use, maintain and purchase. Are manufacturers going to just in time delivery? You bet! Both my saltwalter line and pontoon line have made major changes in production and inventory levels. There are glitches though as parts may take a little longer for dealers to obtain and as suppliers close due to lack of business I expect it to get worse before it gets better. Engine makers are already cutting back on programs and production. Speaking with other reps I find builders have scaled back order expections. This worries me a little in that without any fall orders more manufacturers will fail and not necessarily the weak ones. Dealers will have less inventory on hand and consumers will have longer lead times for special orders. Back to basics, sell your inventory on hand, only stock what is appropriate for you market, pay close attention to inventory turns, sell what the customer wants. Credit is still the #1 issue in speaking with dealers and there must (and will be) another source of flooring. If I’ve learned anything in my 37+ years in the industry is that this too shall pass. We just have to be prepared for a different way of doing business.

  2. Sunshine State

    The industry will no longer be under the assumption of never ending exponential industry “growth” and ever expanding “units”.The dealers (or store locations-see below) will learn to cherish the inventory-including trade ins. Used vessels will not lanquish in inventory.More inventory. Yes- more.Fewer,more capable dealers. Less emphasis on boat shows- dealers/stores taking the place of full model display at their repective dealer/store locations. No need to travel to far flung National Shows to see a decent line up of models.Perhaps no site specific floor plan as we have known it,and no ‘dealer’ arrangements as we have known it……the manufacturer and the store of the same owner entity.New credit/floor plans will emerge,created and supported by wealthy boating enthusiasts.
    The industry will ‘consolidate’ .Fewer “big’ names.There will also be the place for the small manufacturer that also enjoys a quality dealer network.
    The crooks and plain idiots largely removed.
    A return to some long established designs.A strident effort at creating a product that is truly service friendly in the field.
    One only need look back to the boating publications of the past couple of decades to see how the forces of change are always firmly established.We and the natural boating environment we depend on will benefit.

  3. Matt Condon

    Hello Norm,

    I enjoy your articles because they come from someone who was deep inside the industry and now has the advantage of looking at the challenges from a step outside. Well, to answer the question raised in your article – I believe the industry needs to step out of the box too and think fresh. I started a company called Signature Yacht Shares 1 year ago in an attempt to solve many of the industry’s long standing issues. We are an Affilate of Galati Yacht Sales and offer shares in professionally managed yachts. As manager, my job is to deliver a cost-effective, hassle-free experience. We started with the theory that we will grow boating if we make the yachting experience more enjoyable for less money. Customers love it, but it is exceedingly hard work. They never hear something is not covered under warranty or why a system will not work as designed. Yacht shares affords me the opportunity to build the boat right, maintain it right, and we do our best to keep it operating as designed. I chuckle when I hear a traditional boater say that yacht shares are for people who can’t afford to go solo. Share customers choose a boating life without all those problems the industry expects a customer to accept. Its fresh and definately out of the box! – Matt Condon

  4. Komrade Carl

    What happen to Grow Boating??
    Remember that when everyone starts doing the same thing (like house flipping) bad things follow. Everyone now is coo coo for cocopuffs with saving money…. So is this a precurser to a monitary adjustment

  5. Sunshine State

    For many years the industry promoted “affordable” boating.It is now apparent that many boaters did not anticipate the responsibility and cost.

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