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Will manufacturer showrooms become a ‘new normal’?

First it was Maritimo. That was followed by Regal. Then came J&D Acquisitions (Irwin Jacobs) with Carver and Marquis. They’re the most recent major brands to announce new “factory showrooms.” In fact, Regal just completed a gala grand opening in Orlando, Fla., reportedly with more than 500 in attendance.

Of course, it’s too soon to know what impact, if any, these factory showrooms will have on retail sales for the dealers representing these brands. Clearly, the manufacturers hope this gives their dealers a boost. Moreover, dealers I’ve spoken with share that hope, albeit not without some concern and controversy about the concept, its operation and its long-term outlook. That certainly makes this idea worthy of more discussion.

First, the factory showroom doesn’t appear to be a business model for the vast majority of builders. While one of the obvious benefits is to relieve dealers of stocking and floorplan burdens, it simply isn’t applicable to small boats — say, under 30 feet or so — which is the majority of boats our industry builds. Dealers need a reasonable inventory of small boats to effectively sell, and builders simply can’t survive building small boats only on retail orders. While our industry must move closer than ever to a just-in-time supply model, some levels of retail inventory will always be in play.

Some dealers worry this is the first step to factory-direct selling. But direct selling is not new. In Florida, for example, many manufacturers build and sell offshore fishing boats in their localized area. Intrepid and Yellowfin are fine examples. But as NMMA president Thom Dammrich points out, “You can do that successfully in a localized area but not nationally. There is no doubt the major brands that sell nationally will continue to rely on dealers.”

For large boats, on the other hand, there is real merit in the factory showroom idea. It eliminates the stocking costs and floorplan dilemma for dealers, according to MRAA president Phil Keeter, who sees a lot of positives in the idea. Among them, it means a better variety of product for the customer to see, trained factory personnel to talk with the customer, and, very important, both the dealer and builder can make better margins without the inherent interest costs.

Flying large-boat customers to the factory showroom makes real sense when you do the math. For example, floorplan interest on a $500,000 boat at 11 percent is $55,000 a year. Obviously, dealers can fly a lot of qualified customers to see and run the boats with that kind of money available. And it works. MasterCraft has reportedly been aggressive in bringing qualified customers — always accompanied by their dealer — to the factory and has recorded a high closing rate.

That also highlights the difference between having a factory showroom at the factory or some other neutral site versus at a retail dealership, as announced by Carver-Marquis. The latter could lead to barriers and apprehension, noted Keeter. But one thing seems logical — any dealer who wouldn’t take to time to fly with the customer would 1) be failing to control the possible sale and 2) be giving up extraordinary time to build a personal relationship with that customer.

This blog on factory showrooms will continue in Thursday’s Dealer Outlook, when we look at additional upsides and downsides of this latest move and answer the question: Is this a flash in the pan or here to stay?

Comments

10 comments on “Will manufacturer showrooms become a ‘new normal’?

  1. Sunshine State

    If not in fact “New Normal” at the very least the effort represents the ideal that suggests the ‘trend’ is no flash in the pan: the effective placement,presentation, promotion and even customer delivery of product will prove positive,drawing on the force that drives buyers to high profile boat shows to …..well,actually see to believe.Like magic! We see proven effective “floating Showroom” examples in Brokerage too.

  2. Builder of small boats sold through dealers

    First off you can survive & prosper as a builder of under 30 ft boats on dealer retail sales orders. We have done so since 1996. FYI last 2 years have been -not so bad…Thats another topic though
    Secondly there are very few builders who ever were very strong beyond 500 miles from the factory. At 1000 miles it drops even more severly off the charts.
    Thirdly Factory Regional show rooms showcasing boats over 8.5 ft wide with multiple engines will become the norm – no pun intended Norm… What you haven’t addressed (maybe tommarow) is the cost & how these shifted costs are recouped. What it will & should do, if executed properly, is it will relieve the stress in the relationship & form a stronger bound between the builders side & the sellers side.
    The Irwin model is flawed as has been pointed out because he is using existing dealers locations, not neutral independant builder controlled locations which is the base foundation to build this model on if you want it to work.

  3. Chris Foster

    I have owned under 30 ft boats for 23 years. They were at first Boston Whalers and now a Grady White. I live in KY and there is no way to see or sea trial either one of those brands, or many others for that matter, without traveling. We have a local BW dealer but they inventory practically nothing and my closest GW dealer is 365 miles away. I would love to see more manufacturers have factory showrooms where I could see all of that manufacturers models in one trip. It would sure be better than having to go to several dealers to see all the models. I wouldn’t have to wait for boat shows and every model would be available every day all year long. I think it’s a great idea and I think it would allow coastal brands greater market penetration to more inland boaters like myself.

  4. Dave Northrop

    Not a Replacement for Dealers: Although Maritimo received honorable mention in this blog, it is essential to note that we have no desire or interest in replacing our Dealers. In fact, the sensational growth Maritimo has enjoyed in the Americas is a tribute to our Dealer and the partnership we share. Maritimo has introduced 13 new models over the past 2 years, while most of the industry has been forced to stagnation. With a 48′-82′ product range of 17 models, we understand even the strongest Dealers need factory inventory support to properly serve the needs of our customers and insure healthy profitable Dealers. Although new models drive sales, it still takes a strong committed Dealer relationship to properly support the product after sale. When discussing the “New Normal” never underestimate the role of the Dealer with the new boat owner – we feel that relationship is paramount.

  5. Wes Dickman

    Dealers have played THE key role in the sale of boats for so many years, it’s difficult to think of the industry without a “dealer organizations”. HOWEVER, in todays challenging financial world, and with the extensive model range of boat manufactuers, it’s difficult for most deales to make a profit after paying all the related costs of keeping a large fleet of large boats in inventory——-and then have to sell it “to get it out of inventory”.

    There will be a new model of relationship between the dealer and factory——-something more like a “partnership”——where the dealer and the factory share, to the same degree, in the good, bad and ugly of a deal. When that need is accepted by all involved, the new distribution and customer service system will be established. and EVERYONE will benefit!!!!!!

  6. Wally Eastman

    This is a great idea. Dealers can concentrate on good service, have a well established partnership with the builder, have a good product representation and not be stressed by warranty issues or high stocking levels. The builders would have a higher stake in the dealer operations and would not be so quick to work with a lesser quality dealer raising the bar for everyone. Margins could actually be held! The builder will also be free to move boats to different locations to help close a sale and move older inventories. With good planning this would work.

  7. Arch

    There are way too many factors and different variables for anyone to say what will work and won’t work for any given situation.

    To the BUILDER OF SMALL BOATS: Norm’s comments don’t apply to 100% of the builders. We all know there are certain small mfg’s that have done well during the downturn, but MOST haven’t.
    Also, you imply that the location for boats has to be an independent builder controlled location. That isn’t necessarily true. It depends on many factors.
    I would say with a line like REGAL, which is a fairly high volume line, then a factory showroom used by their dealer network makes sense. But with Marquis for example, if you are only going to have 4 or 5 dealers in the entire country, then let the manufacture use the dealers, or just consign the bigger yachts at dealers of their choice.

    TO CHRIS FOSTER- I think you are missing the point. It’s not realistic to expect that there will be some manned warehouse that has a bunch of your center consoles and walk arounds in KY. MFG’s can’t cover that kind of expense. And there is no way you will get all the large mfg’s to share space year round under one roof, in KY. In every way I can imagine, there is no way it would work.

    WALLY- I”m trying to figure out what you are talking about. Most dealers don’t even profit in the service dept. If you take away warranty work, that is revenue out the window. Why would you want the MFG doing that? You want the mfg to have a higher stake in your dealership?
    Desperate times cause people to think irrationally. This system you seem so enthusiastic to endorse may work NOW, but when business comes back, it will only work against you.
    If I’m a boat dealer, I would want all my competitors going on this kind of system, and then I’ll do the exact opposite and be laughing all the way to the bank.
    I’m not saying there isn’t merit to some of these ideas. The dealers and mfg’s just have to figure out something that works for them. And it needs to work in both good and bad markets.
    It won’t work for most dealers, that I can tell you.

  8. Builder of small boats sold through dealers

    Arch
    They all are small manufacturers today & will be for the forseeable future.
    If you only have 5 dealers then you don’t need to have a factory show room.
    At that point you can make the nonstocking guys brokers & pay them a broker fee & authorize them to service & do warranty work for a model.

  9. Arch

    BUILDER…
    Not all mfgs are small today. Most are smaller, but not all are small. Some builders only build a few boats a year, some build hundreds to thousands. What works for one doesn’t necessarily work for another.
    I think business will continue mostly the way it currently is and the stronger mfg’s and dealers will survive the lower volume of business. I can give you dozens of examples of different industries that have gone through similar situations. Everyone is quick to say we have to reinvent the wheel, but in almost every case, the industry barely changes and business continues as is.
    Other than some factory showrooms, and the drop in volume we have already experienced, little will change.

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