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?