Surviving dealers learn recession’s lessons

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There are fewer dealers than in 2007 — the numbers floating around indicate about 35 or 40 percent fewer — and although people aren’t turning out in droves to buy boats, dealers appear to be realizing the fruits of the discipline imposed on them by what many have called the industry’s most brutal recession ever.

There has been an uptick in sales, although data show that the increase is modest — about 10 percent in a market that remains drastically reduced from prerecession levels.

“But I think what we don’t understand always is that’s 10 percent up over a market that’s got fewer dealers, so the dealers themselves are seeing greater growth individually because there’s fewer dealers to do that business,” says Matt Gruhn, president of the Marine Retailers Association of the Americas.

Prior to the recession, dealers relied heavily on new-boat sales, Gruhn adds.

“What the recession taught them was they have to profit from service, figure out a way to profit from parts or F&I or rentals. Basically, they needed to diversify,” he says. “Those who were able to do that came out of this much stronger, and the opportunities they have today are much greater than they would be if they hadn’t. I think that plays into the upside that dealers are feeling today.”

The recession also brought with it another “new normal.” Just a few years ago manufacturers dictated how much inventory dealers would take. Now dealers call more of the shots.

“The former model was a push strategy,” says Larry Russo, owner of Russo Marine, which has three Boston-area locations. “Manufacturers would push product on dealers, and because there was enough demand, they could push it. If you didn’t take X number of boats they’d go to another dealer.”

Now things are different because the recession left a glut of inventory that choked the pipeline for a couple of years, Russo says. “The dealer becomes king,” he says. “Manufacturers can no longer push product on the dealer. If it’s not good enough for you, where else are you going to go? Now dealers can say, I can take X, not double X or triple X. It went 180 degrees the other way.”

The only thing that will shift that power balance is when consumer demand increases and manufacturers think they can be more demanding, Russo says.

For a full report on what the industry’s “new normal” looks like to dealers, see the September issue of Soundings Trade Only.

— Reagan Haynes

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Comments

2 comments on “Surviving dealers learn recession’s lessons

  1. Russell Durham

    Larry,
    Enjoyed your feedback. I sure hope things remain on upswing and believe they will if Romney gets elected.
    I miss the good old days during the Whaler Dealer Meetings.

  2. marinebizsites

    “that’s 10 percent up over a market that’s got fewer dealers”
    Yup, that’s the primary trick to long term survival. Outlive the over-leveraged (typically discounter) competition by not falling into the (typically salesmen induced) traps of low margins and high inventories. Then pick up some decent profits before the next wave of stupidity.

    Never accept manufacturer quota pressures in spite of good business sense. Stand up to them; their people and jerky sales schemes will be gone LONG before a good dealer. Let the suckers get in deeper while you concentrate on taking good care of your customers instead of being pressured by inventory to send them out the door with a boat sticking out of their throats.

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