2010: Nowhere to go but up?

Posted on December 21, 2009
Written by Beth Rosenberg

Industry pros forecast more pain, slow improvement and a bright future

The economic challenges of the last year have made some of the boating industry's most seasoned professionals hesitant to predict what 2010 will bring.

"The best news is that 2009 is behind us," says Rich Lazzara, vice president of Lazzara International Yachts in Tampa, Fla. "When we look back on our industry years from now, I believe 2009 will prove to be the most devastating [year] in history."

Most who spoke with Soundings Trade Only believe the industry's troubles are far from over, with more dealer and manufacturer failures expected, the continuing lack of floorplan choices and a stubborn consumer reluctance to spend on discretionary items.

Not all the news is bad, however. "Sales breakthroughs have been recently reported by marine dealers in some sections of the country," says Jim Coburn, president of the National Marine Bankers Association.

Many say it could be a long, cold winter. "Perhaps another 400 to 500 dealers will fail by mid-2010," predicts Phil Keeter, president of the Marine Retailers Association of America. "Our industry will become leaner through this very painful attrition. In the long run, I think we will see smarter dealers with much more manageable businesses."

Manufacturers, too, expect the difficult times to continue and are adapting accordingly. "I see no evidence that the economic recovery will be strong enough to support robust growth in the longer term," says Peter Truslow, president of Edgewater, Fla.-based EdgeWater Power Boats. "Those of us left in the business have faced this new reality by making significant cost reductions and by changing our business models."

Some, though, see light at the end of the long tunnel. "Our forecast is certainly brighter for 2010 than it was for 2009, even though the retail sales increase may only be minimal," says Phil Dyskow, president of Yamaha Marine Group.

Genmar founder Irwin Jacobs says he believes the purging of repossessed units will continue into the new year, and looks for a more "normal" environment in the second half.

The bottom line: Boating is not disappearing.

"The boating lifestyle has never been more popular," says Dyskow.  The "passion ... has not diminished, and, in fact, we would argue it has strengthened," agrees  MarineMax chairman, president and CEO William H. McGill Jr.

Ian Atkins

Vice president and general manager, Boats.com/YachtWorld.com

From our vantage point in the business of running Web sites for selling new and used boats, we believe we've seen the bottom of the U.S. market. It's showing some signs of stability, maybe even recovery, particularly among brokerage boats where sales volume has surpassed 2008 each month since June.

Our business has seen mergers among brokerage houses and an overall consolidation caused by extreme weakness in the boat-dealer segment that's exacerbated by an almost total lack of both wholesale and retail finance. The brokers and dealers who have weathered the storm appear to have a brighter 2010 ahead, although credit remains a significant issue.

Data is hard to obtain, but it would appear that the U.S. marine economy may recover ahead of the international marketplace. Many European markets are still declining, some severely, whereas U.S. GDP is already on the increase, usually a harbinger of an improved economy even though consumer spending is expected to lag. There are a few bright spots in emerging marine markets such as Australasia.

Most businesses watching their statistics recognize that the Web typically delivers in excess of two-thirds of qualified business leads, and yet most marine companies still spend a tiny fraction of their diminished marketing budgets online. We expect more marketing dollars to shift that way in 2010, as online marketing's value and ROI gain higher recognition. In addition, the most successful companies will integrate into their marketing efforts electronic outreach such as e-mail, PR and increasingly sophisticated social media efforts such as CEO blogs, Facebook business pages and company YouTube channels.

The majority of marine companies know they need to improve their Web sites and optimize them for search engines. They also realize they need multiple online sales channels. Part of the challenge in 2010 for businesses like ours, which serve boat-retailing businesses, will be to develop innovative products that make this process easier and more efficient.

Louis Chemi

Chief operating officer,  Navico Americas

While the boating industry has certainly continued to struggle over the last year, marine electronics are seeing light at the end of the tunnel, which I'm pretty convinced isn't a train. A small portion of electronics sales in 2009 can be [attributed] to boatbuilders, but the larger portion was tied to retrofit on the dealer and end-user levels.

As usual, this growth has been driven primarily by investments in new, compelling technology that gives boating enthusiasts a reason to upgrade marine electronics. Navico's B&G, Lowrance and Simrad brands - and we believe the overall segment - are seeing a growth in sales in Q4 2009. Key factors include new, higher-performance technology and significant improvements in integration.

In the last 12 months, there have been a number of advancements across the industry with regard to new technologies that create better situational awareness for boaters. Today's radars are safer and lighter, in addition to providing unparalleled short-range details and better target separation. Today's sounders provide clearer, cleaner images of what's on the sides of the boat, as well as what's below, in resolutions never before experienced.

Intuitive new user interfaces, real-time weather information and customizable weather displays deliver up-to-the-minute information on threats from the sky, and faster processors allow charts, alerts and overlay of radar and AIS targets to update at a rate that gives boaters the information they need and the time they need to digest it and react. These technology advancements alone have driven recent increased sales within the segment.

That said, while we do expect the uptick in growth we have seen in Q4 2009 to continue, 2010 will not likely be a year of tremendous gains. Therefore, aside from the new technologies that are creating consumer pull, we as an industry must all recognize, accept and react appropriately to the new reality of today's boating market. This can be done in a variety of ways.

Collaborating where possible to cut down excessive shows that burn marketing money without generating end-user pull and enthusiasm. Sharing up- and downstream visibility of forecasts and consumer sell-through so that we can keep working capital at the reduced levels the 2010 market requires. Protecting price points so channel partners and manufacturers alike can maintain adequate margins, thus ensuring a good value proposition for the consumer and allowing companies to invest in the new technologies and services that will drive future business.

This type of change, of course, cannot happen in a bubble. It requires us to work together to protect our industry so that we emerge from this downturn stronger than we were in the past and better prepared for future economic downturns and opportunities.