How experts view the post-recession industry

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26_postrecession_01Marine executives share their acumen at Soundings Trade Only’s annual Miami roundtable

The editors of Soundings Trade Only and experts representing various industry segments met prior to the opening of the Miami International Boat Show to discuss some of the pressing issues facing marine businesses today.

Topics during the far-ranging 90-minute discussion ran the gamut – from repossessions and liquidations to pulling costs out of boating to the future of the industry.

It was the 11th annual editorial board meeting Trade Only has conducted in Miami.

The panel included Bob Apple, senior vice president of sales and marketing for Volvo Penta of the Americas; Louis Chemi, chief operating officer of Navico Americas; Jim Coburn, first vice president/senior consumer lending manager at Flagstar Bank; Darren Plymale, general manager and director of Galati Yacht Sales; David Pugsley, president of the Yacht Brokers Association of America; Peter Truslow, president of EdgeWater Power Boats; Bob Staehle, vice president/general manager of Kellogg Marine; and Bill Yeargin, president/CEO of Correct Craft. Don Parkhurst, senior vice president of SunTrust Bank, was unable to attend because of weather-  related travel problems.

Here are excerpts of the discussion:

REPOS, LIQUIDATION, MARGINS

Truslow: Though repossessed inventory is still out in the market, it’s not there to the same extent it was last year. In many markets, dealers are able to start getting larger margins on boats. Repos aren’t always the great deal buyers think they are.

Plymale: We’re still seeing voluntary repossessions from consumers, and we’re not sure how long that will last. Boats are one of the first things people will give up to save money. Repossessed inventory is still an active channel as dealer failures continue to occur.

Yeargin: Margins must increase because you can’t keep generating at a loss. The margins are going to fix themselves out of necessity. We’ve got to make a profit to stay in business.

Pugsley: Brokers need to be better partners with the dealer community on this issue.

Coburn: Going to the dealer with inventory was always a disaster to a bank, so now they go to professional liquidators. Banks just want to get rid of boats.

DEALER FAILURES

Yeargin: Correct Craft has lost a small number of dealers. Anybody who’s made it this far … hopefully they’ll be able to make it until September.

Truslow: EdgeWater hasn’t lost too many dealers, but the existing dealers aren’t functioning the way they used to. Volume is down.

Plymale: We saw people expand into our marketplace in 2006-07, and they have now retracted. In order to keep customers, we need to get out to the customer faster and more efficiently than ever and solve any problems immediately.

COST OF BOATING

Yeargin: On the content side, that’s driven by what the consumers want … With the new spending paradigm, they will accept less bells and whistles. Innovation that brings value is always a no-brainer. Conspicuous consumption? If it’s not dead, it is mortally wounded … I don’t know how long that will last; it could be awhile.

Truslow: We’re going to see simpler boats – that is going to bring the price down, though maybe not enough for the average American.

Apple: You obviously have to lower your fixed costs. … It’s got to be about value-added versus non-value-added.

Chemi: Using focus groups to find out what people want is one way to ensure you’re offering consumers a product they are interested in and will spend money on.

Yeargin: We have to sell the experience, not necessarily how fast the boat goes.

GENMAR AFTERMATH

Yeargin: That $140 million [lost by vendors in the bankruptcy] is being spread among all of us. … They’ve got to recoup it somehow.

Chemi: We watch our accounts receivable a lot closer.

NEW DEMOGRAPHICS

Coburn: The industry needs to go after the echo boomer generation – that’s where the future of the industry lies.

Plymale: Consumers these days are waiting longer between trading up, and they are trading up smaller – for example, 2 feet at a time rather than 4 feet. We also see more people looking for quality preowned boats. We never saw that in the past.

WEB 2.0

Chemi: It’s about connecting to the customer. It’s an inexpensive way – it’s a grassroots way.

Staehle: With the Internet changing so quickly, it’s important to have people on the team who can keep up with those changes. That’s been a challenge and will continue to be.

Coburn: The younger generation knows no other way to communicate.

Yeargin: You want to give people a reason to keep coming back [to your Web site]. You can go right into their living room and communicate with them. In our business, it’s absolutely critical. It’s not going away. We as an industry are going to have to keep up, or we’re going to look like dinosaurs.

THE FUTURE

Coburn: Retail credit is there, though the game has changed. Underwriting guidelines are back to what they were 20 or 25 years ago. On the wholesale side, I don’t see a huge change … until we get through all this credit recovery stuff.

Apple: What we’ve learned from 2009 is you’ve got to protect the cash and be positioned for the turnaround. Investment in research and development is crucial. Good value and new features are vital.

Truslow: As we go on … we have to look at how big is this market going to be and how boatbuilders can profit and not merely survive. Now is a good time to build market share.

Yeargin: A long-term issue facing the industry is the philosophical shift by consumers from the desire to spend to the desire to save. On top of this, fuel prices are likely to go up. U.S. builders are facing more global competition, and baby boomers are retiring. We choose to see [these challenges] as opportunities.

Chemi: We predict 2010 will be a relatively stable year with a little bit of growth potential. Innovation is key to growth. Investing in research and development is absolutely essential. … They’re not going to buy if there’s no reason to buy.

Plymale: Selling distressed inventory has played a major role in our success in the last year. We focused on service profitability and decreased floorplan. We’re in the ’70s again with our spending habits.

Pugsley: We’re seeing a trend in people downsizing boats, in New England anyway. Americans have very short memories, but they don’t seem to accept the fact as easily that their $150,000 purchase is only worth $85,000. Perhaps the key is to create demand. You always want to buy something you can’t get.

Staehle: We’re down to 13 warehouses from 17 and down to 600 employees from 1,000. For those who deal with parts and accessories, we live and die by the weather. We just pray for sunshine.

This article originally appeared in the April 2010 issue.

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