A passing storm

Posted on Written by Reagan Haynes

In rough-and-tumble market, Grand Pointe Marina increased its service business 20 percent since 2007

When general manager Chris Stevens examined his staffing situation this summer at Grand Pointe Marina, a family-owned boat dealership, he knew he faced some wrenching decisions.

Sales were down 15 percent by midyear, and he anticipated a continuation of the drop-off. Last year, the company sold 230 units. Stevens expects that number to drop to about 200 units by the end of 2008.

Grand Pointe Marina is located in Dimondale, Mich., near Lansing, and sells such brands as Bayliner, Bentley Pontoons, Four Winns, Crestliner, Lowe and Manitou Pontoons. While vessels range from a few thousand dollars to $140,000, the bulk of sales come from boats in the $15,000 to $60,000 range. Boats at this price are a favorite of middle-class buyers, a segment of the population particularly hard-hit in the current economic downturn.

Stevens, 31, has been long involved in the dealership, which his parents, Patrick and Sandy Stevens, bought in 1968. Learning the ropes from them, and through his chef training that included education in business management, he knew the lean times ahead called for action to ensure the company’s continued success after 40 years of operation.

So this summer, Stevens wrote the names of all 18 employees on a piece of paper and envisioned laying everyone off. Then he circled the 10 names of people he would rehire. He retained them and, albeit reluctantly, laid off the rest.

“That’s our true core staff,” Stevens says. “If we needed to, we could get slimmer, but we don’t want to because that would affect our customer service. And when the economy comes back, we will hire more people.”

Slashing eight employees amounted to a 40 percent reduction in the company’s workforce. “This is still a small, family-owned business,” Stevens says. “It’s my mom and dad and me, and all three of us have done more in the past few years, as far as getting our hands dirty.”

The courage to make tough decisions is often a determining factor behind whether a business sinks or swims in a stormy economy. “We had to do some drastic things this year, and that hurt us,” says Patrick Stevens, 63. “[Chris] personally had to let a very good friend of 20 years go.”

It’s never easy to weather the slumps, but Chris Stevens says there are ways to survive. First, dealerships must pay attention to indicators suggesting a downturn and adjust inventory and budgets immediately. If possible, businesses should stockpile cash and start focusing on areas that are flourishing, such as service.

If the downturn lingers, dealers might have to reassess staffing and advertising, and make painful cuts, if necessary. It’s especially important in tough times to remain confident and efficient in the eyes of the customer, Stevens says, and to walk a fine line with staff and marketing cuts.

Joining a peer group like Spader 20 (see sidebar, P. 70), a management consulting group specifically for the marine industry, is also important. Spader 20 has several groups of dealerships that are not in direct competition with one another, but communicate candidly and confidentially about business details, from finances to sales. Sharing information represents a powerful business tool, and it’s particularly useful in a difficult economy when declines in revenue threaten to splash red ink on the bottom line.

Sensing a downturn
Obviously, the Stevens family has seen economic dips in the past, and they saw this one coming. This year’s boat shows ended up being a drain, and the family is considering skipping next year’s in anticipation of another slow year.

“Boat show season was what I consider a flop,” Chris Stevens says. “They’re extremely, extremely expensive, with virtually no help from manufacturers. It costs too much for people to just come look at a product and say, ‘It looks nice, I’ll see you in spring.’ ”

Five years ago, Grand Pointe generated 30 percent of its sales from boat shows. This year the yield dropped to less than 10 percent of annual sales. Chris Stevens says the family had a “gut feeling” the normally heavy sales between June and August just weren’t going to come in 2008. They were right.

In the second quarter — around springtime, when the boating season is usually getting busy in Michigan — Stevens noticed less floor traffic in the dealership. Equally as ominous, he also noticed that the owners of about half the boats in the storage facility were going to sit out the 2008 season. With gas prices on the rise, a deepening housing and credit crisis, volatility on Wall Street, an impending election, and two wars, it didn’t take much of a leap to see that trouble was on the doorstep and not likely to leave soon.

Patrick Stevens has learned to feel these changes in his 56 years in the industry. He learned from his dad, who owned an old-time sporting goods store that sold Martins and flat-bottom wooden boats. Stevens went to work at his dad’s store when he was 10.

“I’ve been through Jimmy Carter’s ‘No boating on Sundays.’ I’ve been through long gas lines, and I’ve been through two [deep] recessions,” Patrick Stevens says. “We sort of learn by fire.”

Anticipating downturns is key, says Norm Schultz, former director of the Lake Erie Trade Association. “While we may not be able to accurately predict each downturn, we absolutely know it will happen from time to time,” Schultz says. “Dealers who survive the downturns recognize that during the good times they must harbor funds they’ll need for the bad times that will come. Unfortunately, historically, dealers haven’t been real good at doing that.”

To prepare for the hard times ahead, the Stevens family cut inventory in the marina’s ship’s store, to a point, and they refused to give in to pressure from boatbuilders to take more and more vessels, which probably wouldn’t sell.

“I know you can’t sell from an empty wagon, but there is ice coming,” Patrick Stevens says. “Am I supposed to guess what models will sell for next year? I’ve been guessing for 40 years, and I’ve been wrong for 40 years. I’m not buying it. Not now, anyway. If [boatbuilders] have to shut factories, they have to shut factories.”

Grand Pointe doesn’t have its floorplan line capacity filled. “Not even close,” Chris Stevens says.

Cash is king in bad times, he says, so dealers should sock it away when sales are strong, especially if they anticipate a downturn. Then they can take advantage of the deals on used and repossessed boats, or deal on manufacturer specials.

Grand Pointe also takes a conservative approach on new technology that can drive up the price of a boat. “If a boat company we sell comes out with something new, we’re not the first one to take it on,” Chris Stevens says. “There are definitely some options on the Four Winns stuff we sell that we will definitely take a pass on right now, because the same boat that’s normally $30,000 would have to sell for $36,000 with the most extreme options.”

Nevertheless, it’s crucial for dealers to train staff on all the newest technology in case a customer is curious, Stevens says. Providing a curious customer with the right answers can translate into a sale.

Merchandise and service

In times like these, Grand Pointe stays focused on profit centers. For example, when management made cuts elsewhere in the company, it kept the service technician team fully intact.

The approach has paid off. By focusing on quality, expeditious service, the company has increased its service business 20 percent since 2007, Chris Stevens says. And that number could grow. Although the need for service typically starts dropping off at summer’s end, the department was still frenzied in early September.

Grand Pointe never turns away a service customer, Patrick Stevens says.
“I don’t care what your problem is. You have a wooden boat that leaks? I’m going to try and fix it,” he says.
Focusing on profit centers such as service keeps dealers in business, says Phil Keeter, president of the Marine Retailers Association of America.

“If service departments are profitable, maybe the dealer needs to hunt for more service,” Keeter says. “You’ve got to really work the client base you already have.”

Marketing and advertising
In addition to pink-slipping eight employees, Grand Pointe cut advertising drastically in 2008. In 2007, the ad budget was about $140,000 and allocated to promote new-boat sales. Of that total, “well over” 50 percent was spent on attending four boat shows, Stevens says, adding that each one cost the company between $20,000 and $30,000. Broadcast television and radio campaigns and display ads placed in newspapers accounted for the rest of the budget.

After attending his fourth “flop” of a boat show in April, Stevens stopped buying ads in May. “The ad budget is now at zero,” he says.

The company is still spending money on direct mail to promote service business, and it does some telemarketing to existing customers to remind them about winterizing and storage services. Direct marketing expenses show on a different budget. Stevens says the mailers are cheap and effective, generating a return on dollars invested, whereas the return from money spent this year to promote new-boat sales has been disappointing, to say the least.

Stevens says he hasn’t decided whether to invest in attending boat shows in 2009, and he hasn’t calculated the dollar amount of the 2009 ad budget. “Whether or not the hard TV and newspaper advertising dollars return in 2009 has not yet been determined,” Stevens says. “We know we can’t have a minimal budget for too many months, but we’re unclear what we’re going to do for winter and spring shows in ’09.

“It’s a really fine line, and we probably went under that fine line by cutting too much in advertising,” Stevens continues. “We didn’t feel like we were going to gamble with anything, and advertising doesn’t always work. Cash in the bank was more important to us. Because we’ve been here for 40 years, and we usually advertise a lot, we have a lot of word-of-mouth [referrals]. If we get away from advertising for too long, that will start to dissipate, but we just felt we needed to take the season off.”

Accessories
Another area Grand Pointe focuses on is accessories, Patrick Stevens says. “We have a big accessories department, and I will not give [it] up to the big-box stores. More and more I go into dealers, and they’ve got one thing on the shelf. I will not let it happen [to us].”

An accessories clerk is the easiest hire to make and the easiest job to maintain, Stevens says, making the profit center high if the inventory is turned regularly. His motto is having “one to show and one to go,” and ordering as needed instead of stockpiling.

“You just turn that stuff,” he says. “How does K-Mart make money on bobby pins? If you turn, turn, turn, you’re going to make money. Box stores get their orders in once a week; mine are a day away. They don’t have people who know about boats, and they don’t carry name brands.”

And through the slump, don’t ever let customers know the hard times are tough on the business, Chris Stevens says. “We’re like a swan swimming. We’re calm on the surface because we don’t like our customers to know we’re swimming really hard underneath.” Picture the orange, webbed feet of a swan churning rapidly under the water, and the swan image becomes clear.

Maintaining poise and confidence is crucial to selling boats in a recession, says the MRAA’s Keeter. “A lot of dealers are acting like they are in tough times, and that turns the customer off. He thinks, If I buy that boat, this dealer may be gone, and I won’t have any place to service it.”

Keeter says some dealers who have higher prices than their competitors have made sales because they exude confidence to the customer. “You’ve got to be careful what you say to the customer because [negativity] could become a self fulfilling prophecy. We’ve seen a lot of that,” Keeter says.

Networking
Patrick and Chris Stevens say the key to being successful in any economy is working with other groups and dealerships so you can learn about what works and what doesn’t. In addition to the Spader 20 group, supporting and being a member of the Marine Retailers Association of America has been vital, Patrick Stevens says.

Becoming certified and adhering to the best practices is also crucial, he says, which is why he made sure Grand Pointe obtained certification from Brunswick Corp. and maintains its status as an NMMA-certified dealership. “Why do I have customers coming 50 miles away from here who live five miles from another dealership? Because somebody didn’t have a plan when the customer came into the dealership,” he says.
A tough economy will sort the weak from the strong. The survivors will be the ones that took care of their customers, and if they keep doing that, they’ll weather the storm, Stevens says.

This article originally appeared in the October 2008 issue.

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