Spring 2011: One up in a sea of downsPosted on Written by Reagan Haynes
Despite all the bad news, dealers see a decided uptick in customer attitude
The question isn’t so much what went wrong this spring. The question is: Did anything go right?
Between the weather, natural disasters, political turmoil abroad, record or near-record fuel prices, a 2-1/2-year economic downturn and gridlock in Washington, D.C., fewer people than expected went shopping for boats. Some customers who were waiting for nice weather to place an order quickly learned they couldn’t get their boat before summer’s end because of long factory lead times.
Despite the odds and early numbers that show fiberglass boat sales still declining, some dealers seem optimistic about their situations and the state of the economy. Though overall boat sales were disappointing, many dealers say their own sales were slightly up or, at worst, flat. In many cases that’s because they gained market share as competing dealers failed.
Perhaps most important, despite renewed rumblings that the United States could be moving toward a double-dip recession, dealers in some areas say there has been a distinct turnaround in consumer attitude.
“I think we’re in a turnaround right now,” says Joey Simmons, general manager at Caruthers Marine in flood-ravaged Vicksburg, Miss. “I’ve got more people calling and coming in asking about new boats.”
At Bassett Yacht & Boat Sales in Springfield, Mass., customers are no longer complaining about the economy, owner Diane Bassett Zable says. “It’s old news,” Bassett Zable says. “If they’re coming in, they’re very specific about their budget. Do they want a lot for less? Absolutely. But buyers are at the point that they do want to finish living a nice little life and enjoy it and, if they want a boat, they get it.”
Raymond’s Boat & Motor Sales, with three locations on Lake of the Ozarks in Missouri, saw flat sales this spring, says general manager Richard Collins. “You can’t pick up a newspaper without reading about a double-dip recession, and then we read that the U.S. is going to default on its loans,” Collins says. “Even if you’ve got a job you’ve probably got two or three friends who don’t have jobs and have been out of work for a year or two. That makes people hesitant to step up.”
Unemployment in the Ozarks region has been running significantly higher than the national average, with many areas locked in at the 13 or 14 percent level in March, according to municipal websites.
Nationally, sales of 14- to 30-foot fiberglass boats declined 11.4 percent in April from the same month in 2010, according to Aarn Rosen, national marine sales manager at Statistical Surveys in Grand Rapids, Mich. “It can vary based on geography, but the moral of the story is the market is still contracting,” Rosen says, although he points out that part of the fiberglass decline resulted from significantly lower sales of personal watercraft.
At Moriches Boat & Motor, Conrad Kreuter’s dealership in Long Island, N.Y., much of the customer base consists of contractors, electricians and plumbers. This is the first year since the recession began that those clients have said they’re busy enough to feel comfortable, even though they’re still working with a greatly reduced work force.
Salesman Mike Deuel says customers at San Antonio’s Master Marine still haven’t made the shift into a new comfort zone. “I still hear a lot of uncertainty in people,” despite a relatively low unemployment rate of 7 percent, Deuel says. “Our ski boat season really starts early, and we didn’t have near the traffic we should’ve had, between fuel [prices] and drought.”
Smith Brothers Marine, which has several locations from western to central New York, has seen improved attitudes, “no question about it,” co-owner Geoff Smith says. “Still, in this neck of the woods — Syracuse, Rochester, Buffalo — they think there’s still going to be a deal out there,” Smith says. “We need to get beyond that.”
January brought a turnaround for Blue Springs Marine, says general manager Jeff Siems, son-in-law of the founders of the 50-year-old Kansas City-area dealership. For the first time in years people at the Kansas City Boat & Sportshow were excited, he says. That feeling translated into revenue: Blue Springs Marine sold more units at the January show than in each of the five previous years, Siems says.
“We can relate some of it to there being a third fewer dealers in our market, so buyers have nowhere else to go,” Siems says. The dealership has increased sales, in units and dollar value, by about 30 percent.
“People are changing their buying habits,” Siems says. “We have a lot more control again instead of the customer running the buying process.”
Increased market share has meant fully booked service departments for surviving dealerships. About five years ago, Blue Springs increased its staff to six mechanics. Previously the entire dealership had six employees. “The first thing we did was grow service to handle all these homeless customers out there, so to speak,” Siems says. Boat mechanics can be hard to find, but Blue Springs was able to capture some of the displaced staff from less fortunate dealerships.
“I still think dealers aren’t putting enough into the Internet,” Siems says, particularly when it comes to picking up displaced customers.
Canon Marine in Penrose, Colo., started getting service bookings at the beginning of April because of bankruptcies in other dealerships, owner Sue Gouveia says.
“Motor sales have been really good,” Gouveia says. “There are a lot of people repowering, trying to get new technology and meet EPA standards.”
“Those of us who have had a service base had a good recession,” says Ed Lofgren, owner of 3A Marine Service in Hingham, Mass., adding that 3A has grown in service, storage, parts and accessories throughout the recession.
In San Antonio all remaining dealers are “knee-deep in service,” Deuel says.
Fishing, pontoon boats
At Blue Springs Marine most boats that are sold cost $40,000 or less, Siems says. Because he includes Lund in his brand offerings, Siems can capitalize on the popularity of aluminum fishing boats in the region.
In Colorado, Canon has had to deal with slow fiberglass traffic but has offset that with brisk aluminum and pontoon sales, Gouveia says. “I don’t know what it is, but that definitely is the case here,” she says. “And used boats are also selling great. I can’t keep them in.”
Although many dealers say boats ranging from $20,000 to $40,000 are the most popular, Gouveia says Canon Marine has sold several pontoon boats in the $40,000 to $60,000 range. The most expensive was a $120,000 pontoon she sold during the winter.
“I think there’s just still a flood in the market of slightly used fiberglass, and that’s what’s moving” instead of new, Gouveia says.
Also, fiberglass buyers in Colorado tend to have other outside hobbies. Gouveia speculates that with little time and perhaps less disposable income, some people have decided to cut boating loose rather than the less costly hiking or mountain climbing, for example.
One constant, though, has been the Colorado angler. “Fishermen seem to be, whether it’s rain or drought, the steady ones that boat continuously,” says Gouveia, who also sells Lund and the Premier and Larson brands.
She hopes to raise margins soon because they are now so low that Canon has to “really squeeze everything we can get out of every penny,” Gouveia says.
In upstate New York, Smith says his Smith Boys outlets near the Finger Lakes have had some success with Berkshire and Harris pontoon boats. At his Buffalo store, his biggest sellers are bowriders in the 18- to 22-foot range. Big bowriders also have been popular in the Ozarks, Collins says.
With a coastal fishing clientele, San Antonio salesman Deuel says Master Marine mostly sells center console bay boats and some aluminum boats. Sales of fiberglass ski boats have continued to lag.
The hot thing in the Ozarks has been the tri-log pontoon boat, selling in the $40,000 to $60,000 range, Collins says. “They’ve replaced people’s deckboats in a lot of ways, so to speak,” Collins says.
Caruthers Marine is mostly selling vessels below the $20,000 range, Simmons says. Pontoon boats, normally wildly popular, declined from 30 units sold in 2009 to two last year, he says. “A lot more people are coming in wanting pontoons, but the prices have shot up so much,” Simmons says. Instead of a $20,000 initial price tag, it now runs closer to $25,000. Customers also want to add a bigger engine so they can tow skiers.
“By the time you do all that, you’re looking at a $37,000 pontoon,” Simmons says.
The high-performance Fountain boats carried at Raymond’s on Lake of the Ozarks are not moving, Collins says. “That market’s just dead right now; the demand for the $200,000 to $300,000 boats is just not there.”
The cruiser market is down across the board, 3A Marine’s Lofgren says. “The 30-foot and above market is absolutely dead,” he says. “It’s just gone. We’re not selling anything in this area that’s 30 and above.”
Fishing boats were selling well at 3A, as well as the newly added Hydra Sports line, Lofgren says, adding that each season has seen steadily improved sales but only by slim margins.
All of the dealers interviewed for this story say quality used boats are selling well, but are difficult to find. “We’re not seeing the trades,” Deuel says. “The used-boat market is extremely strong here because of the lack of them.” The San Antonio market is great for $6,000 to $9,000 boats, but once prices climb above $15,000, “forget about it,” Deuel says.
Smith Brothers Marine is seeing some interest in the very-high-end segment of 40 feet and above, but the 25- to 35-foot range is still quiet. “There are no more leftover boats, so people are coming in and some have sticker shock,” Smith says, adding that year-to-year sales have been flat. “They say, ‘I could’ve bought this boat a year ago for less,’ so they’re a little surprised. So instead of buying a 22-footer, they’re buying the 20.”
He wonders whether the interest void in the cruiser segment is a fundamental shift. “Maybe people don’t have the lifestyle to support weekend cruises anymore and just want dayboats,” Smith says. Still, the popularity of used cruisers indicates interest is strong, but that prices remain the deterrent, he says.
Kreuter says good used boats are in such high demand on Long Island that as he was hitching a customer’s boat to a trailer to take it to the dealership and sell it, the boat owner’s neighbor came out and began asking questions. Before the boat had moved an inch, the neighbor had written a check for the owner’s asking price.
Brokerage has been up in triple-digit percentages at Blue Springs Marine, Siems says. Of those sales, about 80 percent were to people new to boating.
Feedback on lending seemed inconsistent around the country. More customers have been paying cash for boats in their Northeast dealerships, Kreuter and Lofgren say.
Some local banks and credit unions have approached Moriches Boat & Motor to solicit loan business, Kreuter says. When the dealership sends business to those local banks they are still cautious, but lending more freely, Kreuter says.
Only about 25 percent of new-boat buyers want to borrow money, Lofgren says. Some of his customers had been making fast cash playing the stock market but lost some after the most recent dip.
Blue Springs Marine is also seeing more approvals, Siems says. Local lenders in the Kansas City area were offering more wholesale opportunities. But down in the Ozarks region wholesale restrictions are still tight, Collins says.
“The banks don’t want to finance any [used] stuff over 10 years old,” he says.
Supply chain issues
The most common dealer complaint was not a lack of consumer interest in new boats. It was the inability to get customers what they wanted from builders and suppliers. “Our biggest problem that we’ve faced this year, which is the same as last year, is supply chain issues,” Siems says.
Builders have tried to increase boat production, but in many cases their suppliers have not also ramped up, Siems says. “The customers we’re seeing realize inventory’s low everywhere and all the leftover and good deal boats are gone,” Siems says. “People realize if they want it they better buy it before it’s gone.”
It has been more difficult to get inventory at Canon Marine because suppliers will only fill actual customer orders, Gouveia says. “It’s definitely a challenge in terms of accessories and motors and lubes,” Gouveia says.
Outboard engines are in demand, but her Yamahas have been even harder to get after the tsunami and earthquakes in Japan. “Even orders we put in at the beginning of the year, [manufacturers] weren’t able to fill because of the tsunami,” Gouveia says.
Simmons does not expect to get Yamaha outboards at his Mississippi dealership until the fall because of how the disasters have affected the supply chain. “It’s in all different areas, whether it be Yamaha or Mercury,” Simmons says. “We looked at taking on Ranger or Triton, and they changed ownership, so their production’s slow. With a lot of pontoon companies, production is slow.”
One customer decided against signing a deal on a pontoon boat he wanted when he learned he couldn’t get the boat until August, Simmons says. He says he orders cautiously because he doesn’t want to wind up in July, the beginning of the new model year, with “last year’s inventory,” but it is a difficult line to walk, especially with such long lead times, he says.
“That’s what’s wrong with the marine industry now,” Simmons says. “Sales are so unknown, availability is so unknown, so it’s kind of a lose-lose sometimes.”
3A stockpiled some parts after the disasters in Japan, anticipating a parts shortage this fall as people prepare for winterization and storage. “I had a boat on order from Hydra-Sports that I couldn’t get a 4-stroke motor for,” Lofgren says. “We finally wound up working our tails off and finding one.”
Politics and gas prices
Simmons still gets free freight from some companies, but now he gets charged a fuel surcharge on shipments. Some dealers seem less worried about spiking gas prices and unrest in the Middle East and Northern Africa than they are about political strife at home. The political landscape has become so polarized and charged domestically that some worry it’s hindering a true recovery.
From anger over prospective tax breaks for oil companies to anger over proposed tax increases for people earning more than $250,000, dealers, like most Americans, span the political spectrum. “People want a recovery to happen, and the economic outlook won’t allow this recovery to happen,” Lofgren says. “We may well have to wait for a political change to evoke a real recovery.”
As for gasoline prices, “People just take shorter trips,” Smith says.
This article originally appeared in the July 2011 issue.