Dealer sentiment improves in August, but remains in negative territory

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More dealers reported declines than growth in new boat sales for August, according to a survey asking about retail trends, with 42 percent saying they saw sales weaken versus 31 percent who grew sales — however, trends improved compared with July, when 53 percent reported declines and 29 percent saw growth.

Some dealers said better weather had spurred sales, while others said they continued to struggle to close deals, according to a survey that Baird conducted in conjunction with the Marine Retailers Association of the Americas and Soundings Trade Only.

“The customer finally decided now is the time to buy,” one dealer wrote in the Pulse Report. “Unfortunately not enough time to make up for a slow season.”

In contrast, another dealer wrote that the hot spot in the economy continued to elude his part of the country, adding: “The fear now is that the consumer has started to believe their financial statements and not those that are hyped in the media, resulting in a serious slowing in sales across the board.”

Government action and inaction were cited as the main business headwinds as actual weather across the country improved. Sentiment also improved, but remained in negative territory both short- and long-term. The outlook on short-term conditions was 44 versus 34 in July, and the three- to five-year outlook was 46 versus 36 in July. Anything below 50 is considered negative.

Retailers cited several concerns, including political tension, tariffs, lack of or too many manufacturer incentives, poor product quality, recession concerns and rising boat prices.

“We have seen credit quality dropping sharply in the last 12 months,” one dealer wrote.

Another stated: “Inventory levels are too high moving into fall season. Have to really focus on 2020 models and what to order. Current new boat margins are shrinking quickly. Sales demand is fading.”

The 86 respondents were asked what they considered an entry-level boat in their markets, depending on whether they were in freshwater, saltwater or luxury-yacht markets.

Of the 54 dealers in freshwater markets, 38 said entry-level boats cost $20,000 to $40,000, though more leaned toward the higher end of that range. Seven said they cost in the $41,000 to $50,000 range, and nine said they were $51,000 to $100,000.

Of the 27 coastal and saltwater respondents, 10 said entry-level boats were in the $20,000 to $30,000 range, five said they were $31,000 to $40,000, and six said they were $41,000 to $50,000. The remaining six cited a price above $50,000.

“Manufacturers are raising prices too much, losing a lot of people that would have bought when products [were] much lower,” one retailer wrote.

Another stated: “Program margins are too low for the dealer to remain profitable. Pricing steadily increasing — with little change in content — much faster than inflation or consumers’ income.”

New boat inventory remained elevated, given softer retail earlier in the season, according to Baird. However, inventory comfort improved in August, “potentially a key inflection after four months of worsening ratings,” the report states.

“Our checks suggest trends improved in August, but the season is near its end,” the report added. “The level of retail activity appears supportive for manufacturers to work down inventory levels. Net, the 2019 season was unable to recover from a poor start, but we believe dealers can clear inventory through the balance of the year to set up a better 2020.” 

This article originally appeared in the October 2019 issue.

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