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New business models will emerge from recession

Regardless of who or what you read these days, virtually everyone agrees business is being permanently changed by this brutal recession.

Exactly what the boating industry will look like in the next year or two isn’t clear, yet. But big changes are imminent. For example, there will be less dealers (and manufacturers) in the business. For some time we’ve needed to rid the industry of builders of junk boats and dealers who think customer service is an anathema, anyway.

But what might be included in the new business model of those who survive? For one thing, dealers will be in a stronger position when it comes to “signing up” to represent manufacturers. With fewer dealers, manufacturers will have to “deal” to get needed representation in many markets. And, it will start with the influence of the just-passed legislation in Alaska that has suddenly become the yardstick for dealer agreement provisions. Couple that with the manufacturers’ need to replace lost representation and dealers can be more resolute than ever about getting balanced dealer agreements.

Even more interesting will be the likely changes in the way dealers will inventory boats. Survivors will have learned a painful lesson -- that this industry’s business model was previously based on wholesale shipments and the dealers’ credit worthiness. As a result, dealers have been assuming the higher risk inherent in meeting builders’ demands to inventory. That won’t work anymore.

After this blood-letting recession, the needed shift from wholesale as the measure of success to retail will finally happen. For example, we now see it’s unsound for dealers to stock five colors of the 20-foot ski model! Instead, the new business model will see dealers stock only one, perhaps two colors and order any other color for a buyer. Indeed, how many colors of a 20-foot ski model does the market need, anyway? It now seems reasonable that producing just one or two colors will get the job done in the future.

Taking the idea of reducing dealer risk by reducing inventory levels even further, the time has come for dealers who have traditionally stocked large cruisers (say, 30 and up) to push back from the table and start dieting. It’s now painfully obvious that the cost of stocking cruisers makes for a bad business model. Survivors aren’t likely to jump into that game again anytime soon. So, builders will doubtless have to consider stationing cruiser models in selected locations around the country so dealers can fly prospects to them. Besides, going forward, both the costs and availability of floor plan funds seems certain to rule out large inventories at the retail level.

In turn, manufacturers are facing a reinvention of their production and profit models with post-recession eyes. The market, wholesale and retail, will not be returning to the “same old.” It brings back memories of the recession and luxury tax debacle of the early ‘90s. That slashed our industry’s sales in half. And, even after that recession ended and the tax repealed, we never came all the way back to the sales highs of the late ‘80s.

Today, here we are again, mired in a similar sales drop in a worse recession. When this dust finally clears, and it will, we are not likely to recover all the losses we’ve again experienced, at least not for many years. So business models changes on all levels of our industry will be the mark of the survivors.



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