IBEX 2018: Industry hears about changing buyer behavior, e-commerce changes

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TradeOnlyRoundtable

Soundings Trade Only yesterday at IBEX hosted a panel of industry experts who focused on the fast-changing aftermarket. Editor-in-chief Michael Verdon moderated the discussion. Topics discussed included changing buyer behavior, new uses of technology among consumers, the continued impact of e-commerce on business and the movement of some companies into other industries.

Ron Japinga, CEO of Guitar Centers and former executive vice president at West Marine, started the discussion by noting that his company has moved beyond the “retail apocalypse” of several years ago.

“We discovered we had the same problems at Guitar Centers as we did at West Marine,” Japinga said. “We were in a male-dominated sector that was aging, without much of an ethnic balance and very few females that were enjoying the pastime.”

Guitar Centers, Japinga said, took an “omni-channel” approach of Web-based sales and in-store retail to grow its revenues. “We found that we didn’t have to increase the size of the footprint of our stores, but if we engaged them in the stores with more experiences, our sales went up,” he said. “We found when they wanted to learn more, they’d buy more products. It was very similar to the concept we were working on at West Marine.”

Freedom Boat Club chief executive John Giglio said his company grew after the last recession.

“The timing of the last downturn helped us dramatically,” Giglio said. “People still wanted to get on the water, but they couldn’t get equity from their homes and could no longer buy a boat. We offered them a more affordable, fixed-cost option.”

The company grew from 45 locations in 2012 to its current number of 171.

Giglio said that demographics of Freedom Boat Club members can be different, depending on the location of the franchise. “The average age of our members in our corporate locations in Southwest Florida is 65,” he said. “But in more of our urban locations, we’re seeing more millennials. We see the big difference between members and traditional boat owners as more of a lifestyle choice. Most of our members are not ready to plunk down the money for a large investment in a boat.”

Larry Russo, senior vice president at MarineMax in Boston, said that the customer has changed in the last 15 years during a period of declining boat sales. Russo said today’s boat buyer tends to be less mechanically inclined than in previous years, though the buyer is also wealthier because the average price of a boat has risen.

“The accelerating price structure on new products makes new boats less affordable for mainstream buyers,” Russo said. “When they can buy preowned, it satisfies the buyer.”

Russo noted that the number of dealerships has also fallen from 10,000 in the late 1980s to about 3,000 today. “In 1972, there were 19 Boston Whaler dealers in Massachusetts,” he said. “Now there are two. The whole fabric of the industry has changed. We’ve seen the dealer base slowly eroding, though they are now better dealers.”

Joe Lewis, owner of Mount Dora Boating Center and MRAA chairman, said consumers are now much more sophisticated and that one of the biggest challenges dealerships face is staffing. “We need to put into place more educational content to train dealership personnel,” Lewis said. “We realize there are no short-term answers with this, but the days of finding a technician on the street are over. We need to start recruiting workers at a younger age.”

“We just don’t pay enough as an industry,” Russo added. “You go to another industry, and they offer double the hourly wage. We need to have the courage of our convictions to raise our rates so we’ll be able to recruit these people.”

Lewis noted that one of the reasons people drop out of the boat-buying process is their perception that dealerships lack “transparency” in their operations and pricing. “That troubles consumers, and our research shows we’re losing 66 percent of possible new owners as a result,” he said. “Dealers need to become more transparent both with their operations and explaining the actual cost of ownership.”

Colin Puckett, head of seller marketing at Amazon Business, also noted a “cultural shift” in the customer experience. Puckett, who had worked for Northern Lights for 11 years before moving to Amazon, was most surprised about Amazon’s “customer obsession,” which extends to every part of the customer experience.

“In the marine industry, we seemed to be more focused on competitors or the technology around a new product,” Puckett said. “The question many businesses need to ask themselves is how they can innovate around the customer experience, and one way to do that is through transparency.”

Japinga said Guitar Center focuses on brand-building, in its retail stores and online. “We try to stay laser-focused both on our own brand and the brands we carry,” he said. “If someone can touch your brand in multiple places, it will help growth. We try to stay away from price and instead carry the best brands.”

He said e-commerce is the fastest-growing segment of the business, accounting for 27 percent of total sales.

Tom Schuessler, president of Land ‘N’ Sea, said e-commerce has become an increasingly important part of his company’s business but that a consistent service approach is necessary for both online fulfillment centers and brick-and-mortar dealerships. “Those customers both want a broad product selection with a deep supply of inventory,” he said. “So you have to have knowledgeable sales people and strong marketing materials that pull through to the consumer.”

Land ‘N’ Sea recently moved into the recreational vehicle market. “After a recent acquisition, we saw that there was room in the market for another competitor, so we added RV products to our line and then took a regional approach to distribution,” Schuessler said. “We launched operations in the Midwest and then moved into Texas, and most recently, we’ve set up a facility in Fresno, Calif.”

Schuessler says that an RV dealer “isn’t all that different” from a marine dealer. “They have different product selections, but at the end of the day they’re also looking for strong service and support,” he said.

Freedom Boat Club has launched a new club for recreational vehicles in Southwest Florida and plans to roll it out in other areas of the country. “We’re looking to expand the club concept beyond boats,” Giglio said. “Our research shows that boat and RV users are very similar. We’ve been limited by lack of access in marinas for our boating business. That shouldn’t happen with the RV business. All they need is a parking lot.”

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