In their efforts to keep inventory levels under control, boat dealers say they are ordering fewer 2009 models than they normally would — some taking up to 40 percent fewer units than they might in a strong market.
“Their inventory levels have built up,” says Phil Keeter, president of the Marine Retailers Association of America. “Back in March and April, when they were selling a little bit of stuff, it looked like levels weren’t going to be too bad, but then when we kept getting flatter and flatter and flatter, the inventory that looked like it was manageable at one point in time; now that inventory is larger than what it needs to be.”
Aged inventory — product that is a year old — has built up, Keeter says, estimating that in some cases it’s up to 25 to 30 percent. Floorplan lenders, he says, like to stay below 10 to 12 percent.
Thom Dammrich, president of the National Marine Manufacturers Association, says most boat makers he’s spoken with have reported lower ordering levels from their dealers.
“When you go into a cyclical downturn like we’re in, we sell less boats, so dealers order less boats,” he says.
An ongoing process
Many of those dealers who say they have acceptable inventory levels have spent the last couple years carefully controlling the numbers of units they buy and adjusting as the economy dictates. And they, too, plan to purchase fewer 2009 models.
“The situation the marine industry finds itself in is not one that happened overnight,” says Larry Russo Sr. of Russo Marine, a Sea Ray and Boston Whaler dealer in Massachusetts and Rhode Island. “If dealers have been paying attention to the changing times starting three or four years ago, they would have ratcheted down purchase commitments to ensure that inventory levels would meet demand and not exceed demand.”
Even so, says Russo, he expects to order about 20 percent fewer 2009 units than he purchased last year, despite experiencing a 33 percent increase in business over last year.
Luke Kujawa of Minnesota-based Crystal-Pierz Marine says his inventory levels are better than they have been in years.
“We curtail, internally, our aging inventory, making it very saleable and for good profit,” he says. “We have ordered less based on our projections and our self-imposed inventory turn requirements.”
Crystal-Pierz closed six of its 12 stores this summer in response to what Kujawa calls the worst market he’s seen in more than 20 years in business.
“If not for the store closings, we would be in perfect inventory position. With the closings, the units we have need to be absorbed by the continuing locations inflating their inventory a bit,” he says. “It is still in pretty good shape.”
Selling mostly 2008s
Tom Stidham, of Norris Marine in Norman, Okla., says his inventory levels are “within the acceptable range,” adding, “If I have one [boat], I have one more than I want this time of year, but we’re on par with prior years.”
Stidham, who sells Bayliner, Tracker and Crownline, also ordered fewer 2009 models, and says he’s still selling mostly 2008s at this point.
“We’re definitely going to let the market guide us,” he says. “We’re trying to support our manufacturers as best we can in a tenuous market, but we’re in a reasonably good inventory position.”
Stidham also noted that his region seems to be in better shape than most going into the fall.
Alan Bohling of Seattle Boat Co. agreed that the region in which a dealership does business has a large effect on is inventory situation. The Seattle area, he says, had cool weather through June, which is normally a peak selling season.
Due to a “perfect storm” of cool weather, high fuel prices and the general economy, Bohling says his business has been off 40 percent this year — even with adjusting his orders down 25 percent. A decline of that magnitude is unprecedented for him, and he, too, will be ordering fewer 2009 models.
“To me, a 40 percent drop in one year seems nuts,” he says. “I’ve never seen it — never in the history of 25 years of being in the boating business. I’ve never seen a year where it’s dropped that dramatically; 20 percent, 18 percent, 21 percent — OK, I can deal with any of those, but 40 percent was just an anomaly.”
Cut by half
Joe Lewis of Mount Dora Boating Center and Marina in Florida says low-water conditions in his area have helped him keep his inventory under control for the last two years, but he’s still only ordered about half the boats he normally would for the coming season.
“Inventories are still very high, particularly here in Florida,” the Harris FloteBoat dealer says. “This season was just dismal.
Even Clearwater, Fla.-based MarineMax, the nation’s largest boat retailer, is drastically reducing orders. In a July conference call with analysts, company executives said they planned to order about 40 percent fewer 2009 models. MarineMax has 88 retail locations in 22 states.
Dammrich says most manufacturers he’s talked to have cut production significantly to cope with the reduction in orders from dealers.
“Some manufacturers are doing just fine, but I would say they are in the minority,” he says. “I think big and small (manufacturers), both are experiencing a decline in sales at the moment, and they’re all doing the same kinds of things to control costs: reduce head count, eliminate waste and make it through.”
Most dealers say they haven’t been feeling any pressure from their manufacturers to take on more units than they want, though Keeter says he’s heard of instances where that has been the case.
Dealers, for the most part, praised their manufacturers for the shutdowns this summer that cut production in response to the downturn.
“They’re doing the same thing we are,” says Stidham in Oklahoma. “They’re trying to make an inventory correction so that we don’t get this thing totally out of balance. You can manage 10 and 15 and maybe 20 and conceivably 25 percent variation, but things that end up being 30 and 40 percent are difficult to manage your way out from, from an inventory situation.”
Learning from the past
Russo, the Sea Ray and Boston Whaler dealer, likewise praises Brunswick Corp. for shutting down plants this summer to clear out the pipeline.
“Anytime a company can shut off the supply faucet, the marketplace benefits because it gives everyone a chance to catch up,” he says. “Brunswick, in some circles, has been criticized for their plant shutdowns and their layoffs and furloughs, but that’s exactly what had to happen in these changing times.
“If they didn’t do that, they’d be sitting with way too many boats, trying to force them down our throat,” says Russo. “They’d have to discount the boats for us to even be interested in buying them, and then you end up pushing them out into the marketplace and making less margin, less profit.”
Bohling, who sells Cobalt, Cobalt Yachts and Sunseeker yachts, says he’s seen a major difference in manufacturers’ response to this downturn than has been the case in past market slumps. For example, he says, Sunseeker understood when he recently canceled an order for a 62-foot boat just before production.
Manufacturers he’s worked with in the past didn’t always have the same attitude, he says, with some refusing to allow dealers to reduce orders.
“The difference this round is that nearly every manufacturer has aggressively adjusted production, and they have learned from the past that just continuing to build boats and push them down dealers’ throats is not going to help the industry,” Bohling says.
Looking for more help
Still, some say they’d like to see more support from manufacturers.
“Some of the dealers I speak with would like to see the manufacturers stepping in with a little more support to help them through this rough patch, particularly when it comes to the interest they are currently paying to GE and those guys,” says Lewis. “It seems there’s no relief coming.”
Lewis, who is looking for new boat lines to carry, says he’s been getting calls from manufacturers looking for new dealers.
“Opening up a new dealer that has no inventory is pretty attractive to them at this point in time,” Lewis says.
Keeter says this is a situation that frustrates him, although he’s not surprised by it.
“You’ve got a number of dealers out there that aren’t going to take more product because they have enough,” he says. “That means [the manufacturer] has to find someone to sell to, so if he can’t sell to his existing base, why not go get some more people. I think that’s really, really dumb. They need to protect the dealers they have.”
Keeter would rather see manufacturers help dealers give rebates to customers, or assist them in other ways.
“The most valuable thing that a dealer has right now is his customers,” says Keeter. “The most valuable thing that a boat manufacturer has is his customers, and those are dealers.”
This article originally appeared in the October 2008 issue.