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The Strategy You Wish You Always Had

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MRAA_July-New-Boat-Inventory

It’s like clockwork. In May 2016, May 2017 and May 2018 alike, boat dealers across North America agreed, for the most part, that new-boat inventory levels were too low. You can see this in the accompanying image, which was pulled from the monthly Pulse Report, published by the Marine Retailers Association of the Americas, Soundings Trade Only and Baird Research.

The first year in that cycle, the 2016 calendar year, would mark the sixth consecutive year of increased boat sales following the Great Recession. It wouldn’t be until 2019 that we would see year-over-year boat sales decline — foreshadowed by the fact that the 2019 selling season was the first time in four years that dealers did not report a shortage of inventory in May.

In hindsight, inventory levels rose unseasonably high by fall of 2018, then entered 2019 at the highest point the Pulse Report had ever noted them, and then grew to the point where 80 percent of dealers reported that inventory was too high. In the fall of 2019, the buzz was that dealers and manufacturers needed to work together to begin reducing the number of boats in the pipeline.

Then, in March 2020, just as a successful boat show season was winding down, Covid-19 shut down businesses at the same time new-inventory boats were being offloaded onto dealer parking lots. The panic throughout the industry was reminiscent of 2008-2010, when 35 percent of boat dealers went out of business. Not unexpectedly, one dealer forecasted a rather ominous future: “It’s going to be a bloodbath. We’re going to lose so many dealers.”

Three months later, that same dealer — and many others across North America — were experiencing record sales. The inventory marker plummeted from 80 percent of dealers running too high in March to 80 percent running too low by June. And now, a year later, the inventory drought is at its worst, with little relief to come.

Unlike the 2016-18 cycle, the current inventory situation will not correct itself anytime soon. Barring some economic collapse and thousands of simultaneously canceled boat orders, we won’t see “normal” levels of inventory stocked in dealerships until late 2023, perhaps even 2024.

In July — technically the first month of the 2022 model year — we were already getting reports of dealers being sold out of all 2022 boats. With every new conversation, the forecast moves further into the future. Dealers continue to presell boats, and manufacturers struggle to overcome supply-chain issues.

But when inventory levels do begin to stabilize, will you be ready?

This little history lesson means nothing if you don’t start considering how you’ll manage your inventory going forward. If you can take a moment to reflect on what you were thinking when inventories were creeping up in late 2019, or during the extremely high inventory environment of the Great Recession, then you can envision your ideal inventory-management process.

I often think of a dealer friend who told me, in the midst of the Great Recession, that if he had known previously what he had learned through the downturn about managing costs, he would have been much more efficient and made a lot more money. With Covid-19, let’s be honest: We got lucky. Instead of the sales bloodbath that was predicted, we had the greatest boom this industry will likely ever see.

While that’s great, the downside is that during the upswing, we start to feel invincible. Bad habits creep in. We start to believe that we don’t need to spend money on marketing. Our salespeople don’t have pressure to move boats off floorplan. We put less emphasis on lead nurturing. And we’re at risk of our sound inventory management practices becoming a forgotten science.

Don’t let these good times lead you to bad habits. When the flood of new buyers begins to recede and inventory levels start to rise, it will be too late to create your strategy. But you can be ready for it if you start preparing now.

You could utilize better metrics to help manage inventories. Perhaps you want to become a cash buyer or begin to nurture the right process that will lead you to higher inventory turns. Maybe better market intelligence could help you stock smarter. The right decisions made today could make the difference between the lower profit levels of old and maintaining the incredible profit levels you’re seeing now.

Take the time, while your showroom is empty, to begin building the inventory management strategy you wish you always had.

Matt Gruhn is president of the Marine Retailers Association of the Americas.

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