The mood among boat dealers is shifting. Two years on from the historic, Covid-fueled rise in demand for boats, the tide is beginning to turn.
“Selling boats is definitely harder,” one dealer told our team here at the Marine Retailers Association of the Americas, “and the position of strength is just starting to swing back to the customer. It’s still early, but the interactions and conversation are beginning to change.”
Another told us: “We saw an overall decline in May sales, in both dollars and units. Sales traffic is down, as are leads and website visits. Deals are becoming harder to close, credit issues are popping up, and one customer walked this month due to interest rates.”
In MRAA’s monthly May 2022 Pulse Report, which is produced in partnership with Soundings Trade Only and Baird Research, another dealer commented: “Sales activity is still decent, but deals are getting tougher. Order-taking days are in the rearview mirror. Product quality and parts shortages are making deliveries more challenging, and stressing our people and schedules. I really do not want the cure for all of this to be a major decline in sales.”
Making those hard-to-close sales even worse, the number of sales leads coming in is plummeting, and not just to pre-Covid levels. We’re seeing reports of leads being around 50 percent of what they were in 2019.
If dealers aren’t tracking this information themselves and paying attention to what it means for their business, they’re putting themselves at risk. As this inflationary period and the corresponding economic inputs drive up boat prices, interest rates and fuel costs, the sentiment among dealers crossed into “unfavorable” territory early this year. It has yet to recover. It’s part of a long, slow decline in dealer sentiment since the indicator peaked in summer 2020.
The accompanying graphic (pulled from that same Pulse Report) shows how dealer sentiment, both short- and long-term, has crossed into “unfavorable” territory for just the third time since the MRAA began tracking it in 2013. The other two times were 2019, when inventory levels climbed too high, and March 2020, when businesses were shuttered because of Covid-19.
“If we are not in a recession already, then we are quickly heading there,” another dealer wrote in the Pulse Report.
Whether you’re a believer in a forthcoming recession or not, there’s no denying that market dynamics have changed, and not for the better. While I don’t want to contribute to some self-perpetuating market slowdown, I do want to note that these warnings signs are important reminders that dealers need to solidify the fundamentals of their businesses for a rainy day.
Think about it this way: In the movie Twister, the stars face a powerful tornado that destroys everything in its path. They survive a direct hit by anchoring themselves to pipes that run 30 feet into the ground. The question dealers should ask themselves is: What will you anchor your business to in order to survive whatever storm may be on the horizon?
There’s no denying that the past couple years have been fantastic. High demand, coupled with little to no inventory costs, drove dealer profits to record heights for many. As that environment slows and sales become more challenging, what will operations look like?
Will systems and processes be better than they were in 2019? Or will bad habits begin to surface and hold businesses back? Now is a good time to ensure that sales teams are polished when it comes to nurturing and closing leads. Dealership owners have reported salespeople who have, in some respects, forgotten how to sell after a couple years of taking orders. How will sales remain strong as inventory begins to climb?
Similarly, there’s work to be done in service departments. With the insane demand and pressure on service departments during the past two years, dealers need to ask whether their team has become better or worse. Has the department’s efficiency and turnaround time improved? Have technicians learned how to improve scheduling, prioritizing and ordering of parts? Can service departments carry the business if there’s a significant reduction in sales?
Right now is the time to focus on anchoring every business to strong systems and processes. Take a step back, identify bad habits, and begin building a plan to correct them.
At the MRAA, we have numerous options to help — ranging from free publications to silver-level memberships that include more than 200 dealer-specific courses. We also run Dealer Week, which includes the latest in dealer-training programs; and Dealership Certification, where our consultants help to ensure that systems and processes are current and sound. In fact, the MRAA’s entire reason for existence is to help dealers run stronger businesses.
No matter if the sun keeps shining or a rainy day ensues, no matter if there’s a brief rain shower or a Category 5 hurricane, every business is better off with a strong foundation of proven systems and processes to anchor itself. Make sure they are in place before the marketplace becomes more challenging.
This article was originally published in the July 2022 issue.