With nearly as many boat brands as prerecession but far fewer dealers, builders are going all out to recruit the crème de la crème
No one knows how many boat dealers the industry has lost, but everyone knows the number is high. And roughly the same number of builders are vying for a share of a market that's a fraction of the size it was five years ago.
The result is a frantic competition among builders to find the best remaining dealers to represent their brands - particularly builders that have lost their retail foothold in major markets. "Manufacturers are actively looking for strong dealerships, and with diminishing numbers of strong dealerships, it's gotten to be a rat race," says Ed Lofgren, owner of 3A Marine Service in Hingham, Mass., and president of the Massachusetts Marine Trades Association.
"There's a scramble going on," says Lofgren, who recently added Hydra-Sports to his lineup. "It really is a dealers' economy in that way."
By some estimates the industry has lost about 40 percent of its new-boat dealers. Some suggest that the number is even higher. In Massachusetts, about two-thirds of dealers have stopped selling new boats, Lofgren says. He estimates that the Bay State will have 30 new-boat dealers early this year, down from more than 90 in 1990.
"I believe that's indicative of what's happening throughout the nation," says Lofgren, pointing out that Massachusetts' unemployment numbers have been lower than the national average.
The competition for dealers is fierce, says Phil Keeter, president of the Marine Retailers Association of America. He says the industry has 40 percent fewer dealers and 60 percent less demand for product than it had in 2007, but has roughly the same number of manufacturers. "When you put that together, that's a disastrous picture," he says.
Many of the remaining dealers have refused to take new inventory because they already have too much or they don't have floorplan money. "So you've seen manufacturers scurrying to find someone to sell their product to so they can keep their lines operating," he says.
With so many options open to them, Keeter fears that some dealerships have taken on too many lines. He hopes they will revert to handling only the brands that work best for them.
"With the slowdown in the industry, it's opened a lot of doors," says Peter Way, owner of Bourne, Mass.-based Cataumet Boats, which also has locations in Chatham, Mass., and Barrington, R.I. A Grady-White dealer for nearly 50 years, Way added Sailfish to his lineup in May.
"We had certain criteria about what meets our needs, and once we narrowed down what those criteria were in terms of sizes and power and quality level it created a surprisingly short list of possible candidates for us," Way says.
Cataumet had tried entry-level products with little success, so Way looked for a high-quality, yet affordable line. He also sought a privately owned company because he believes it makes for a more personal relationship. He wanted Yamaha power and boats in the 19- to 32-foot range, which account for the bulk of Cataumet's sales. Way says those requirements led him to Sailfish.
"I don't think we're unique. We're ultra-conservative in terms of adding products," he says. "Years ago, when the industry couldn't build enough boats, you as a dealer would take more risks, but now it's back to bread and butter. There's enough risk in the industry without dealing with a product that's on the fringe or dealing with a company that isn't as secure."
Legendary Marine, based in Destin, Fla., and Lofgren's 3A Marine Service in Massachusetts recently signed with Hydra-Sports Boats. Last year, Hydra-Sports was bought by MCBC Hydra Boats, a subsidiary of Wayzata Investment Partners, the owner of MasterCraft Boat Co. The MasterCraft reputation convinced Lofgren that Hydra-Sports would be a good fit.
"They are known for quality, and that's what we were looking for - quality and stability," he says. "They were a good line when Genmar had them, and they'll be a vastly improved company now that MasterCraft has taken them over."
Since the Hydra-Sports purchase early last year, MasterCraft president and CEO John Dorton - who holds the same title with MCBC Hydra Boats - says he has added 10 Hydra-Sports dealers domestically and five internationally.
"MasterCraft dealers tend to be more profitable than most anybody else in the industry. We just make it worth their while to carry our line," Dorton says, pointing to incentives and growth margins.
Despite the difficult economy and shrinking market, MasterCraft continued to grow market share in 2010, says Fred Pace, managing partner of Legendary Marine, a dealership with four Gulf Coast locations. The company has kept all of its engineers and has had more money to spend on research and development than most, Pace says. That will give Hydra-Sports an upper hand in product innovation, he says, and that's what his customers want.
Pace also was impressed that Dorton and others at Hydra-Sports embrace the boating lifestyle on a personal level, making them more tuned in to the hands-on boating experience.
"They're consumed with bringing new product to the marketplace as quickly as possible, and our experience is that today's customer is focused on new products," Pace says.
Just as important was MasterCraft's history of customer satisfaction, a value heavily stressed at Legendary Marine, says Pace, who also was drawn to the company's Internet presence.
"After being in this business 22 years, the last few years have been humbling, for sure," he says. "One thing that has rung true for our team is we have to be able to embrace change."
Like dealers, builders have grown increasingly picky about their partnerships. "Manufacturers might be scrambling for new dealers, but they are actually more selective than in the past," Way says.
They find that they do better sticking with a high-quality dealer than by adding a subpar dealer just to sell a few more boats, he says. "They look at it as, the sheet is blank."
Sailfish has added 15 dealers in the past year and has been targeting high-end outlets since September 2008, says Northeast regional representative Chris Lufkin.
"We upgraded our entire dealer network," he says. "We found respectable dealers in New England, Florida and the Mid-Atlantic. We also found Grady-White and Boston Whaler dealers that have high-end product lines, and Sailfish is the value play."
That strategy appears to have paid off. Lufkin says two of his new dealers accounted for 60 percent of Sailfish's sales in 2010, a year that saw sales double from 2009 levels. "Dealers are always looking for new opportunities," Lufkin says. "I think I was ahead of the curve, and I got lucky in a couple of instances."
Lufkin also wanted reputable dealers who did not undercut or sell into one another's territories, and he says that was the impetus for cultivating the new dealer network.
Dorton maintains that most new-boat sales are to upscale buyers and says that has helped attract dealers to Hydra-Sports.
"Our view is to have Hydra-Sports worldwide," Dorton says. "It was a bass boat back in the day, and it was the first boat I ever bought, so I had a real passion for the brand."
It had been moved around from plant to plant and "got lost in the shuffle of a big company," Dorton says. "But we have added no less than 40 innovations since we bought it," a fact not lost on prospective dealers.
"Our company is run by guys who fish and wakeboard and water-ski," Dorton says. "We don't go backpacking. We go get in our boats, and [dealers] appreciate that. They're smart people. They see the way we build the boat, and they're smart enough to discern a good process from a bad one."
Brunswick Corp. recently began to put some of its brands into dealerships with other Brunswick brands, a practice that had been taboo. But after losing dealers in key markets, Brunswick decided to go to its A list and have those proven dealerships carry the other Brunswick brands, rather than find a lesser dealer to sell them, company president Andrew Graves says.
"I think Brunswick, in its infinite wisdom, has done a tremendous amount of damage to competitors, given its ability to sign new healthy first-class dealers in prospective markets," says Larry Russo, owner of Russo Marine, which has three locations in the Boston area.
Dealer Russo recently added Bayliner, Meridian and Trophy to his lineup of Sea Rays and Boston Whalers. All are Brunswick brands.
The builders that have helped dealers through the recession have an automatic edge, Dorton says.
"We've spent a lot of time and money keeping the pipeline clean," he says. "We'll roll up our sleeves, put a suit on and jump on a plane and go talk to bankers on their behalf. We've worked real hard and spent a lot of money, so I think that word gets out."
Lufkin says he sells dealers on the Sailfish brand partly because he offers more support than some regional representatives. "I'm at their beck and call," he says. "I'm the guy who sets up the boat shows with the dealer. I'm there from show open until that dealer has left, and I'm there on Monday helping break down."
Lufkin believes dealers will come to expect that kind of support, and manufacturers that can't provide it will be in trouble.
Lack of support is why some brands that have had loyal dealers for decades have found themselves abandoned for other brands, Russo says. "You don't give up an investment like that unless there are real problems," he says.
The industry overall has made great strides in improving the historically strained relationships between manufacturers and dealers, Dorton says.
The recession may have helped. It's hard to make big changes when everyone's building at capacity, Way says.
"It's one thing to talk about it, and every dealer and manufacturer knew what should be done in terms of [making] a more equitable relationship," he says. "This is a fresh opportunity."
Even builders that had not done enough to support dealers have a shot at redemption if they have an honest, equitable plan moving forward and show dealers that their proposal has teeth to it instead of just more talk, Way says.
"There is a relatively small percentage of dealers set up to survive this," Dorton says. "Now they have to pick the right product line to get there, so hopefully they pick a good product line with good margins and attract the right buyer."
This article originally appeared in the February 2011 issue.