These three not only stayed afloat, they built a foundation for the future
As the industry begins its recovery from the recession, it's apparent that the economic impact of the last few years has been enormous on boat dealerships.
Actual dealership closures are difficult to track, with estimates ranging from 800 to 1,400, according to Phil Keeter, president of the Marine Retailers Association of America. However, he adds, there are many that may no longer sell new boats but still run a service department, sell brokerage boats or have marinas. So Keeter estimates about 500 dealers have closed their doors and another 400 to 500 are open but no longer selling new boats.
With the primary selling season well under way, Keeter says sales in general are slow. The good news, however, is inventories are way down. Manufacturers putting off the introduction of 2011 models until fall may be the key to helping dealers this season, he says.
In the face of much discouraging news, there are also some bright spots. There are dealers who have found ways to survive the recession and, in some cases, thrive by finding new ways of doing business or shifting their focus from new-boat sales to other products or services. Soundings Trade Only interviewed the operators of three such dealerships: Colorado Boat Center, Midwest MasterCraft and Prince William Marine. Here are their stories.
Colorado Boat Center
Nancy and Tom Smith, owners of the Colorado Boat Center in Loveland, Colo., say prudence, loyalty to employees and customers, and efforts to provide quality service and a great boating experience have kept them in business through the tough times. The dealership sells the Glastron, Crestliner, Moomba, Supra, MB Sport and Hurricane brands.
"With so many dealers who have closed their doors during the past few years and many others cutting costs that give the impression they won't be in business much longer, it's important for consumers to know that they are doing business with a dealership that is going to be around long after the initial sale," Nancy Smith says. "We spend a great deal of time selling the value of our dealership and have refrained from getting involved in price wars with our competitors, which can send a message of desperation to the consumer."
Even before the recession, the Smiths had to deal with hardships, courtesy of Mother Nature. "We've basically gone through 10 years of economic crisis in the boating industry in Colorado, because when there were a couple of years in the mid-2000s - years that across the country they had an upswing - we were in the middle of a 100-year drought," says Smith.
Despite the challenges, the Smiths, who opened the dealership in 1990, say they have never had to lay off an employee and actually added two people in the last year in their service and parts departments. With the support of staff, all wages have been frozen for the last three years, she says, but employees appreciate the security of knowing they have a job and a steady income.
They also have kept costs down by refinancing their property at a lower interest rate, taking advantage of partnerships through the MRAA and manufacturers, and renegotiating advertising and marketing products and rates.
"One thing we've been real adamant about through this recession is whatever we do to cut back or try and reduce expenses, that kind of thing, we have worked real hard not to cut in areas that are going to be noticeable to the consumer," Smith says.
"We are stepping up our service," adds Tom Smith. "That's where we're seeing a lot of new business because of all the dealers that have gone out of business." The hope is that those service customers will eventually turn into boat-buying customers.
Tom Smith says sales are better now than at this time last year, and he's seeing fewer people trying to "beat you up" on price. "A lot of the other boat dealers have sold out of their non-current boats and so [consumers] aren't hearing from other dealers that there's great prices out there and now's the time to buy. So when they're not hearing that, they're not coming in expecting that," he says.
"We're able to make some profit margin on the boats we're selling," he adds.
Through early May, the dealership had been dealing with bad weather and the Smiths are hopeful that once the season arrives for good, the buyers will be in. "This is the time of year that we normally gear up and start selling a lot of boats," Tom Smith says. "I think our January and February - and even December last year - were very much improved over last year and so we see the trend is there for people to buy boats. But because of the weather we're just not getting them in."
Retail financing remains tight and the Smiths credit their customers' mostly upper-middle-class status for keeping it from becoming a larger problem for the dealership. They say they don't have a lot of credit issues, but acknowledge it's tough and they don't see the situation changing anytime soon.
So what's kept them in business as others have closed their doors? Having cash on hand, providing quality customer service and paying the bills on time. "We take care of our obligations," says Nancy Smith. "We pay our bills and that has really kept up a good relationship with our manufacturers and our vendors, and so they trust our decisions. They know that we're going to do right by them."
On the Web: www.coloradoboatcenter.com
Andy Larson, owner and general manager of Crystal, Minn.-based Midwest MasterCraft, says sales are still slow, but he's confident things are on the upswing. The pessimism that was pervasive among consumers a year ago isn't there anymore, and he's seeing a more optimistic customer in his showroom.
"We're up a fair amount over last year. We're actually kind of lean on inventory," he says. "Things are still slow on the sales side a little bit. I think the consumer saw some of the deals that were available when there was sort of a glut on the market, and some of those people that didn't buy are still out there looking and the deals that were available then are not there now."
Larson says improving weather should help sales. "It's amazing that people buy $70,000 boats because it's sunny and warm outside, but it's absolutely true," he says.
Larson sells only the MasterCraft line, but has what he calls the Midwest's largest water ski and wakeboard pro shop. He says the shop helped business during the downturn by offsetting some of the weakness in boat sales. It's particularly growing online, he says, noting that the Internet, social media and other advances in technology have been a boon to his business.
"I think embracing technology is going to be a big key going forward," Larson says, noting he's active on Twitter and Facebook and sends about 15,000 e-mails a month. This summer, he's bringing on two unpaid interns to work on social marketing and expand the dealer's presence on the Internet.
He also stresses the importance of going beyond a "canned" Web site that any dealer can buy, and making sure a user search of certain keywords will call up the site. There was a point last summer when his dealership "Googled" higher than MasterCraft, and Larson says he took a picture of the screen to remember the day. "We sell a ton of stuff online and the site costs us a few hundred dollars a month," he says. "That's the best marketing in the world."
Larson says he's been profitable since buying the company in 2002. He says his philosophy of being fiscally conservative and keeping cash in the business has helped him during the downturn and reinforced the importance of those practices. They were especially handy when Larson switched from GE to a local bank for wholesale financing. The switch, while an arduous process, will save him about $75,000 this year. That savings comes from avoiding GE's 2 percent capital access fee and a 3.5 percent lower rate that does not go up if inventory ages.
The recession also made Larson look closer at the models that were selling and scale back on some of the "softer models" that don't sell as well. "We've really just been more particular about models, rather than numbers," he says. "We have put our inventory dollars into more of the sure things."
Larson has also been aggressive about clearing out older inventory, something he might not have pushed in better economic times. As of early May, he had two 2009s left and the rest of his boats were 2010s.
"In my opinion, in the past, most manufacturers looked at [a boat] as being sold when it left their facility and went to a dealer, and certainly this last year and a half has gotten them thinking that it's sold when it's actually left the dealer and gone to the owner's home," he says, commenting on the changing relationship with his manufacturer.
One of the other big changes brought on by the economic climate was the decision to look at the service department as a separate business unit within the dealership. In the past, Larson says, the business was primarily driven by sales.
"Thankfully, over the recession, customers were still using their boats and storing them and needing service," he says. "Some of the people who maybe would have bought a new [boat] - but the times were what they were - they spent more money bringing theirs back into better condition."
On the Web: www.waterskis.com
Prince William Marine
Communication is key for Carlton Phillips, who has owned Prince William Marine for more than 25 years. There are sales meetings four times a week, company-wide meetings once a week and regular management meetings. Ask him at any time where inventory stands and Phillips can tell you.
"I'm a firm believer that you can't make decisions without information," he says. "Nobody should be left in the dark. I don't hide prices, the cost of boats, from the sales department. They know what the boat costs; they know what we make on it. There's no hidden agenda here. It's all wide open."
The Woodbridge, Va.-based dealership, which has been around since 1958, sells Sea Ray boats - a company Phillips calls a "great partner." In addition to the dealership, Phillips also runs a marina with 340 wet slips and about 270 spaces for dry storage. The facility, he says, provides a "country-club like" atmosphere for his consumers and keeps them coming back. You'd be hard-pressed to go two weekends without a special event.
Phillips' basic philosophy is simple: He knows he sells a product that no one needs, and if you don't take care of the customer they're going to find 1,000 other things they can do with their money. "We're professional," he says. "We do the job right. We underpromise and overdeliver. I'm here seven days a week, eight to 12 hours a day."
Used-boat sales are "very, very good now," Phillips says, and new-boat sales are a "little off" from a few years ago. "Last year we were down 20 percent from the year before, and the year before we were down 18 percent," he says. "I think '08 was the first year we had a decrease in business. Every year before that we had a double-digit increase because we invest in our business. Everything we make we put right back into the business."
Phillips adds: "I think it will be up this year over last year. Not much, but I think it will be up."
About 20 to 25 percent of the dealers in his area went out of business during the downturn, he says, attributing part of his increase in sales to a loss of competition. Other keys to his success include a certified used-boat program and a partnership Sea Ray has with Costco that allows him to display boats at the retailer, which he estimates will bring in 40 to 50 new-boat sales.
The used-boat program allows him to bring value to used product for his customers. "We do everything here to eliminate a problem," he says. "People buy boats to get away from problems."
Phillips says retail financing is improving a little and is maybe 10 to 15 percent better than it was at the end of 2009. But, he says, it's still about 50 percent more difficult than it was in years past. "We used to be able to approve a $250,000 loan on our showroom floor for a customer. ... I don't think we could approve a 15 cent loan right now," he says, though his stable business has allowed him to avoid an increase in floorplan financing with Bank of America.
In general, Phillips says some of the simplest things he does around the dealership may be some of the most important in keeping customers coming back. "Every light's on, everything is bright, the grass is cut, the fence is painted," he says. "I want to instill that secure feeling in someone who comes in and invests with us."
On the Web: www.pwmarina.com
This article originally appeared in the June 2010 issue.