From Soundings Trade Only Today
Most boat dealers say they are ordering fewer 2009 models than they normal would, while at the same time most manufacturers have cut production to handle the reduction in orders.
"Their inventory levels have built up," said 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, then the inventory that looked like it was manageable at one point in time, now that inventory is larger than what it needs to be."
Some dealers are ordering up to 40 percent fewer units for the new model year. Even those dealers who say their current inventory levels are acceptable, are purchasing fewer 2009 models.
"The situation the marine industry finds itself in is not one that happened overnight," said 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, Russo said 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.
Tom Stidham, of Norris Marine in Norman, Okla., sad 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 this year, and said he's still selling mostly 2008s at this point.
Alan Bohling, of Seattle Boat Company, said that the region one does business in has a large effect on their inventory situation. The Seattle area, he said, 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 said his business was off by 40 percent this year - even with adjusting his orders down 25 percent. That’s an unprecedented drop for him.
Therefore, he too will be ordering fewer 2009 models.
Even Clearwater, Fla.-based MarineMax, the nation's largest boat retailer with 88 retail locations is drastically reducing orders this year. In a July conference call with analysts, company executives said they planned to order about 40 percent fewer 2009 models.
Most dealers said they were not feeling pressure from their manufacturers to take on more units than they wanted, though Keeter said he's heard of the opposite scenario as well.
"(Manufacturers are) doing the same thing we are," Stidham, in Oklahoma, noted. "They're trying to make an inventory correction so that we don't get this thing totally out of balance.”
Russo, the Sea Ray and Boston Whaler dealer, praised Brunswick for shutting down plants this summer to clear out the pipeline.
"Anytime a company can shut off the supply faucet, the marketplace benefits by that because it gives everyone a chance to catch up," he said. "If they didn't do that, they'd be sitting with way too many boats trying to force them down our throat.”
Wednesday, September 10, 2008
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5 comments:
I'm not quite up there yet in big boats. Right now I only have a Sevylor inflatable but I am still able to catch alot of fish. Maybe one day I'll be at this level to be on a boat to relax and not fish.
Follow the money trail... As a private investor in the used boat biz, I've been following this trend very closely.
Categorically speaking, a boat or yacht is only sellable to the extent that financing is available.
Over the past 6 or 7 years, a major portion of retail boat purchases have been funded (directly and indirectly) by way of rising home equity. As of mid-2007, this has all but dried up for the working middle class... While at the same time marine-specific lenders are imposing stricter qualifications on borrowers.
The problem is real. But fortunately, so is the solution. Follow along with me here for a minute:
A number of years ago I came across an excellent book by Robert Kiyosaki called Rich Dad Poor Dad. And it started me thinking about all the profits I’d created over the years… for the banks!
While I was out there working to pull equity out of the one-time sale of each boat – the banks were financing my buyers and as a result, usually earning many thousands of dollars on each transaction that I created for them.
Not one bank ever sent me a thank you letter.
I also realized that it was the banks who ultimately controlled much of my success or failure, by deciding how much money they were willing to lend my buyers on any given vessel, of course preferring to err on the conservative (ie. low) side.
But it gets even better. You see, when a vessel is depreciated to the point that she is no longer financeable at all, her resale value bottoms out and she becomes more or less available to the highest cash bidder – regardless of her capabilities, condition or remaining service life. The market is littered with perfectly good boats that fit into this category… 15 or 20 year old vessels being sold for pennies on the dollar.
These boats become ‘stuck’ because in a credit based society, very few individuals actually have the lump sum of cash available with which to purchase these vessels at anywhere near their formerly financeable, comparable values. Those who do have the cash, or access to it,often expect a big discount, or in other cases they are affluent enough that they might prefer to use that cash towards financing a newer model.
For us as investors, buying a fully depreciated boat or yacht off the discount, cash market is only as lucrative as our ability to solve the problem that put her there in the first place.
The good news is, it’s a relatively easy fix.
It was years ago that the scales fell from my eyes and I realized that the boats and yachts themselves were potentially mere 'vehicles' through which the creation of new money and credit could be created.
I would seriously encourage any investor or dealer to 'step outside the box' at this time. The old way of selling the boat and outsourcing (or referring) the finance arrangements will probably continue to spell much difficulty in the coming years.
The market is now dominated by those who can provide both the yacht and the financing, preferably 100% in-house, but with outside investors to carry the notes. There are intelligent, safe ways to structure these arrangements so as to sell each boat quickly and keep the cashflow moving.
editor@powerboatsforprofit.com
The boat business is not isolated from the current US economic situation.
My best advice is to do business with a dealer that has a long history of proven customer service and longevity in the boating industry.
The consumer should also be mindful of the Marine Industry Dealership Certification program, which holds dealers to a list of "best practices" that belong to only Marine Industry Certified dealers.
And lastly, buy locally, from a reputable dealer so that they can service your boat and motor needs long after the sale as this is a huge part of a successful relationship.
Dockgirl
Cannons Marina
Longboat Key, Florida
I would LOVE to sell motor boats! I have been boating all my life and have always been interested in all the varieties of styles and uses. Not to mention all the wonders of boating itself. I have always been interested in selling boats or yachts, but have not found it to be easy to break into the trade. I have been in sales for most of my adult life and have been a top performer the whole time. Now that I'm financially set, I would love to follow my passion and break into the trade. Does anyone out there know any tips, or have any connections I could contact? I'm 49 years old, excellent health, living in Portland Oregon. Resume available by request. Please help me pursue my passion. THANK YOU for reading my blog! vrisk@hotmail.com
With the rising price of fuel, the lack of funding from banks and the lack of confidence in buyers I believe that the cost of boating for the average Joe may be a pastime. I think there are enough boats on the market now to take care of the next two years of buyers. New outright sales will still be happening. Trades are going to suffer and dealers will not be able to put enough money in these boats to get people out. If one purchases a boat right now the plan should be to hang on to it for five to six years.
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