Entry-level PWC surge may broaden category’s appeal
Put your ear to the ground and you might hear a faint rumble that indicates change is afoot. It could be just distant thunder, but judging by fresh data and industry chatter, it could also be a building groundswell that’s set to overtake the personal watercraft category.
After riding a wave of sales growth throughout 2012 and the beginning of 2013, the PWC category has been hovering at barely positive monthly sales growth, according to Info-Link. That could be set to change, however, as the innovative and affordable Sea-Doo Spark may unleash still-unknown responses from Kawasaki and Yamaha that aim to attract new and younger customers to revive the marine industry’s most adrenaline-powered category.
Spark heard around the world
Google “Sea-Doo Spark” and you’ll get 1.8 million search results. Read any marine trade journal or enthusiast rag, or walk the aisles of your local boat show, and you’ll discover that everybody in the industry is talking about the Spark — Bombardier Recreational Products’ new PWC that is the result of CEO Jose Boisjoli’s’s directive to build two PWC for the price of one.
While it’s the most attention getting feature, a shiny starting price of $4,999 isn’t the Spark’s only trick. It’s skinned in bright colors like Bubble Gum and Pineapple, and packed with innovations like its minimalist Exoskel architecture, Ergolock ergonomics and light-recyclable-and-strong Polytec exterior material that were all crucial to meeting Boisjoli’s goal. For comparison, Yamaha’s best-selling entry-level VX Sport starts at $7,999 and Kawasaki’s STX 15F Jet Ski begins at $9,699.
Based on exclusive interviews with Boating Industry, Sea-Doo has captured the attention of competing OEMs Kawasaki and Yamaha, which both suggested they may develop new entry-level PWC models in direct response to Valcourt.
But getting the attention of competitors isn’t enough, and Sea-Doo is embarking on a new marketing campaign designed to attract a younger, wider audience to personal watercraft — a category that has seen its average customer age rise to a not-quite-crotchety-but-close 47.
PWC sales in holding pattern
Like the rest of the industry, the recession dealt a cruel blow to PWC sales, but growth resumed in early 2012. After approaching 10-percent monthly year-over-year sales growth throughout ’12, the category is currently in a holding pattern that may be set to change for the better.
Data from Statistical Surveys Inc. shows that Sea-Doo was the only PWC builder to grow its sales in 2013, up a modest 3.2 percent for the year. Sea-Doo currently holds 49.9 percent of the market. During the same period, Yamaha, which owns 40.4 percent of the market, saw its sales decline less than one percent. Kawasaki’s Jet Ski sales dropped another 10 percent following three successive years of market share declines that saw Team Green’s slice of the pie decrease from approximately 15 percent in 2009 to 9.1 percent in 2013.
Regional data from Info-Link Technologies shows PWC sales grew in Florida, Michigan, California, New York and much of the Midwest in 2013, while Texas, New Jersey, and much of the southern and Appalachian states saw PWC sales declines over the same period.
According to Timothy Conder, a CPA and senior analyst at Wells Fargo, PWC sales increased 8.1 percent year-over-year in February to 805 units. Conder’s report added that inventories remain near historic lows, leading to the prediction that “PWC will likely enjoy low-double-digit growth” throughout the remainder of 2014. He added that BRP is poised to gain market share, largely due to the expected impact of the Spark.
Spark’s upcoming challengers
While Sea-Doo will enjoy some solitary time in the sun with the Spark after eight years of development, its competitors seem seriously interested in developing their own entry-level models that will challenge the new entrant and, quite possibly, reinvigorate the entire PWC category.
At Yamaha, WaterCraft Division Group President Mark Speaks said, “There’s no question in my mind that, if we can drive the price point down on personal watercraft, we would greatly expand the number of people who are able to purchase a personal watercraft and certainly at the same time, also lower the average age of our customers and appeal to a broader segment.”
He added that any potential new entry-level entrant could help in growing the market and that it is an area the company is currently studying very carefully.
“We want to make sure that any product we put the Yamaha name on lives up to our build standards and will contribute to our reputation and will provide our customers with a great experience,” he said. “We’re not going to bring out anything at a lower price point until we’re sure we can accomplish all three of those things.”
The task of developing such a new model, Speaks said, is a “monumental task” that involves developing new technologies, and building hulls, decks and engines at lower prices than has previously been possible at Yamaha.
“This effort to find ways to bring features in at a lower price point and bring personal watercraft down to absolute lower price points is a huge, huge undertaking, however it’s one we’re very serious about and very committed to,” he said. “It will be a while before you see products coming to market that are a result of that effort, but it’s a very high priority for us.”
Speaks said such a Yamaha-branded model could benefit from an engine platform used in a different product category as a way to share tooling costs and keep the price down.
On the same note, Kawasaki PWC Product Manager Bret Snider went further by congratulating Sea-Doo for its innovation with the Spark and suggesting his company’s attention is aimed squarely at the mid- and entry-level categories.
“We need to chase the volume and we need to come to market with products that represent the voice of the customer,” Snider said. “There’s some migration from the flagship to the mid level, so we need to place some attention there. Also, in the entry level, that’s the volume, so if you’re chasing the volume, you need to take a look at that entry level and determine what opportunities there are.”
He added that the company’s STX 15 has higher performance and a similarly higher price than competing entry-level units.
“You could argue our performance is too high for the entry-level, so perhaps there’s an opportunity to create a variation of that model that’s a lower price point with a little bit lower performance, or create a new platform altogether.”
Snider said Kawasaki’s approach would maintain the company’s established performance attributes with “trickle-down” performance from elsewhere in its product lineup.
“I think even at a true entry-level product, I think we would put more focus on hull performance and probably pushing that power plant performance a little bit more,” he said.
The company has a specific engine in mind that is in active development for a different application within the Kawasaki stable. The market should expect “some reaction out of us in the next four model years,” he said.
The next frontier of PWC research and development will not be confined to building new entry-level models. If recent advancements are any indication, all categories should expect a mix of new ride-enhancing technologies, as well as existing features to spread downward from the highest-performance models through the rest of the company lineups.
Sea-Doo relishes the exclusivity of its Intelligent Brake & Reverse (iBR) system, which has recently spread to more products throughout the lineup, including the value-oriented GTI models. The company also received a welcome boost by nabbing the “Best Watercraft of the Year” award from Jet Ski Magazine.
Marketing Director Julie Tourville said iBR is a crucial Sea-Doo feature in a market where close to 50 percent of the market is PWC first-timers. Tourville added that the company remains focused on developing technological advancements that attract a younger audience. Qualities like ease of towing, lower cost, better fuel efficiency and environmentally sustainable materials present opportunities for reaching younger customers.
“Consumers have less and less time, are super busy, are looking for ways to escape, for ways to relax, for ways to entertain; they want instant gratification and I think our category is one that really indisputably provides a lot of these elements,” she said. “We’ve got great products that provide so much pleasure, time with the family, memories of great times, sunny days, and I think that in days when we are all extremely busy, I think [ours] is a great industry to be in and to provide that opportunity to consumers.”
Kawasaki recently launched its new supercharged and intercooled, 310-horsepower Ultra 310R, which it claims is the most powerful stock PWC ever built. Aggressive, youthful features include 12-position motocross-style handlebars, race-inspired colors and graphics and new Sportseat with a high-grip seat cover that’s also imported from the motocross dirt bike market.
Snider said the company’s range of flagship models are exceeding expectations, including the luxuriant 300LX that includes the industry’s first fully integrated “JetSound” stereo system that includes a pair of 30-watt speakers.
“That’s been received really well,” he said. “The media came in, to be honest, a little unsure what to think of it, but after experiencing the product they said … this adds so much to the experience of riding a PWC beyond what we ever thought, so that’s been very good.”
As for whether higher horsepower is in store, Snider said there’s always room to push the power envelope forward, but that would further raise prices. He suggested hull technology may be a more pressing area of research and development, along with reducing weight and improving the efficiency of its vehicles.
“We’ve got class-leading engine performance, class-leading hull performance, but that comes with a price tag, so it’s not a technological challenge, it’s more of what the consumers will bear,” Snider said. “I think we’re pushing that limit right now, and testing it especially with the LX.”
Yamaha has increased its PWC R&D investment in recent years in expectation of a recovering market, and Speaks said the company’s range-topping FX Cruiser SVHO — with a supercharged 1812cc engine and a $15,399 starting price — has seen “red hot” sales and exceeded the company’s expectations.
As for adding more power in the near term, Speaks said “we’ve probably satisfied the vast majority of people in terms of the performance they’re looking for.”
Instead, shedding weight and increasing fuel efficiency is the focus in coming years, as evidenced by Yamaha’s newly introduced NanoXcel material that enabled the company to shave 60-70 pounds out of the hull of its VX series, an advancement that aids handling as well as fuel economy.
Speaks said some of Yamaha’s less glamorous innovations in the category have been its brand-new PWC leasing, the Certified Pre-Owned program launched last spring, low-interest programs that have allowed customers to buy a WaveRunner for less than $100 a month and a guaranteed buy-back program that allows customers to return their unit to the dealer after 36 months to walk away or trade-up to a new model.
Finding face time
Innovation is also coming in the form of creative marketing. Yamaha recently became the official boat and PWC sponsor of the Monster Energy Supercross series, leveraging the company’s reputation and brand recognition in front of a younger audience.
“Communicating with consumers face to face is a type of marketing that you can’t top,” Speaks said. “Finding new venues where we can meet with people that have an interest in our product is a top priority for us, particularly if we can find ways to do that and expose the product to people that may not even be aware that we were in the [PWC] business.”
With younger consumers used to replacing items like smartphones every two years or sooner, he added such a mentality could eventually be good for the PWC business if it “enables those buyers to experience our personal watercraft in the same fashion that they experience their smartphones or laptops … those folks are growing up, getting older and heading our way, and we’d like to move toward them and try to meet that wave a little quicker.”
Matching its youthful Spark with an equally spry marketing message, Sea-Doo partnered with music producer Joel Thomas Zimmerman, known to his electronic music audience as deadmau5 [dead mouse], to launch its #SparkSomeFun Test Ride Tour that will visit 33 North American cities. The tour was kicked off with a live deadmau5 concert at the Fontainebleau Miami Beach on March 23.
The company invited 500 fans to attend the free concert, and encouraged participants to post a photo to Facebook or Twitter with the #SparkSomeFun hashtag.
“He’s an extremely well known music producer, he’s got an extremely big following, but we also knew that he was a Sea-Doo fan, which was a key element that sparked the idea of collaborating with him,” Tourville said.
Although its market share has declined in recent years, Kawasaki’s Snider strongly reaffirms the company’s ongoing commitment to the PWC market. He added that its dwindling share is cause for concern, but that the company’s current challenge has less to do with its products, and more about exposing the product to consumers at trade shows, through demo rides and at other public venues.
“We invented this segment — we’re in a refocusing stage right now,” Snider said. “From a product point of view, we have a few holes in our lineup, but the product that’s available today I would put against any other product out there. We’re full steam ahead in staying with this segment.”
Looking ahead, he added that the company is always examining other possible configurations and innovations that could be brought to market. One possibility, which he noted was an observation not any hint of future product, is the ongoing popularity of stand-up PWC, which are still a presence at some watercraft races.
“I’m not suggesting that we’re doing anything about it other than looking at it from way outside and wondering, but I’ve attended some watercraft races this year and was quite surprised to see the number of stand-ups,” he said. “A lot of them are old Chris Fischetti long-haired hippies that never got out of it since the 70s, but what’s surprising to me is the number of young kids that were involved. In talking to them, [asking] ‘Why are you doing this?’ a lot of them were motocross kids that got tired of hitting the ground and wanted some form of competition and more rider-active recreation.”
Yamaha’s Speaks sees the potential for significant segment growth in the coming years, noting that approximately 21 million Americans rode a personal watercraft last year. He added that there are approximately 1.6 million registered PWC in the country, yet the industry sold less than 50,000 new units last year, suggesting there is ample room for growth.
“Prior to the recession the market was very stable at about 80,000 units per year and we’re currently operating at … between 45 and 50,000 units, so we’re way down from pre-recession levels,” he said. “I expect as the economy improves and as consumer confidence improves that we’ll see personal watercraft volume move back up towards pre-recession levels. Whether it will get back up to that exact level I don’t know, but we have a long ways to go.”
Sea-Doo’s Tourville declined to offer any predictions for 2014 sales, but waxed optimistic about the impact the Spark will have on the company’s overall PWC sales.
“The initial read is extremely positive, dealer feedback is extremely positive, consumer feedback is positive as well,” she said. “People like the fact that it’s extremely accessible, so that’s of course the number one element that stokes attention at boat shows. They also like the fact that it’s not only accessible as far as entry price, it’s also accessible in terms of fuel efficiency, [and the] ability to tow it behind smaller cars, which opens it up to a broader audience. Plus, although it’s more accessible, it’s also cool looking, customizable, colorful, and extremely playful in the water.”