Sherwood: Boat Packages – Where’s the value?

Those who have been reading my column regularly over the years know that I have often taken issue with the boat and outboard motor packaging concept. My big issue regarding packaging basically is that I am not convinced that there is any value added. On the other hand, I do believe “pre-rigging” adds value for dealers.
The terms “packaging” and “pre-rigging” both involve the marrying of a boat and outboard motor. When I refer to “packaging,” I am talking about the sale of a boat and outboard motor as a single product, usually on the same invoice for a “lump-sum” price, even though the boat and motor are often shipped separately. “Pre-rigging” is when boat builders rig a boat with controls, steering and connectors to accept a specific outboard motor brand and model, which the dealer purchases separately, usually from an outboard motor manufacturer.

This started back in the early to mid 80’s- right before the two major outboard motor companies accelerated the packaging concept with their bidding war to buy several boat companies. Of course they packaged their own outboards on the boat transoms that they had purchased.

Bayliner was the pioneer in the packaging concept when it sold boats with old technology Force outboards on the transoms. Later outboard manufacturers started selling outboards to independent boat builders, and boat packaging grew to the point that it is now estimated that 80 percent of all outboards sold in the U.S. are on packages.

Value is added when pre-rigged boats are delivered to dealers with instruments and controls attractively incorporated into the overall design, with control and steering cables installed. Pre-rigging reduces labor costs for the dealer and cuts the time to get the rig ready for delivery. Makes sense in most cases.

So what is wrong with packaging boats and outboard motors? I just don’t think it adds any value over pre-rigging most of the time. Why? First, no value is added when builders ship the outboard motors separately from the boats or, as many do, have the engine manufacturers ship outboards directly to their package dealers. Second, in many cases builders try to push a brand of outboard to dealers who might prefer a different brand that they have handled for years. Why would builders do this? Because they either have gotten a sweeter deal from one of the outboard motor companies or suddenly find themselves with too many units of a particular brand or model in stock. Finally, dealers can no longer make their own best deals with outboard motor manufacturers when their units come as part of a boat package.

Another problem with packaging has evolved because many builders have gone beyond selling outboards on packages and have been selling them “loose” to dealers at prices sometimes lower than these retailers would have to pay if they bought direct from the engine manufacturer. Overall, the result has been that many boat builders have now become distributors of outboard motors by purchasing units direct from factories and either including them with packages or selling them loose to dealers.

Years and years ago, outboards were sold to dealers through distributors. But this practice was stopped as it only added another costly step in the distribution of outboards. Now it appears we are back to using distributors (aka boat builders) again. From what I hear, most builders keep about 10 to 15 percent of the action in the process of “distributing” outboards with packaged boats and by selling loose engines to dealers. In the past, part of this “skimmed” percentage was kept by the outboard manufacturers to help their profits and to pay for expensive R & D, and part of it went directly to dealers to enhance their margins.

With boat builders now acting as engine distributors, it adds yet another step in the distribution of outboard motors and increases the overall cost of distribution. Shipping costs are multiplied, builders need warehouse space and financing for the outboard inventory and inventory control systems, etc., all of which means added expense to get outboards from the outboard manufacturers to the dealers. It becomes an inefficient additional step in the overall distribution of outboard motors that costs dealers and outboard manufacturers margin. But it is putting unearned dollars in the pockets of boat builders who I feel add no value to the equation.

I really feel that packaging potentially hurts dealers, outboard motor manufacturers and the industry. I think dealers should push their builder partners to focus on just building and marketing boats and go back to the “pre-rig” concept where there is value added.

Builders could probably receive reasonable incentives from outboard manufacturers to pre-rig boats to fill dealer orders. As I have written before, “Dealers would be amazed at how builders will dance to their music, instead of the other way around, when several million dollars of boat sales are at risk.”