When love has gone

Boating is a romantic industry. Fascination with our water machines has drawn a lot of us into the business and brings us motivated prospects. The relationship between manufacturers and dealers is one of the more frail areas in the romance.
Many good steps toward “leveling the playing field” on contracts, improving fragile products, handling customer grievances, etc., have been taken in an effort to shore up this weak point. A lot of these steps are working, even if incomplete. One of the big ones that has only fragmentary resolution concerns what to do with the orphan products left in the dealer’s inventory after irreconcilable differences have parted the bonds.
A few facts must be recognized to approach a solution:

  • The manufacturer has already achieved a “manufacturing margin” profit on each orphan. The dealer has not made anything on them as yet. This margin percentage is not consistent from manufacturer to manufacturer, but it is what he normally asks of the marketplace.
  • The industry has now (belatedly) recognized that a boat is not really “sold” until it finds a consumer home. Unsold inventory is still a joint manufacturer-dealer problem, wherever the boat actually hangs out. Manufacturer buy-back clauses in finance agreements emphasize this point. It is safe to say that at least some of this manufacturing margin can legitimately go to defraying relocation of the orphans.
  • Money paid by the dealer (or the manufacturer) to banking institutions for wholesale financing is a cost of doing business. Nobody should expect to get it back in the divorce.
  • Transportation costs sort of belong to both parties, and they need to work together to take advantage of the expenditure where possible in finding a new home for the orphans — as close by as possible.
  • Other dealers in the area really don’t want the orphans thrown on the market priced for fast sale. Manufacturers don’t either, if they think about the brand damage.
  • Boats still new and never titled but bearing a serial number designating them as products of a previous year are worth less than their price when fresh. Ten percent for the first year seems commonly accepted. A lesser reduction for the second year is appropriate. Fortunately, these older boats were also originally priced lower than the new ones because of material and wage inflation, etc.
  • I’m sure some of the above postulates will not suit every reader, but I use them as a necessary guide for discussing a solution. The industry is heavily invested in improving the dealer-manufacturer relationship and has recognized the contractual portion of that relationship as an irritant. The disposal of orphan product is the toughest part of the contract dilemma, as I see it.
    I urge a multi-part approach that has at least vague resemblance to the following:
    1. When either the dealer of the manufacturer sees that the relationship is floundering, he lets the other party know as early as possible. The other may answer his problems, or, at the least, help intelligently begin the dissolution. Getting rid of the orphans-to-be at reasonable prices is a good first step. A new dealer selected may even help out by taking some of it on — particularly with manufacturer financial inducement. This also minimizes the “place utility” (freight) losses.
    2. The manufacturer needs to attempt orphan substitution (with inducements) on new models ordered by other dealers. Force-feeding a constipated market with more product is pretty dumb for all parties.
    3. The departing dealer should try to move the orphans with as aggressive a program as possible. Special one-time manufacturer advertising assistance might help here.
    4. When we are down to the dregs, the manufacturer needs to offer incentive pricing and transportation help (particularly with “free” back-hauls) to the rest of his dealer network. These units should be the ones pushed by his regional sales folks ahead of new product.
    5. When all else fails, if the manufacturer can’t handle repurchase financially, perhaps our wholesale financing institutions can help them over the troubled waters for up to a year without worrying overmuch about when the boat was constructed. They, too, have an interest in the brands on which they lend. These boats constitute a bargain for somebody. We just need the time to find him.
    I can already hear some of my manufacturer buddies calling the hit man, and maybe a few dealer friends, too. This is a problem we all have to solve. Contracts alone won’t fix it. Marketing will.

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