Creating A Super Store

Hitting a moving target is never easy.
And that’s what boat-brand strategies are: plans in need of constant re-evaluation as product trends, economic climates, demographics and competitive landscapes ebb and flow, peak and fall.
Those dealerships that are best at it may have few things in common. Just look at Boating Industry’s Top 100 Dealers, which produce from $2.2 million to $1.2 billion in annual revenues, feature anywhere from one to 85 locations and employ between six and 2,218 full-time employees. But regardless of the differences in these dealerships’ profiles, they all understand that getting their strategy right involves a willingness to track and embrace change, inside and outside their dealerships.

Easy street?
Andy Larson’s approach is one such example. As the owner of Midwest MasterCraft in Crystal, Minn. — a one-location, one-brand dealership — Larson has had many boat manufacturers ask him to join their dealer network. And each time an offer is made, Larson says he seriously researches it, considering the implications of such a move.
“We try to look at all options and give them due diligence,” he explains. “But we haven’t found the right mix where the rewards would outweigh the potential issues.”
In some ways, Midwest MasterCraft is ripe for an additional boat line. Its new facility has plenty of room for expansion. But it’s easy to see why Larson has yet to do so.
“We used to be a snowmobile dealership, which cost us boat sales and profitability,” he explains. “We weren’t as focused. It’s easier for us to laser beam on our MasterCraft customers.”
The life of a one-brand dealer sounds awfully good: only one dealer meeting, one sales or service school, fewer models, less parts, fewer shop tools, lower floor plan interest, easier warranty processing, less administration expense, less product knowledge to absorb, and less show room and boat show space required.
“If you have a single brand, life is so much easier than with multiple lines,” says David Parker, president of Parker Business Planning, a marine business consulting firm. “The biggest question is will that brand in your market area provide you with the volume and gross margin you need to run your business and deliver the bottom line you want to achieve.”
In Larson’s case, the answer is yes, at least for now. His dealership is based in a Minneapolis suburb, and because MasterCraft “doesn’t put dealers on top of each other,” this represents a sizable market. In addition, MasterCraft has been expanding its product offerings, helping Larson’s business stay on a growth path. He also puts a lot of focus on his dealership’s Pro Shop, which is expanding as well.
Risky business
The risks of pursuing a one-brand strategy are pretty significant, and Larson knows it. The biggest one is that the dealer’s success quite literally depends on one manufacturer. And no boat builder, no matter how successful, is ever a sure thing. New ownership, natural disasters and changes in strategy can change a relationship overnight.
“It scares the hell out of me,” Larson admits. “The health of your business is completely at risk. If something went awry, we would be in a world of hurt.”
Midwest MasterCraft’s current agreement with its boat builder partner ends with each model year and only ensures 90-days notice if it chooses to end their relationship. And if Larson sells the dealership, MasterCraft has no obligation to keep the company in its dealer network. Minnesota state law doesn’t do much to protect boat dealers, he says.
What ultimately lets Larson sleep at night, however, is the strength of his relationship with MasterCraft. When he bought the dealership from the previous owner less than four years ago, the boat builder invested in the business to get it started, “something I don’t think a lot of boat companies would do,” he says.
In addition, he says that most boat companies, like MasterCraft, recognize that dealers that are working hard, delivering strong CSI scores out of nice facilities, don’t grow on trees.
MasterCraft does now offer a three-year agreement, something Larson expects to sign for the 2008 model year. But that’s not where he’s looking for comfort about the future of his business.
“I don’t think it gives me a whole lot of structure or leverage, per se,” he comments. “If the manufacturer is dropping the ball, the three-year agreement won’t do me much good.”

At the forefront
Like Midwest MasterCraft, Gordy’s Lakefront Marine is an exclusive dealer for a high-end product in a relatively large seasonal boating market. The two dealers also both have close relationships with their manufacturers.
Gordy’s has been a Cobalt dealer since 1997, and owner Tom G. Whowell says Cobalt’s Pack St. Clair and Paxson St. Clair often come to the Chicago area for its customer appreciation events and boat shows. Gordy’s customers also can call the boat builder executives directly, he adds.
“As parallel father-son family businesses, we share the same values, trust, respect and ethics,” Whowell says. “It has lent itself well to being an exclusive dealer.”
While Whowell admits there are risks to Gordy’s approach, he says belonging to a Cobalt 20 Group and serving on the Cobalt Dealer Council adds to the company’s comfort with its exclusivity.
“We’re at the forefront of the future direction of [Cobalt],” he explains. “We know what’s coming ahead of time.”
Like Midwest MasterCraft, Gordy’s has been on a growth track, recently adding a second store. The company attributes this, in part, to Cobalt’s new yacht line.

Filling many baskets
Woodard Marine has held many different boat brand strategies throughout its history.
Experience has taught its owner — Bob Woodard — not to put all his eggs in one basket. Over the past 47 years, two of the dealer’s major boat brands have gone bankrupt, one went downhill under new ownership and yet another was eliminated by the manufacturer.
The dealer’s history also includes lessons related to the southern Vermont dealership’s rural market. While Woodard would like to work with fewer manufacturers, he says the nature of his location demands a large selection of brands.
“While we would much prefer two manufacturers, with the kind of income we need for the families to live, we need to represent more brands,” he explains. “We can’t lose customers because we don’t have what they’re looking for. Without the diversity, we’d be locked into a much smaller operation and it would be tough to cover the overhead of a good operation.”
The company admits to some challenges under its current strategy, which includes 10 boat brands, five owned by Godfrey, four owned by Brunswick and one owned by Regal, an independent boat builder. The two biggest are training its sales and service people on each product line and keeping track of the various brands’ promotions. While it can’t send staff to each manufacturer each year, each of the dealer’s sales staff specializes in one or two brands, which helps, he says.
Woodard is currently researching the addition of a PWC line, interviewing dealers in his 20 Group about the various brands, looking at registration data, asking manufacturers for their financial statements and scouting out local lakes to see what brands are most popular at the docks.
“Each brand we sell fits into a niche,” he concludes. “We’re able to offer the customer the opportunity to look and decide amongst those manufacturers – all in one place.”

Anything but average
With lakes, rivers, a large bay and the Gulf of Mexico nearby, Texas Marine’s strategy is to offer product to suit the region’s diverse boating interests.
“A lot of people don’t know what they want when they come in,” says owner Mike Hebert. “If we don’t have something to suit their needs, there may not be anything that will do that.”
The dealership began 26 years ago with one location and one brand, slowly evolving into the four-location, 11-brand business it is today. But Hebert says his strategy is not for the average dealer. The resources it requires, from one end of the business to the other, are extensive.
“Most dealers can handle three to four lines,” agrees Parker. “Beyond that, it’s harder for the average dealer to do a proper job of managing them.”
When Texas Marine expanded into the Houston market 15 years ago, its three additional locations provided the infrastructure and personnel to handle multiple brands, Hebert explains. Since then, the company has grown from 5 boat lines to 11. Each of its stores carry most of its brands, but some do better with certain lines than others, depending on the type of boating most popular near each location.
One of the strengths of this strategy is its diversity, giving multi-line dealers stability in good times and bad. The bay boat market has recently flattened out, for example, but Texas Marine has seen a substantial increase in its bass boat business. If the boat market is strong and some builders have supply shortages, multi-line dealers can often fill in with products from other builders.
Like Woodard, Texas Marine handles its main challenge, product knowledge, through specialization. But with a much larger sales force, Hebert has created a formal in-house training program in which there is one specialist for each brand who educates and supports the sales people, offering hands-on seminars on the water.
With so many brands to manage, Texas Marine’s standards are high. Hebert requires that a new brand be able to deliver profits within the first year and sales of at least $1 million. Manufacturer partners must be high-end market leaders that are financially strong with good support, marketing campaigns, a generous territory and a long-term commitment.
“One year does not make a good business plan,” comments Hebert. “By the time you invest your time and effort, train your personnel, etc., you want to know you’re going to be selling that line for years to come.
“And if they don’t have the proper support, if there are problems getting parts or warranty approvals where it’s keeping us from meeting our customers’ expectations, it could give us a black eye with the customers. Nothing is worth that. The satisfaction of our customers is the success of our company.”

Name: Woodard Marine Inc.
Location: Hydeville, Vt.
Stores: 1
Brands: 10 (Aqua Patio, Bayliner, Boston Whaler, Hurricane, Lund, PartiKraft, Regal, San Pan, Sweetwater, Trophy)
Full-Time Employees: 11
Strategy: This one-location, multi-brand dealership has used many strategies over time, but with a territory that covers half of Vermont, the company has found the most successful approach is to try to provide options to meet all its customers’ needs. “Most dealers have three brands,” says owner Bob Woodard. “I think we’re unique. The decision was made because of the rural nature of our market.”

Name: Midwest MasterCraft
Location: Crystal, Minn.
Stores: 1
Brands: 1 (MasterCraft)
Full-Time Employees: 9
Strategy: As owner of a one-brand dealership, Midwest MasterCraft’s Andy Larson has considered adding other boat brands. However, he says it’s harder to provide the same level of service on a lower price point ski boat. And if he were to adopt a line in another market segment, he wonders whether he would gain volume, but not necessarily profitability. “I don’t care if we’re a $5 million or $10 million dealer,” says Larson. “I want to be able to run a business that’s healthy, where we can take care of customers and staff.”

Name: Texas Marine
Location: Beaumont, Texas
Stores: 4
Brands: 11 (Blue Wave, Chaparral, Contender, Crest, Nautic Star, Ranger, Robalo, Silverton, Stratos, Yamaha Jet Boats, Xpress)
Full-Time Employees: 58
Strategy: In an effort to serve the Houston area’s diverse freshwater and saltwater boaters, this four-location dealership has grown into its 11-brand boat strategy over time. “I don’t recommend the average dealer try to be everything to everyone,” says owner Mike Hebert. “It takes a tremendous amount of resources.”

Name: Gordy’s Lakefront Marine, Inc.
Location: Fontana, Wis.
Stores: 2
Brands: 1 (Cobalt)
Full-Time Employees: 55
Strategy: Before the Cobalt brand became available in 1997, Gordy’s Lakefront Marine was a service-only facility. But its executives say the alignment between the dealer’s and manufacturer’s way of conducting business has made for a strong and exclusive marriage. “It really comes down to quality, not quantity,” says owner Tom G. Whowell. “It may not be for everyone, but it works for us.”

Shopping for a new brand?

You may want to ask yourself the following questions about the manufacturer, according to David Parker, president of Parker Business Planning, a marine business consulting firm.

Does the manufacturer care whether the dealer is successful?

Does it produce quality, leading-edge products at a reasonable price in its market segment?

Is it a major player — or does it have the potential to be a major player — in its market segment?

Does it pay its warranty claims in a timely manner?

Is it willing to pay full retail for warranty labor if you meet certain criteria?

Does it have a history of revamping a model segment every 3 to 5 years?

Does it consider the boat sold when the dealer buys it or when the retail customer buys it?

Is it willing to give its dealers “adequate” protected territories, the definition of which is different in each type of market (sometimes it’s 50 miles, sometimes it’s 100)?
Does it provide programs to help its dealers stock and sell boats to the retail buyer (ex. free floorplan financing, boat show incentives, co-op dollars)?

Does it encourage its dealers to make money on their product or constantly pressure its dealers to sell for less?

Does it encourage its dealers to advertise and sell in their own servicing territory?

Have the majority of its dealers been with it five or more years?

Is it willing to grant a 3-year dealer agreement that is balanced and fair to both parties if you meet reasonable criteria?

Does it attract a customer base with which your company is comfortable doing business?