The dealership of tomorrow?
I offended a dealer in one of my last magazine columns. This dealer, or former dealer as it may be, recounted the unprecedented conditions of the economy and, more specifically, the marine industry when he outlined how his business has succumbed to external pressures. He noted the drought boaters and businesses face in his home state of Georgia; $4-a-gallon gas; the housing bubble that burst; banks that won’t lend (and severe interest rate hikes by those who remain), and the ever-present doom and gloom found throughout politics and media as a culmination of forces that his business could not withstand. This, despite focus his business on providing value and customer service and reinvesting more than $1 million into his business in recent years.
His note was far less a complaint over my written words — “Today, many of those weaker, unprofessional dealers have closed their doors.” — than it was an acknowledgment of his reality: “there has never been a time like this that I can recall in my 38 years in the marine business.”
But his message back to my response hit home. He said simply that we should pose this question to our readership: “If you could start a new business today, would you open a boat dealership?”
I’d like to take that even a step further: “…and if so, what would your business plan look like today vs. what it may have been five years ago?” We’d love to hear your thoughts on that.
As a former VP Operations and CFO for a multi-location luxury yacht dealership many years ago, I can answer your question with a strong “No.”
But not because of the current economy.
The major problem with boat and yacht dealerships is the contractual relationships between manufacturers and dealers, which are generally lopsided in favor of the manufacturers.
Beyond that, there is the problem that many, if not most, manufacturers seek first and foremost to move product as fast as they can out of their inventory and onto the floorplans of dealers, thereby creating the cash flow that they (the manufacturers) require. The rest is the dealer’s problem. With what promises now to be a radically changed credit landscape in this country, the future of dealerships, as they have until now been constituted, is bleak.
The only chances for survival and, in many cases, resuscitation will be for manufacturers and dealerships to carve out new relationships in which they are truly “partners in marketing,” where the manufacturer accepts cooperative responsibility through final delivery to the retail buyer, and beyond. No more loading up dealers with unsellable inventory. No more abondoning dealers to the floorplan loan sharks. No more agreeing to the existence of more dealership than the market can sustain. No more ever-shrinking dealer territories. Need I go on?
Hey Matt – not withstanding the revolutionary economic times we are in, the sad reality is that many dealers have suffered and closed because of the sins of the past and actions they failed to take during the “good times” – there is an old expression – good weather makes for bad sailors and bad weather makes great sailors – dealerships can and should be profitable if run the right way on a consistent, persistent and systematic basis. The advice I would give is for those who believe in their business and abilities to ask themselves – If they had to start their business all over again tomorrow – based upon their past experiences – what would they 1) start doing; 2) stop doing; 3) do more of and 4) do less of. The answers are like looking at your own game films and should be revealing if done the right way.
Interesting subject and interesting comments!! I, or should I say we, Good Employees) have made excellent profits over the past 30+ years, which ended in 1998. The problem is on both sides of the fence. I have told 100’s of dealers in my seminars that they are the customers of the manufacturers and they do not have to accept the manufacturers terms and conditions nor do they have to accept the manufacturers suggesed orders. Nobody physically twisted their arms. In many cases the overstocking of inventory was based on the dealers eagerness to qualify for year-end rebates.
Less than 5% of all marine dealers have a written Business Plan to operate from. They have no clue until the end of the year, when the accountant gives them their tax return, whether they made or lost money. The facts support this when they suggest that the average net profit generated by a marine dealership is a measily 2%. You can’t blame that on the manufacturers.
Now are the manufacturers also to blame for our current dilema? You bet they are. They set up hundreds of dealers who did not have a Business Plan, did not take care of their customers, and generally did not have a good grasp of business profitability. For the most part these are the dealers who are failing today. I hope the manufacturers have also learned a lesson on how to select good dealers in the future.
I agree with one comment which stated that there has to be a new way of doing business crafted if we are going to prosper in this industry in the future. I also believe that the manufacturers have to lead the way. We have to recognize that it is necessary for both dealers and manufacturers to understand each others needs and craft agreements that address those needs.
OK… SO WE AGREE THAT A LOT OF DEALERS HAVE NO BUSINESS PLAN BUT HOW MANY MANUFACTURERS ACTUALLY HAVE ONE AS WELL..THEIR ONLY BUSINESS PLAN IS TO CRAM BOATS DOWN A DEALERS THROAT AND OPEN UP AS MANY NEW DEALERS THEY CAN FIND THAT HAVE FLOOR PLAN ROOM..THEY DO THIS WITH VERY AGRESSIVE PROMOTIONS AT DEALER MEETINGS..I ONCE WENT TO A DEALER MEETING AND WAS SOLD A MILLION $$ WORTH OF INVENTORY AND THEY THE MANU ON THERE OWN GOT MY FLOOR PLAN RAISED TO COVER IT!!!MY FAULT BUT I WAS UNDER THE ETHER!!!!!ALSO AT ALL THE DEALER MEETINGS I ATTENDED WITH ALL THE PROS GIVING ADVICE I STILL ALLWAYS WAS TOLD THAT 1 4% NET PROFIT IN THE RETAIL INDUSTRY WAS VERY AVERAGE!!!!!4%???THATS HOW YOU GO BROKE WHEN THE TIDE TURNS>>>>>>>>>