Promise & challenges of pre-owned market ahead

How much of the pre-owned market is the industry capturing? A recent look by this magazine, based on Spader 20 Groups, indicates that pre-owned sales per dealer of about $1 million a year are roughly one-sixth, or 16.5 percent, of new boat sales measuring $6 million. That shows growth from 1999 when estimated pre-owned sales via marine dealers were 11 percent. The difference of about 5.5 percent translates to 55,000 more pre-owned transactions being handled by established marine firms each year.
Gaining control of the pre-owned market is of vital importance to the boating industry. When traditional marine businesses are involved, studies show pre-owned buyers have a better boating experience. Instead of letting the “driveway-to-driveway” transaction rule, putting a marine professional in the process helps avoid product problems, facilitates the transfer or provides knowledge to eliminate false expectations by seller and buyer. Satisfaction by boaters — who buy either new or pre-owned — will grow even more quickly as more marine industry businesses continue gaining “Certified” status.
To clarify, this is not the sole job of retailers. For a pre-owned product to be able to be spiffed up, refitted or repowered, requires foresight by the builder in design and construction. Component suppliers should be able to provide a dated owner’s manual to a new-old buyer. A growing need is help finding a place to store or moor the new-old craft. Or moving it from point of sale to a new home. There are many touchpoints in the pre-owned transaction, and many opportunities to capture the pre-owner’s enthusiasm — or ire.
It may not be prudent to compare retail activity in the boat and auto markets; however, 2005 data from National Automobile Dealers Association offers a possible look to the future for marine. New car dealers sell more used cars and light trucks (20 million, retail and wholesale) than new ones (about 17 million). Of interest, NADA data shows used car operations contribute roughly twice as much profit than new car operations at auto dealers.
Members of the National Marine Bankers Association recently reported that 53 percent of their loan volume is generated by pre-owned boat sales. Boat brokers derive literally all of their commissions from experienced boats changing hands. Marine surveyors get a big chunk of their business from buyers interested in the condition of a boat before it’s sold. Independent marine insurance firms estimate about 20 percent of their new customers come from the sale of a pre-owned boat, but the big auto and homeowner underwriters are likely getting 70 percent of volume there.
Partnerships or alliances with those who already serve the pre-owned market can leverage the success of others who want to get in. Offering a lender “clean pre-owned deals” might result in better terms for a qualified borrower. Inviting the local marine insurance agent to be available at an open house could generate pre-owned referrals for both businesses. Allowing surveyors to use the boat yard for their work might unveil a pending sale to the dealer or marina.
There are places for improvement in the pre-owned market that can also spur industry involvement and consumer acceptance. More readily available financing, especially for pre-owned inventory, will encourage greater product selection at traditional retailers. Comprehensive and longer warranties with greater ability to pass-along to second owners can create consumer confidence in pre-owned products. A wholesale market to handle the “not so good” pre-owned boats needs redefinition and structure to be more useful to the industry. At some point, the industry needs to market the benefits of pre-owned boat buys without unduly impacting new boat activity.
None of this will be quick or easy. The pre-owned boat market number trends, however, can no longer be ignored. Pre-owned sales activity fostered by a much wider boat buyer market is growing faster than the new product side. The really good news is that the industry is being more successful in moving those driveway sales into bonafide marine businesses, building a broader base of satisfied buyers and enjoying the profits that result.