The dealership of TOMORROW

The Greek philosopher Heraclitus said, “Nothing endures but change.”

What separates leaders of the business world from the rest of the pack is their ability to adapt to that change, identify the opportunities it creates and capitalize on them. That’s especially true in a year like this one, which will likely go down in history as one of the most challenging on record for the marine industry.

With that in mind, Boating Industry magazine asked some of our sector’s most forward-thinking professionals to consider how the different aspects of marine retailing might evolve as the industry begins to emerge from the downturn. Here’s what they told us.

Inventory Management
By Dusty McCoy, chairman and CEO, Brunswick Corp.
There can be no doubt across the recreational marine industry that practices relating to inventories in dealers’ showrooms, as well as the level of these inventories, must change from those of the past. The reasons are many and varied, but the basic cost of floorplanning, including curtailment payments, and the need for dealers to reduce the level of the invested capital in their dealerships to improve their returns are the leading factors.

As a result, we must turn the system from a “push” by the manufacturer relationship to a “pull” from the dealer relationship. Concepts such as made-to-order, predictable lead times, just-in-time delivery to the dealership, inter-dealer transfers and deliveries, and more, will become common as the industry transitions to permanently lower inventories while increasing customer satisfaction. For these concepts and practices to work, transparent information must be available real-time between manufacturer and dealer, and between dealers. As the industry transitions to this model, we must never forget the consumer’s needs must be met, and that accurate information communicated in a timely manner to the consumer is a basic requirement.

By Irwin Jacobs, chairman, Genmar Holdings LLC
I have a theory and a belief and a strong commitment that there has to be a fundamental model change in the industry. If the manufacturer, the dealer and the floorplanner are not getting a return from their business, something is wrong. What is the problem? There are a lot of them, but the fundamental one is that the way dealers have been taught to buy inventory, and manufacturers to sell inventory, and floorplanners to finance it, has much too much risk in it.

Let’s use a model year changeover, for example. Loading up the dealer with as much product as possible, I don’t think that works anymore. I think the dealer has to be able to sell more at retail earlier in the year and should have a proper inventory: not 10 of each model, but one or two, whatever they need. Then, they can give the customer a true opportunity to buy a boat at a discounted price that they couldn’t get in season. That should be a retail order with deposit to be delivered in season. The floorplanner is happy to finance that. Then, we don’t have to pay the floorplanner to hold that inventory there. That way, when you get into the season, the dealer will have a proper inventory on which he or she can make a profit, instead of trying to discount it in season. That means more boats will be built to order in season. We may not be able to run our factories 12 months a year. Maybe it’ll be 10 months instead.

There will be different models for different products. We’re using this model on FinCraft, which we can produce en masse, where we say, “You can have one or two truck loads instead of five, because we can deliver them on very quick notice.” A dealer could be able to turn his inventory eight or nine times without investing a ton of money in floorplan and having to worry about carrying it over into the next year.

We could see reduced boat sales until this model becomes a reality because it may take a year or two for the customer to adjust. The important thing is that the dealer doesn’t discount in season. Prices have to go up to make a decent profit on a retail order. If any of us are losing money – the dealer, the manufacturer or the floorplanner – it’s not good for anyone.

By Jerry Brouwer, general manager, Action Water Sports
What I will do in the future is be firm on what I am willing to take in units from a manufacturer and not back down due to pressure and threats. I’ll simply say, “no” and try to help the manufacturer understand my rationale. I won’t take 50 to 70 percent of my yearly inventory before the upcoming spring. In the past, we have continually been left with the wrong inventory because of manufacturer demands. This negatively affects turns, margins, semi-fixed expenses, etc.

Manufacturers need to understand healthy, profitable dealers are their friends. Short-term thinking does not win in the long run. Having the wrong dealer in a market is worse than having no dealer in the market. Having high standards will only help manufacturers over time. Too much inventory means everyone is going to lose eventually, including the customer. Healthy units in field inventory must be a focus 24/7, and manufacturers will attract the dealers they desire when they decide to play the game differently. Harley is a perfect example of this.

We continue to work hard on the multitude of areas in our business, but where I could have done much better was our turns — stocking far less inventory. Many items have affected this issue, including the long, downward spiral Michigan finds itself in. However, going forward, inventory and turns will take on a new level of focus for me.

Consumer Demographics
By Phil Dyskow, president, Yamaha Marine Group
We believe the demographics of likely boat customers will vary depending on whether we take a short-term or long-term outlook. For the short-term, most of the people who had the ability to make a boat purchase at the upper end of the market before the recession will generally continue to have purchasing power. The baby boom population will begin to retire in the short term, and they will have more leisure time to fill. Remember, they are still the largest and wealthiest segment of the population and will be aided by a transfer of wealth from their parents. As an industry, we do a good job of targeting this demographic, but we will need to be more aggressive and creative when it comes to enticing the baby boom generation to spend their time and money on boating.

For the long term, the customer change will be more dramatic. Along with the baby boomers, Gen X and Gen Y will acquire wealth and disposable income. That means there will be more potential boaters than ever before. These customers will want a different style of boating than their parents were accustomed to. They will want a hassle-free and more enjoyable boating experience. They will not only want reliability; they will demand it. That’s where Yamaha has an advantage, and we will continue on that path.

Financial Management
By Rod Malone, president, The Sail & Ski Centers
For many dealers, the immediate priority as we emerge from the downturn will be the return to profitability and rebuilding cash reserves. Without profitability, there can be no investment in the dealership’s growth or equity. Forecasting sales and expenses and creating and managing to a budget will be critical in the return to profitability. The dynamics and costs of doing business have changed and are likely to be different in the future. Running our dealerships strictly intuitively will be a risk. We will need to measure our operations carefully and often to make sure that profitability is maintained at each level of the business. Budgeting for and working to improve fixed-operations departments such as service, accessories and storage will be important in the future to buffer the ups and downs of new and used unit sales. The distressed product that is moving through the market as a result of manufacturer and dealership closures will create fixed-operations opportunities now and in the near future.

The retail and indirect lenders – such as dealerships that are profitable and doing a healthy volume — will come back with the upturn in the market, although the pendulum has swung so far that it will take longer than most of us would like.

Consumer Lending
By Scott Anderson, vice president, Recreation Lending, Merrick Bank
I believe consumer lending in the marine industry will improve with the recovery, but I don’t see it returning to the simplified lending that occurred prior to the downturn. I believe lenders will be more cautious to make sure they are placing themselves in a more secured position by placing great emphasis on the value of the collateral. This will include requiring a larger down payment and being more conservative on what they’re willing to advance on the contract. I think verification of employment and income will include a more thorough process. As the industry gains momentum and sales increase, the likelihood of new lenders entering the space will grow, but I don’t believe there will be as many national lenders participating as in the past. You may find the regional and community bankers become more active once stabilization has occurred. They will need to see their capital improve and their portfolios perform well before entry into the marine space. The marine industry is still a long-term viable industry; however, it will require floor financing to help the industry recover. This will require greater cooperation between the manufacturers, dealers and the lending community.

Products
By Clint Moore, president and CEO, Volvo Penta of the Americas
We at Volvo Penta believe many changes are in store for our marine retailing partners in the future – not the least of which will be the products they sell. We also believe these changes will be good for our dealers and, perhaps most important, for boaters. These changes will occur quite rapidly once the recovery takes root, which hopefully will be soon.

Two basic premises drive our thoughts and plans: First, the marine business will be much smaller for the foreseeable future. We are structuring our business for a market that will be half the size of the last cycle peak in 2005. Secondly, the market will be more focused on high-end and technically advanced products, regardless of boat size.

Based on these assumptions, we believe: New boats from about 40 feet and up will be pod propelled. The traditional inboard shaft propulsion will disappear as new boat models are launched. Based on the experience of over 10,000 IPS units in customers’ hands, we know that boaters who have experienced the benefits of IPS will not consider going back to the old world of shafts.

Boats too small for IPS, whether gas or diesel, will be brimming with advanced technologies that will take the boater’s experience to an entirely new level. Experienced boaters will enjoy the many benefits the technologies will enable. Perhaps more significantly for the supply chain, these technologies will entice new boaters to the water. It will become so easy, safe and environmentally friendly to become a boater that traditional barriers will disappear.

Volvo Penta’s product plan will focus on high-tech, high-quality, high-end solutions. We will move away from the traditional entry-level sterndrive business because it is no longer economically viable. But we also believe this move will help keep more people in boating. Industry CSI data consistently shows that customers with higher technology products are more satisfied and loyal with plans to purchase new products in the future. The void created by our withdrawal will either go unfilled as the market moves upscale or toward outboards for small (16-17 feet) price-pointed family boats.

A whole new product offering will emerge, which we refer to as “soft products.” The new technologies will enable dealers to sell product enhancement software to customers at their stores. These soft products will not require any hardware, only downloads. Soft product revenues will become very significant, and the margins will be among the highest in the dealer’s business model. Additionally, the soft products will enable dealers to “customize” offerings to their individual customers depending on their wants and needs.

Boat-selling dealers will sell boats that are much more standardized from a product perspective. This will be good for everyone, most of all, the boater. The inevitable standardization will facilitate flexibility and higher quality from manufacturers, simplify the sales process for both customer and dealer and reduce dealers’ inventory requirements.

Boat selling dealers will be much more focused in their brand and product offerings. Each of us will be challenged to pick the very best partners. A smaller market will force everyone to consolidate. It won’t be economically viable for a dealer to offer multiple brands of overlapping products.

We believe exciting and profitable times lie ahead for our dealer partners. No doubt, product advancements will be at the center of our “new world.”

Consolidation
By Bill McGill, chairman, president and CEO, MarineMax Inc.
For sure, business in the future will differ from the past for customers, dealers and manufacturers, and business must be approached differently by dealers and manufacturers if we want to prosper going forward. Our industry, with almost 6,000 retailers and 1,500 manufacturers, is grossly fragmented and antiquated. For years, our industry’s “barriers to entry” have been entirely too low for dealers and manufacturers.

For a manufacturer to be able to basically lay up a copied hull/deck, misassemble a boat with engines/propulsion and other components bought from third parties in some metal building, and then not properly service the boats they produce, greatly hurts our industry and leads to customers, understandably, exiting boating. Almost anyone can get into manufacturing and then go find a dealer on a gravel lot to sell their “product” without teaching, servicing and showing the customer how to have fun.

Look to the auto industry and you will not see an auto manufacturer offering engines, drives and components to others. How many auto manufacturers are there compared to our 1,500? And yet clearly we are a fraction the size of the auto industry. What’s wrong with that picture?

This economy and the forecasted slow recovery will hopefully have a cleansing impact on marginal dealers and manufacturers who do not understand the “Lifestyle of Boating” and the needs of customers who seek our recreation as an escape from stress and relish the positive impact on family bonding. In my opinion, customers now and in the future will demand that we teach them, service them and show them how to have fun on the water as a family. The dealers, like MarineMax, who understand the needs of their customers and deliver on the promise that boating will be a recreation and not a hassle will be the winners when this “perfect storm” subsides and we begin to chart calmer waters. Yes, we have garnered hard experience concerning inventory and expense management, which will benefit us going forward as great “lessons learned.” We understand that our customers’ passion for boating is our future and will continue to bring opportunities as we look beyond the immediate horizon. The good news is that our customers are still out on the water boating, and that isn’t going away.

Consumer Engagement
By Jeff Behan, president, Recreational Boats, Brunswick Corp.
As we have looked at successful dealers during the past several years, one important, common element emerged — a committed focus on consumers. The importance of consumer focus is no recent secret. The new learning is its importance to business viability in addition to business growth. In the future, successful consumer engagement will involve: 1) developing deep relationships with existing customers, 2) connecting with customers where and how they wish, and 3) using these relationships to diversify dealer revenue.

While capturing new boaters will be critical in the future, there will be an even greater focus on retaining existing customers. Relevant engagement with consumers, no matter what the means, will secure important long-term customer relationships. Successful dealers will have mastered a natural, ongoing dialog with their customers and prospects. They will also use events to connect their customers with their dealership and other local boaters. These relationships will be the foundation for a strong revenue base.

Consumer behavior continues to change, particularly around interaction with the Internet. Winning in the future requires embracing consumers’ use of the Internet as a tool to build relationships and gather information. It also means engaging consumers as they accelerate their use of social media to connect with all aspects of their boating lifestyle.

A major portion of consumers’ spending during their boating lifetime is oftentimes not on the boat purchase itself. During this downturn, we have found that dealers with revenue sources in addition to new boat sales have not only survived, but have thrived. Revenue from service, storage, winterization, marina operations, used and repossessed boats, and parts sales makes for a healthier dealer financial picture. Many of these revenue sources are tied to boat usage rather than boat purchases, which dampens the impact of an economic downturn. As an added benefit, they also generate better gross margins and reliable cash flow during the non-selling season. The key to unlocking these revenue sources is to capitalize on the deep consumer relationships discussed earlier.

The current downturn has created ripple effects that will impact marine retailing for years to come. Those dealers who truly engage consumers and develop long-term relationships will be well ahead of the game.

Forecasting
By David Parker, president, Parker Business Planning
Almost everyone has been adversely affected by the current recession. For some dealers, sales are off as much as 75 percent or more from the highs of just two to three years ago. Owners have made very difficult decisions regarding expense reduction and employee layoffs. Margins have been depressed as dealers try to get rid of non-current inventory. As a result, net profits are off significantly for many businesses. Dealers want to know what to do to better prepare for next year. Here are some things to consider.

Budgeting is more important than ever. The process of forecasting is the same as always — estimate sales dollars, gross margin percentage and expenses. However, in the “new economy,” a few adjustments will need to be made. Sales volumes for next year may not increase, so here are some suggestions.

1. Work on ways to increase the gross margins on each sale.
a. This could mean buying more new and used “deal” boats.
b. Get back in the “habit” of higher margins for the 2010 models.
2. Reduce average inventory levels and increase inventory turns. Not long ago, 2.0 turns was considered good for boat, motor and trailer sales. With today’s interest rates and curtailments, 2.5 to 3.0 turns or more will have to be the norm. Use the following formula to determine the target average inventory amount.
a. Sales $ – Gross Margin $ = Cost of Sales / Turnover = Avg. Inventory $
b. Example 3,000,000 – 600,000 = 2,400,000 / 3.0 = 800,000 Avg. Inv.
3. Order enough 2010 product to adequately represent what sells in your area. If you still have a lot of non-current models in inventory, only order what you need to fill in the gaps. This is not the year for stocking the “fringe” models of which you might sell only one during the upcoming season.
4. Make sure that staffing levels are proportionate to the level of business you are attaining.
5. Look for opportunities to increase income from new sources:
a. Charge a “Document Fee” of $199 to $399 or more.
b. Add a “Shop Supplies” charge = 10 percent of labor up to $75 (for a copy of our “Shop Supplies” justification sheet, e-mail me at: david@parkerbusinessplanning.com)
c. Use a “Parts Freight In” charge = 7 percent of repair order parts (only) to cover freight.
d. Increase your “effective labor rate” by going to menu pricing or flat-rate charges for most labor items.
e. Other product lines – if you have had your eye on another brand or category of boats, this may be a good time to get it.
6. Remain cautiously optimistic – there will always be people buying boats!

Human Resources
By Valerie Ziebron, president of VRZ Consulting and a Yamaha University instructor
A skilled marine worker is a commodity, similar to the commodity of money. Most of us have learned to survive with a whole lot less these past couple years. Smart dealers figured out early, and reviewed regularly, how to pare down one of their biggest overhead expenses: payroll.

Similar to cutting out other expenses, after a while the new standard is created. Life carries on and duties get carried out. The jobs might not get done with the same level of finesse, but they do get done.

One of the best discoveries for a lot of owners was facing the facts about what positions in the dealership are “revenue generating,” aka “can’t-live-without” positions. Some of these were surprises that were learned the hard way, as when a support staff was cut only to have tech efficiency drop like the stock market after the inauguration.

Out of necessity, more cross-training was done and that now leaves us with staff who have had their comfort zones expanded and can subsequently handle a lot more on their plates. Many of these workers have taken pay cuts or, at the very least, have gone without bonuses. What will this mean when things pick up?

Let’s look at it from your current employees’ perspective. As the dealership starts to make money, would you rather have your pay ratcheted up and bonuses made available or have additional help brought in to aid with the workload? Hmmm….

Oftentimes, after a recession or a down market, the jobs, as we once knew them, just don’t come back. The news reporters chirp like parrots “jobs are a lagging indicator,” and so they are.

We have, out of necessity, gotten creative for many of our human resource needs. We are leaning on family more, using retired folks or favorite customers to help with sales, events, boat shows and even on-the-water demos for new prospects. We are hiring out sub-contractors, or anything that can allow us to get around full-time employee costs. Some jobs will return based on pure arithmetic. If sales leads or service requests pick up to a level that simply cannot be addressed by current staff, we will hire. That is basic supply-and-demand based economics: the way our country and our industry work best.

Business Models
By Larry Russo, Sr., president and CEO, Russo Marine
Let’s do some history. The millions of wooden boats built during the “boating boom” of the 1950s and 60s are now all gone, with the exception of a few surviving classics. The demise of wooden boats fueled the fiberglass and aluminum boat building industry for many years as wooden boats were replaced. Most of the boats built since 1970 are still in use today, thanks to the durability of the new materials. The pre-owned boat population has exploded at the expense of new boat production.

Over the past 20 years, new boat production has dropped from over 600,000 units per year to under 150,000 units, a 75-percent decline. However, the total number of boats registered in this country has not declined year-over-year because the fiberglass and aluminum boats don’t wear-out, and they don’t need to be replaced. The industry will never get back to producing 600,000 boats per year; there is simply too much competition from all the pre-owned boats in the marketplace. And every new boat built becomes a pre-owned boat in just a few, short years.

We are constantly adding to the pre-owned inventory. The steadily rising cost of new boats has made most pre-owned boats a better value. In addition, lenders prefer pre-owned boats because they have already been depreciated and present less risk. The ever-increasing population of pre-owned boats will continue to put downward pressure on the production of new boats.

As a result, the boat building industry will never return to its glory days and will continue to be reshaped by a decrease in demand while many consumers shift their interest to pre-owned boats.

The economic events of the past year will dictate a new order of doing business in the future. We will emerge from this recession with fewer manufacturers, fewer brands and fewer retailers. Those retailers that survive will be leaner, more efficient and will have retooled their business model to do more business with less; that means fewer brands per store and fewer people working in the business. Greater brand focus will provide a better working atmosphere for employees, healthier dealer-manufacturer relationships and, most importantly, improved customer service.

I can speak from experience; this is the model that we put into motion in 2006 when we purchased the Sea Ray brand and made a critical decision to go exclusively with Brunswick. Over the past three-plus years, we have generated efficiencies that have allowed our business to not only survive in this economy, but to flourish. We are no longer burdened with trying to satisfy multiple manufacturers with competing and conflicting strategies. We have become loyal to Brunswick, and they respect the relationship by giving us leadership and direction, great products, valuable business tools and generous financial support when needed.

The marine retailer of the future will be compelled to streamline their operations and focus on delivering a better overall boating experience. This can be best accomplished by focusing on a one-brand or a one-category strategy. If having only one brand does not deliver enough sales volume to satisfy market demand, then a dealer will consider staying within a category and becoming the best “fishing boat” dealer or the best “pontoon” dealer or the best “cruiser” dealer in a market.

Becoming a specialist in a given market will deliver the necessary volume, and that dealer will become known as “the place to go” for the best overall experience with that brand or within that category. Other retailers will become pre-owned “only” dealers capitalizing on the ever-increasing pre-owned boat population and thus eliminating the additional business burden of maintaining a dealer-manufacturer relationship.

Marketing
By Roch Lambert, vice president and general manager, Sea-Doo/Ski-Doo/Evinrude for BRP US, Inc.

The advertising world has changed and will continue to change moving forward. With the new media that is available, the consumer is much better equipped to gather a lot of information before making a purchase. I have seen countless times where the consumer is far more educated on the product than the salesperson he or she is dealing with. My message is we all need to invest more time in making sure our people who interact with our potential buyers are well versed in what our brand stands for, not just repeating a generic selling pitch. Dealers need to determine in what way that interaction will add value to the consumer’s buying process.

On our side, we continue to review and adjust our media mix. The fact is we continuously increase our effort with electronic media. We invest more in initiatives like our repowerwithevinrude.com micro Web site to answer specific needs that support our promotions. I am a strong believer in engaging marketing. Get consumers to interact with your ad, not just passively read things as it is always a challenge to come up with visuals and messages that get people’s attention at first glance. That is particularly true when the message is somewhat complex and needs to contain a lot of information, as in the case of an outboard engine.

Dealers need to define what they stand for. The brand they promote to the consumers is essentially their dealership name. What does that dealership name stand for? Are they focused on attractive pricing, aggressive promotions, unequalled service, etc.? And then they need to determine how that brand position translates into a consumer experience. Are my prices lower than anyone else in the country? Do I deliver the boat on the same day? Is my service department more competent than anyone else or is it faster? Once that brand position is clear, we have to stick with it and mention it in everything we do. Changing who you are as the wind changes is not going to help people recognize what you offer. It creates confusion in their minds. Have a plan and stick to it.

Consumers will come back. They truly enjoy the products the marine business offers, and they will come back like previous generations did. We all need to make sure we position ourselves well to get our fair share of that demand.

Service
By Brad Weber, director of service, Mercury Marine
Traditionally, in the marine industry, you go through these cyclical ups and downs. Some dealers have very strong and focused service organizations so those valleys aren’t as deep as those who don’t have that strategic focus. There have been other dealers who, when the business starts to dive, shift their focus to service to get them through those times.

Today’s economic environment is completely uncharted waters. What it will look like is yet to be defined. But we continue to spend the money and make the investments in working with our dealers cooperatively to improve and enhance their service business as experienced by the retail customer. If you take care of customers on the service side of the business and it’s a positively managed experience, it creates customer loyalty, which in turn creates rewards, retention and revenue. At the end of the day, revenue drives the business. That’s the constant theme for us in working with our dealers.

Our CSI program is dedicated specifically to service. We measure CSI during the worst-case scenario: When a product under warranty has some sort of issue and the customer takes it in to be serviced, at the time it is billed, we ask them about their service experience, full well knowing they aren’t going to be pleased. The consumer perception is that it should be trouble free through the warranty period. Our products are leading in the quality side of the business, but things happen. And we want to make sure that we don’t just fix the mechanical problem, but also the emotional problem. We ask not only “How was the service experience?” but also “Was it handled positively?” and “How likely would you be to purchase another Mercury product?”

If, during those difficult economic times, that dealer stood by the customer and took care of him, you can’t buy that kind of loyalty. The dealer will eventually reap those rewards when the customer is ready to purchase a product.

We in the industry have lost a huge number of dealers, but there still are a lot of boats and product out there that needs to be serviced. As things improve, there will be more demand upon the remaining dealers’ service departments. The service department was historically looked at as a necessary evil. But dealers will start to understand our philosophy on it: It’s a strategic competitive advantage. As dealers are able to reinvest in their businesses, I think you’ll see them make service a priority, whether it’s brick and mortar, training or equipment.

Lead Management
By Chuck Lewis, president, Channel Blade
In the quintessential film on salesmanship, “Glengarry Glen Ross,” Blake, the alpha dog salesman played by Alec Baldwin, puts the importance of leads to his underperforming sales team this way: “These are the new leads. And to you they’re gold, and you don’t get them. Why? Because to give them to you would be throwing them away. They’re for closers.”

We all know the marine industry landscape is changing. We will see fewer dealers, builders and buyers in the foreseeable future. Our ability to manage, generate and convert leads is more timely than ever as we charter this new evolving marketplace. Conversely, the online marketplace is booming. Why is this important to us in the marine industry? Consumers are researching product information, financing, inventory, availability and owner experiences online. Consumers want answers right away. They want sellers to respond instantaneously. We want what we want now. So, as we receive these requests about our products and services, we must treat these as the gold they are … leads!

In the housing market, it is estimated that an effective lead program will cost $1,000 per closed lead; agents close between 2 and 8 percent of total leads, and close rates vary based upon quality of leads, follow up and selling ability. The marine builders are paying attention to these types of statistics. In the face of declining marketing budgets, the budgets for lead management, lead generation and dealer education are on the rise. What does this mean? As these investments rise, so do the expectations of the dealer. To exceed increasingly high consumer expectations, many dealers will benefit from continued education on the importance of response time, quality of response and conversion rates. Failing to meet these minimum expectations will result in leads being redistributed to more competitive dealers.

Yes, we will see more leads and more quality leads as our industry improves its ability to focus and target potential boat buyers. We will all be held accountable for the process, technology and education we implement to be successful in managing our leads and converting them into sales. Due to the effectiveness of prevailing and developing technology, successful lead management will be done more and more under the microscope. So, as we plunge forward into a very uncertain future, let us remember these very certain words of Blake: “Put that coffee down. Coffee is for closers only.”

Sales
By Joe Verde, president, Joe Verde Group
A salesperson’s responsibilities have always been the same: bring a prospect on the lot, sell the product and retain them forever.

These last few years, though, dealers haven’t had to push very hard on those three areas. Sales have been so good for decades that dealers relied on advertising instead of training, coaching and requiring salespeople to prospect or retain their customers. Even the selling process has been ignored. Why bother – we’re selling plenty!

Now everybody is wishing for more floor traffic, and advertising isn’t doing the job. When those few do show up, the sales force doesn’t have the skills to convert a prospect into a delivery today.

So what’s the plan – what can a dealer do today to sell more tomorrow? In real life, not much – tomorrow will be here before you can write a plan.

But you can start planning for what you want to happen two weeks from tomorrow, 30 days from tomorrow and in the next 12 months – and you can actually make it happen. How? By doing the things management has been avoiding …
1. Get the management training you need to pull this off.
2. Train your salespeople initially and then daily, without exception.
3. Coach them to develop their skills and good habits.
4. Manage every selling activity you expect, and accept no excuses.

There isn’t much rocket science to any of this, and the biggest problem that holds dealers, managers and salespeople back is change.

That’s why your first step to recovery and growth is to develop the leadership and management skills in your dealership so you can start building more traffic, selling more of the people on your lot, and retaining your customers forever so you never have to go through a slump like this again.

Customer Expectations
By Gary Druckenmiller, Jr., co-founder, TheOpenSea.com
Customers will demand transparency. Customers will require fairness. Customers will want the truth. And they’ll want all of this on their terms and in the manner that is most efficient to them. And you know what? They’ll get it.

Remember, boaters don’t just boat. They’re from all walks of life, they buy non-marine things, they are part of other hobbyist groups, and they will be using social networking in other capacities outside marine. Eventually, they will ask themselves, “Why isn’t my dealer using this stuff?” When they ask that question, it’s already too late for Joe Dealer.

The customer’s expectation going forward is easy to figure out then. They will expect that every aspect of their lives have a social networking component to it. When they are unable to manage face-to-face, a large or niche social network will need to be there. So my advice to dealers is just as simple: Be there. When that big marine social network really starts to make a name for itself, get on that site, set up shop and start talking because your future customers will be there too. And they’ll be looking for you.

Social networking will be one of the catalysts that allow the industry to recover from this downturn. I see dealers using these tools to ensure their own survival. The good news is that dealers are now in a position to take advantage of functionality like social networking in an effort to not only save themselves but also “catch-up” to how other markets operate. In the end, dealers will become vastly more effective in how they capture leads, gain consideration, convert and retain customers, thanks to social networking. Three to five years from now, dealers will be using social networking as their primary method of solicitation, marketing and ongoing dialogue between themselves and their customers.

Alternate Profit Centers
By Mike Hebert, president, Texas Marine
There is a lot of discussion among manufacturers and dealers on how to survive this unusually severe downturn and thrive in whatever economic climate exists when it is over. I believe there could be some substantial changes, and we may never be able to revert back to the standards of recent history. Any progress and correction could occur over an elongated period of time. These changes include fewer buyers, smaller sales volumes and smaller profit margins on new boats, at least until the large numbers of repos and overstocked inventory is gone. Thriving with these lower sales volumes and margins will take more than merely cutting expenses. You must have basic expenses such as reasonable facilities, personnel, insurance, etc. You can only cut your expenses to a certain degree. Our customers will still expect a high level of service, a considerable inventory selection, trained personnel to help them and much more.

In addition to cutting expenses, dealers will need to look for other ways to increase profits, not only in existing profit centers such as new boat sales, service, F&I and accessories sales, but also in other profit centers they currently do not have such as fiberglass repair and aluminum fabrication for boating related products like leaning posts, cast platforms, wakeboard towers, etc. Service departments can and should contribute to a large portion of the profit in a dealership. We may not be able to pay all of the operating expense of the entire dealership with service revenue, like the auto dealers have done for years, but most dealers have a lot of room to grow the service department’s revenue and profitability.

Many dealers focus most of their management’s time and resources on boat sales, but we will all have to learn the benefits of putting the focus on other, more profitable areas in our dealerships such as used boats, which have much bigger margins, and brokerage business, which is also much more profitable because there is little risk and no cost of inventory.

Many dealers still are not dedicating personnel for finance and insurance departments, which leaves large amounts of profit on the table. F&I departments are another big source of profit, most of which contributes directly to the bottom line. I believe the dealers who follow these guidelines can maintain profitability in the years to come and will not only survive, but also will thrive, even in these tougher times. If, or when, the new boat sales volumes and profit levels return to pre-economic downturn levels, these dealers will be able to realize a reasonable return on their investment instead of just working for wages.

Social Networking
By Cam Collins, president and CEO, Exuma Technologies (makers of DockMaster software)
I believe that the future of the marine industry will depend upon how well retailers can connect with boaters. The days of spending millions of dollars advertising average products to the average consumer just doesn’t work in our industry. We all have so many interruptions coming at us all day long that we are forced to ignore most of what we see and hear. With the advent of social networking and Web 2.0 technologies, never before have marine retailers had more tools available at relatively little cost to get their message out to those that want to hear it. I believe that the successful marine dealers will find themselves focusing on fewer customers, offering fewer brands and accessories. However, this “focus” will create strong relationships between dealers, OEMs and boaters, resulting in fewer customers spending more money on average.

We need to make boating information more readily available. I think we can all learn something from the Food Network and TV chefs like Emeril. Great chefs pride themselves on creating unique dishes with wonderful flavor. Rather than keeping these recipes a secret, like the Coca-Cola syrup formula, they get on national TV to tell the world how they make something. In the television model, this in turn sells advertising for the network and the chefs sell more books.

I’d like to see the marine industry make their “recipes” more available to boaters. For instance, a dealer with a strong service business or a boatyard could create a blog on their Web site where they outline “How To” stories on basic repairs. These blogs could be quite interactive with video and images showing step-by-step how to change the oil in your four-stroke outboard or replace a float switch in the bilge. The blog could also talk in more detail about when routine maintenance should be performed, thus giving dealers a platform for describing their services in more detail. Blog sites are relatively easy to create using tools like WordPress.com and Blogger.com. Exposure can be organically grown through Facebook, LinkedIn and Twitter. Would the dealer or boatyard potentially lose some revenue because they’ve shown their customer how to do something they would typically charge for? Maybe, but how much loyalty do you gain by showing off your recipes?

Dealer/Manufacturer Relations
By Phil Smoker, vice president of corporate sales, StarCraft Marine
We’ve all been given a crash course in inventory management over the past 12 months. When money is cheap and easy, inventory turns become less important and manufacturers/dealers are more likely to experiment with new products. In the good times, it’s tougher to stay disciplined. The downturn has forced us all to re-evaluate our businesses and focus on our core competencies.

I think everybody (finance companies, manufacturers, dealers, etc.) played a role in creating the sins of the past. Now, each of these stakeholders is resetting their business models and driving the entire supply chain to have a different look. The finance companies are making money more difficult to attain, becoming stricter with curtailments and driving their decisions based on inventory turns. In response to this change, the dealer is lessening his inventory and concentrating on the product that turns quickly. This has caused manufacturers to lessen their options by standardizing more product and focus on the product that moves through the pipeline quickest.

We feel that the dealers will adjust their business to fit this new model in a number of ways. They’re going to work with fewer manufacturers as a means to simplify their business. In addition, they’re going to work with manufacturers that can keep their business simple with “year-round” programs, responsive customer service and better inventory/production communication with the dealer network. There will also continue to be more integration between the manufacturer and dealer Web sites to provide information, especially as dealer inventories lessen.

In the end, I envision an even closer relationship between the dealer and manufacturer with regards to inventory management. Both will work closer together to develop “stocking levels” and monitor them throughout the year. These “levels” will use variables based on the current environment and territory – and not just on past performance. This will place more weight on the manufacturer to respect the dealer’s territory, and more discipline on the dealer to concentrate on the product at hand. This will give the entire pipeline more guidance and allow each stakeholder to recognize market conditions quicker, so that the next downturn doesn’t catch any of us off guard.

Cash Management
By Noel Osborne, consultant &?instructor, Yamaha University
Cash is golden. In fact, it always has been. The difference now is that virtually everybody in the marine industry is running out of it. Both manufacturers and dealers are struggling to pay their bills and the prospects for a near-term resolution to the problem appear to be very remote.

During my presentations as an instructor at the yearly Yamaha Marine Symposiums, I advised those dealers in attendance to try and have a minimum of six months worth of operating cash on hand at all times. Most looked at me with that deer-in-the-headlights expression and suggested that I simply did not understand dealership operations.

I must admit that I was wrong when I suggested everyone had to have six months in operating cash. The truth was, and is, that they needed closer to 12 months worth — and possibly more. There is nothing that we can do to help those who failed to survive the current dilemma, but we can take some steps to help those of you who are still hanging on.

First and foremost is the fact that you have to conserve cash in every way possible. Secondly, you need to maximize every gross profit opportunity that you can find. I suggested recently that you need to recognize the fact that in all probability you derive up to 80 percent of your gross profits from somewhere around 20 percent of your offerings, whether they be boats, engines, parts or accessories. We need to identify what that 20 percent consists of.

Carefully review all of your sales for the previous several years and identify what that 20 percent consists of and stock those items. Don’t stock the slow-moving products. This will significantly reduce your inventory carrying costs and improve your bottom-line. Floorplan interest is not going to go down. It is going to go up as the country is burdened with the cost of paying for all of the government programs.

Gone are the days when we could run our dealerships without developing well-orchestrated plans. In fact, we have to develop comprehensive business plans that detail every income and expense item by month. We have to know what we can expect in the way of gross profits on every boat model that we stock, and we have to be able to project within reason when those models will sell.

We have to be able to project what our service income is going to be every month for every element of service. That would include retail labor, retail parts, warranty labor, warranty parts, rigging labor, rigging parts, plus any other service related items such as canvas or detailing.

In addition, we need to know precisely what the costs are for each of these service items. Successful dealers in the future will recognize the fact that service may very well provide the lion’s share of their gross profits.

If we develop a business plan that details our projections for every one of our income and cost of sales items, then we will be able to determine what our projected gross profits are for every month of the year. Chart them on an Excel spreadsheet and you will be amazed at how much your gross profits will vary throughout the year. You are now on your way to putting a cash management system in place for your dealership.

Next do the same thing with your operating expenses. By that I mean a detailed monthly listing of every expense item on an Excel spreadsheet. You will probably find that the total monthly expenses do not vary that much from month to month. While you are at it, carefully examine every expense item. Do they make sense? Are they logical? Could you reduce some of them without crippling your dealership? I bet you can.

Next marry these two charts together. Subtracting your monthly operating expenses from your projected monthly gross profits will show you what your projected cash flow should be for the year. I am sure that there are certain months where your cash flow will be a negative number.

It is important that you recognize and plan for those months or you will not be able to pay your suppliers or your valuable employees. This is why you need to stockpile some of your accumulated profits from your positive cash flow months.

The old adage that “You cannot manage what you do not measure” is more important now than it ever was in our industry. You should prepare an actual cash-flow chart that parallels the information shown on your projections chart. We all know that the chances that your projections will be the same as your projected numbers are rather remote. That is precisely why financial reporting documents, primarily your profit-and-loss statements, are so important.

Examine your P&L’s carefully. Do they show what your profitability is for every income item? If they don’t, then you need to revisit how they are structured. Remember that your chart of accounts drives your P&L’s.

If every item you want to measure is not shown on your chart of accounts, then it will not show up on your P&L. Simple as that.

With your business plan in one hand and your P&L in the other, you can now measure your monthly performance against your projected performance. If your actual numbers are off from your projections, especially if they are more negative, then this will impact your cash flow in the following months and you will have to adjust your operations to compensate for them.

If you fail to do this then all you are doing is burying your head in the sand. You will have to pay the price for failing to manage your cash properly.

That price could mean survival in the future.

Web Tools
By Bernie Veon, vice president & GM, Boat Trader

Without question, the economic turbulence over the last couple of years continues to reshape the marine industry. However, those with good business models, strong product lines and great people are weathering the storm and will be best positioned to grow future market share in our $33.6 billion U.S. industry. This holds true across all business segments within the marine industry, including how dealers leverage technology and invest their advertising and promotional dollars going forward.

Advertising spending in general continues to move away from traditional, qualitative-based broadcast and mass media in favor of quantitative and measurable alternatives, specifically toward online advertising. Historically, we have seen a natural progression over time towards more targeted sales channels as marketers seek to optimize investment dollars and communicate more efficiently with their core audience. The current recession has only served to accelerate this structural change. Online advertising spending is expected to double from $26 billion in 2008 to $51 billion in the next four years.

The value of each lead, and the expected return on investments for advertising in general, has never been greater. As a result, businesses continue to aggressively steer their investments away from qualitative “nice-to-have” mediums and toward quantitative “can’t-live-without” sources. This trend will continue until we establish a new waterline for recreational boating consumer supply and demand curves. Dealers should leverage their promotional investments in sources that provide measurable results, target boat shoppers and enthusiasts, and provide a satisfactory rate of return.

In general, today’s online consumers are more sophisticated and knowledgeable when it comes to major purchasing decisions and demand more information in order to retain their interest. As a result, they are searching an average of seven sites before reaching their final destination. Therefore, in today’s world, simply having a Web site is not enough to secure a competitive advantage — as successful dealers are casting their entire inventory throughout the Internet in order to reach information-savvy consumers.

Additionally, consumers increasingly expect a more integrated and enriched experience when shopping online. This is especially true for purchases with significant investments, including boats. As a result, traditional online listings have given way to video, reviews/tests and consumer-generated content.

“Dealers that want to survive and thrive in today’s competitive marketplace need to model their businesses more closely around changing consumer preferences,” says Courtney Chalmers, brand manager for Boat Trader. “Boat buyers are using new methods for researching, shopping and communicating and providers like Boat Trader are working hard to satisfy these changing demands. Now, more than ever, dealers have access to tools and resources to help them obtain new customers, convert them to a sale and retain them as loyal customers. And, the economic downturn has created new opportunities for dealers to take market share from those that have ‘laid low’ through the rough times.”

According to the NMMA Recreational Boating Statistical Abstract, every boater that a dealer fails to convert to a buyer costs the dealership $84,796 per customer over 25 years, the average value of one customer in a lifetime (25 years) of boating. There are a variety of tools to help a dealer measure results, but surprisingly, some still rely on pen and paper to track results and leads from their promotional investments.

“A recent Boat Trader study revealed that 49 percent of all email leads go unanswered,” says BoatTrader.com’s David Bingham. “That equates to a lot of lost sales opportunity.”

The most successful dealers have a CRM and lead management system that allows them to view and respond to leads quickly, monitor responses and track conversion rates to evaluate the effectiveness of their marketing campaigns.

Successful dealers also know the importance of staying on top of consumer trends. Technology continues to reshape the way we shop, and advances in smart phone technology have made these tools more accessible. About 50 percent of iPhones have replaced conventional mobiles phones, 40 percent have replaced smart phones and 10 percent have replaced nothing.

One of the most promoted features of the iPhone is its Web browser. Surveys confirmed that smart phones are driving a substantial increase in mobile browsing and the large majority of owners said they do a lot more browsing on their phones than previously. Boat Trader has witnessed this trend first-hand and has seen a 566 percent increase in mobile application visitor traffic since January alone.

Smart phones are also known for the user-friendly “keyboards,” which reflects the exponential growth in SMS text messaging in the U.S. According to the Mobile Telecoms Industry Annual Review, SMS text messaging is used by more than twice the number of people who use the Internet. In response, many providers are now offering services through which dealers can be alerted of incoming leads via their mobile devices so that they can communicate with them more quickly.

Tomorrow’s most effective dealers will be those that leverage technology to reach the largest possible online audience, convert a high rate of leads/inquiries and completely integrate their Web site, lead manager/CRM and online marketing channels. By closely aligning the functionality of these components with their strategies and consumer shopping preferences, dealers can take advantage of technology advances and cost efficiencies while eliminating redundancies. Translation: more sales, more profit and fewer headaches.