Many dealerships look at accessories and ask themselves why they should be bothered selling small-fry items like fish finders and water skis. With competitors like West Marine, Cabela’s and Bass Pro Shops, they figure they’re better off focusing on the big-ticket boats in their showroom that they’ve invested so much money in.
However, with the opportunity for diversification, relatively low startup cost, customer convenience, and shot in the arm to other profit centers accessories can provide — not to mention higher margins than new boat sales — the question those dealers might be better off asking is: Why aren’t we enjoying the returns a well-run accessories department can provide?
“The awesome thing is that margins are double what boat sales margins are or more,” says Andy Larson, owner of Minnesota’s Midwest MasterCraft. “A good accessories department can float the boat.”
Larson’s dealership is one of the country’s leaders when it comes to putting the time, thought and capital in the proper places to do well with accessories sales, and the company has reaped the rewards of those efforts. Midwest MasterCraft sold more than $1 million in accessories last year.
The average dealership may not experience such dramatic returns. John Spader, president of Spader Business Management, says accessories sales are not going to make or break most boat dealerships. But they can provide a bump to the bottom line, and perhaps more importantly, can have a significant positive impact on the business’ other operations.
“The biggest boost to the dealership is not going to come, in my opinion, from the net profit,” Spader says. “It’s going to come from the floor traffic you drive, the relationship with the customer, the CSI score. You can get some incremental sales at pretty high margins and really cement that customer to you. If you’re looked at as a good accessories place, they’ll come in, and you get a chance to sell them boats and service and parts and all that other stuff as well. And most dealers do not have that going.”
A real asset
The margins that can be made with accessories make it a lucrative department, if operated correctly.
“It’s such a huge profit center because the margins are so good,” says Larson. “If you can get any volume, it turns into a real asset.”
He explains that the margins depend on what you’re buying and who you’re buying it from, but he estimates that they lie somewhere from 30 percent to 50 percent, and “we’re not seeing 30 to 50 percent selling boats, I can tell you that.”
Those kinds of margins on accessories are not unique to Midwest MasterCraft. Parker Business Planning President David Parker says the better accessories dealers within the 20 Groups he oversees often get an average margin of 35 to 40 percent.
“Absolutely, the margins are better than boat sales,” Parker says. “No matter what boat you sell, there are lots of accessories that can be sold with it that can help improve the bottom line of the dealership. In the last three years, it actually has been growing because people have been fixing their boats up rather than trading them.”
The average dealer may make margins in the low-to-mid 30s, says Spader, but dealers in the top 20 percent make margins in the low-to-mid 40s on accessories sales.
If there’s enough volume at those margins, a business will not only enjoy a strong return on investment, it will also be able to achieve Larson’s goal of diversification.
“If you’re looking at accessories like it’s another profit center, to us that’s our other boat line almost,” Larson says. “We do enough accessories and then figure that it’s double the margin plus, it’s our way of having another line. Theoretically, dealers could grow — who knows if it’s to that level — but could grow that to where it is a big profit center where someone is making a ton of money.”
Once a customer has made the decision to buy a boat, accessories sales often fall right into place as boat buyers are usually pleased to have dealers offer them products that can make their boating experience easier and more enjoyable, Parker suggests. Dealerships that aren’t positioned to capture those sales are just giving that business away to their competitors.
Midwest MasterCraft does between $2,000 to $4,000 in accessories business, on average, for every boat it sells. Other dealers often think they can’t compete with specialty stores such as West Marine, or big box stores like Cabela’s and Bass Pro Shops, he says. But that perception is costing them money.
“If they’re buying the boat from you, why don’t you not give them a reason to go to those stores,” he says. “That’s why they got into the business of selling boats. Everybody’s boat customers were going there for accessories.”
Having sold a lot of accessories to customers who bought their boats elsewhere, Larson knows how important it is to give buyers what they need to keep them coming back to his dealership.
Parker says the dealerships he sees with well-run accessories departments “are usually bustling with activity, and that creates more sales in all your departments.”
But with all the opportunity accessories seem to provide, the majority of dealerships still aren’t taking full advantage. Spader says that many dealerships are still in survival or stabilize mode and that in the last few years, unless a dealer was really knocking accessories sales out of the park, the company may have even cut positions in the accessories department and let some of that staff go.
“My gut sense,” Parker comments, “says that no more than one-fourth to one-third of dealers are really taking advantage of the accessories business like they could be.”