By David Gee
What will determine success for your dealership during this 2021 selling season? The overall economy? For sure. Consumer confidence? Check. Workforce issues and challenges? Yep. That trio hovers at – or near – the top of the list nearly every year. But this year, two new entrants rear their ugly heads: inventory, or lack thereof, and the coronavirus.
Before we dig into the year ahead, let’s take a quick check of the year that was. And by most accounts, it was pretty stellar all things considered.
The headline? The NMMA reported retail unit sales of new powerboats increased last year by an estimated 12% compared to 2019. More than 310,000 new powerboats were sold, accounting for levels the industry has not seen since before the Great Recession in 2008.
“2020 was an extraordinary year for new powerboat sales as more Americans took to the water to escape pandemic stress and enjoy the outdoors safely,” said Frank Hugelmeyer, NMMA president. “For the first time in more than a decade, we saw an increase in first-time boat buyers, who helped spur growth of versatile, smaller boats – less than 26 feet – that are often towed to local waterways and provide a variety of boating experiences, from fishing to watersports.”
Okay, so far, so good. But our resident economist, Elliot Eisenberg, PhD., who was the keynote speaker at the inaugural Boating Industry ELEVATE Summit conference in 2019, and then again at the virtual version this past November, says those sales figures deserve a closer look.
“Normally when the categories of recreational vehicles, light vehicles, powersports, and boat sales are all up, as they have been, the economy is firing on all cylinders,” explains Dr. Eisenberg. “But this time it’s not. That’s due to what I call coronavirus contamination. This is when people say I’m not going to vacation in Europe, or Orlando, or take that cruise, but instead decide to buy a boat or an RV. Those sales numbers are a positive, don’t get me wrong, but they’re not totally indicative of the health of our overall economy. You can’t look at your boat sales figures in isolation. You have to take in consideration the rest of the economy.”
The survey says…
Before we drill too far down on some causes for concern when it comes to the rest of the overall economy, let’s go to the survey.
The first question we asked dealers in our audience (and by the way a big thanks to those who responded) was what factors do you consider most critical to your success in 2021?
The percentage of dealers who said the overall economy was in fact the most important thing on the list was 62.2%. Consumer confidence was about 10 percentage points back, followed relatively closely by weather, the coronavirus and government regulations.
There is one thing to note, however. And it’s a miss on our part. Or my part, to be specific, since I put the survey questions together. I did not have inventory on the list. It just wasn’t on my brain at the time. It’s obvious though from the comments section we included in the survey, and at the end of this piece, that the subject of inventory is on your brain. Likely a lot!
“Dealers that have a good selection of inventory and that have purchased a large amount will be successful in 2021,” says Jeremy Dawkins, the owner of Boating Industry Top 100 dealer Lincolnton Marine in Lincolnton, Georgia. And those that haven’t? We can all probably finish the sentence.
Nautical Ventures Director of Marketing Frank Ferraro echoed the sentiment about adequate overall boat inventory levels. And added that they are also concerned about having all they need to keep up with a surge of repower business also spurred on by the COVID-19 pandemic.
When I was reading through the survey comments one dealer principal had kind of a different take on what it meant to have a shortage of boats to sell. So I reached out to him for amplification.
“At one point last summer we only had five boats in stock between two stores,” explained Andy Larson, the long-time owner of Midwest Water Sports, a MasterCraft, Supra, and Moomba dealer in Minnesota. “So with Eric, my manager, we spent some unallocated time on eCommerce which paid huge dividends this year.”
It wasn’t just time management that called for creativity. Covid also created changes in the traditional selling cycle.
“Buyers know that inventory scarcity was an issue last season and most understand it will be an issue in 2021,” Larson said. “We have seen many more buyers willing to make a commitment sooner even without manufacturer discount programs. We have 70% of our 2021 inventory allocations sold now. So we will have to find creative ways to line up as many 2022 sales as we can, with limited 2021 inventory options. Then we will take some of the hours usually spent selling in season and apply them to other areas of the business to improve the customer experience and dealership profitability.”
So when exactly will supply and demand sync up? Glad you asked. Actually, we asked that question in the survey and here is what you had to say.
Slightly more than 38% of the survey respondents said supply and demand won’t come together until 2022. There were some slightly more optimistic among you with 36% predicting Q3 of 2021, while 13% are predicting Q2 and 10% are calling for Q4. And it’s worth noting a small number of you are predicting supply and demand will come together in Q1 of 2021. There’s about a month left for that to happen.
Despite a potential lack of product to peddle, and supply chain issues, and all the rest, the revenue outlook for 2021 looks pretty rosy, at least according to our survey.
In fact, over half of the respondents expect to have an even better year this year than last. Nearly 28% are looking for overall revenue to be up between 10% and 25%. Just under 25% expect an up year, but less than 10%. About 10% expect a flat year, while 25% expect revenue to be slightly down and nearly 8% expect it to be down 10% - 25%.
Tina Maloney is the business manager at Florida’s Harbor View Marine, where she has worked since 2005. They have locations in Pensacola and Orange Beach, and offer new and used boats, a marina, hi/dry storage, parts and service and even a boat club. She said they still have concerns about more COVID-driven mandatory lockdowns and a potentially worsening unemployment rate.
Our economist friend, Elliot Eisenberg, who recently relocated to Florida full-time, shares those COVID-19 economic concerns.
“At the beginning of the pandemic,” he explained, “the purchase of services went down, but the purchase of goods went up. However, the retail sales growth appears to be over for the most part and looks to be returning to more normal levels. You have to remember we are in the midst of a global health crisis, not a true recession. And absolutely the rise in coronavirus cases is a real concern for the overall economy.”
Put another way, Eisenberg says the strong sales figures of houses, cars, boats and RVs are now “old news.” He says we need to get other sectors going.
“The single best way to know if our economy has totally returned to health is to turn on the television, watch a sporting event, and see if the stands are full,” Dr. Eisenberg says in closing. “When the NFL, NHL, NBA, MLB, MLS and all the rest have packed stadiums, then you’ll know our economy is good to go.”