Thursday, February 5, 2009

The Changing World of Boatbuilding and Sales

Commentary:
Last week I wrote about the new definition of value and how the current boat market is effecting the priorities for choosing a boat to buy. Our fellow Beneteau and Alerion Express dealer in Lake Erie, Don Finkle, recently wrote a piece on the dynamic landscape of boatbuilding and sales (see below). I thought I would share this with our customers and prospects on Lake Michigan as it imparts Don's many, many years of experience as a stocking boat dealer. More importantly it provides perspective on why it is a great time to buy a boat.

As a country, it seems as though we are currently stuck in 'neutral'. It seems as though we are waiting for our governmental leaders to provide a solution for us that will compel the move to 'drive'. This hesitation is continuing to feed the spiral of our nation's economy. As Americans we need to declare 'enough' and set the wheels of progress in motion.

The secret is within each of us.

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The Changing World of Boatbuilding and Sales


by Don Finkle

The public does not really understand how precarious the life of most boatbuilders really is. I can recall some years back when Edson, manufacturers of steering systems and other parts used in sailboats, sent us a letter. They listed all of the boatbuilders that they used to supply to that were no longer operating. There were three full columns of names, single-spaced, that filled an entire sheet of paper. Once-respected names like Cal, Ranger, O'Day, Cape Dory, Bristol, Pearson, Ericson, Islander, Columbia, Hughes, Olympic, Tanzer, and on and on. The list was sobering. All gone. Since that time there are many more that have disappeared. And that was long before the current economic slowdown.

As a dealer, the financial strength of our builders is extremely important to us. We want them to be around to provide warranty service, parts, and to maintain the prominence of the brand so that our customers' boats have good resale (and trade-in) value. This is why you don't see RCR taking on every new model that comes along, no matter how appealing it might seem at first. How many times have you seen ads for boats that never ended up being built, or that went away after one or two years? Race boats are especially prone to plummeting resale value. The market is small to begin with, and unless a one-design class is established they are tossed aside for the next newer, flashier, faster design.

Sailors are conservative by nature, at least when it comes to buying boats. They may get excited at the boatshow when they see the new "Speedo 35", but then the reality sinks in of what it will be like to own one, try to gets parts and support, and then someday hope to sell it. Even the very well-healed have slowed down their penchant for going after the "latest and greatest".

You have no doubt noticed that there are few North American builders anymore. The foreign builders come and go with the currency exchange rate, the world market, and other factors. They have their own problems that in some ways are worse because of labor laws in their more socialistic countries. We have had our tailfeathers burned in the past by trying that route, which is why we stick to Beneteau. They are the World's largest sailboat builder, and most importantly they build most of the boats for our market right here in the US, in Marion, SC. Groupe Beneteau is a publicly listed company that has great financial strength that is there for all to see. Their boats enjoy solid resale for a variety of reasons: terrific value package, top-name designers, dual-purpose for long useful life, great brand recognition, well made and extensively outfitted. We do our homework so when we sell you a boat it is because we truly believe in it.

Our builders have come up with their own economic stimulus programs and they are immediate and substantial. The details vary by manufacturer, but the results are the same…you will save enough money to make it worthwhile buying now. We know and you know and they know that most people are sitting on their hands because of the fear that is being promoted every day. Most people are just as capable of buying a boat today as they were a year ago, but are less comfortable in doing so now because of the uncertain future. However, the builders and dealers are combining to make it possible to buy a boat at a price that makes it unlikely you will lose when you want or need to sell it down the road. Thus you can still enjoy sailing without the worry that you are doing something crazy and jeopardizing your future.

There is a big reason why we are all trying to stimulate sales now as opposed to later. You have heard about the banking sector tightening lending, and that tightening has affected businesses more than consumers. It is much easier for us to get you a retail boat loan than it is for us to get wholesale financing for our inventory. The landscape is changing, and in the future dealers will carry much less inventory than we have in the past. This a fact widely acknowledged in the boating and banking industries.

We need to sell what we have in stock, and the builders know that they have no hope of selling any of us a boat until we sell what we already have. This adds up to selling off whatever is in stock, and dealers and builders are in this together, working to make it happen. Once we sell off what we have, most boats will be ordered only when we have a customer for them. At that time we will no longer be "dumping" and the prices will not be what they are now. Simply put, we cannot make a living selling boats at the prices of these left-overs, so this pricing strategy is short-term. We see no reason for smoke and mirrors, no BS, this is the way it is. These are the facts, plain and simple.

Those who are in a position to take advantage by buying one of these in-stock boats will get a deal they have not seen before or probably will not see again. Keep in mind that the discounts are shared by the builders and the dealers, so when they stop kicking in there is no way we can match these later. If you are looking for a boat that we don't have, one of our dealer friends will have one and we'll get it from them. The rest of the good news is that you will still get the good service to go with the sale, and these boats are all terrific products. The fact that boat sales are slow has nothing to do with the boats themselves, simply the result of external forces. We just sold a new Beneteau First 10R to friends who jumped on a great deal, now it is up to you!