Let’s All Sing Kumbaya Over Model Year Debuts
I was fortunate enough to have gone to work in the recreational vehicle industry in 1976 and I’ve enjoyed every minute of it since then.
Looking back at this point, I marvel at the RV retailer who has survived gas rationing, staggering gas prices, high interest rates, housing bubbles and so on. Time and again, retailers and manufacturers weathered the storm and invariably came back in a reinvented state. Survival was the key.
Having said that, with all the challenges in this arena, the one that would seem most controllable in my view is the timing of new model introductions.
Minnesota dealer Dan Pearson, a former RVDA president, once tried to address this issue with no decision to show for his efforts. I applaud his vigilance, and I still think manufacturers and retailers should get together and put a stake in the ground as to when to jointly coordinate new model year debuts. Maybe it’s RV Open House Week in late September or during the Louisville Show in late November. Or maybe it’s timed with a calendar year.
But any way you look at it, through thick or thin, the retailer is at the mercy of the manufacturer as to what to stock and when to stock it.
That’s the bottom line.
At the stroke of a pen, the way things are now, current inventory often turns into aged, year-old product right in the middle of a selling season whereas the manufacturer’s decision could be based upon little more than the idea that “business is bad; this will pick it up” or “let’s get the jump on our competition.”
But really, coming out with 2014 product in April of 2013 not only puts the retailer in a bad position, but also creates a credibility gap for the retail customer. While book value of standing inventory automatically drops a significant percentage, just think about what happens with regard to a customer who just took delivery of a 2013 and now has to deal with quicker depreciation?
Yet another issue with respect to early model year changes is that when a new product comes out, lenders’ curtailments suddenly come into play. Since the global meltdown a few years ago, lenders have held the retailer’s feet to the fire on paying curtailments, and left-over product may be subject to a higher interest rate.
This industry is capital intensive and cash flow is critical to a successful operation. Curtailment, on the other hand, is a drain on cash flow and in some cases can create major problems in managing a business, prompting retailers to sell off product in a “panic sale” atmosphere that impacts gross margins.
But if the industry gets together on a specific month to launch new products, then retailers could more easily plan ahead and start to reduce their leftover inventory. However, the down side for the manufacturer is the tendency on the part of many retailers to “wait for the new model launch and then buy.” So, then, the manufacturer has the reciprocal challenge of unloading its current model product.
The problem, however, remains that all it takes is one manufacturer to come out earlier than the agreed-upon date and the gloves are off, so to speak.
So does the industry have the discipline to collectively select a month to announce the unveiling of new models and stick to it?
Can we all get on the same page?
So far, the answer is unfortunately “no”
But there’s hope.
As I am writing this piece, complaining about model change and reading Automotive News, I see where Ford, Chrysler, Audi and Mazda are acknowledging the problem and have begun synchronizing their model years by incentivizing 2014 product as of April 24. Ford is building 2014 Mustangs and selling them as 50th anniversary models. Now that’s a new spin on an old problem. Why not make a 2015 fifth-wheel or trailer and call it the 50th anniversary model and give away special glasses. Now there’s a novel idea.