Editor’s Note: Thom Dammrich, president of the National Marine Manufacturers Association (NMMA) and current board chairman of the American Recreation Coalition (ARC), spoke this week at a National Marine Bankers Conference. The following account of his speech appeared in Soundings Trade Only e-newsletter. NMMA’s more than 1,400 member companies produce every conceivable product used by recreational boaters. An estimated 80% of marine products used in North America are produced by NMMA members. The association was formed in 1979 but traces its roots back to 1908.
Gross domestic product grew at an annualized rate of 3.5% in the third quarter,” said Thom Dammrich, president of the National Marine Manufacturers Association, Tuesday (Nov. 10) at the National Marine Bankers Association’s 30th annual conference in Hilton Head, S.C.
“That’s very positive,” Dammrich said.
In past recessions, the time lapsed between the peak in consumer confidence to the trough has been 26 to 35 months. “At the end of October, we’re in the 27th month (of depressed consumer confidence),” he said. “Sometime in the next three to eight months we’ll see consumer confidence turn up.”
Home prices rose 1.4% on a seasonally adjusted basis in the second quarter of 2009, the first increase since 2006. Auto sales are increasing over last year, as are recreational vehicle sales.
“We tend to follow the recreational vehicle industry by six months, and they started picking up in July,” Dammrich said. “We should begin to see boat product sales pick up in 2010.”
That said, Dammrich predicted dealers and manufacturers face a cold, dark winter ahead because so few boats are sold in winter.
“Some dealers and manufacturers are not going to make it,” he said.
He projects the industry will sell 135,000 boats in 2009 and about the same volume in 2010, but he says production should increase 160% to 135,000 in 2010, up from 52,000 this year.
He says manufacturers are going to have to figure out how to build for the peak selling season so dealers don’t have to carry a lot of inventory (floorplanning costs have soared.)
This will challenge both manufacturers and their suppliers. Lenders, who have tightened credit requirements to the point that many can’t qualify for loans, will have to help fuel the recovery.
“In fact, many believe the recovery of new boat sales and manufacturing will be paced by the availability of credit,” Dammrich said. “Without credit, the recovery won’t happen.”
Dammrich says manufacturers are looking for new business models: keeping dealer inventory low, selling larger models direct to the consumer, building to order, developing dealers who own more equity in their business, and cutting back boat shows from 300 to perhaps 30.
He says they are expensive and often don’t return to exhibitors a good return on investment. “We don’t need any more than 30,” he said.
“Ninety percent of boat shows need to go away.”
As part of a five-year licensing agreement, Boating Industry magazine, a publication of Affinity Group Inc., will be responsible for “the overall creation and development” of the annual Marine Dealer Conference & Expo (MDCE), the annual convention of the Marine Retailers Association of America (MRAA).
Slated for Nov. 16-18, the newly named Marine Dealer Conference & Expo will be held at the Coronado Springs Resort in Orlando, Fla., a move that numerous dealers suggested in a survey last year, reports Tammy Galvin, a vice president of Affinity Media, publisher of Boating Industry. The more convenient location is expected to generate greater participation from the dealer body.
Boating Industry, a leading trade journal in the marine sector, will work closely with the MRAA convention committee and will assume responsibility for all sponsorship sales and marketing efforts, according to Galvin, who’s based at Affinity Media’s suburban Minneapolis office.
“This partnership will culminate in a must-attend event that – at long last – will bring the seemingly disparate segments of our industry together at just the right time,” said Galvin. “Let’s face it: All segments of our industry have seen an incredible amount of attrition that is likely to continue. It’s abundantly clear to us and the MRAA that the survivors will be those arming themselves with every conceivable best practice available, and that’s precisely what we will deliver.”
A number of boat builders have expressed an interest in incentivizing their dealers to attend the event, which is still in the early planning state, and others are looking to hold downsized dealer meetings there. Likewise, industry 20 Groups are planning to hold their regular meetings on the front and back ends of its educational content.
“Exhibitors maxed out the available space at the 2008 MDCE in Las Vegas, and this year, with the move to the Coronado, companies seeking to display their products and services in front of an even bigger crowd of dealers will find a much larger and more convenient exhibit hall,” a release states. “The Coronado features more than 86,000 square feet of exhibit space, of which the MDCE has more than 58,000 square feet already reserved, a welcome necessity with growing exhibitor interest. In fact, numerous boat builders and other companies are already signing up to showcase their products.”
New boat sales for the average dealer tracked by Spader Business Management were down 47% in the first quarter vs. 2008, the company reports. Sales dropped from $1,083,738 to $574,357, with pre-owned boat sales down only 2.3%, Boating Industry reported today (May 1) on its boating-industry.com website.
Spader, a training and consulting firm based in Sioux Falls, S.D., tracks North American marine and RV dealers.
New boat inventory levels were down a little more than 14% for the first three months of the year ending March 31 – from $3,8 to $3,2 million. Spader reported used boat inventories were up 23.8% to $453,918 in the first quarter, resulting in a total inventory decline of 11%.
Total dealership sales fell 36.1% compared to Q1 2008. F&I revenue fell 53.8% and service revenues dropped 19.4% for the month, while parts and accessories sales were down 15.1%, marina revenues dipped 0.9% and other department sales slipped 58.5%.
Total dealership gross margins rose 3.5% because, with boat sales down, a greater percentage of revenue is coming from higher margin areas, Spader explained. The average dealer reported a significant increase – 5% — in gross margin on parts andaccessories. New boat gross margins edged down 1.2% vs. last year.
Spending, in turn, was down by more than 20% in terms of dollars spent. However, as a percentage of gross margin, the average dealer spent more in the first three months of 2009. Personnel expenses, floor plan interest expense and fixed expenses were all up in terms of the percentage of gross margin spent on those items.
The average dealer reported a net loss of $127,013 for the first quarter of ’09 – 10% more than the average net loss of $114,808 for the first quarter of 2008.