Business news from the Fredericksburg region.
Sea change ahead for boat sales?
Luke Hellier and his wife have been shopping for two years for their first boat.
They’ve researched online and shopped Craigslist and auctions. But one place they haven’t set foot is the showroom.
“We’re trying to find a deal,” said Hellier, a 29-year-old from Edina, Minn. “We think we can save 20 percent or more from a private seller.”
Used boats have always outsold new, but five years after the recession, powerboat buyers of every stripe are still focusing on value, value, value. Boat manufacturer Brunswick surveyed 15,000 people and found that the majority liked boats but saw cost as a deterrent.
That’s causing manufacturers to rethink the way they do business, including maintaining or lowering the cost of every new boat from entry-level to high-end. Manufacturers are not only offering new boats below the $20,000 threshold, but even under $5,000 in a few cases.
Mark Niforopulos, general manager of St. Boni Motor Sports in St. Bonifacius, Minn., said that he’s been begging manufacturers for years to change their “exclusionist” thinking. “We went through this fancy phase with all these expensive bells and whistles,” he said. “The industry is badly in need of a reset.”
Boat buyers choose used over new by a factor of 5 to 1, a ratio that retailers and manufacturers would like to narrow. In 2007, used boats outsold new by only 3 to 1, according to the National Marine Manufacturers Association.
Part of the reason for new boats’ sinking sales was an abundance of bargains after 35 percent of boat dealers closed during the recession, said Matt Gruhn, president of the Marine Retailers Association of the Americas in Brooklyn Park, Minn.
“There was a lot of repossessed product back then,” Gruhn said. “We hope those days are behind us.”
Recovery continues to ebb and flow. The number of new powerboats sold in the United States before the recession had been cut in half by 2010. In 2013, the number grew to more than 160,000, but it still doesn’t qualify as a recovery.
Irwin Jacobs, who owned 16 boat companies in the 1980s and still owns Larson Boat Group in Little Falls, Minn., said the growth in new boat sales, while not stellar, is at sensible levels. “We’re the first business to go in a recession, and the last to come back,” he said.
To rev sales, manufacturers and retailers say they’re putting value front and center. At Brunswick—which owns nearly a dozen brands, including Mercury, Bayliner, Lowe, Sea Ray, Crestliner and Lund—Chairman and CEO Dusty McCoy said, “Every new model made should cost the same or less than the model it replaces.”
But it’s not about stripping a model to make it affordable. McCoy said many new models come standard with features that today’s buyers expect, such as joystick docking for easier maneuverability, state-of-the-art dash systems and fuel-efficient engines.
“Consumers want more but expect to pay less,” McCoy said. “They want more standard features without a higher price. It’s happening across the industry.”
Dan Chesky Jr., co-owner of Dan’s Southside Marine in Bloomington, Minn., said that he’s completely changed his customer approach. He’s added an affordability page on his website so customers can see how a new boat fits in their budget.
“If someone is spending $150 a month on a cellphone, we can show them how to own a new boat for about the same amount,” Chesky said.
The monthly payment on a 16½-foot new Alumacraft with a 50-horsepower, four-stroke engine with fish finder, trolling motor, cover and trailer is $159, assuming a $17,628 purchase price, 10 percent down and financing for 12 years at 5.49 percent.
“We say that you could own that boat for less than $200 a month instead of throwing out an $18,000 price tag,” Chesky said. (Interest rates vary from 4.99 to 18.95 percent, depending on a customer’s credit.)
Chesky said most buyers make extra payments to pay the boat off faster, but they still negotiate hard to get the original selling price down. “The wife says, ‘We really don’t need this,’ and the husband says, ‘If I can get it for this price, let’s do it.’”