Time To Pivot
Wanda Kenton Smith
After a buoyant two years and an unprecedented sales heyday among first-time boat buyers, the recreational marine industry must now prepare to pivot once again amid a shifting economy. I heard early rumblings of looming problems after the Fort Lauderdale International Boat Show, where there were good crowds and positive vibes, but deals were slow to close.
Since then, the level of concern has spiked. In conversations with retailers around the country, I’ve heard that long-awaited, presold boats in multiple segments have been received and prepped for delivery, but a variety of buyer concerns have resulted in cancellations. Demand has softened while dealer inventories are building.
This certainly isn’t unusual activity in the off-season months, but waning consumer confidence is tied to growing economic uncertainty. In mid-November, Curtis Dubay, chief economist at the U.S. Chamber of Commerce, said in a keynote speech that the tide may be out through 2024. He noted that consumer sentiment has plummeted in recent months to its lowest point in recent history, including during the height of the pandemic.
The big story of the day is inflation. Dubay said food-at-home prices are up 12.4% compared with a year ago. Gas prices, while down from recent record highs, are rising again and remain up 20% versus last year. Electricity is up 14%. An average 30-year fixed mortgage rate is now 7.1%. Wages are growing, but inflation is outpacing them. Consumers are carrying larger credit-card balances.
As Dubay characterized it, the economy is in a “unique and volatile” predicament. What’s unique is that despite food, housing and energy costs being significantly higher, consumers and businesses continue to spend. He says consumer savings of $2.7 trillion built up during the pandemic are serving as a buffer but warns that the savings stockpile won’t last forever, with nine months of savings remaining in the pipeline. On the business front, employers are continuing to hire, raise wages and make capital investments, all while the borrowing costs for businesses is climbing.
Dubay projects a bumpy two-year ride before inflation comes down. If the economy slows, he says, regulators may ease interest rates. But if inflation remains high, rates will likely keep rising through 2024, creating much more severe conditions until we reach a projected period of robust growth starting in 2025.
At the same conference where Dubay spoke, Info-Link managing director Jack Ellis also spoke about consumer confidence and noted the potential impact of geopolitical pressures, personal investments and the high correlation between home values and boat sales, which are expected to plunge to prepandemic levels.
Ellis said the current U.S. fleet of recreational, mechanically propelled vessels includes 10.8 million boats owned by 8.5 million households, which represents 6.5 percent of the population. There’s plenty of opportunity for continued growth, and that fleet represents many older boats, with the median age at 21 years. Some 83 percent of all boats built in the past 25 years are still in use. During the next five years, Ellis projects, half the fleet will have new ownership, with new boats being added, older boats being scrapped and pre-owned boats continuing to change hands.
There is a bright spot to all these boats in the market: A recent report from the National Marine Manufacturers Association cited 2021 recreational boating retail expenditures at $56.7 billion. New boats, and associated products and services, claimed $22 billion of that pie, with the balance spread among preowned boats, outboards, aftermarket accessories, insurance, fuel, finance, dockage, trailers and more.
History suggests that boaters will continue to spend and invest in products and services, which will help keep suppliers afloat. But the multimillion-dollar question is: Will customers invest in new or used boats during an expected recession?
For the past two years, manufacturers and retailers haven’t invested much in consumer advertising to drive that type of investment. Why would they? They simply didn’t have the inventory and were selling everything at exceptionally high profit margins.
In the new environment, marketing must pivot. Here are four recessionary marketing strategies to consider.
First, sales teams must sell again. They need to change their mindset and start hustling to avoid inventory overload. Invest time on sales solutions. Develop a cohesive sales and marketing plan. The sooner, the better.
Second, think about consignments. A ton of first-time boat owners are going to decide whether to stay in boating. I hope we’ve shown them why boating is a great investment, but a percentage who bought during the pandemic will be ready to shut down the engine. Retailers should stay closely engaged with these customers and offer an easy consignment gateway. We don’t want the preowned market flooded with late-model boats being dumped directly by owners, a situation that could severely dampen new-boat sales.
Many owners who bought high may be upside-down on their financing and will need help navigating the sales process. Have a strategy to manage this scenario.
Third, consider selling to current customers. Personally, when thinking about big-ticket vehicle purchases the past few years, I have bided my time. I’m in the market, but there’s been no compelling reason for me to buy, with plenty of reasons to wait. I believe there are many existing boat owners like me: They’ve continued to enjoy boating with their current ride and have been patiently waiting for the economic turbulence to die down. Now is the perfect time to engage with this type of customer, sending a personal message about why this is the best time to buy. Don’t slash prices and discount, which devalues the product; instead, find other incentives to help customers rationalize their purchase. Consider extended or special service programs, guaranteed trade or buyback options, attractive option packages, or holding current-year pricing on new-model boats.
Last, look into targeted marketing outreach. It’s relatively inexpensive to conduct digital marketing campaigns. Get your messaging and offers out there while consumers are still spending. Invest time to craft your messaging so it will resonate in these precarious times. Analyze your media key performance indicators, and focus your advertising investment with channels and platforms that have delivered the best return.
What’s happening with the economy is a marketing mayday. Now is the time to pivot in your marketing strategy and take control of your destiny.
This article was originally published in the January 2023 issue.