Tag Archives: Boating

The Perfect Storm, Part 2. Fixing “Pale, Stale and Male”

  • The mood at last week’s Miami Boat Show was sunny, like the weather.  Enthusiastic shoppers, lots of shiny new boats, and based on conversations with manufacturers, not enough new boats to meet demand.

Miami Show Crowd

However, as previously posted, some clouds on the horizon foreshadow the powerboat industry’s vulnerability in a way that will redefine the landscape over the next 10 years.

  • The core buyer base is aging. The 55-60 year old buyer base (let’s generalize and call them Boomers), are committed and usually repeat buyers.  And they look a lot alike  (in the words of one industry executive: “pale, stale and male”).
    But there aren’t enough younger first-time buyers (generalized as Millennials) to replace their unit or dollar sales.  Over the last 15+ years, the share of new boats sold to first-time buyers has dropped dramatically.
    It’s the same old dudes buying more boats.
  • Recession bites. The next recession, like the last one, will flood the market with used boats when owners sell, crushing new boat sales – – a sales circuit-breaker if enough Boomer owners exit the market permanently.  Remember, older buyers generally buy the more expensive boats.
Older fisherman

Typical core new boat buyer

This post tries to explain why there are not enough younger boat buyers, and offers some ideas of what can be done to prepare for the future.  While a bit longer than my typical post, there are lots of pictures, so please read on.

Boater_Age_NMMA

Source: NMMA

Following our Miami visit we circled back to get input from senior leaders representing manufacturers, dealers, Freedom Boat Club (the leader in this segment) and the NMMA, the leading trade association.

The upshot:  the core appeal of powerboating is not going anywhere, but the industry will need structural changes to address some fairly major challenges to sustain health (read: sales) over the long term.

And the current pace of innovation is not enough to drive the changes necessary.  Disruptive innovation is needed in everything from boat design, mode of power, sales/distribution channels to marketing.  This is not about reducing price or offering new colors or more horsepower.

Disruptors transform the way a basic demand is delivered.  Myopia has led to the downfall of many former market leaders.

  • Home Video: Blockbuster (VHS/DVD) yields to Netflix (streaming)
  • Personal photography: Kodak (film) yields to digital / smartphones
  • Books: Borders (bricks & mortar) yields to Amazon (online)

Based on appearances, the powerboat industry seems headed this direction – – focused on maximizing revenue with the current model (largely fiberglass gas-powered outboard boats sold through dealers).

There are signs that disruptors are at work — but there is a long way to go.

Buying Cycle - Boating

To explain where the industry has been and where it needs to go, we compared the buying process of legacy (Boomer) core buyers with considerations of potential Millennial buyers, in a 4-step process.

INTERESTEXPERIENCEPURCHASEHABIT

So what are some paths to long-term growth? 

Here are some ways the industry can take action (with some examples):

  • Before addressing new buyers, the industry must keep current owners around as long as possible.
    Slow down defections – – aggressively court current owners and build relationships through CRM, owner events and personal outreach – build loyalty and maybe get another purchase

To encourage Millennial first-time buyers:

INTEREST

  • Accelerate development of more agreeable, alternative power sources:
    • GM’s experimental marine division, Forward Marine, introduced a 100% battery-powered boat. With a max speed of 20mph and a range of 1 hour at that speed, it’s not ready for prime time yet, and won’t get you many dates, but this is the direction some of the industry will go.  Think Tesla.  Maybe a hybrid as well.
GM Boat

GM Forward Marine prototype

  • Indmar just introduced EcoBoost, the marine version of Ford’s EcoTec engine – gets the same horsepower and torque with 4 cylinders as a typical V-8. More environmentally friendly.

    EcoBoost

    Indmar EcoBoost

  • Torqeedo is an established German company offering quiet, efficient electric motors. Due to relatively low gas prices and a maximum of 100 hp, growth is slow but it is steady.  They’re getting traction.
Torqeedo

Torqeedo Deep Blue 80R

  • BlueGas Marine has developed economical natural gas power for boats. Traction is difficult for the above reasons as well as infrastructure (need the gas equivalent of charging stations), but the equation can change quickly if oil prices spike.

More aggressive marketing

  • Cross-market! Boating should not just be for insiders anymore!  Visibility must be increased by pursuing prospects with related affinities:  skiing, hiking, etc.  Not just a booth at the boat show.
  • Be more inclusive, diverse and experiential. Feature a range of age, ethnicity, interests.  Leverage social media to reach prospects beyond the familiar core demographics.

700-00039414

Wakesurf photo

 

  • Innovate beyond current offerings – materials, design, features
    • New boaters don’t have the burden of tradition and will likely be more open to unconventional but more functional approaches (after all, someone had to buy the first Prius)
    • RIBs – Rigid Inflatable Boats (Axopar, Technohull) offer more efficient performance using different hull design and materials. They are really cool, perform great, look different, and that’s ok.
Technohull

Technohull (top); AxoparAxopar

  • Powered catamarans look different but offer advantages of smooth ride and more space

EXPERIENCE

Leverage technology to reduce fear as a barrier to purchase

  • Self-docking boats will be available in 2020
  • On-board digital video tutorials can provide much more effective learning than paper manuals
  • Controls are shifting from analog to digital, to mimic/integrate with smartphones

 

 

OWNERSHIP

  • Offer more versatile/multi-use boats at attractive price points – not single purpose (e.g. fishing) but can handle a variety of activities on any given day (analog: SUVs), making purchase more acceptable
    • Sea-Doo introduced a jet ski that converts to a fishing craft – – and it starts at $15k

 

 

  • Yamaha’s 2018 Boat of the Year (the FSH 210) is an affordable, do-it-all boat that is an excellent choice for first-time boaters.
  • Don’t require purchase to participate
    • Freedom Boat Club is a franchisor with 178 locations, with a model based on eliminating some key barriers to purchase (includes lessons, takes care of maintenance and insurance). The goal – make participation frictionless.
    • Members pay a monthly fee for unlimited access to a variety of boats in a huge number of locations, rather than committing 6-figures for a single boat.

FBC logo

  • Other similar models such as peer-to-peer rental, fractional use, etc. will undoubtedly increase as there is less reliance on solely purchase
  • More fully integrate the internet in the shopping/buying process – as in the auto industry, reduce reliance on aggressive final-mile dealer salespeople.

HABIT

No surprises!

  • Full transparency in the sales process, specifically costs/ obligations of ownership
  • Continuous on-boarding/learning  from the dealer, not just 2 hours when the boat is picked up
  • Aggressively encourage new boater networking to share tips, experiences, and create peer communities
  • Mentoring programs linking experienced boaters with new boaters.  Older boaters would love to pass along insights; a no-judgment setting makes it a win-win.

Mentor

These are just a few things the industry can do to mitigate unavoidable changes.  It will take foresight, patience, and investment – – and may not pay off immediately.

lots-of-boaters.jpg

But an industry that proactively and creatively adapts to the needs of new boaters with great product and a great experience, will be much more successful than what we currently seem to have – – an industry that asks potential new buyers to adapt to the way things have been.

How Do You Reinvigorate a Mature, Cyclical (but still really fun) Industry? Part 1: The Challenge

This is a story about a great industry that was extremely hot…until it suddenly wasn’t.
It presents a unique challenge in how to navigate long-term growth in a world with changing values, attitudes and demographics – – in an unpredictable economic and political climate.

This is Part 1 of a two-part post.  Part 1 sets up the challenges to the boating industry.

In Part 2 we’ll discuss some things the industry is doing to meet these challenges, based on observations at the industry’s premier annual event, the Miami Boat Show – which begins on February 14, 2019.

Perfect Storm - Title

Powerboats are indisputably lots of fun, whether it’s to fish, ski, dive or just to cruise around.  It’s no surprise that about 140 million Americans participate in boating annually, and that in 2018 the industry generated an estimated $170 billion in annual economic activity (Source: NMMA).

Boating-NMMA

Source: NMMA

But as we’ll see, even with several years of growth, the powerboat industry is facing some real headwinds in countering demographic shifts and bracing for the inevitable next recession.

Please read on, and if you’d like, post your ideas on how you’d attack this challenge in the comments section.

———–

The Ultimate Discretionary Purchase

At the very far endpoint of the need-want continuum (aka 0% need, 100% want), beyond ice cream, puppies, personal Zambonis or large screen TVs, there are recreational boats.  Unless you make your living on the water, you don’t need a boat.

And with considerable entry costs leading to ongoing expenses (fuel, insurance, dock space, maintenance, accessories, etc.), this is an industry that is inextricably linked to economic ups and downs.

As a CNBC commentator put it: “Boating is perhaps the most cyclical consumer sector imaginable. Vessels are expensive to purchase, time consuming and completely discretionary.”
https://www.cnbc.com/2014/04/01/yachts-a-practical-investment-for-regular-investors.html

Boat Slip

Entry-level recreational boats can be very affordable, but prices can easily push six or even seven figures as size and complexity increase.  A relatively ‘entry-level’ 25-foot recreational boat can cost $200,000 or more.  A 40-footer can be well over $1 million. This is an industry that has historically tried to push the envelope during optimistic economic times.

Boat_Sales_NMMA

National Marine Manufacturers Association

But the seas are not always smooth.  Powerboating, in particular, is vulnerable to a perfect storm.

  1. Not counting the very wealthy, most people considering a major discretionary purchase will delay or just not buy in an unstable economy
  2. Like the tide drawing out, when economic uncertainty hits, many existing boat owners sell their boats, creating a large pool of relatively new and very affordable used inventory. Anyone still interested has ample reasons to buy used, which is crippling if you’re trying to make or sell new boats.
  3. The average age of boat owners is relatively advanced (currently around 55), meaning that a lot of purchasers (many of them Baby Boomers) from earlier growth years are permanently exiting the market. There are new, younger buyers, which is great, but currently not enough of them to sustain continued growth.
  4. In an economic downturn, related personal factors such as existing loans, lack of available credit and home sales come into play as people make decisions – and cutting boat expenses can be considered a less painful way to try to balance the family books.
  5. As powerboats generally use internal combustion engines, they can be subject to the political climate and resulting legislation. The ‘un-green’ optics of boating are a turn-off for a certain population segment, and ‘greater good’ legislation can create negative real consequences for marine (one example: ethanol is widely mandated but causes expensive damage in marine motors which are run more sporadically).
Boater_Age_NMMA

National Marine Manufacturers Association

This perfect storm was on full display in the few years leading up to 2010.

The Great Recession – all kinds of ugly

In the early 2000s, economic optimism drove strong unit growth, with about 375,000 new powerboats sold in 2006.  Dollar growth was even higher, as convenience features like stereos and refrigerators, the conversion from 2-stroke to cleaner/quieter 4-stroke motors, greater available horsepower and resulting higher prices all increased industry sales markedly.

And while there was some softness in 2007, when the stock market tanked in 2008, the industry nose-dived.  Annual sales dove to about 150,000 in 2010.  Even with several recent years of strong market growth, as of 2018 it has not fully recovered, with sales of new powerboats reaching 280,000 – – still below levels of a decade earlier.

Boat for sale

As one industry official put it in 2015: “We fell off a cliff about five years ago.  Homes were going into foreclosure, and people were making hard choices. On top of that, manufacturers didn’t build many boats in those years. But we lived through it.” https://www.sacbee.com/news/business/article8801072.html

Numerous manufacturers and dealers simply closed up shop.  One estimate had the boat manufacturer workforce reduced by 50-75% as a result of the recession.

In some ways, boating faces a long-term challenge.

  • Many current boaters will eventually age out of the market
  • New younger (and less affluent) boaters are interested in experiences but less interested in possessions — including single-family homes where possessions (like a boat in the driveway) can be stored. They are also influenced by ecological considerations.
  • A multitude of other factors complicates things: consumer confidence, rising student debt, an increasingly diverse population that may not have boating as a shared experience – – even concern about fuel price stability

Make no mistake, as of now the industry continues to grow, it is expected to grow further in 2019, and there are several bright spots of strong growth – – like the emerging wake sports segment, and personal watercraft (aka jet skis).

Malibu_SeaDoo

Brands pictured:  Malibu, SeaDoo

And the economy still appears strong, consumers appear to be confident, and the boating industry is continuing to extract growing revenue from ever more big, exotic and outrageous products (a 627 HP, $90k motor was introduced a few years ago, and immediately a 53-foot, $3 million luxury fishing boat was introduced deploying 4 of them – along with 50 neon-ringed speakers.  Rumor is that there will be a six-motor boat at this year’s show).  So making hay while the sun shines is definitely a current strategy – take advantage of consumer confidence and feelings of wealth.

53 Suenos

Pictured: HydraSports 53 Sueños

But the next recession is not a matter of if, it’s a matter of when, and Boomers will continue to exit the market.

SO – WHAT CAN BE DONE TO ENSURE SUSTAINABLE GROWTH IN THIS MARKET?

Maximize growth with current products?  Introduce game-changing products?  Hedge with counter-cyclical products?  Double down on technology?  Pivot to something else entirely?

Would love to hear your thoughts.

For Part 2, we’ll report back within a week, including some evidence of the current (greater luxury and features) and future (laying the groundwork for the next few decades).

See you at the show!

MIBS - 2019