Loss of market or loss of share?

[Presentation]

Loss of market or loss of share?

From what I have read, Sea Ray is lowering production capabilities of its smaller and mid sized cruisers and raising them for its larger ones. The reason this is being done, I was told by the local dealer, is Sea Ray is struggling to sell all the smaller boats it’s producing yet can’t build the larger ones fast enough to meet demand.

This got me thinking about the recent model changes. To be honest, I don’t like them. The cockpits seem to waste space and reduce sitting locations. Two examples of this are the redesigns of the previous versus current 240 Sundancer and the 280 to 290 Sundancer.

At the same time I understand boating sales are soft.

This leaves me wondering if the issue is a declining small to mid sized cruiser market or loss of market share by Sea Ray in the small to mid size cruisers. :huh:

 

[Pakmule]

It could very well be that the small to medium cruiser market has become commoditized and the profits on those boats are being squeezed. By shifting production upmarket they can make more money on the boats that they sell with fewer resources being used for production.

Of course I have no research to back up my silly theory.

 

[goblue]

It's a reflection of the credit crunch. Cars are also soft, especially for the big 3. The low end of any product is always the first to suffer when there is speculation of a recession. High net worth people look at the softening of any market as a buying opportunity which explains big boat sales. Having said that there are fewer high end boats in the $650,000-1,500,000 range being built today than a year ago; but one builder I'm familiar with is only down about 3-4% across its product line, while mass production builders are down far more than that. Megas in the $30 million and up may not be down at all. This is just the way a free market works.

 

[bob]

Loss of market or loss of share?

This got me thinking about the recent model changes. To be honest, I don’t like them. The cockpits seem to waste space and reduce sitting locations. Two examples of this are the redesigns of the previous versus current 240 Sundancer and the 280 to 290 Sundancer. :huh:

I've got to agree with Doug. It's probably "loss of market." We looked at the latest 240 DA and found the seating arrangements very poor--that's why we went to a used model. We have a much better deck layout and at an affordable price. There are a few nice features of the new ones such as digital engine monitors, but that's about it. The 2007 promotional video makes such a ballyhoo of a tiny table that swings out, but at the same time they've cut out seating space.

We started out with a meager 160 BR and moved up into a 220 DA, and finally our present 240--all SeaRays. Now, it seems that SR is interested only in selling the big ones. I'm sure they're going to lose a good customer base by ignoring/eliminating entry-level boats. It makes one wonder if SeaRay is loosing sight of their market.

Interestingly, a friend bought a new SR 290 at a substantial discount. Makes you wonder if there's too much of a mark-up at the dealer end too?

 

[Dave S]

If what you say is correct, then your dealer is probably right.

As far as comparing the style of the old boats to the new ones, that will always be somewhat controversial. But unless Sea Ray comes close to "bombing" on a particular style of boat, those things that people perceive they don't like quickly go away and become non-issues. Remeber the folks that buy the new boats usually haven't owned the older versions so they don't have the same frame of reference that a current owner of a particular model may have.

 

[bob]

The low end of any product is always the first to suffer when there is speculation of a recession.

If that's the case, I could speculate it's the demise of the housing market. People who have bought into the "sub-prime rate" mortgages could be the same ones who are buying the lower-end boats. Now, due to the credit crunch, their boat, (or plans on buying a boat), are among the 1st "luxuries" to go.

 

[gerryb]

Think bigger. To Sea Ray (Brunswick) a 28 foot boat is a small boat. Brunswick is spending the bulk of their capital dollars this year beefing up capacity in their 35+ size boats, namely the Meridian line which will finally have an East Coast facility. The entry level boats (under 20') are still profitable but they require a disproportionate amount of capital spend (& warranty expenses)vs. manufacturing larger boats with larger revenue streams. Brunswick is also increasing the amount of dollars going to offshore production facilities (Mexico & Latin America) but ONLY with regard to their smaller boats... There actually is some logic here, given a tightening market with more competition.

 

[sdrevik]

Another data point- the used "small" (for SR) boat market is very hot. Here in TN, a sport cruiser or even a Sundeck' doesn't stay on the market for more than a few weeks if it's in decent shape and decently priced. I tried buying a 2004 Sundeck, but it was sold within 12 hours of the Saturday paper coming out.

The buyers of more modest boats are bargain-hunting and looking for used (like I did), causing a slowdown for new boats of that size.

 

[goblue]

The low end of any product is always the first to suffer when there is speculation of a recession.

If that's the case, I could speculate it's the demise of the housing market. People who have bought into the "sub-prime rate" mortgages could be the same ones who are buying the lower-end boats. Now, due to the credit crunch, their boat, (or plans on buying a boat), are among the 1st "luxuries" to go.

Possibly, although it is more likely that the subprime housing market people could only barely afford a house, let alone a boat. More likely the fall off in small boat sales is related to the people who have good jobs but fear layoffs or the loss of bonuses. They don't want to take the chance on a luxury purchase. People in that situation should wait for the dust to settle. They run the risk of selling their boat for too little money, and possibly worse yet, rolling the unpaid balance into a longer term, bigger loan so they can afford a bigger boat at a payment they rationalize. This is a poor choice that many people make.

 

[bob]

My logic was that people got into adjustable rate mortgages that have a traditionally very low interest rate. Their logic was since they weren't spending that much on the house, they could now afford to buy a boat, luxury car or whatever accoutrements to show they've "arrived."

Now these adjustable rate mortgages are now escalating upwards, they have to make the decision which of their "toys" they need to sell off and keep the house.

A significant "disconnect" is the rich are getting "richer," (higher executive salaries). How will they spend all of that money? On expensive boats! Recently, the local newspaper here in Maine, ran an article about how local boat builders; e.g., Hinkley and others, are backlogged with orders for high-end boats for the very rich.

Perhaps that's where SeaRay's is directing their marketing these days, leaving us, the "great unwashed," with low-end boats with fewer features.