It’s a dealer’s market now, especially with 2010 dealer agreements
By Ben H. Sherwood

We have all heard the term, “It’s a buyers market.” Well I think we are currently in what I would call a “dealers market,” especially as regards dealer agreements. Very soon most manufacturers will be starting their annual re-signing process. But this year things can be a bit different for dealers.  Read more…

I never used to give too much thought to dealer agreements and the impact they had on marine dealers. But that changed when I retired from 30 years in the outboard motor business and bought a Chevrolet dealership. When my lawyer and I read the dealer agreement, it was fairly obvious that it was fair to both parties.

There were some definite requirements that I had to meet as a Chevy dealer. The premises had to meet certain standards, and I was required to put up adequate signage. My dealership had to have a trained sales force; sufficient advertising that was ethical; trained service technicians; and an adequate parts inventory and more. These are all requirements that you would expect of any new car dealer.

The dealer agreement also stated: “Dealer’s sales performance will be evaluated by the Division on the basis of Dealer’s sales and registration effectiveness. Sales evaluation reports will be furnished to the Dealer at least annually so the Dealer may take prompt action if necessary to achieve satisfactory sales performance.”

Furthermore, the dealer agreement noted, “If General Motors determines that the Dealer has failed to provide adequate premises or to adequately perform its sales or service responsibilities, General Motors will review such failure with the Dealer. As soon as practicable thereafter, General Motors will notify Dealer in writing of the nature of Dealer’s failure of performance and of the period of time (which shall not be less than six months) during which Dealer will be expected to remedy such failure. If such failure has not been substantially remedied at the expiration of the period, General Motors may terminate this agreement by giving Dealer three months advance written notice.”

There is a lot more “legalese” in the agreement but the above quotes support the points I want to make. It was a fair agreement that prevented what I call “frivolous” terminations like what I have seen so often over the years in the marine industry.

I never got a letter from GM about any performance issues, but wasn’t it nice to know that dealers who encountered performance problems for whatever reasons were given at least six months to correct them. Further to this, GM made key sales, service, and business advisers available to dealers who experience performance problems.

Boat and motor dealer agreements
We definitely need fair dealer agreements like this in the marine industry. And I think this year, 2009,  dealers have a better opportunity than ever before to insist on boat builders giving them a more balanced dealer agreement. Call it a year when we have a “dealers market.”

We are in a very tough economic time with many retailers in most industries closing stores, cutting prices dramatically or scaling back, and making cuts in expenses and the number of employees. With the boating market the way it is, with a shrinking dealer population, the odds are much improved that many manufacturers can be convinced by their dealers to consider offering a dealer agreement that is fair to both parties.

In today’s market, not many manufacturers will be willing to lose a good dealer to another boat brand over such an issue. Another factor that gives dealers more leverage is that many boat builders are out looking for new dealers as some of their retailers have already dropped out of business. So if your present suppliers don’t want to offer you a fair and equitable dealer agreement, just remember that there are other good brands out there anxious to sign good dealers.

Fair agreements needed
This industry needs dealer agreements that are fair to both parties, like the auto industry offers. The outboard manufacturers generally have fair dealer agreements. And some boat builders do also. But far, far too many builders do not. And this must be corrected. Marine dealers are the lifeblood of this very service oriented industry, and it is incumbent on the industry to see to their well-being.

Recently Boat and Motor Dealer magazine did a survey of marine dealers that asked the question, “What is your view of the status of Dealer-Manufacturer Agreements?” I was saddened by the multitude of negative responses to the question.

Here are just a few of the responses that typify what most dealers had to say:

• “They are one-way streets, contrived and assembled by the manufacturers, for the manufacturers, with little to no tangible benefit to the dealers. Until this is rectified, there cannot be a truly good relationship that benefits the industry as a whole.”
• “Severely one-sided in favor of the manufacturers. Many independent builders who initially adopted the proposed dealer agreement have since retreated from it.”
• “They are terrible. Manufacturers continue to stuff product down our throats far too early in the season and interest rates kill us because we have to start paying for product way too early.
• “They’re very weighted towards the manufacturer.”
• “It is the golden rule. Those who have the gold make the rules. We have a three-year contract that is cancelable in 30 days. Wow.”
• “There has been some progress made, but we have a long way to go.”
• “The relationship needs continued improvements. We are in this together. It is not a one sided equation to either parties benefit.”
• “Dealer agreements don’t mean much if they want to get rid of you. You are gone. They just make it hard for you to get product and to collect warranty.”
• “I was on the NMMA task force about 10 years ago and sat in on the engine committee as well as the pre-owned boats committee. Everything boils down to the manufacturer vs. the dealer. Since the dealer doesn’t hold the poker hand with the good cards, it is up to the manufacturer to take the lead in improving the agreements so they are a two-way street. Our customer (the boat buyer) is who we should be concerned about, and the manufacturers and dealers must work together to see that the consumer’s needs are met fully.”

Now is the time
These comments represented what 95 percent of the respondents to the survey had to say about dealer agreements. Pretty sad commentary eh? And the manufacturers wonder why eight or more states, most recently Alaska, have passed legislation that protects dealers. And several more are considering it. Much of this legislation would never have come up if all boat builders had been offering dealer agreements that were fair to both parties. As one survey respondent wrote, “I believe there should be a dealer/manufacturer agreement that is fair to both. The Michigan Boating Industry Association has been working on an agreement for a few years that is fair to both but has run into great resistance from the manufacturers. It is time for both sides to come together and meet in the middle.” I agree. It’s time!

Another dealer wrote, “While some manufacturers have taken fair agreements seriously, too many still are not willing to help a loyal dealer grow by staying with them. They would rather cancel.”

This is the year for dealers to push manufacturers harder for fair dealer agreements that should have been offered a long time ago. It is a dealer’s market and a great time to get this fixed!

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Ben H. Sherwood is an industry veteran and a marketing consultant who operates Sherwood Marine Marketing in Pleasant Prairie, Wis. He can be reached by phone at 262/694-6636 or via e-mail: ben@bensherwood.net.