Industry leaders encourage by 2003 forecast of level market, considering outside negative factors
Looking back at the turmoil that has characterized much of the last two years, it’s fair to say that 2003 might be that long-awaited opportunity for the PWC industry to breathe a collective sigh of relief. After all, this is an industry that has not only had its own hurdles to cross, including a rapid transition to cleaner technology, bans across much of the National Park system, and the highest gas prices in years, but also one that has had to endure the greater overall threats of terrorist activity, a severe economic downturn, even the continual outbreak of war, first in Afghanistan and then Iraq.
Given this scenario of uncertainty, most industry observers consider it a very positive sign that the end result in sales is what looks to be another year of a mostly level market.
“When you consider the uncertainty about the economy, concerns about terrorism, the war in the Middle East, it’s actually encouraging to see that results could be that strong,” says Yamaha’s Mark Speaks. “The fact that the industry will be stable for really what is the third season, that’s a very solid sign that the industry is now stabilized at a level below what we would naturally expect it to support in good times.”
Ah, stability. Industry insiders continually used the term to characterize the current market. Given the decline that the industry has faced since its heady peak in 1996, the term sounds almost as good as gold. Coupled with what looks to be widespread acceptance of new, cleaner, fuel-injected two-stroke and four-stroke technology, a re-opening of many national parks, and some truly exciting new product, early indications are that unit sales are on par to finish at a similar pace to 2002. Translation? The long-awaited leveling off of the PWC market looks like it has been reached.
“I certainly don’t see this year as being a huge growth year in the watercraft industry,” confirms Polaris watercraft head Ron Bills. “I see it as another year of market stabilization, as we introduce cleaner, friendlier product, and the older product that is in the consumer channels, the 10-year-old machines, are worked out of the system and the consumer is now replacing that with newer technology.”
Few Effects From War
Given the events of the past four months, a stable outlook just may be a godsend. Throughout the first quarter of 2003, war loomed on the horizon, the prospects of which left many manufacturers, distributors, and dealers fearing the worst. But while many expected the pre-war tension, coupled with the outbreak of hostilities entering the second quarter, to have a negative impact on sales, almost the opposite happened. Manufacturers report strong results through the period, and cautious optimism heading into the key sales months of May and June.
“We all had our concerns over the economy, and the war,” says Bills of the days leading up to the U.S. invasion of Iraq. “Certainly I never would have guessed 30 days ago that the war would be over and we’d be worried about the artifacts in the museum.
“The reality is that’s kind of where we’re at. If you go back to what happened in the Gulf War, with consumer confidence being down, with retail sales of recreational products coming almost to a halt preceding the war activities and then rebounding thereafter, I’m happy to say we’re seeing the same result. That’s driven primarily by the improvements in consumer confidence as the war seems to be diminishing its impact to the economy.”
It’s an effect that has not only been felt in the PWC industry, but across the board for motorized, recreational products.
“We haven’t seen hardly any effect at all,” says Honda’s Lee Edmonds. “And that’s across the line, not just watercraft. Everything. It’s been kind of surprising. Business continues to be steady. It’s not the type of growth, at least in the other segments, we might have seen three years ago, but it’s still growth, and that’s good.”
The same scenario has played out for Kawasaki, Sea-Doo and Yamaha. “Right now, business is really strong,” agrees Sea-Doo’s Tim McKercher. “We were a little concerned because we were a little bit down right before the war, and once the war started we thought it was going to go even further down, but the opposite happened and we really still can’t explain it. Sales started really picking up during the war, and over the last month we’re above last year in sales, and we’re pretty close to what our forecast for growth is.”
Summarizes Speaks: “It looks to me as though the companies that are introducing the right kinds of product, and providing their dealers with the right kinds of support, providing their customers with reasonable incentives to purchase, are enjoying good success. Those that aren’t, aren’t.”
But while war tensions, economic worries, and even the National Park bans all seem to have eased, industry insiders admit there are still plenty of challenges on the horizon. And according to many, they start with not forgetting the challenges we seem to be winning, foremost of which are the continuing access issues across the country.
“I think those types of issues will continue to be challenges,” says Edmonds. “If you parallel it to what goes on in the off-road motorcycle market, you’re always going to have those kinds of challenges from groups that would rather not see PWC being used out there. It’s got to be something that the industry is constantly vigilant of, constantly aware of it, and working to promote a positive image. These latest things that have happened are positives, but I don’t think it’s the end of that challenge.
“I think the best thing is manufacturers and dealers trying to educate their customers. Similar to what we’ve seen with ATV, motorcycles, and even the snowmobile industry, we need to continually educate the customers, not only in terms of how to use the product in a responsible manner, but also rider education, trying to improve actual riding skills.
“It’s something we constantly need to be aware of. It’s not something that just goes away.”
Kawasaki’s Steve Fisher agrees: “We still have some of the anti-recreational groups that are not going to give up in their quest to eliminate us from the water. I think that will remain a big challenge. We’ve been addressing specifically each one of the concerns they identify, but they are tenacious in their efforts to eliminate all motorized vehicles from the water.”
Manufacturers also are aware that the great strides they have made in reducing emissions levels don’t allow them to now simply rest easy. “EPA is still continually getting more stringent, so it’s an ongoing challenge for our engineers,” says
McKercher. “Our boats are clean now, but we have to keep making them cleaner and cleaner, while trying to keep the boats fun and keep them affordable. Those are huge challenges.”
Companies also need to assist dealers in reducing inventory levels. “The industry has got to clean up the pipeline,” says Speaks. “Before we really see sustainable growth, we’re going to have to see inventories brought down to a low level, we’re going to have to see manufacturers and dealers end the season with low carryover so that we don’t have competition between current and non-current product in the peak of the season.
“Manufacturers have to decide to get their house in order, and it needs to be universal across the board before we can expect to see that sustainable growth.”
Going On The Offensive
On the offensive side of the battle, the next hurdle is how to once again grow the current market. While each manufacturer has its own individual strategies, all agree it’s essential to start with learning how to develop the long-term enthusiast.
“In the early days people flocked to personal watercrafting, and now that is no longer the case,” Speaks explains. “The rate of first-time buyers is still relatively high compared to other powersports products, but it is historically low for this type of product. We’ve got to find a way to build that up again.
“To paraphrase a co-worker, ‘It’s a sport where everybody who experiences it walks away smiling … but too many of them walk away.”
Even those who have been PWC enthusiasts in the past. There are a multitude of one-time buyers who entered the market during its heydays in the early-to-mid ’90s, but failed to remain in the sport. Of those who have, many have proved reluctant to purchase new product.
“They obviously had enough interest to enter the market at that point in time, many of them still own their machines, but a significant number have sold it and not purchased another,” Speaks continues. “We’ve got to determine what is it that they didn’t find attractive enough about the sport and how do we correct that.
“When we as manufacturers are doing a good job giving customers things that are different enough from what was available the season before, they come to our dealerships and purchase our product. When we lose sight of whatever it is they’re looking for that’s not been maximized or delivered at all in previous generations of product, and don’t make the right changes, then they stay away. They either keep their existing product or just decide to wait for something new.”
One way to entice buyers into something new is to again achieve attractive price points. Today’s high-end machines are certainly tempting, but the price of all this innovation and technology eliminates a certain portion of the buying public. “We’ve got to find ways to bring innovation in at lower price points in order to expand the market and bring in a whole new crowd,” says Speaks.
One company that has done just that is Kawasaki, which released the lowest-priced four-stroke on the market for 2003. “The lower price on the STX 12-F was an intentional move to get consumers back at a price point where it is not such a major purchase decision,” explains Fisher. “And, get them interested in Kawasaki’s four-stroke, which performs great and provides them with everything they need to have great times out on the water.” The company followed a similar strategy with their redesigned stand-up, which came in between $900-$2500 cheaper than its competition. “We did feel that, in this rebuilding year, a price strategy that benefits the consumers and is attractive to the consumers is definitely the course that we want to take,” says Fisher.
Grow The Industry
Yes, there is potential for growth. Speaks cites a government recreational survey that determined about 20 million people over the age of 16 consider personal watercraft a “fun sport.” Contrast that with sales of less than 100,000 units a year, and roughly 1.3 million units currently in use. “There’s a huge gap between all those people that think this is a fun sport,” he explains, “and those that are participating in it.”
“Grow the industry, that’s the number one focus,” agrees Bills. “We’ve got a great sport, we’ve got some great product, a lot different than it was 10 years ago. We need to get it out there.”
One common solution to the problem shared by all is delivering not only the right kinds of product for the times, but also delivering that product on time. It’s no coincidence that manufacturers that are currently enjoying the most success are the same ones who not only have cutting-edge, innovative vehicles that capitalize on the current climate, but have had that product on showroom floors ready to sell.
“Product is definitely king,” says McKercher. “But the key is not only good product, it’s having your product in the dealerships. We came out with the SC really early and in large volume. People read the articles in the magazines, see the advertisements and then go into the dealerships — which is what all that is for — and the product’s there.
“Having the product that you’re promoting ready to be sold is key. There have been times in the past where our newest product that we had big numbers for didn’t come out until late May or so. Of course that hurt our sales. This year we had all our ducks in a row. The product was there during boat show season, and all the way through spring, and it will be there through summer.”
Light At The End Of The Tunnel
A good start on a good year? Let’s hope so. Sales look to be stable, product is better — and more focused — than ever before, and a strong foundation is in place to overcome the ongoing challenges of emissions and access. The key appears to be staying on the defense, while concentrating offensive efforts on growth.
One manufacturer who will almost certainly see that growth in 2003 is Honda, which not only has introduced a third model to compliment its existing two craft stable, but is also enjoying a vastly improved dealer network. “This year has started really well for us,” says Edmonds. “We’re expanding our dealer network, so going from four states to multiple states with a lot more distribution is going to be a big help.
“We started out with two models so we have nowhere to go but up!”
Up is certainly where everyone would again like to be. Given the times, however, everyone we spoke with was more than happy to accept stability. “We’re pretty happy,” says McKercher. “We’ve got a positive outlook — the war is over, gas prices are going down, and it’s going to start getting hot everywhere. It should be a great season. It hasn’t really even gotten hot across the country yet. Once it gets hot across the country, we’re really excited to see how sales are going to go.”
Says Speaks: “If the manufacturers do a good job of introducing the right type of innovation in the marketplace, we could be on the verge of seeing that long-awaited turnaround.
“That uptick is inevitable … and it’s not too far out there.”
Industry sees little change in 2003
Industry leaders encourage by 2003 forecast of level market, considering outside negative factors