The Concept of
“Thin-ventory”
THE IDEA STARTED at the Toronto International Boat Show. I
was talking to a dealer who owns a small family marina catering to avid fisherman. He carries several lines of specialized
fishing boats, as well as a wide selection of engines.
“This is killing me,” he said. “On one side, all my suppliers
want me to take more product this year and on the other, the
floor planner is tightening down on me. I’m getting squeezed.”
Recalling the comment, and wanting to explore the situation in more depth, I called Jeff McDermott, VP, Sales,
Recreational Products at GE Capital Solutions. “Well, I don't
know that dealer,” he said “and, of course, every situation is
different. We've actually opened up credit for qualified dealers”, Jeff said.
“I’ll tell you what I am concerned about most,” Jeff continued. “I’m worried that with the rise in the Canadian dollar,
people may not quite appreciate how changes that have lowered prices of many boats – and that seems to be stimulating
sales - can still leave dealers earning correspondingly lower
total revenue. What it comes down to is that most dealers will
have to process and sell more units to earn the same revenue in
2008 that they earned in 2007.”
So, look for a finance provider who offers a solution that best
manages the currency fluctuations we’ve been experiencing.
Let’s go back to my conversation at the boat show with the
dealer who felt that he was getting squeezed. This dealer
already has a solution. He plans to concentrate on his best
product line, knowing that he may lose some specialized sales,
but believing that this “focus” will give him a better chance to
reach the volume plateaus and earn discounts and marketing
money with that one boat builder. This is the start of “
thin-ventory” thinking.
Next, by concentrating his marketing effort on one product
line, he is more likely to gain credibility in the eyes of his consumer. This way, his ads can all feature one brand of boat and
his messages will not be diluted.
Another step in the thin-ventory management process is to
increase turnover. The dealer could call all buyers who have
put deposits down, and try to deliver their boats and close sales
earlier. This dealer may have to offer his buyer an incentive; he
could, however, increase revenue simultaneously by, say, offering a sweetheart deal on a matching trailer if the buyer takes
delivery in February or March.
Get the money now. This way, he thins out his inventory,
banks the money early and can continue working on new
sales, rather than leaving the next sales thrust until the May
long weekend.
In spite of US economic uncertainty, our Canadian economy
is performing well. Dealers we talked to reported solid sales at
the Toronto International Boat Show, and at least one company
– Regal - reported that they had achieved record sales volumes
at this show.
You've all heard the old adage: early to bed, early to rise,
work like hell and advertise. So, get going earlier than ever
this season, push to close any business possibilities out there,
and advertise aggressively to build your volumes during the
high season.
Jeff McDermott was simply suggesting to turn over your
inventory as often as you can, maximizing your total revenue in a year where there's certain to be pressure on margins. By turning over inventory faster, you are in a much
better position to weather another unexpected economic
downturn. Work with your suppliers to shorten the order
and delivery cycle. Make sure your money is not tied up in
non-current product.
