25 years back, when the manufacturer shipped a new vehicle to a dealer, the freight charge was just added to the invoice for that vehicle. The numbers weren’t that large, and as a part of doing business, when the boat or RV was retailed, most dealers absorbed that cost. However, times have changed, and the cost to ship a vehicle across the country can be significant. Not collecting freight from the customer can be the difference between a profitable deal and paying a customer to do business with the dealership.
Recently, I hosted some discussions with one of the Marine OEMs. A key topic we addressed was whether or not they should offer unified shipping costs to dealers/customers. Unified freight costs are what you see in the automotive world. No matter how far away (or close) a dealer is located from the manufacturer, every dealer pays the exact same shipping charge. While there are some current Marine and RV manufacturers who operate under a unified model, most charge some variable amount based on mileage.
There are both pros and cons of a unified system.
Cons
- With the internet, advertising is national, and when dealers pay varying amounts for freight, consumers don’t always understand that they can’t accurately compare pricing between dealers.
- Variable rates require manufacturers to develop and utilize complex tracking and billing systems.
- Vendors often try to locate in areas that are central to their dealer base, and this can strain local labor markets.
- A manufacturer might find it tough to be competitive in a remote marketplace.
- Dealers who take advantage of Dealer Pick Up (DPU) will, in most cases, still need to pay the unified freight charge.
- Volatility in the shipping markets (the price of fuel, transportation shortages, etc.) can cause a vendor to have to make mid-year adjustments.
- At times, customers will drive to a different location to purchase a boat from a dealer who is charging less for freight. The customer will then return home with their new purchase. The local dealer is deprived of this sale, and in cases where service capacity is limited, the customer may go not receive priority treatment as they didn’t purchase from their local dealer. In this situation, everyone loses, and brand value is eroded.
Pros
- National advertising can be consistent across the country.
- It’s easier for dealers to trade inventory when they know exactly what the cost of each piece is.
- Manufacturers have an easier time of invoicing new builds.
- Regional manufacturers may have local pricing advantages.
- Customer confusion is limited.
- When the manufacturer is shipping a higher volume of products, they can often negotiate improved/reduced rates.
One other option we discussed was the option of zone charges. Instead of having one price for dealers across the country, or charging the exact cost to each dealer, a series of bands are created to cover varying distances from the manufacturer. The band that a dealer is located in receives a set price. UPS, FEDEX, and other package shippers use this model.
While dealers who are located relatively closely to their suppliers often like the DPU options, most vendors that I talked to on this subject don’t like having the dealers pick up products directly from the factory. This is because dealers don’t always use the same types of vehicles/trailers for their transport needs, which then require custom methods to secure the load. Also, drivers often show up and want to wait while the vehicle is loaded, which is often an inconvenience for the OEM as employees have to stop what they are doing to start a different task.
The manufacturer I worked with didn’t see shipping as a profit center. They do not attach any additional costs on to the freight invoices, but they don’t want to have shipping turn in to an additional expense.
Personally, I’d prefer to see one charge that all dealers paid. It’s easier for the manufacturer, creates consistency in advertising, and in my opinion, an improved customer experience. However, this is a zero sum game, while some dealers/customers will pay less in freight, others will pay more. It all evens out in the end.
When you look at other industries, both the automotive and powersports sectors have moved to a unified shipping charge. Will the Marine and RV industries follow suit, or just continue on as they have been doing?
#Freight #Shipping #Marine #RV #Boats #TravelTrailer #Destination