What’s the Right Thing Now?

As we enter the third month of mobilization against Covid-19, dealers face the full gamut of business experiences – from full shutdown to record-breaking sales in some markets.  While it is certainly too early to draw any definitive conclusions, it seems clear from the already open markets that the RV industry is, as always, resilient.  Our products provide peaceful, safe adventure for families, and it is entirely possible that domestic tourism will gather strength in the months and even years ahead as other opportunities for travel are restricted.  Even though it may not feel like it for many of you at this moment, we are fortunate to serve an industry that is so valued by North American consumers.

So what to make of this mercurial atmosphere, with some citizens protesting their right to work and shop, even as others suffer mightily from the broad reach of this cunning virus?

Our view is that in the short term dealers must act with situational awareness, balancing their internal financial and management strength with the immediate opportunities in their market.  This means adjusting personnel and inventory to match the market opportunity of the next 60 to 90 days.  But dealers also need to keep a wary eye on what comes next, as the full impact of Covid-19 is felt throughout the economy.

For all dealers, the health and safety of employees, vendors, and customers must come first. Even if you are personally unconcerned, local and state ordinances represent a real source of liability for American businesses. If an employee or visitor were to become ill and it were discovered that your dealership was not adhering to signage, social distancing, or any of the myriad other Covid-19 regulations, it is not hard to predict the legal claims that will follow. In addition to the moral imperative to keep folks safe, dealers should think clearly about the business necessity of following these ordinances to the letter.

Many dealers in newly-opened states have reported a strong rush in demand.  They are bringing back furloughed employees, worrying about dropping inventory levels, and selling at or above pre-pandemic levels.  With some manufacturers more or less out of production for a period of time, we have heard reports of dealers scrambling for inventory – even buying units and floorplan options they know are not right for their market just to fill empty slots. After so many years of plentiful production, these dealers are unnerved by the sudden lack of available production and have adopted a “buy anything” approach. This can be short-term thinking that may have long-term consequences. Arguably, running low on inventory might cost you a few sales.  Indiscriminately buying the wrong inventory may cost you dearly down the road.

Consumers that can buy now, are.  They are frustrated and tired at being cooped up at home and the allure of healthy family travel is bringing them to your dealership.  But we would all be wise to remember that many of our potential consumers have been shaken hard by job losses, tightening lending markets, and the other economic fallout from Covid-19.  It is not hard to imagine some pull back of market strength after this first burst of seasonal strength. So if your market is suddenly strong again, keep in mind that the economic situation is fluid at best, so be careful that you don’t overplay your hand for your Balance Sheet. The conservative play might be the smart one in this atmosphere.

But some dealers find themselves on the other extreme. If your state or region is just now starting to open up, think carefully about the season ahead and the meaning of the couple of months of missed business. If March, April, and the first half of May have been substantially below your budget targets, what sales volume would have to happen in June, July, and August that could bring you back to your full annual target? For most dealers, even if the demand were there the inventory and delivery capabilities will not be.

If this describes your situation, be circumspect as you open up; maybe it makes sense to accept the sales losses of the first part of the season won’t be made up and adjust your staffing and unit count accordingly.  If the market turns out to be great, you may indeed be so busy you need to turn away business. However, if there is continued turbulence in the economy you will be well positioned for the off season and what comes next in 2021.

As these examples illustrate, it’s impossible to speak with any accuracy about the industry at large – there are just too many extremes depending on local markets. But one thing is true for almost all dealers: a couple of months of this year’s early selling market have been disrupted to some significant degree. The questions dealers should be asking themselves now are: what impact will this have on our final numbers for the 2020 selling season and how prepared will we be to handle the poor cash flow months of the late fall and winter? Given the unprecedented uncertainty in today’s economic situation, our view is that these questions deserve immediate attention. What is your choice going to be? Adjust to a smaller footprint now and be happily overwhelmed with business? Or find yourself short on profits and cash October 1.