Guest Editorial: Canoe Rack is just the canary in the coal mine, vendors need to pay attention

Todd Frank, owner of The Trail Head in Missoula, Mont., shares his point of view on the closing of the Canoe Rack and vendors' influence on the area's boat market.
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I wanted to take a moment to respond to both the announcement of the Canoe Rack closing here in Missoula, as well as the editorial comment from the SNEWS® staff -- click here to read the Dec. 8, 2008, SNEWS® story, "The Canoe Rack in Montana to close its doors and liquidate inventory after three decades."

While I agree with pretty much everything Ben (Schmidt) said about the challenges of being a boat dealer in Missoula, I thought the discussion deserved another point of view.

I bought the Trail Head in May of 2000, after having been involved as a manager since 1994. In my time here as manager and owner, I saw first hand the changes from Don Burke owning the Canoe Rack to Matt (Stribe) and finally Ben's tenure. While Matt had a couple of good years selling boats, he did so by buying the business at a reduced margin. Low overhead, boats sitting in the sun all year-round just off the highway, and a cracked Royalex boat of the brand we sold on display to dissuade folks from buying anything but what he sold. The numbers he did were not sustainable, as Ben found out after buying the business. Sooner or later, the deals end or you go broke.



I thought the editorial was interesting in that it said nothing about the behavior of the vendors in the Missoula and overall Montana market. SNEWS talked about it being a Darwinian time; from my world, it always has been. What has changed is the behavior of the manufactures and how they place value on the dealers. That is the real story here, and I cannot figure out why SNEWS put the kid gloves on for the vendors; from my side of town, they ARE the issue.

What I have seen since 2000 is that vendors have created problems that are just starting to come home to roost. Losing the Canoe Rack in Missoula is the canary in the coalmine. Missoula is an active outdoor community of 60,000 or so. In 2000, boat sales were competitively handled by the Canoe Rack, The Trail Head, Board of Missoula, Pipestone, Gart's and Wal-Mart. Top to bottom, every kind of boat was represented in town from $2,000 Kevlar canoes to $299 Coleman specials and everything in between.

Today, we have REI (which technically is not a boat dealer here in Missoula, but will ship in orders freight free), Sportsman's Warehouse, Bob Wards, Sportsman's Surplus, Sports Authority, Edge of the World, Wal-Mart, Costco, Ace Hardware, The Trail Head, Canoe Rack, Pipestone and all the online competitors. It is my contention that all the new dealers have had a singular effect on the market locally. What the specialty guys like Ben and I are missing is all the easy sales of rotomolded plastic canoes and kayaks, the package deals that big-box stores are able to sell. We also miss the middle-of-the-road boats. In fact, in a 10-day sale at REI two springs ago, they sold over 15 Mad River Explorer Royalex boats at 15 percent off -- not bad for a shop that is not a dealer. It is the dozens of those we used to sell that allowed us to carry the composite canoes and high-end touring boats. Manufactures opening multiple doors to "address another market" basically took away the segment of the market that made boating a profitable category for specialty paddlesports shops.

I felt like it was a challenged category in 2000 when I saw boat manufactures launching two or three new kayaks after we had placed pre-seasons. By the time we got boats in Montana for a June selling season, the boats we received were two generations old. We chose to bail on selling whitewater kayaks immediately after I bought the store. I could see that, without blind passion, it just did not make any sense to play the game. We chose to focus on canoes and touring and recreational kayaks and try to differentiate our offer from the whitewater guys. We saw more opportunity not to sell more boats, but to sell the ones we did more profitably. Whitewater was a no-win deal, so focusing on touring and rec seemed like a good idea.

We watched every Outdoor Retailer Summer Market as vendor after vendor gave us the sheepish talk about how they had to open some other dealers to get the numbers they needed. "We still want you guys on board," they would say. "Specialty is different. You guys can sell the stuff the boxes just can't. The boxes will introduce more people that you can then capitalize on." Nice BS story -- all the crappy boats have done is turn off a whole slew of potential paddlers because they bought a POS from someone who has never been in a boat.

We continued to cut our orders as we saw more and more business go to big boxes, first Johnson, then Watermark, then Confluence, then Confluence/Watermark, then Legacy Paddlesports and that is just the well-financed big guys who have opened multiple dealers in Missoula. At one point, I spent a day driving around Missoula and counting boats on display in town. It was my estimate that on display was a two-year supply of boats for the Missoula market; over 300 boats that dealers owned end of season. It was staggering.

After two years of everyone (big boxes and specialty) selling boats, the orders dropped off and prices at the local level plummeted. Box stores who are used to operating at 40 percent to 50 percent margins were seeing 30 percent plus the cost of freight and then not getting even that. Keep in mind, this was the heady boom years and they were failing to sell through at anything close to a profitable margin. We kept cutting orders until we had to beg the vendors to accept orders that did not meet the minimums. We shifted those resources to the inflatable side of the business where vendors seemed to understand that the market was limited and were happy with a couple of good dealers. Dealing with inflatable guys who live out West is a refreshing reality check to how broken the hard boat business model is. The local inflatable boat guys seem to understand the category and are willing to accept criticism of decisions and listen to what our needs are. Wow, what a concept.

We have watched hard boat sales slide for seven to eight seasons now, and if seeing it and adjusting is the Darwinian approach you think makes sense, I guess we are winning. Our business is healthy so far in the down economy, but to call us a specialty boat dealer at this point is a stretch. Great rafting shop, yes, but a canoe and kayak shop, like Ben tried to run, no way.

I think the vendors are the ones who better be paying attention to the Canoe Rack going out of business. We still have too many dealers in town to make boating work as a business, but for sure we have far too many suppliers for anything close to a healthy industry.

Anyone want to take bets on vendor survival in the next 24 months? I'm giving odds.

Todd Frank

Owner

The Trail Head

Missoula MT

Since 1974

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