Pile ’em high and sell ’em cheap!!
A bargain is a knock down price – whether it’s a can of peas or a luxury yacht. It’s the low purchase price no customer can resist. In 2014 yacht sales were fractionally up to 400 out of the nearly 1000 superyachts for sale worldwide, but much of the sales are the result of a cut price selling method usually used by big supermarkets.
The 75 million yacht Nero has dropped its price by over 35 million Euros in 4 years while Cakewalk originally priced at 215 million USD has dropped to 119 million Euros. A drop of approx 64 million USD. Getting a bargain like a tourist in the Kasbah has become the norm for yacht buying.
In the transparent world created by the internet it doesn’t take more than a few clicks for a buyer to know how much a yacht is reduced or for how long it’s been on the market. When the average selling price is now 60% of the first asking price, Owners are facing the unpleasant reality that they will only get a fraction of the real value. Retaining brand and brand value is not in the picture. New buyers inherit the sales history online and this then perpetuates the present market driven price structure while putting pressure on new build prices. Sellers must be disheartened. Owner/Sellers are often long term clients but to keep them happy brokers would do better to re-examine their marketing strategies. Creating an online entity for the brand and the product will support the value, not destroy it. Owners are used to their yachts maintaining their capital value, how will they accept continued depreciation of their assets? Purchasing habits have changed and marketing with it. There are new opportunities out there and they are online.
We all research everything on Google. Access to information is immediate, honest and transparent: this is the beauty of it. Just think about your own buying habits: you research online. When you buy a house it is not the agent that does the selling but the marketer i.e Zoopla. At least 70% of the buying process takes place before customers make any person to person contact. And 80% of the buyer’s decision is made before he even meets the salesman. That makes marketing all the more important and whilst the salesman’s role may still exist, there is no ignoring it has changed. It also means that it is crucial for the yacht to have better presence in the pre sale process.
So how will the broker’s role change in the future? Clearly specialist knowledge makes a huge difference and is important, but outside yachting the buying process is often a direct transaction between customer and seller – and it starts online. Any look at the state of the high street or the rise of airbnb and Uber will confirm this. The evidence is clear: yacht brokers will need to embrace innovation or face extinction. It’s the hard lesson of modern times: either grasp the new marketing methods or sink.
o why is the yachting industry refusing to adapt? New methods could well be perceived as making a broker’s role redundant or very much reduced. Yet clearly brokers play a very important role. The purchase procedure requires technical knowledge, transaction and contract experience. And another skill you can’t teach – a sixth sense on how to negotiate and smooth some of the most complicated and high value deals in modern sales. And when the broker brings the buyer then clearly their role is critical and well worth the commission.
Brokers report that 75% of sales are the result of two brokers working together: one bringing the buyer and the other representing the seller. The high commissions paid on the yacht sale are reflective of the two broker method, but is this in the Seller’s interest? Commissions are also about recovering the marketing costs – a costly outlay initially shouldered by the selling broker. These high costs are, of course, due to magazine advertising, glamorous offices in exotic locations, expensive cars, boat show attendance and producing beautiful printed brochures. Zoopla does none of that. Sellers no longer need to be charged for this outdated marketing or unnecessary broker real estate. And increasingly we hear they don’t like it.
In a desperate attempt to keep the potentially destructive new buyer/seller deals at bay, the brokerage network appears to have ring fenced to keep innovation out. This may not be deliberate but it only takes one tiny chink in the dam for a trickle to appear. The hole is already there. Anyone who read Captain Todd Rapley’s article in The Crew Report (http://www.thecrewreport.com/features/21897/the_crew_report_issue_70_preview_going_for_broke_captain_todd_rapley.html ) will have seen the water leaking through. It’s the beginning of the end for brokerage in its present form.
However getting the Internet to work for you in marketing is an expert skill. In conversation with brokers about the need for embracing digital marketing there is always the same response – “we’re already doing that”. Not so. Not a single brokerage is embracing these methods effectively: one good search online says it all. Apart from the mostly, unwatchable films and the poor websites – the marketing methods adopted quite simply show naivety of what buyers’ require. To begin with, no serious high-end business would ever display a luxury item i.e. a beautiful Rolls Royce in the kind of down-market showroom reflective of current Internet yacht display. Business owners need to understand the full opportunity the worldwide web presents – social media for instance is not an advertising platform, nor is it just for younger people and full of time wasters. If you don’t do it right, it simply does not work.
The change in the industry will come whether we like it or not. Brokers must recognize that customers have new buying habits, marketing has changed and there are no secrets anymore. Negative pricing is there for all to see. In more difficult markets now more than ever what counts is not the product (i.e the yacht). What really matters is the brand. And you don’t get top brand by selling at knock off prices.