For distributors, the road through 2009 was wrought with twists and turns.
But there were some bright spots. In a move to shore up its West Coast presence, PoolCorp in October purchased regional distributor General Pool & Spa Supply. The decision was lauded by one Hayward executive as “a great futures-type acquisition.”
A drop-off in new construction spelled fewer and smaller orders for building products. As a result, many firms had to consolidate and “lean up” their operations. What’s more, downward pressure on pricing resulted in further lost profits and, according to some accounts, affected construction quality.
Around the same time, BioLab announced it was re-entering the distribution market after just over a year of going dealer-direct. “I believe it has a strong
future,” said company vice president and general manager Charlie Schobel at the time. “For us not to participate in that important segment was wrong, I thought.”
What the future may hold for pool and spa distribution is anybody’s guess. But certainly a handful of trends have emerged. And to decipher and lend context to those trends, Pool & Spa News recently sat down with the heads and representatives of five of the industry’s largest distributors.
Following are excerpts of what we learned.
PSN: How and why has the role of distribution in the pool and spa industry become more important in recent years?
Bill Kent, president, HornerXpress, Fort Lauderdale, Fla.:
The role of distribution hasn’t changed, but the economics of our new market have increased the value of the services provided by distribution in general. Especially in the new construction market, the economies of scale make purchasing through distribution a more attractive alternative than buying direct in large quantities.
Manuel Perez de la Mesa, president/CEO, PoolCorp, Covington, La.:
Businesses that don’t consider the total cost of distribution incur operating losses and tie up capital to their detriment. As product offerings continue to increase and as access to capital becomes more expensive, the role of distribution becomes more important. Also, as an industry matures, manufacturers need to rely more on distribution as their channel to market in order to operate most effectively, and survive.
William Churchman, CEO, Imperial Pools Inc., Latham, N.Y.:
It’s impossible to predict sales volume and inventory requirements. [So you have to consider] that transportation costs have risen dramatically over the past 10 years; manufacturers have imposed higher order and freight minimums; technological advances, product innovations and the increased variety of competing items give consumers more choices, making it more challenging for retailers to accurately predict product mix; and cash flow has become critical, [so] the builder, retailer or service company cannot afford to tie up cash as they once did. Even for the larger buyers, buying closer to home, and buying less and more frequently, is making more sense.
PSN: How has your company evolved to better manage your business — how specifically are you providing more value to your customers?
Nigel Leach, corporate director of package pool sales, W.W. Adcock Inc., Huntingdon Valley, Pa.:
Technology obviously has impacted business in a positive way. [We have] more efficient inventory and purchasing software, real-time inventory, bar-code reading, etc. We’ve also put in place services beyond the inventory of product, including online ordering for our wholesale customers, and branding our own products that have synergy and relationships with each other. We also offer retail sales training, consumer financing support, Web design services and marketing assistance that take a more holistic approach to the difficulties our customers are facing.
Charles Arakelian, owner, Baystate Pool Supplies, Cambridge, Mass.:
We have endeavored to make the dealers better at what they do by running seminars at our branches as well as at our annual Opportunity Day Trade Show. These events, which focus on pool and spa products and service, are presented by in-house staff and vendor representatives. In addition, we’re making improvements to ordering for our dealers from us and for us from our vendors through [Electronic Data Interchange].
Churchman: The biggest investment has been in our own staff training program, our Imperial Training Initiative Program. We are training everyone on everything — customer service, water chemistry, CPO certification, product and product applications, prospecting, sales, problem-solving and complaint resolution (in case we ever actually get one), just to name a few. We want to make sure every “touch” has positive results for our customers.
PSN: What trends have you observed in your customers’ buying habits of late, and how do you see those habits evolving?
Leach: Customers have very gradually begun to install more technology and higher-end products. Unfortunately, this has been driven by legislation and consumers asking for it instead of our customers actively selling technology and value add. There’s a huge opportunity for our customers and the industry if we collectively become more proactive to sell up.
Arakelian: Buying is being done more for the necessity of the short term as opposed to the future. Early buy orders have been down, which definitely indicates too much carry-over inventory, fewer preseason pool and spa sales, and an ambivalence about the coming season. I feel they will eventually start carrying more inventory again when these conditions change.
Churchman: Our customers are being much more conservative … and relying on us to have what they need, when they need it, using our inventory as safety stock. If we, as distributors, serve this need well, I expect that this trend will continue, even after our market begins to recover.
PSN: How can brick-and-mortar pool and spa retailers compete (and win market share) against online retailers?
Perez de la Mesa: First, be open when consumers want to buy (Friday 5 p.m. to Sunday 5 p.m.). Have properly designed, built-out and merchandized stores with rotating specials, end caps, etc. to create excitement and energy with consumers. Have an aggressive marketing program to draw consumers into stores. Have helpful employees that really help consumers and provide a positive shopping experience. Have the right inventory with the right placement to maximize sales. And use technology to reach consumers via the Internet to complement their storefront — just like a restaurant offers takeout as well as eating in.
Leach: Consumers shop online because of convenience. It’s a 24-7 marketplace. Most families have two breadwinners and cannot shop 9-5. Late evening hours and weekend openings give buyers the opportunity to shop. They can also duplicate online shopping with their own Website, and we offer help with this. The old adage works: Don’t fight ‘em, join ‘em.
Arakelian: Even if a retailer does not choose to enter the Internet business, they should recognize that there are people in their town buying pool cleaners, heaters and other equipment online that are going to need service and parts. Consider the aftermarket needs. You don’t have to sell someone a car to sell them tires! And providing a customer with good service may get you their next purchase.
PSN: How can hot tub dealers and manufacturers revitalize the category and reverse the negative sales trend of the past few years?
Kent: Wait for Obama to get the economy turned around. OK, we know that’s a joke. [I believe] the economic cycles will always be there, and we just need a strong balance sheet and a lean operating cost to survive the low points. Focus on word-of-mouth advertising.
Arakelian: We don’t feel that hot tub manufacturers or dealers are doing anything wrong. Spas just require more disposable income than many people have right now. Plus, $12,000 spas featuring vast entertainment systems — “marching bands and fireworks” — are not what’s needed right now. Today’s spas are aesthetically attractive, so offer more models that focus on function and therapeutic benefits (that are more popularly priced).
Churchman: We certainly need to continue working with health professionals to discover and promote the health benefits of water therapy. What can be done now — and probably won’t be done — is to [ensure] that the consumer experience of hot tub ownership is positive. I’m referring to after-sale service. Too many tubs are being sold by retailers who are not qualified or not willing to service and support what they sell. As manufacturers, we have to control the channels better.
Perez de la Mesa: There’s an opportunity for significant consolidation of manufacturers and the creation of higher barriers to entry; without consolidation it is unlikely for much capital to be invested in this sector.
PSN: Finally, what do you see as the biggest challenge facing the pool and spa industry today, and how can it be overcome?
Churchman: I believe the biggest one is overcapacity. There are too many manufacturers, too many products, too many distributors, too many builders, too many retailers, etc. to support the current and anticipated demand. As ugly as it sounds, there needs to be a shakeout at every level. Companies must fail and flawed business models must be eliminated — natural selection.
Kent: In general, the industry has a blind spot in that it fails to embrace the swimming, diving and water polo communities — our most passionate user groups. Get in touch with your local swim teams [and others] and turn them into your sales force with a synergistic support program.
Leach: It’s giving value to products, and encouraging or reaching reluctant buyers. People’s personal savings are at their highest levels since 1998. Americans are not good at two things: dieting and saving money. There’s pent-up demand, and our industry is leaner and meaner than it’s ever been, with a diversified product line. Plus, sharper sales information to [push] the value of hot tub and pool ownership will put us on the road to recovery. Oh, and a hot summer!
Perez de la Mesa: While the nation and the industry benefited from the “bubble” of 2002-2005, in many respects the industry has been in a “bubble” for the better part of its entire existence. To succeed, businesses must embrace change and be capable and willing to invest. This is the free enterprise system — the best system known to create opportunity and wealth for mankind.
We value your feedback. You are welcome to share your thoughts on this and other issues with Pool & Spa News.