Late last year, members of the Northeast Spa and Pool Association formed a task force to develop ways to support brick-and-mortar stores as they square off against the Internet.
The idea wasn’t to drive online-only retailers out of the pool and spa industry, but rather to “find a way that we can all exist,” says Chris Lightenburg, northeast sales director for Garrett Liners, in Morrisville, Pa., and a member of the group.
“This is an opportunity, not a crisis — I think that’s the way that everybody needs to look at this,” adds Lightenburg, who used to head a buying group designed to help independent pool and spa companies better compete with Internet outlets.
According to the U.S. Commerce Department, total e-commerce sales for 2009 were $134.9 billion, representing a 2 percent increase from 2008. By contrast, brick-and-mortar stores saw retail sales drop 7 percent in 2009.
What’s more, online retail sales in the U.S. are expected to top $141 billion in 2010, a 7.5 percent increase over 2009 figures, according to eMarketer Inc, which provides research and trend analysis of digital marketing and media.
In the pool and spa realm, some products are a natural fit for e-tailing — toys, for instance, which are easily shipped and require no follow-up service. But consumers today are purchasing bulkier, more service-intensive items that require professional installation, such as pumps and filters.
And that’s where the real hardships are felt. While most retailers understand the need to move product, many still would like to see manufacturers better recognize the value of their businesses.
“We honestly feel that we built this industry,” says Irene Insignares, owner of Cool Pool & Spa in Nanuet, N.Y., who helped form the NESPA task force. “And I need support from the manufacturers and distributors.”
So what are retailers doing to combat the Internet pricing phenomenon? And what can manufacturers and distributors do to help alleviate the pressures brought on by Web-based sellers?
Dale Howard estimates 20 percent of his higher-end product sales are being lost to online-only retailers.
But what’s worse are the complaints he gets from customers about his prices — some of which are more than 25 percent higher than those found on the Internet. As a result, the owner and president of B&L Pools, a five-store operation in Phoenix, is losing patience with manufacturers that offer deep discounts to online vendors.
“I’m done trying to sell products that I’m going to get hurt on,” Howard says. “And I won’t promote products I’m going to lose customers on because the pricing is so different.
“These dealers shouldn’t be able to sell products for below my cost and still make a profit,” he adds. “When it starts getting into significant dollars, even your best friend will go to the Internet.”
Howard’s solution, like so many other retailers faced with similar dilemmas, is to align his business with suppliers that closely monitor their MAP, or minimum advertised pricing, programs.
“You just try to make it known to manufacturers that this is key to keeping those relationships,” he says. “Otherwise, it could be the end of mom-and-pop retailers.”
Kelly Reed agrees. The operations manager at Contemporary Watercrafters in Gaithersburg, Md., will sometimes offer a discount to a customer who approaches her with an Internet price that’s 10 or 20 percent below her own.
“But when there’s a 50 percent price cut, you have to let those sales go,” she says. “It’s really hard when you get a longtime customer who wants it that much cheaper.”
As a result, she tends to favor manufacturers that offer better pricing or warranties to traditional retailers over online-only vendors.
Along those lines, some retailers would like to see manufacturers offer special programs and incentives for brick-and-mortar clients who service their products. This would translate into a different product line for mom-and-pop stores, who can then market the special features and prestige of those items.
Indeed, after-sale support is directly linked to customer satisfaction, says Kathleen Carlson, senior vice president of sales and marketing at Aqua Quip in Seattle. She cites recent research indicating that 50 percent of hot tub owners would not buy a spa again, largely because of poor follow-up and warranty work, both of which are virtually nonexistent online.
“If it wasn’t for the support from specialty retailers would we have people happy with our products at all?” she says. “If it’s a new product, who really lets the consumer know about it? It’s the specialty retailer.
“Manufacturers have tried to pull product through this industry,” she adds, “but those that work with the specialty retailer find much better success.”
Bypassing mass merchant or Internet sellers would create added excitement among staff, she explains, “and we are that much more loyal to the product. The end result is that we sell a lot, and the wholesaler and manufacturer make money.”
Howard agrees that in-store support of various product categories — pumps, heaters and filters, to name a few — is crucial. The absence of brick-and-mortar backing, he believes, means consumers may not grasp the benefits of high-efficiency pumps.
“People are doing their research in the store, and then turning around and buying it online,” he says.
So there’s a direct correlation, he explains, between a successful brick-and-mortar industry and the marketing and sales of brand-name products, though it may not be readily apparent.
“[Certain manufacturers] are moving a lot of product online that’s getting recommended in stores,” Howard says. “Without that, cheaper products from China, for example, are going to take over. The Internet industry for pool products is starting to trend toward those look-alikes that don’t work.
“When people really start getting burned, the pendulum may swing back to brick-and-mortar, where you get a true sense of the look and feel of the product,” he adds.
It’s a complicated subject, to be sure. Manufacturers and distributors aren’t likely to cut off the Internet channels because, quite frankly, they’re moving product.
But, some argue, the products would still move even if they weren’t offered online.
“Without the Internet, the product is still going to get sold,” Howard contends. “All this does is allow them to be sold at a lower price.”
Take the Big Green Egg, a popular grill that’s provided steady sales for pool and spa retailers. The product’s manufacturer strictly prohibits mass merchandisers from carrying it, restricting those channels to specialty retailers.
And when the policy is violated, the manufacturer is quick to respond.
“When the economy started going south, a retailer apparently sold them to Sam’s Club, because it popped up online,” says Steve Bludsworth, owner of All Pool Service & Supply in Orlando, Fla. “The Big Green Egg folks went nuts. They just refuse to sell to mass merchants.”
This strategy has worked in other industries. For instance, shoes and clothes often sell on the Web for roughly the same price as in full-service stores.
“What happens with fashion, shoes and textiles is you often depend on your retailers, so if they learn you can buy the products at a discount [elsewhere], they may stop pushing that product,” says Lars Perner, an assistant professor of clinical marketing at USC’s Marshall School of Business. “So those brands then become very dependent on the goodwill of the full-service retailers, and they’ll do a lot to crack down on the low market prices that are available online or by discounters.”
Carlson maintains that manufacturers and distributors should follow the lead of other industries in channeling their products. Suggesting it can’t be done, she says, is “just an excuse.”
“It is not an easy thing to fix and make right for everyone, but it can and should be done,” she says. “Not just for the specialty retailer, but for the industry.”
Rebecca Robledo contributed to this story.