“Hey, you’ve been ripping me off all along!”
— a treasured, and now former, customer.
Pool and spa professionals spend years nurturing customer relationships, doing what they can to demonstrate the value of independently owned businesses.
Unfortunately, there are times when factors out of a company’s control can derail those efforts. For brick-and-mortar retailers, being undercut by the Internet has become a major source of customer and revenue loss.
A friendly relationship quickly becomes testy when a customer finds a product online for significantly less than their favorite B&M dealer offers it.
A new wrinkle in this scenario has become increasingly common. Retailers and manufacturers sometimes discover that the much-discounted product seen online is not actually produced by the original equipment manufacturer (OEM). Instead, it is a generic.
But because the website’s marketing copy is unclear, the customer is unaware that the part isn’t from the OEM. This trend — seen with increasing frequency — becomes even more troubling when one considers that for every customer who speaks out to a retailer, many more don’t. Instead, they purchase the generic (and sometimes inferior) products and quietly stop visiting their neighborhood pool and spa stores.
This trend has meant lost profits, angry customers and a decrease in brand equity for reputable manufacturers. Perhaps more importantly, it’s also opened a murky can of worms in terms of the law. And companies are nowhere near finding an effective solution, but instead must address each instance on a case-by-case basis.
In the gray zone
Fraud is defined as acting with an intent to lie about what one is selling. But in these cases, it’s not always so clear cut.
“You’ll see some examples where it’s deceiving, but they’re not lying,” says Mike Massa, vice president of sales at Hayward Pool Products, a manufacturer based in Elizabeth, N.J. “They write the descriptions vaguely enough that a consumer doesn’t really understand.”
Regardless of whether it’s done intentionally by certain online retailers, consumers can become confused by use of inaccurate, sparse or vague wording on a web product page, causing them to form the wrong impression while purchasing.
The vendor may have used the SKU or part number for the genuine article in the headline, leading consumers to assume that’s what is being sold. Other times, the displayed part number is similar to the OEM’s, perhaps missing a dash, or sporting an extra lowercase letter at the end. Or the SKU for the genuine part may be mixed with a couple of other numbers, so it’s not clear what is being marketed.
Other times, the OEM’s logo or a blow-up chart of the equipment on which the part is placed, may appear on the page.
“They’ll say it fits a certain product and mention the Hayward product, not say it is a Hayward product,” Massa says. “They’ll say, ‘This replaces this SKU,’ and it’s insinuated that it’s a Hayward product or part. But you really have to read into it.”
These practices sometimes are done with no criminal intent. It may be that the genuine part numbers, OEM logos and equipment illustrations are provided to simplify web searches. But the practice can give the wrong impression, some believe.
“They’re showing a picture of the original manufacturer sometimes; they’re showing the manufacturer’s name and insinuating, but they’re being somewhat clear that this is just a replacement [part] for that unit — when you read it carefully,” says Dale Howard, president of B&L Pools, a Phoenix-based brick-and-mortar operation. “But … if you’re reading it quickly, you could be misled.”
Then there’s often a lack of language explicitly stating that the product does not come from the OEM, which can cause confusion. Nor do these web entries name the producer of the generic part.
It has to do with the delicate balancing act of selling a generic replacement part. Some might find the actual word “generic” unappealing. But there are code words that most consumers understand — for instance, when they see phrases comparing the product to that of the OEM, such as “outperforms Brand X,” “similar to Brand X,” or “just as good as Brand X.”
Some words and phrases are less clear: “aftermarket,” “replacement,” and “fits XYZ Equipment.” Are they deceptive? Experts disagree. Some say the terms are well understood among consumers, while others believe they’re more open to interpretation.
After all, OEMs often use the terms “replaces” and “replacement” when marketing their genuine parts. “So it’s big, that word,” says Jon Morrison, president of NPS, a Las Vegas retailer with brick-and-mortar locations as well as a website. “I think it has to be more clear.”
While not all consumers may understand the meaning of certain terms, the court may find them sufficient. “Aftermarket” is one of those words. “It may not be [clear] to the consumer, but it would be clear to a court if it’s called an aftermarket part,” says Mark Stapke, an attorney with Los Angeles-based Peckar & Abramson.
But sometimes, even if shoppers do understand, this information may appear too far down the page to be read.
Focus on parts
While this problem has been noticed with whole goods such as pool covers and pumps, it’s seen more often with parts. There are a few reasons for this.
For starters, consumers have become more aware of parts. At one time, most people restricted their product research to whole goods and relied on a retailer or service professional to recommend replacement parts. Now they use the same kind of energy in research and price shopping for parts. “So they come in saying, ‘I need this widget part no. 123. Would you sell it to me for this price?’” Morrison says.
And whereas whole goods will come with a stamped logo from the OEM, many parts don’t because they’re too small, or because the manufacturer doesn’t want to bog down a piece of equipment with several individually stamped parts.
Additionally, patents on certain automatic cleaners and other types of equipment are expiring, thus opening the door for generic versions.
Certain parts are more prone to being sold in a misleading way. Components made of molded plastic are especially susceptible because of lower manufacturing costs. As a product category, automatic cleaners see a lot of this activity because they contain a higher number of moving parts, most of which are made of plastic.
And there’s a so-called sweet spot as far as price range goes. “The Internet is effective when the item is $20 or more,” Howard says. “Otherwise, the cost of shipping would offset any savings.”
Neither the retailers nor the manufacturers claim this problem has a large impact on their bottom lines — yet. It’s hard to quantify business that’s lost because of misleading web pages. But for OEMs and many retailers, replacement parts have long been an important and profitable part of the product mix.
“It’s happening day in and day out in some way, shape or form,” says Scott Ferguson, director of marketing – parts, accessories and training, for Zodiac Pool Products in Vista, Calif. “But it’s hard to quantify in terms of the sheer volume.”
Professionals say this problem is increasing every year and they expect it to continue indefinitely. “I’d say it’s probably a fairly small number, but growing,” says Keith Ainsworth, CEO of NPS. “If I had to put a number on it, 20 percent, tops. But two years ago it was probably 5 percent. So it’s definitely [growing], especially as the generics get better and the competition gets more fierce. …”
In the store
While it may be difficult to quantify what percentage of parts revenue is lost due to this phenomenon, retailers are positive that customers get 100 percent angry when they think their local B&M is price gauging.
Service technicians stand to lose as well. For both groups, it can mean not only the loss of that particular sale, but of long-term goodwill and future business. And for all the customers who come in and complain, there are many who don’t. ?This can be especially painful when it’s a loyal longtime customer who comes in and points to a product sold on a website. “They’re saying, ‘Hey, you’re ripping me off. This thing says Zodiac,’” Morrison relates. “You’re saying, ‘I know it’s probably not because they cost [more than that] at wholesale.’ But they’re saying, ‘Yeah, whatever. You’re trying to pull a fast one on me.’
“So I now look bad even though I’m doing what I need to do and I have great pricing.”
Competing online firms can get called out as well. “I think in a lot of instances the wording ... makes them think that it’s really a Hayward pump or a Pentair filter or a Loop-Loc cover,” says Dan Harrison, president of Las Vegas-based Poolandspa.com Inc. “It makes them think that enough to call us [and] say, ‘Well, I get all my stuff from you guys, but my filter tank cracked and on your site, the Pentair filter body is $640. But I can get it on blah blah eBay store for $170.”
In other, even more awkward cases, a product has failed, and the customer is seeking warranty support. One retailer has seen this happen on salt cells that are purchased over the Internet and fail in about half the time of the average OEM cell.
“When we tell them, for one, we can’t warranty Internet parts typically and, two, we can’t warranty it because it’s not an original equipment part, they feel betrayed,” Howard says.
Manufacturers suffer similar dents in their goodwill when consumers purchase generic parts they believed were from the OEM.
They are confronted, too, not only by consumers, but by retailers and service techs wondering how other companies can sell the products for so little, and asking if the manufacturer had a hand in it.
In addition, manufacturers sometimes find out from their warranty technicians that a non-OEM part was put in a product — say a pump or cleaner — when the consumer believed it was genuine. They sometimes even receive the product sent back to them for repair or replacement.
In addition to lost profits, and the knowledge that other firms are making money off their names, original equipment manufacturers fear that the confusion can hurt brands they’ve spent hundreds of thousands of dollars to build. If a consumer mistakes a generic for a genuine part and that part fails sooner than expected, it taints the OEM and what they produce.
But almost worse than that is the fact that consumers often don’t know to look for signs that a product is genuine, such as heavily branded OEM packaging, stamped logos or trademarked colors. And if a generic $15 part ends up having a shorter life span than a genuine part three times its cost, the consumer may not even be aware and can just replace it without thinking about it. No lesson learned.
This reality has made manufacturers more protective than ever of their patents.
But in many cases, a single offender doesn’t warrant the costs of full-scale litigation, so the legal options are fairly limited.
When they hear a consumer was misled, producers are quick to respond, often contacting the retailer and warning them to cease and desist the action.
In addition, manufacturers such as Zodiac Pool Systems Inc. have begun to work more aggressively to incentivize dealers to sell only genuine products. The company’s recently released Preferred Professional Provider Program has dealers commit to selling and installing only genuine OEM parts in Zodiac products in exchange for benefits such as extended warranties, placement in a dealer locator, and merchandising materials.
For their part, brick-and-mortar owners have taken to educating their staffs on how to differentiate genuine products from generics. To do this, they need to stay informed on what’s out there. That’s why Morrison will order generics that customers challenge him with or that he otherwise comes across.
In addition, some of these brick-and-mortar retailers who only sell genuine parts are starting to consider offering generics. They see manufacturers raising their prices each year at a higher rate than the generic producers, so the difference is getting bigger. “For a small piece of plastic that somebody doesn’t necessarily need, if the prices keep going up, the generics become more attractive to people,” Morrison says.
When confronted with disgruntled customers, brick-and-mortar companies that offer price matching then are left with the choice to either forsake the profits by letting a consumer walk out the door, possibly forever, or lose a little by selling it for the same price as the seemingly generic product.
When customers find something online for a price that seems too good to be true, retailer Dennis Marunde will look at the item with the customer and point out any apparent differences between it and the OEM product. If the customer stands his or her ground, and the product actually qualifies for a price match, then he often will relent. (The president of Arvidson Pools & Spas in Crystal Lake, Ill., only price matches on products he keeps in stock.)
“We knowingly and willingly take the margin hit if we need to because we want to keep that customer,” he says. “[Our intent is] not to let them go out the door empty handed. What’s important is being known as a resource.
“We don’t win every battle, but our goal is to win the war.”