At a time when Amazon and other e-merchants are wreaking havoc on brick and mortar retailers, it’s vitally important to make a good impression on customers as soon as they walk in the door.
“E-commerce has had an impact on brick and mortars,” says Calvin Boothby, owner of Redlands Pool & Spa Center and a member of the Association of Pool & Spa Professionals Retail Council. “There is no doubt about that. The customer walks in already knowing prices so you have to change your profit margins to compete. The glory days of the industry — if you paid $1 you sold it for $2 — are over.”
So how do pool and spa retailers compete against the Internet?
“With e-merchants, there’s a wait time for delivery of at least a day or maybe two, whereas with brick and mortar stores, customers can walk out with the item immediately,” Boothby says.
“But you have to be competitive enough and give excellent service. If you’re close — and the magic number is no more than 15-20 percent over what e-merchants are selling it for — then the customer will take it home because he wants to fix it today, or he wants to install it today.”
A new survey of retailers by Pool & Spa News reveals that, in spite of a recovering economy, many in the industry remain concerned about the future of brick-and-mortar stores.
The lay of the land
Despite signs of recovery in the housing market, Bil Kennedy, president of the Atlanta-based market research firm PK Data, says the industry’s future is still uncertain because the nation’s fundamental economic drivers haven’t recovered enough to “justify a sense of robustness in the pool and hot tub economy.”
“Housing starts have turned around, but we don’t know to what extent that is going to be sustainable,” Kennedy says. “We need to see more of that, less unemployment, a stronger gross domestic product and a stronger economy on a sustained basis. Just seeing something over one or two quarters isn’t going to be enough to impact the pool and hot tub industry.”
Of those surveyed, 25 percent said the future is bright for brick and mortar stores, and although the Internet has posed challenges for most retailers, the industry will not only survive but it will also thrive once more.
More than half — 51 percent — said some brick and mortar stores have already buckled from pressure from Internet competition and more will continue to suffer as a result of e-commerce. They expect a modest number of brick-and-mortar stores to close their doors in the next five years.
Nearly a quarter of those surveyed — 23 percent — believe the future is bleak for brick-and-mortar stores and the landscape for dealers will look drastically different five years from now, with only a small group of these retailers surviving.
Asked what percentage of sales were lost to the Internet in the last two years, the responses ran the gamut. However, the largest group of retailers (54 percent) believed that online sales took between 10 and 29 percent of business from the brick-and-mortar environment.
Those surveyed made a variety of comments, noting “we are already seeing a drastic reduction” in sales of robotic cleaners and chemicals and, “I have been asked to install replacement liners that have been purchased online.” Another said, “If you are only selling a retail product that you can purchase on the Internet, you could be in trouble. However, if you also build or service pools, the Internet should not affect you too much.” Still another said, “Unless your business is diversified (services, sales, construction), it will be hard to avoid being negatively impacted.”
Ann Janowicz, owner of Kasper’s Pool & Spa Supply in Easton, Penn. and chair of the APSP Retail Council, says she agrees with the more optimistic quartile.
“I’m optimistic that if retailers can learn to work with the manufacturers and distributors, essentially optimizing their strengths, they can build strong retail stores,” Janowicz says. “That will allow retail to do what it does best — the servicing of, and interaction with, customers.”
Like many of those interviewed, Janowicz says that brick-and-mortar retailers offer a key service that Internet companies don’t — the ability to install and service pools and spas and related equipment.
“A swimming pool is not static furniture,” Janowicz explains. “It needs nurturing. And if you can build a relationship with the person who has to nurture that entity in their backyard, then you have a business relationship that can continue and thrive.”
The pool and spa retailers interviewed by Pool & Spa News share varying levels of Janowicz’s optimism.
While the last few years have been a challenging time for the industry, many owners of brick and mortars believe the resilient businesses that survived the recession and are employing creative mea ns ways to face Internet sales head on will succeed in the years ahead.
“E-commerce is not going away,” says Debra LeClerc, vice president of The Pool Doctor of Rhode Island.
“It’s had an impact on a lot of brick-and-mortar pool and spa professionals. So we’ve recognized that we need to adapt to the changing culture around us.”
MAP of the future?
At a time when many mom-and-pops can’t afford to match online prices, the businesses that are doing the best are utilizing innovative measures to regain their financial footing.
In Arizona, dealers are lobbying for better enforcement of minimum advertised pricing, or MAP. Under MAP, manufacturers don’t allow their products to be advertised for prices below a specified amount. So far, the program has met with varying degrees of success. And while some manufacturers do a good job of monitoring MAPs, others fail to enforce the policy, retailers say.
Thomas Landi, owner of Landi Pools and Games in Vineland, N.J., says another problem with MAP is that manufacturers might set the MAP price on a $3,000 item, for instance, at $3,299 — leaving a profit margin of only $299.
“That is ridiculous because we’re retailers, not distributors,” Landi says. “If I’m going to match a MAP price, it’s too costly to bring in a product to make a margin of 10 percent or less. I think it’s a potential solution, but manufacturers need to ... set fair MAP prices.”
In an effort to support local dealers and help them stay competitive, manufacturers have taken several different approaches. Zodiac Pool Systems recently launched a tiered rebate system. Under the “Get Rewarded” program, Zodiac provides rebates based on prices of pool cleaners customers find on the Internet. The company has also revitalized its Polaris Days and Zodiac Days promotional events to support the rebate program, encouraging dealers to run up to three events per year.
Zodiac and Polaris support the events with press releases, a special events section on its websites, and a special promotional code that allows participating dealers to offer up to an additional 10 percent off MSRP. It also supplies dealers with T-shirts, window posters, tent cards, yard signs, balloons, pens and other giveaway items.
Hayward Pool Prodcuts, based in Elizabeth, N.J., launched two new programs to help retailers and services stay competitive as well.
The first is a $50 installation rebate for consumers when any of the company’s three variable speed pumps are installed by an industry professional.
In addition, all of Hayward’s variable speed pumps come with extended warranties when installed by a pool professional. The EcoStar warranty increases from one year to three, and the Super Pump VS and Max-Flo VS double from one to two years when installed by a pool professional.
“Hayward hopes these two programs help our retailers and servicers ensure that consumers get the complete value proposition: a quality product with professional installation and an extended warranty for peace of mind after the sale,” said Bruce Porter, Hayward’s director of marketing communications.
Help from Uncle Sam
In another development that may help pool and spa retailers compete with e-merchants, California and Pennsylvania now require shoppers living in these states to pay sales taxes on Internet purchases. Experts predict this trend will continue to include all 50 states and likely become federal law, giving people less incentive to buy products online.
In February, a bipartisan group of senators and representatives introduced a bill, the Marketplace Fairness Act of 2013, which would allow brick-and-mortar retailers to compete more effectively against out-of-state internet sellers. Addressing what U.S. Sen. Mike Enzi (R-Wyo.) called “one of the largest loopholes in our lifetime,” the bill would give states the option to require the collection of sales taxes by out-of-state businesses, rather than rely on consumers to remit those taxes to the states voluntarily. An estimated $20 billion in sales taxes goes uncollected annually involving out-of-state online merchants.
Brian Quint, president of Aqua Quip, a Seattle-based retailer, says one of the secrets to survival in the future will involve carefully choosing what manufacturers and products to align with.
“What we are trying to do is align with manufacturers that have taken steps to maintain their brand and price integrity on the Internet,” Quint says. “We are either making sure we are picking products that don’t have an online presence, or we are being very thoughtful on what kind of price protections by way of MAP are being upheld by manufacturers.”
For Boothby, “staying ahead of the game” will involve working with thinner profit margins, “selling your labor” and offering outstanding customer service.
“As the owner of the company, that’s what runs through my mind every day,” Boothby says. “I have to increase sales and my sales have to be tied to service. As an old athlete, I know you have to give 110 percent to play the game. If you only give 100 percent, you won’t stand up. But if you give 110 percent, I think you will survive.”
Mike Thompson, owner of Thompson Pool & Patio, refuses “nine times out of 10” to install pool equipment that people purchase online at lower prices.
If the equipment later breaks down, Thompson says some people will claim it was installed improperly, leaving him responsible for the fix — a proposition that often costs him more than what he earns by doing the work.
“The competition from e-merchants is impacting my business because I’m seeing more and more ‘showrooming’ going on,” the owner of the Norman, Okla.-based business says regarding a recent trend in which customers visit brick-and-mortar stores to learn more about a particular product and then go home to purchase it online at a lower price.
“When you get into the bigger purchases — especially pool cleaners — people really are straight-out ‘showrooming’ on that stuff, and finding prices on the Internet that are cheaper than I can buy wholesale,” he says.
A number of brick and mortar retailers say they are taking similar steps, but Calvin Boothby, owner of the Redlands Pool & Spa Center in Redlands, Calif., is using a different approach to address the problem.
Most people buying equipment on the Internet are DIYers trying to save a dollar.
“They are going to do the work themselves and don’t need any help until they realize what they are trying to do is beyond their capabilities,” Boothby says. “Then they come back to us brick and mortars and say, ‘I bought this pump online. Will you install it?’”
Boothby has no problem installing the equipment because “the way we look at it as a company is we really just want to get in your backyard.”
“We want to see what else they are going to need for their pool or spa in the future,” he explains. “We might discover that they have a 15-by-30-foot concrete pool that needs plaster or the tiles look shabby and that they will need service they can’t get online. So that’s how we compete against the Internet. You have to out-service the Internet to remain competitive.”