Leslie Sauer closed her swimming pool and spa retail store in
August 2011 after several years of struggling to compete with
Internet giant Amazon.com.
In an unexpected twist of fate, her children instantly became
popular guests at neighborhood gatherings.
“My kids go to birthday parties with their hands full of
pool toys to give away,” says Sauer, who is chief financial
officer of Aqua Artists Pools & Spas based in suburban Los
Angeles. “I’d rather give away leftover inventory than
sell it on the Internet,” she notes.
Sauer and her husband purchased the 48-year-old firm in 2003 but
quickly realized it was impossible to offer customers the same low
prices they were finding on Amazon. Because she adhered to a strict
“shop local” philosophy that heavily influenced her
buying practices and values, Sauer refused to become part of the
very system that seemed to be destroying small businesses like
hers. Aqua Artists now operates as a swimming pool service and
maintenance company out of a small warehouse facility.
“Online businesses were just killing us,” she says.
“We went from store to storage.”
Several retailers have suffered a similar fate with others
expressing serious concerns that they too will soon be following in
Analysts can’t argue with these predictions. “Amazon is
a black hole sucking everything into it,” says Bob Phibbs, a
retail speaker, author and consultant. “Don’t kid
yourself; it’s a threat to every industry.”
As Amazon approaches its 18th anniversary, the reach of this
global e-tailer cannot be overstated, and brick and mortars are
clamoring to find a solution to an ever-growing powerhouse
that’s wreaking havoc on the future of small businesses
Welcome to the jungle
Much like the complex, layered ecosystems that make up the
world’s rainforests, Seattle-based Amazon.com is an
elaborate, multi-tiered company consisting of intertwined business
platforms. The site features millions of products sold and
distributed by an ever-increasing number of third-party vendors,
but it’s also a vendor itself and the producer of the Kindle
e-reader; a publisher; fulfillment center; software developer;
provider of cloud computing services; and investor in several
companies, including the daily-deal site LivingSocial.com.
But it didn’t start out that way. Founded by Jeff Bezos in
1995, the firm took root as an online bookstore, sending a loud
message to already suffering independent book sellers who were
competing with mega-chain stores: the retail environment was again
going to change.
And it did. Fast. Most independent bookstores seemed to melt
away almost overnight, yet the truly dramatic shift occurred when
the once-untouchable Borders filed for bankruptcy last year while
its rival Barnes & Noble clamors to stay alive.
In 1997, Amazon issued its initial public offering of stock for
a price of $18 a share. (As of press time, it traded at a hefty
$238.24 a share.) Soon after establishing itself as the
“World’s Biggest Bookstore,” it diversified into
music, electronics, apparel, toys and other goods. Since 1998,
Amazon has made at least 33 acquisitions — CreateSpace.com, a
distributor of on-demand DVDs; the shoes and apparel company
Zappos; and the Internet Movie Database (IMDb), to name but a
Through a strategic and aggressive growth plan, Amazon has
become the largest online retailer selling to more than 180 million
customers worldwide. This achievement has come with the help of
more than two million companies and individuals who function as
third-party vendors operating via Amazon. In fact, 40 percent of
the units sold are through these independent merchants, who were
responsible for a whopping 65 percent unit growth in the fourth
quarter of 2011 over 2010, according to a company statement made
earlier this year.
In short, an individual can purchase just about any product
imaginable through Amazon.com with the click of a mouse. Amazon
also owns the trademark to 1-Click, a system allowing consumers to
store their information in a database and place all subsequent
orders in one step. Amazon has licensed 1-Click to Apple which uses
it for its own online store as well for iTunes and iPhoto.
Quaking in their boots
While the rise of mass merchants posed a danger to independently
owned pool and spa retail stores, the threat from Amazon is much
worse, warns Bil Kennedy, president of the Atlanta-based market
research firm PK Data.
“E-commerce is becoming the currency of the realm, and
younger homeowners and the next generation of swimming pool owners
will naturally go online for their pool products,” explains
Kennedy. “It’s a cultural shift that can’t be
suppressed through traditional merchandising tools.”
And Amazon is an entirely new type of opponent due to its size,
product diversity, customer base and ease of use. Its prices are so
low that mom-and-pops are losing sales daily. Some suggest simply
matching the online price, but often the difference is so great
that the average brick and mortar might not be able to pay the rent
if they did so. In essence, the margins just aren’t
“I can go online and buy a heater as cheap, or cheaper,
than from a distributor,” says Richard Giamusso, general
manager of Olympic Pools in greater Scranton, Pa. “You have
to match the price to retain the customer and you don’t make
enough to put the key in the door.”
Making matters even worse is “showrooming,” a trend
which has been springing up in stores over the last few years. This
occurs when a customer visits a brick-and-mortar location to touch
and feel a product, and then goes online to buy the item at a lower
price. Often, the consumer will gain technical information and
recommendations from the retailer as well.
“They’ll say they can get it for $50 or $100 cheaper
online,” says Doug Mayhall, president of All Seasons Pools
and Spas in the greater Chicago area. “They’ll take
photos with their phone, leave and I never see them
Now, Amazon has made it even easier for consumers thanks to
Price Check, a free app for handheld Android and i-devices that
enables a shopper to scan bar codes in the store and instantly find
the product online. Last holiday season, Amazon even reportedly
offered a small discount to those who made purchases using the
Then there are the shipping options. Depending on the
merchandise, customers can typically receive their orders in less
than two business days. And Amazon Prime, a service that provides
free two-day shipping for millions of products with no minimum
order size, costs a mere $79 annually.
Moreover, two-day shipping could potentially turn into same-day
shipping. A 1992 Supreme Court ruling in Quill Corp. v. North
Dakota exempted retailers from charging sales tax in states where
they didn’t have a physical presence. For years, e-merchants
used this to their advantage and buyers enjoyed a tax break (even
though they were technically required by law to report their online
purchases on their tax returns). In the last year, however, a dozen
states have begun requiring Amazon to collect a tax on purchases,
and in response, the mega-retailer is building major distribution
centers in all of those locations. This will allow the company to
deliver goods even faster.
Lastly, brick and mortars are unable to develop the type of lead
generation enjoyed by Amazon. This is due, in part, to the
acquisition of Junglee in 1998. The company reportedly conducts a
sort of data mining that targets individuals who purchased products
in a given category and then emails those shoppers with special
offers related to their previous purchases. This provides Amazon
with marketing clout that’s unlike anything brick and mortars
could ever achieve.
The blame game
In spite of the reams of data available about Amazon, there’s
one big question for brick-and-mortar pool and spa retailers which
has yet to be clearly addressed: How is it possible for Amazon and
its third party vendors to charge so much less for the same
The answer is buried under a great deal of rhetoric, excuses and
“Manufacturers give a lot of these Internet players
backend deals,” says Mayhall. “The Internet players are
getting better deals than everyone else.”
One solution that has been tried with varying degrees of success
are Minimum Advertised Pricing programs whereby a manufacturer does
not allow its products to be advertised for prices below a
specified amount thus leveling the playing field.
While several manufacturers do a good job policing MAPs, some
firms fail to enforce the policy, retailers say.
“It all stems back to the manufacturer,” says
Giamusso. “They have the power to control this. After all,
brick and mortars started the industry, not the
Meanwhile, manufacturers argue that distributors are the ones
supplying the product to e-tailers while the manufacturers
themselves are simply enforcing MAP pricing. Others agree.
“Frankly, no one knows the answer but you can’t just
blame the manufacturers,” says Grey Frandsen, co-owner of
Riverside, Calif.-based Magnolia Pool & Spa Supply.
“Manufacturers are certainly trying to rectify the problem.
We know they are working hard to rope back in the
Either way, dealers are seeking solutions in the hopes of
keeping their businesses alive.
“Someone is not telling the truth,” explains
Giamusso, who says he can purchase a product on Amazon for much
less money than he can get the same item from a manufacturer or
distributor. “If [the online retailer] is selling at a price
lower than what a dealer can get it for, something is wrong in
Denmark,” says Giamusso.
Bottom line, no one is willing to take admit fault, and the
industry is left in limbo.
The re-inventors of normal
In a television commercial Amazon launched this summer, a narrator
says, “We’re the re-inventors of normal.”
The statement reverberates with many industry members.
“Amazon has invented, reinvented and reinvented the
category again,” says Kennedy.
This is especially true when it comes to how people are
purchasing pool equipment, the segment that may be most drastically
affected by online retailers. Seven years ago, industry
distribution giant PoolCorp estimated that 4-to-5 percent of its
products were sold through online purchases. Today, that number is
approximately 11 percent. The most common items are those that
require little-to-no installation knowledge, such as an automatic
pool cleaner, which is currently the most popular pool product sold
on the Internet according to PoolCorp CEO Manuel Perez de la
Several leading online pool and spa retailers are contributing to
this shift by capitalizing on Amazon’s customer base. For
these third-party sellers, the website serves as a mechanism to
reach a vastly larger audience.
“Amazon is like a walking billboard for the pool and spa
industry, and a lot of people are being exposed,” says Dan
Harrison, president of Las Vegas-based Poolandspa.com.
Harrison has been operating his online business for 18 years,
and his site, which also serves as a premium fulfiller for Amazon,
features more than 130,000 SKUs for practically every swimming pool
product available. In May, he experienced the biggest retail sales
day in the history of the company, an accomplishment he attributes,
in part, to his working relationship with Amazon.
Harrison’s e-commerce business is one of several dedicated
pool and spa sellers who set up shop on Amazon, and at least 20
others carry related merchandise on the site, he says.
“People are discovering stuff on Amazon that they
didn’t know existed,” he says. “I believe
I’m doing a positive thing for our market.”
Many agree, viewing a relationship with Amazon as a healthy way to
approach the inevitable change in consumers’ buying
“Successful companies have to adapt to stay viable,”
Frandsen says. “I refuse to think any new platform entering
into the economy is a bad thing. It evens out the playing field. In
economics it’s called perfect markets.”
In fact, his own retail store is what he refers to as a hybrid
company. In addition to operating nine showrooms or “customer
service centers” in California, the firm also runs three
online retail sites, one of which, Garfield Pool Equipment (or
www.garfieldpoolsupply.com) is a third-party vendor on Amazon.
“This is an evolving time for the industry unlike any
other in its history,” he says. Instead of fighting against
the metamorphosis, Frandsen urges people to get involved.