Adventures Abroad - The International Spa Market

Scott Webb Headshot

Cargoship 0411Less than a decade ago, overseas spa sales were a mere footnote at the bottom of the balance sheet. Perhaps one in ten spas got a ride on a container ship. All the rest were purchased in the United States and Canada, and that's where most of the industry's efforts were focused.

Rather suddenly, however, the rest of the world has definitely decided it likes hot water. The overseas spa market share today is much larger — perhaps 60 to 65 percent of the total, depending on whom you ask.

Dozens of North American spa makers now do business overseas, and for some of them, it's their principal market. Of course, this has had an effect on their domestic market.

Certainly, for these companies, there's been a broadening of focus. Where they used to concentrate exclusively on the whim of the consumer here at home — now there are customs inspections, bills of lading and tariffs to consider. And that change has not gone unnoticed by some dealers in the U.S. But while it's true that the international market has diverted attention from their domestic base, overseas sales have allowed them to stay in the game, so to speak, through the depths of the recession.

During this period, as U.S. sales have plummeted, many American spa makers have been able to steer clear of the disastrous corporate cuts that frequently accompany a sharp drop in sales, says Tom Kneeshaw, director of sales and marketing, Viking spas, Wyoming, Mich.

"The international market is allowing manufacturers to stay in business through a hard recession, and it's providing money for them to maintain quality and continue updating their products," he says. "They've taken these overseas opportunities to assure their own survival in this slow period, and that survival benefits the dealer because it allows the dealer to maintain the manufacturer relationship that they currently have."

Born In The USA

Of course, no matter where it may travel, the hot tub will always be a native of the United States. It was born here in the late 60s and early 70s, depending on how you define the product. But it was just a matter of time before the rest of the world caught on.

Kneeshaw noticed some of the first curious visitors: "I remember 20 years ago doing trade shows and there'd be people from overseas, mostly buying pool products. They'd come to America to import products because our pool industry was bigger than theirs, and they'd see these hot tubs."

In time many of these contacts developed into the beginnings of a hot tub market, as consumers around the world began to take notice of the product. Usually a country would begin by importing tubs from the U.S. In some places, such as Australia and a few European countries, local manufacturers sprang up as businesspeople saw an opportunity to feed their domestic markets.

As awareness of and demand for the product has grown, opportunities for American manufacturers have appeared, sometimes in much the same way they might here. A potential retailer sees a successful dealer featuring Brand X, and decides to get into the business. A call to the Brand X regional rep reveals that the local territory is already spoken for. So of course they start looking for another manufacturer. And that search often takes them to the U.S.

Where The Buyers Are

In terms of spa purchasers outside the U.S., the countries that have experienced the best growth in the last decade are the ones that you would probably guess, and perhaps a few which might surprise.

"Germany, England, France, Spain, as well as Belgium and Holland have all seen growth," says Andy Tournas, president of Thermo Spas, Wallingford, Conn., and also president of the International Hot Tub Association [see sidebar]. "These are countries that were introduced to the hot tub a long time ago by American companies, but they still have opportunities for growth — everyone is hindered by a poor economy at the moment — but overall, the awareness of hot tubs hasn't reached a high level yet."

Scandinavian countries would seem like a natural fit for hot tubs, too — they're cold, they have money — except for their traditional preference for saunas. This has turned them into something of an elusive quest for spa exporters.

"Look at Norway, a place with phenomenal resources," says Kneeshaw. "They have a lot of purchasing power there. Where the U.S. has something like nine spa owners for every sauna owner, in northern Europe it's the reverse.

"It's really a question of opportunity. Just like sauna people think there's great opportunity in America — they think that people here just don't know much about saunas and their benefits yet — well, spa people think the same thing about Northern Europe.

"I think it's a great opportunity because it's an untapped market — and I know you hear that phrase a lot, but it truly is."

Australia is another country that has shown strength in its domestic market, despite its small population. Other potential markets include Brazil, a country whose economy is flourishing although its tariffs on spa imports are prohibitive, and India, China and Russia.

And there are many smaller markets, ones that might not readily come to mind, that appear ready to blossom, says Tournas. "For example, next week Greece is having its very first-ever pool and spa consumer trade show. We will be there to participate in that event. Two weeks after that, Morocco is having it's first trade show where pools and spas will be represented.

"These are two countries that you wouldn't have thought of, and they demonstrate a growing interest in hot tubs."

Easy Money? No

Each country presents it's own challenges for a spa exporter, Kneeshaw says. "For example, in Italy, it's hard to find a home that has more than 80 amps. When an overseas spa model takes up perhaps 30 amps, it's difficult to sell someone on something that's going to take up close to half his house's amperage. Or pin the Netherlands, where everything is small and compact and there's not a lot of backyard space to work with, it can be difficult to find room for a spa."

Opening up these markets requires patience, commitment and resources, notes Leo Hamacher, vice president of international sales and marketing, Watkins Manufacturing, Vista, Calif., a company that currently does business in 68 countries worldwide.

"In Europe alone, you have 35 different languages. So it can be a challenge just to communicate, not to mention problems of documentation and other obstacles. There are finance issues, carrying costs, shipping schedules. You don't have flooring — that doesn't exist in the international market, so typically you need to find a strong financial partner.

"The international market takes resources, unless you're doing some sell-and-dump kind of thing, where you ship a container of spas, and say, 'Here you go, Mr. Importer, you figure it out.'"

The fundamental principles of sales and marketing do not change when a company goes overseas, Hamacher concludes.

"It's just like in North America, those retailers that do well typically have a strong relationship with their manufacturer. The same applies internationally. And you have to build those relationships. So you've got to have some staying power in order to do that."

Comments or thoughts on this article? Please e-mail [email protected].

 

The China Syndrome

Chinese companies have become formidable manufacturing competitors in many worldwide markets, from shoes to hydraulic shovels, due to their extremely low labor costs, which manufacturers in western countries cannot match.

The general pattern of their entry into a product sector has become very familiar — with product offerings, often of lower-than-average quality, but at well below typical market prices, attracting cost-conscious consumers.

This same pattern has emerged in the spa industry in recent years in the international spa market. There is a large and growing spa-manufacturing base in China, which was in evidence at the big international pool and spa show in Lyon, France, in November of 2010.

"There were a lot of Chinese manufacturers there," says Kneeshaw, "but they have a bad reputation in Europe so far, and most people want to steer clear of them. So far their cost hasn't been such that it's just too good of a deal to pass up. Right now, we're still relatively competitive with China on price, so that makes choosing an American- or Canadian-made spa (or for that matter an Australian- or even a New Zealand-made spa) a no brainer."

Perhaps the strongest showing for Chinese manufacturers thus far has been in the vibrant Australian market, notes Hamacher. "The Chinese offer an affordable product in that market, which may not face extreme temperatures that are encountered in North America. So good insulation and so forth may not be as relevant, and those are costly pieces of a hot tub. And it's easy to ship them there."

While Chinese spas have garnered a large share of the Australian market, quality of product and compliance with standards has been a thorny issue for Chinese spas, according to Spiros Dassakis, CEO of the Swimming Pool & Spa Association (SPASA) of New South Wales, a major trade association in Australia.

"Whilst some premium Chinese spas are compliant," he says, "many more simply do not come up to par," Dassakis says.

Some of the issues of note with Chinese spas may include one or more of the following (to name a few):

  1. Do not meet Electrical Standards
  2. Do not meet Water Recirculation Standards
  3. Have very little or no filtration
  4. Insufficient suctions per pump
  5. Incorrect sizing of pump
  6. Absolutely no after-sales service, support or spare parts

"These are serious issues, and in some cases, serious breaches of Australian electrical safety standards as well as entrapment dangers amongst other issues," he adds. "To the consumer, Chinese spas look like great value for money; however, more often than not they are a significant problem."

—S.W.

 

 

Tubs To The World

With international spa sales partly in mind, the International Hot Tub Association was incorporated in October of 2007 by a group of spa manufacturers determined to develop the spa market both in and outside North America.

The idea is to get spa manufacturers to work together against the forces which tend to hinder expansion, says IHTA president Andy Tournas, president of ThermoSpas, Wallingford, Conn. "We've seen so many markets that have been hurt because of poor products — ones aren't energy efficient or have low safety standards. If you expose your consumers to poor products, you hurt your industry."

"We're trying to create a good domestic environment for spas, and as we grow, to help create that same environment in the international community. Our plans are to bring everything we learn about efficiency, about safety, about standards, water chemistry — all the things that help protect an industry and help it grow — to the international community."

Be Assured

One way the Association is trying to spur the development of the international spa market is by promoting a unified rulebook for spa manufacturers.

"What we don't want is different rules for every country," Tournas says. "An international organization makes it easier for countries to align their laws and standards."

For countries that are just encountering spas or a particular spa manufacturer for the first time, it's important to be able to look to a trusted industry organization that is enforcing stringent standards on its members.

"If you're going to buy a product, put 300 gallons of water into it and hook it up to 220V outlet and let your family get in it, you want something to give you assurance that this product is safe. By providing that assurance, we help open those markets to hot tub manufacturers," Tournas says.

Government standards and compliance tests are another area where an international association can help. As each country develops its rules, the IHTA hopes to keep them aligned and manageable. "You don't want them all to design different compliance tests; that way you'd have to meet a different test for each country. If you make information available to them, they will come up with a single test that qualifies a hot tub for a number of countries."

"That's what helps an industry grow. And that's what these countries need, because we already have the experience and have done all the work."

How's It Going?

So far, Tournas says, it's going pretty well. The association has begun its outreach effort with meetings with other national pool and spa groups.

"When we sat down and spoke to the other hot tub trade organizations from other countries, their response was very welcoming. Their attitude was, 'To be honest, we're more of a pool organization. We have members who are in the spa business, but we don't have the data to respond to them as we'd like.'

"So our message is that if you are a spa manufacturer, supplier or distributor, it makes sense for you to join the IHTA and help open up new markets. The best thing a trade association can do is be strong and vibrant and attractive to manufacturers, and then with that strength, based on a company's desire to be a member, to be able to dictate proper activity. That leads to an industry policing itself — and the better it does that, the less likely it is to be policed by the government."

—S.W.

Buyer's Guide
Find manufacturers and suppliers in the most extensive searchable database in the industry.
Learn More
Buyer's Guide
Content Library
Dig through our best stories from the magazine, all sorted by category for easy surfing.
Read More
Content Library