Q&A with pool builder and spa retailer Kenneth Smith

Lll 210 AqKenneth Smith is president of Niagara Pools & Spas, a pool builder and spa retailer with four stores in and around the metro Philadelphia area. His dad started the business in the '50s, initially building pools, then adding hot tubs in that industry's infancy 30-odd years ago. In an interview with AQUA, Smith acknowledged recent woes in hot tub retailing, but pointed out that sales have always been cyclical and predicted an eventual return to levels not seen in five or six years.

How do you compare 2009 with what you've seen in the 30 years before?

It's really where you're coming from. If you're looking at gross overall numbers, obviously 2004 was kind of the high spot for everyone. Then the next few years, you had a little change in '05, then the downturn accelerated the next few years. But it really depends on where you've been and what your expectations are. It's different, though. I've been the president of the company for about six years, and I've been running it for about 15 years, and I really have not seen anything like we saw last year.

How has the economy in the Northeast affected things?

It pretty much blends in with the national economy, but I don't think our housing in the Philadelphia metro area has been hit as hard as some other areas. It's a mature area, so it didn't have the acceleration that other places did. It seems like housing has ground to a halt no matter where it is, but while the general pricing is off, it hasn't dropped 20 to 30 percent in this area like it has in others. I think we're better set for a recovery because of that.

I think the worst time was February of last year. The new administration was taking over, there was just very little business and people didn't know what to expect. And there was all the nonsense going on in the financial markets the previous quarter. It really just put the kibosh on everything. But we got little glimmers of hope throughout the rest of the year, and we were profitable. It's a different type of business. We're doing more service, things like that, and we noticed that the median price of tubs has come down. People aren't buying the expensive tubs - people have changed their buying habits for sure.

What models do you carry?

We carry Jacuzzi right now, but we're looking at carrying some others. Their offerings haven't changed that much, but their upper end is selling less than it was, but still doing fairly well.

Do you think manufacturers should be getting away from the bells and whistles and concentrating on bringing the prices down with more basic models then?

I think people still want a lot of pop and sizzle for their buck. They want more in a lower-end tub - maybe not to the extent of a television, which was a little over the top. But people still want the stereos, and they do well, and they're looking for jazz and horsepower. They want to see a tub that's fully featured in the $5,000 or $6,000 price range, where a lot of times in the past that buyer was in the $7,000 or $8,000 price range.

There is a variety of stuff that the manufacturers are starting to produce in that range, and it looks pretty good. They're functional and people will buy them.

Are the higher end manufacturers working to get more into tubs for those lower price points then?

I don't think they're concentrating their efforts on that end of the market. I think they recognize that when a customer wants all the features along with the quality and a warranty, people realize there is a price to pay for that type of product. When you get into the lower price points, you're not going to get a five-year warranty, or, if you do get one, there'll be a proration or other out-of-pocket expense.

So manufacturers are aware that people will still pay for quality, and they're coming out with some higher-end models, too.

Do you see things returning to where they were a few years ago?

I think there's a huge market out there that's still untapped, but it's going to lag the economy; it's going to lag housing. But, yeah, I think we'll see some big numbers again and I think they'll come back to very close to where they were. It goes in cycles. We've had ups and downs before.

We saw a study a manufacturer did a while ago about household penetration and they were talking about some really big things for the spa industry as a whole, and their projections held true for about two years. Then, of course, consumer buying habits started to change. Instead of them rushing in and saying, "I've got to have a hot tub," it was, "OK. I'm going to shop a little more." This started out back in the third quarter of 2004. But to answer your question, there's a lot of demand out there. It's a great product. I call it a life-changing appliance. It changes what you do when you get home, when you wake up, it changes your weekends. There's a big market for them.

Other dealers have told us they've learned lessons about running a leaner business once things turn back around. Is that your plan?

We all feel that way right now, but when things get rockin' and rollin' you can throw that right out the window, because if the customer wants it, you'd better have it. I don't mind having inventory, but right now we're running leaner and there's much less in our warehouse. We're not making early buys like we've done in the past. Some of that is because manufacturers aren't changing their lines as rapidly.

You can run lean, but there will come a time when that takes a backseat to having product ready for the consumer. So that kind of messes up the "going lean" thing.

Sales staff will be a derivative of the number of sales and how many customers are walking through the doors. That will obviously increase once things get going again.

Advertising is tough. I don't know where to go. I don't think anyone does. There's so much internet stuff going on, but I don't know. That's the million-dollar question right now: How do we attract consumers without throwing money at everything. Maybe the best thing we can do is just love the people we have and try to get them referring as best as we can. That's always where we've gotten a lot of our business.

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

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