Hot tub Q&A with two dealers

James S. Johnston
vice president, sales & marketing,
Marquis Spas
Independence, Ore.
Warren Stefferson
vice president
Baja Products, Ltd.
Tucson, Ariz.

1. What strategies can dealers use to compete against online retailers and mass merchants?

WS: Having a showroom certainly helps. Consumers want to know what they are getting into, literally. Purchasing a hot tub is as personal as buying a car. Many people spend every evening in the comfort of their spa. Having a chance to sit in a tub, see it, touch it and watch it run can really be a deal maker. Even if you don't showcase a majority of tubs, having one or two key floor models helps to give a more complete picture. Online retailers may be able to give consumers the price they want, but a local professional spa dealer can provide customer service and delivery. Most online retailers and mass merchants use independent third-party contractors. Deliveries are usually provided to the curbside, and backyard delivery/install may be available at an additional fee.

It's not easy hooking up or moving a 500-pound spa. If you don't know what you doing, then who's responsible? Also, chances of there being a factory-trained and authorized service center is remote, which in many cases forces the consumer to organize for a local service provider and pay labor charges.

JJ: A hot tub is not a commodity nor is it a simple product to understand prior to purchase. So product knowledge is a factor in consumer satisfaction. People want to buy from people they like and trust and who can help them feel good about ownership. If you reduce competition in your market area to only a price conversation, then you will not prosper against those big mass merchants and the online suppliers. Product knowledge, selection, service, communication and responsiveness to customers are attributes that a customer will assign a value to if you show them those things are part of their purchase from you.

Of course price matters. You need a credible reason to buy in your store, so run events on a regular basis, and be prepared to show customers how your price and the value of your support warrant their business. Almost always, you get what you pay for and cheap prices mean cheap products - especially at mass merchants. Good value goes beyond price and is something that includes an industry professional in the community that can be trusted and relied on beyond the sale for service and support.

2. Has the implementation of California's Title 20 affected business at all? Do you think it will spread to other parts of the country?

WS: Going green and energy efficiency are concerns that are pushing all manufacturers to adjust their way of producing quality products. Baja recently received compliance and will be primarily marketing spas in states other than California.

We believe the CEC (California Energy Commission) energy standards will spread. We've seen other states already mandate California's standards and have heard talk of more states adopting the CEC or similar compliances. So, though it may not seem to have made a huge impact immediately, we certainly think it's paving the path toward energy efficiency standards throughout the spa industry. It's a strong marketing statement to have tested and passed these tough CEC energy standards. But being as "green" and energy efficient as possible is important in today's commerce.

JJ: Initial reports of retailers of Brand X erroneously claiming Brand Z was not compliant in order to try to kill consumer interest in another dealer (when the other dealer's Brand Z actually was compliant) were fairly common. I think that has largely subsided.

Now the issue will be brands that claim to have products that comply when their testing methods may not accurately prove that. Regulations will certainly spread to other states in due course. If California, Oregon or other entities will actually test and enforce the statutes, then the reputable brands like ours will benefit from this process. If they don't enforce it, we will have gone to all of the expense to adapt and adjust for compliance while the brands of lesser integrity will not have bothered and will just keep selling and misrepresenting their compliance.

3. How are your best dealers dealing with the economy? Can you give an example or two?

WS: Like most leisure products companies, spa and pool dealers are being as cautious as possible while watching their inventories and overhead. This time of the year we typically see dealers bringing in spa inventory in anticipation of the spa/pool season. However, this year dealers seem to be waiting to order spas until after they are sold. It also didn't help the spa industry when GE and Textron Financial Floor Planning decided for the most part to get out of the spa business, which forced dealers out of an inventory credit line.

Dealers have diversified into other backyard products (barbecue, sauna, furniture, play systems) and the majority of our dealers have diversified into pools. If dealers offer repair service, they're trying to get more service work since the retail side is getting little traffic. In fact, many of our dealers are saying that service is keeping their doors open.

Dealers are still advertising and still doing parking lot sales, which can only help. The good news is it seems that recently the spa business has seen an uptick in business and consumers are starting to shop spa dealers again. Fingers are crossed that the worst is behind us.

JJ: The best dealers recognize that while traffic is down, the number of "tire kickers" is also way down. If a customer is coming in the store these days, or stopping by at an off-site event, he is likely qualified and motivated to buy. So closing rates are high now when you make a viable sales presentation with a credible reason to buy today. The best dealers are turning units, even at a reduced margin if necessary, because inventory turn and fresh product coming into the showroom are more valuable in keeping the business running successfully than holding out for higher margins on older models.

Hot tubs are not store fixtures; they are inventory that needs to move. Trying to hunker down and weather the storm in a slow economy is not a winning strategy. Aggressively making deals keeps the business moving forward despite the economic situation. You may work harder and make less, but you keep moving forward rather than falling out of your market's action.

Another winning strategy has been to aggressively market opposite the various traveling spa shows that pop into town with a big advertising campaign and then leave with no ongoing customer support and no retail store presence. We have seen a couple of local dealers position sign holders, spread leaflets, and run their own store and parking lot events at the same dates and times as the big traveling events, building solid business from the consumers that are seeking out those highly advertised traveling event people. Don't be afraid to make the case that you, the local retailer, can offer a comparable or better value - and you will be around to take care of any future support the customer may need. Those traveling show people will not take care of the customer down the road. Good dealers are winning when they make that distinction.

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