Lake Mary, Fla.-based hot tub retailer addresses industry issues

Gibb Teel is national sales manager for Dream Maker Spas, the Lake Mary, Fla.-based maker of rotationally molded hot tubs. AQUA recently caught up with him to get his views on the state of the spa industry and his timetable for a market turnaround.

1. What's your assessment of the hot tub market?

There's no doubt about it that over the past couple of years the spa business has taken it on the chin. But I know that from March through August our sales were actually up over the previous years and we're trending positively now. And so we want to carry that momentum forward.

We see the spa dealers across the country getting smarter and more aggressive than they were during the heyday a few years ago when people were coming into their stores and they were buying, no matter what. Now, the dealers are having to go out and go to the customers rather than waiting on the customers to come to them. We're seeing more and more dealers open up to this philosophy, and we see the whole market trending positively into the future.

2. How are dealers getting out to where the customers are?

They're doing home shows, parking lot sales. Also, at Dream Maker, we have a program set up with Sam's Club called the Sam's Club Roadshow. We don't sell to the mass merchandiser; instead we allow our dealers to go into a Sam's Club and set up a 300-square-foot booth in a prime spot in Sam's Club and sell Dream Maker Spas. Sam's Club doesn't get the money, the dealer does.

They pass out their business cards, their shirts, and they are selling their own Dream Maker spas in a location where you're going to get 4,000 or 5,000 people a weekend to come see their company. It's a great program and dealers have been very receptive.

Sam's Club gets about 10 percent of the money. The difference is if you go to a typical homeshow at a convention center, the dealer is going to pay for the booth, pay for the carpet, pay for electricity and man it. And if they don't sell anything, they're still out all that money. At a Sam's Club Roadshow the dealer sets up and if for some reason the dealer doesn't sell anything, he's not out the money. Now, if he does sell something he does pay Sam's Club about 10 percent of total sales. So it's less margin, but it's great exposure and sales. We just got finished doing one down in South Florida where the dealer sold seven models during a Sam's Club Roadshow. Anyone would sign up for a seven-spa sale right now.

Less traffic in a showroom means a dealer is going to have to either increase that traffic, or else go where the traffic is. That's key in today's market.

3. Is Dream Maker's price point set to help them succeed in the early stages of a recovery?

That's definitely what we're expecting based on what we've seen. We were the last hot tub company to actually feel it when the economy started taking a nosedive. We did feel it, but we were the last, and we don't think we've felt it as bad as many that we've heard about across the country. And again, we're trending up over last year these past six months. People still want hot water and hydrotherapy, people still want to relax, people are staying home more and people still want to have that great backyard. They just might not be willing to spend that $8,000 for it right now. And that's where Dream Maker comes in. Our most-popular model is under $3,000 and you don't have to get an electrician, you can deliver it yourself. So we're definitely in the right category for today's economic climate.

4. Tell me about your average dealer and where you fit into their marketing strategy.

Dream Maker is an auxiliary line. Most Dream Maker dealers have Dream Maker as their value end, then they'll have a middle and a high-end acrylic line to complement. It's just like at Wal-Mart where you can go in and buy everything from candy up to big-screen TVs, each with different levels of retail value - good, better, best. There's no reason dealers should limit themselves to a certain demographic. With the Dream Maker line and another higher-end line, a customer who wants a hot tub can walk in and should have no reason to walk out, because that dealer has every single price point available in the market. Many of our dealers sell Hot Spring and Jacuzzi and many others.

5. What's more common, the customer who comes in and looks at a high-end spa then moves down to a Dream Maker, or the other way 'round, where they come in for the price then get moved up a level?

Typically a person gets interested in a hot tub because they've been on vacation in Colorado and in a hot tub at a resort, so they go into the spa store and they look at them and find that, 'Golly. This spa that was at the resort is $10,000! And my neighbor's spa is $8,000! I'm not prepared to do that.' So many customers are going in not really knowing what they're looking for as far as price point. It's the dealer's responsibility to qualify that customer and let him or her know that there are many options and that they don't have to pay $8,000 to get hot water and hot water therapy. I would say people come in with champagne taste and a beer budget.

6. With dealers across the country losing local competitors, are the dealers that are still in business seeing much of a bump?

We hear about dealers who are no longer in business, and a market opens up. I believe it's still going to take some time for the remaining dealers to see the effect of that. I mean, the reason that other dealer went under is there wasn't enough demand to support them. But the tide is going to turn. There's no doubt about it. The economy is going to get better, the spa market is going to get better, and when they do, both the manufacturers and the dealers who are there are going to reap the benefits.

7. Do you have any advice for dealers they may not have heard already?

You find a lot of spa dealers with a 2005, 2006 mind-set. It's 2010. Many dealers set their hot tub sales out at $4,000 or $5,000. It's the same for an inground pool builder who does only $50,000 pools. I think too many dealers are losing market share by trying to appeal to the high end. We've found that in today's economic climate you need price points in $5,000 increments starting at $2,000.

You don't have to lower the margin. Dream Maker is a full-margin hot tub that just happens to cost less money.

8. When the economy picks up, do you think there'll be a lag, or will the backyard industry be a leading indicator?

That's a good question. People a lot smarter than I have tried taking a stab at it, and they don't really know, so I'll leave the timetable to the experts. But, when it does happen, I do believe that the outdoor industry will start to come alive pretty quickly. Because as credit gets freer and money becomes easier to get, I believe people want to invest in their backyards and in their homes. This may not happen immediately, but I believe sales will pick up pretty quickly once the economy does.

That's good news.

Yeah. Knock on wood, right?

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

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