Pool and spa retailers, now at the height of their 2021 season, are 15-plus months into unprecedented hot tub demand. For some, orders that were placed last season are just now being fulfilled by manufacturers.
"The last semi load of hot tubs we received about two weeks ago was ordered in July of 2020," says Dan Lenz, vice president of Orland Park, Ill.- based All Seasons Pools & Spas.
When the pandemic demand caught up with All Seasons last year, Lenz, like many dealers in the industry, was low on hot tub inventory and was looking for new ways to cope with an empty showroom. "On top of our regular line of spas, we added two more product lines to our showroom, largely for two reasons: The company had stock at the time, and because we had customers coming in with different budgets," says Lenz.
But what also came to mind was a used hot tub initiative. "The whole game plan was to take a customer's old hot tub as a trade-in, allowing them to upgrade to a newer tub and giving them a discount on their next spa," explains Lenz. "And then, depending on the condition of the used hot tub, fixing it up and turning that into another [pretty much immediate] sale."
It's a great concept — lose a hot tub, gain a hot tub — and one that some retailers have been implementing for some time. But in today's retail environment, when inventory is still a guessing game, the idea becomes more appealing.
We spoke with Lenz and another industry dealer about growth and strategies in the used hot tub sector.
Stay-at-home ordinances not only motivated first-time hot tub buyers but also those looking to upgrade. Like most products on the market today, hot tubs have advanced in technology. And much like you would update your Apple smartphone to the latest model, some spa owners want to do the same.
Norm Coburn of New England Spas in Natick, Mass., refurbishes and sells around 40 hot tubs per year, with the majority of spas coming from previous customers who are looking to upgrade. "It's always been a part of the landscape to allow customers to upgrade," says Coburn. "When you have been in business for a number of years, you find that people are very interested in what's new — the latest features, jets, seats, water care, innovation.
"For example, when customers come into the showroom to buy chemicals for their hot tub, I sometimes notice they go over and look at the new units. And it's like a car: There is a cycle by which people naturally want to migrate to something new and something under warranty again."
Coburn allocated inventory to replenish his showroom for the 2021 season, so when opportunities arise to speak with customers about newer models, the tubs will be available. And unlike last year, he doesn't plan to sell his floor models anytime soon. "We will not be selling our floor models at this point in time," he says. "I think it's important that customers can look at the product."
Sales opportunities can happen outside the showroom, too. "When we service hot tubs, we notice if a unit is outdated," says Lenz. "Customers are putting money in it every year to keep it going and eventually, they say, 'You know what? Maybe we should consider getting a newer model.' And we move to a larger conversation."
LET'S MAKE A DEAL
The trade-in process involves some negotiation, as customers hope the exchange will help them to get a better deal on a new tub, but Lenz says, "We're not talking about giving people tons of money for these used tubs.
You have to offer a credit where you can comfortably make some minor repairs to the tub and still make a profit from it. But then, to give the used-tub buyer some comfort, you need to have enough invested in the spa that you can give them at least a one-year warranty."
There is also the possibility where the used hot tub isn't salvageable, but Lenz says there is still money to be made there. True, the customer does not get a credit on a new tub, but trucking away the old one is a large weight off their shoulders, he says, which helps in the sale.
"I think a lot of pool companies throughout the country are different from the big box pool stores, the chain stores, in that we have the ability to go out and haul hot tubs away," he says. "Even if the tub isn't worth anything, there is value in that."
Lenz cautions about the investment that entails, however. "It does involve some time to and from the dump to get rid of them, and there is a fee involved in that. But you are still making a new hot tub sale, so I think there is good potential for the industry to market that incentive."
There are also customers looking to sell used tubs who would simply make more money elsewhere, in which case Coburn is very honest with them. "If a customer were to call and say, 'I want to get rid of my hot tub, and I don't want a new one because I'm moving,' we would simply tell them, 'You can get more money if you put it on Craigslist. We pay short dollars for those kinds of tubs.'"
After the deal has been made, the refurbishment process begins. "We have been very ambitious in terms of setting up workstations in our warehouse facility, whereby we can put a number of hot tubs up and work on them, refurbish them and replace components to ensure we can resell them," says Coburn.
New England Spas has a checklist to make sure no component goes unaccounted for. "Almost every time, we end up replacing filters, pillows, covers and sometimes cover lifters. Cabinets may need repair, as well. And then of course, if there are any mechanical issues, whether it be controls, circuit boards or pumps, we make sure that it's running properly before we resell it," says Coburn. He has developed a forecast and successful cadence of ordering parts, so stock is available.
The refurbishment cost is entered into Spafax, a revenue management software, which helps to price the tub for resale.
THE RESALE CUSTOMER
Oftentimes the used hot tub customer is a first-time buyer with a budget — and they may also wonder just how often they'd actually take a soak. "It is largely about the price. They may have some interest, but also some reservations about how much they will use it," says Coburn. "Customers may even recognize a value opportunity in a used hot tub. There clearly is a depreciation factor when you buy a new one. If you choose to sell it in a year or two, you get a fraction of what you paid for it."
Each salesperson at New England Spas has a running list of customers who are interested in refurbs. With today's high demand, as soon as one is posted internally, the used tub is sold within a day or two. "Right now, used tubs are sold before even making the website or the showroom floor," says Coburn.
Lenz is always looking ahead, so he plans to use the refurbished spas as an incentive for future business. "If someone were to buy a decent used hot tub that works, looks good and has a one-year guarantee for less than $3,000, I would also like to negotiate a trade-in guarantee," he says. "I would guarantee that, if after a year the hot tub is still working as it was when it went out the door, a certain value would be put towards buying something new.
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"This is a useful sales tool for customers who are on the fence: 'I really don't think I would like a hot tub, or maybe I would like it, but I don't want to spend $6,000 or $8,000 to find out.'"
GROWING THE INITIATIVE
While word-of-mouth promotion is the best marketing strategy to sell and receive used hot tubs, both Lenz and Coburn have or plan to put in place promotions to grow their programs. But with the stresses of meeting the demand surge, it's been hard to find the time for marketing.
That's why New England Spas is especially excited to host its annual Cash-for-Clunkers promotion this year, which will return the company to some normalcy. The program, which is modeled after the car industry, promotes trade-in opportunities for customers looking to upgrade and/or get under warranty again. "It is one of our most successful promotions each year," says Coburn.
And for the customers who upgrade, they join an elite group of clientele Coburn has coined "the hot-tubbers."
"Hot-tubbers have hot tubs for life. They get the wellness lifestyle; they love it. And if they can't have it, they miss that," he says. "To continually offer them an opportunity to upgrade that lifestyle is important."