Tips for pool and hot tub dealerships to compete against Internet and big-box retailers

by jason_cramp | March 23, 2018 2:28 pm

By Dennis Gray

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Over the last few years, this author has been fortunate to meet hundreds of pool and hot tub dealership owners and their teams from across North America and has seen ‘islands of excellence and opportunity,’ everywhere. Every dealership has things they do well, from practices and processes to creating new ideas. If a blueprint for success were to be created using these core strengths, and shared with other pool and hot tub professionals, it would be of great benefit to the industry.

There are ominous signs across the industry

Almost every backyard leisure business owner expresses sheer frustration, utter disappointment, and downright anger at the changes affecting their businesses and livelihood. Many are tired of the battles they face, day in and day out, competing with big-box stores and Internet discount vendors who are aggressively poaching their long-standing customers, and the resulting declining sales, margins, and profitability that comes along with it. Most pool and hot tub entrepreneurs express worry about the future prospects of their businesses when it comes to facing these overwhelming challenges successfully. However, these things are not going to stop. In fact, the pace of this pillaging will only continue to increase rapidly. That is, unless the industry collectively decides to take a stand and reverse this business challenge.

These problems cannot be overcome with the same level of thinking that created them. Einstein put it succinctly, “to continue to do what you have always done and expect a better result is the true definition of insanity.” This is, however, precisely what most of the backyard leisure professional dealer community has been using as its strategy for the past decade in the face of dramatic challenges from big-box retailers, the Internet, and the new ‘compare and switch’ consumer. The typical dealership’s outdated strategy is weakening workplaces, destroying hard-won net worth, and exposing others to more of the same.

Consider a better way forward

This leads to what this author calls the ‘David Strategy.’ An epic, but poorly understood battle, and the ways that learning can transform business by ‘changing the rules of the game’ to the advantage of backyard leisure professionals.

Everyone knows the story of David and Goliath—the massive-bully warrior and the man-child shepherd underdog with a stone and a sling. This story has a divine, miraculous ending, where the good person wins. However, this is not what really happened. In learning what the real ‘David Strategy’ was, and how it can be applied, dealers can use it to transform the success of their business.

David’s victory over Goliath, and the resulting triumph of the Israelites over the Philistines, is a great bedtime story. However, it was not about a miracle. It was about an underdog using an unconventional strategy to make the opponent’s strengths their weaknesses, and refusing to play a game stacked in an adversary’s favour.

A common phrase in the pool and hot tub dealer community is “One cannot compete against Wal-Mart, or Amazon for that matter.” When considering the scale and reach of these types of vendors versus the typical professional pool and hot tub dealer, this seems like sage advice. Just like Goliath, these retailers are seemingly unbeatable, but this does not mean pool and hot tub dealers do not have the smarts or ability to compete against these types of retailers. As the story goes, David knew he could not win against Goliath if he played by his rules, so he chose to make his own and employ a strategy that turned Goliath’s strengths into his weaknesses. The following are examples of how pool and hot tub dealers can apply similar strategies from this story to the challenges they face today.

1. Stop playing the game to the enemy’s advantage

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The ‘David Strategy’ has one unbendable rule—do not play into the opponent’s strengths. Big-box and Internet vendors always focus on commodities; therefore, pool and hot tub dealers must design their business to focus on products and services that are new, innovative, and unique.

The following example can help determine how exposed the business is. To perform this test, pool and hot tub dealers should visit their local business supply store and pick up some red-dot labels, then stick one to each product or technology in their store that is older than five years. Then, the dealer should examine their shelves to get a crisp understanding of the root of their declining sales, margins, or customer retention issues.

Any product with a red dot is what the big-box stores and Internet vendors focus on. Therefore, pool and hot tub dealers must commit to change this weakness in their business design if they are serious about winning this battle. The way to do this is to start letting one metric drive the business: it is called the vitality index, pioneered by Hewlett Packard (HP).

Simply put, constantly measure and try to improve what percentage of the business’ sales revenue is in products or services less than five years old, with limited market access. HP, after studying thousands of businesses, determined that focusing on driving this metric each year had a direct relationship on driving profitability and customer retention.

Action steps:

Never purchase products based solely on relationships. No products should ever be stocked on a pool and hot tub dealer’s shelves unless they complement the business’ strategy of decommoditizing. Business owners can still golf with their favourite vendor sales reps, but that is no reason to expose their business to the opposing enemy. These reps will learn quickly they must bring new and unique offerings to the table. This will drive new product development.

For example, identify the ‘preferred recommendation’ (i.e. picking a lane) for each category and place laser-like focus on promoting traditional pool, hot tub, and saltwater pool care. Make them stand out in prime space in the store, and get retail staff on board and well trained to promote and sell what the business believes is the best option/product for its customers.

Businesses should view products it stocks on shelves as ‘tenants’ in an apartment block it owns. Every one of them should pay their rent and build the value of the business’ investment. Good tenants drive revenue and customer retention. They support the business strategy and do not expose a pool and hot tub dealer to poaching from big-box and Internet vendors. If a tenant is hurting the investment or business strategy, the dealer should take action and make a plan to replace it with a better ‘tenant.’

2. Weapons: Get back to advocating limited selection access and superior systems

It is very clear many backyard leisure stores have lost their primary business focus as a specialist. In years past, their strength was promoting and selling unique systems of pool and hot tub care, not individual products. Too many have adopted a mixed bag big-box approach. The message to consumers is “products, not systems, are what professionals recommend.”

This is why consumers often believe the brand they buy does not matter and, if the price is right, and the timing convenient, picking up pool or hot tub products at a big-box store or on the Internet is okay. The result is they ‘cherry pick’ or come to the store only for their problems. Having four or five different brands for the same product is what Wal-Mart, Amazon, etc., does, and is never what specialty businesses trying to lock their customers’ focus do.

Tactics: Address and satisfy unsatisfied needs

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Great businesses are always built around discovering and solving unsatisfied needs. Pool and hot tub owners have many. Saltwater pool customers are a good example, as they comprise 20 per cent of the North American market (one in five customers) and many of them go to big-box stores.

These consumers believe they are part of a special breed and wish to be respected for that. They paid more for their pool to be equipped with a saltwater system in comparison to what a traditional pool would cost. They want to have their unique needs addressed; their pools are different, as are their reasons for buying a saltwater system. They do not want a complex, traditional, weekly pool care program; they want simplicity and problem-free maintenance. It is a win-win scenario for dealers who can provide these products and services for this client base.

Action steps:

To succeed at this, dealers should seek out higher performing, unique products that fulfil unsatisfied needs, and build their businesses around them. Further, the products and systems being promoted should meet three criteria:

1. They solve unsatisfied customer needs;
2. They increase profits and customer retention; and
3. They are unique with limited market access.

Focus: Create exceptional and personalized customer experiences

The soft underbelly of big-box and Internet vendors is competent, knowledgeable, personalized customer care. Pool and hot tub businesses should exploit this. Hire and train exceptional staff, and teach them about the importance of ‘soft skills,’ e.g. how to make eye contact, remember client’s names, saying “Thank you,” and being proactive in preventing problems. Even more so, make a habit of following up with customers on every pool or hot tub problem. Consumers love the personal approach specialty businesses can provide.

Action steps:

To do this, dealers should modernize their hiring strategy and focus on those candidates with great ‘soft skills.’ Many dealers in the pool and hot tub industry use http://hiringsmart.com/, as a tool to hire better. Finally, as previously mentioned, dealers should follow-up on all client problems with a personal call to ensure what was recommended resolved the issue at hand.

Commit: If a dealer wants to win, they have to act

It is one thing to complain about the problems the business is facing, committing to take action and meaningful steps in the right direction is something else. It takes work, effort, and learning to politely say “No” with respect to products and ideas that are not in keeping with the business’ strategy. Above all, it requires a pool and hot tub dealer’s personal leadership to execute. The rubber meets the road when a business owner commits to becoming David, no longer playing Goliath’s game. The rest is easy. Professional dealers built this industry and now it is time to fight back.

[4]Dennis Gray leads Backyard Brands Inc., as founder and president. He has 43 years of experience in developing and marketing water care technologies for swimming pool and hot tubs. His company markets its brands of pool and spa water care products exclusively throughout Canada, and more recently also through the U.S. to backyard leisure specialists. Gray is a frequent international conference presenter and family-business trainer who has delivered more than 500 major presentations for various industry and professional associations worldwide. He is an honours business graduate from Ryerson University, with continued business studies at the University of Toronto, and is a graduate of the Ivey School of Business Executive program. Gray is an internationally certified consultant in theory of constraints, a certified behavioral analyst, and a past member of the Canadian Association of Professional Speakers (CAPS). He can be reached via e-mail at dennis.gray@backyardbrands.com[5].

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