Hot Tub Retailers still grappling with pluses and minuses of e-commerce
The rift between brick-and-mortar spa retailers and their low-cost online competitors has been well documented. Many traditional hot tub dealers, however, have launched online sales operations of their own. Now that the line between e-commerce and in-store sales has been blurred, more and more business owners want to know if they should get into e-commerce, how they might benefit and what they stand to lose.
Traditional Stores and E-Commerce: Two Pieces of a Three-Part Puzzle
For Mark Nelson, owner and president of Master Spas of Western Michigan in Grand Rapids, Michigan, success is a three-legged stool supported by physical stores, off-site promotional events and e-commerce.
Weaken or remove any pillar, he says, and the structure collapses.
“If you have a great internet presence but no brick-and-mortar location, you’re not going to do very well,” Nelson says. “If you just do outside shows and there’s no home base to service and supply that, you’re not going to do as well. Add those three strategies together, and you’re going to be wonderful.”
Nelson’s focus on events at off-site venues has enabled him to eliminate several brick-and-mortar locations — and the expenses that go along with them.
“Where I used to have six stores, now I can go 30 to 90 miles away from my hometown store and get $1 million to $2 million in extra revenue doing 1-20 shows, without any overhead,” Nelson says. “You don’t need 20 stores anymore, but you need 20 locations to visit.”All of it, however, is supported by his e-commerce efforts.
Nelson purchased masterspasfilters.com and a few other URLs, then hired a professional company to build and maintain his e-commerce site.
Like his off-site events, e-commerce allows Nelson to avoid traditional business expenses.
“Once it’s up and running, the overhead is very low,” Nelson says. “Aftermarket chemicals and filters — that’s free money. That’s where the internet works really well. People will come from an hour, hour-and-a-half to my store. With the internet, they’ll come from other countries to my store. With e-commerce, we can be a worldwide company even though we’re not a worldwide-size company.”
He maintains a warehouse, from which online orders are drawn, and ships his products via FedEx. Just one operations employee is dedicated to the entire e-commerce shipping enterprise.
E-commerce allows Nelson to reap consistent residuals from customers who purchase a spa in his store, then continuously buy chemicals in the months and years that follow.
By selling customers a year’s worth of chemicals upfront, he increases the likelihood they’ll come back to him online for the same brands and products when it’s time to re-up.
“If someone has done something for a year, they’re not going to want to change,” Nelson says.
For Jeff Bailey of Spring Dance Hot Tubs, with locations in New Jersey and Pennsylvania, branching out to e-commerce was a matter of addressing the realities of a changing industry.
“You have to be where the people are, and the people are online,” Bailey says. “The amount of people who live 10 to 15 minutes from us, buy a hot tub in our store and then never come back is staggering.”
Bailey says the loss of foot traffic makes exponential growth nearly impossible and e-commerce has become necessity.
“The main reason we started selling online was to make things convenient for our customers,” Bailey says. “What we didn’t expect was Edna from Enid, Oklahoma, coming to buy from us — but she does.”
Online sales, however, have not yet made up for lost foot traffic, and e-commerce has sometimes proven to be an inconvenient and costly endeavor.
“We’ll process six to 10 orders every day,” Bailey says. “We have to have a person pull all the orders, stack the boxes and ship it. It costs money. We offer free shipping, but nothing is free. It’s expensive.”
The trick for Bailey is knowing what his e-commerce platform is — and what it is not.
“We’re not online to be the deep-discount seller,” Bailey says. “We’re very specific. We sell what we sell in the store.”
Bailey hired the same outside company that built his website to design and set up his online store; from there, the process is handled in-house. The same employees who work the front counter handle the online orders when there’s downtime.
“Before, someone would have sat around waiting for customers to come in, now they’re checking for online orders, packing those orders in boxes and shipping them via UPS,” Bailey says.
A particularly strong point in Bailey’s e-commerce platform, which reflects the original purpose of customer convenience, is his auto-ship program, where customers set up recurring purchases to ship automatically. This adds convenience and helps customers stay on top of routine maintenance and care.
“When there’s a product customers need every four months, they get it in the mail without thinking about it,” Bailey says. “All they have to do is pull the old one out and put the new one in.”
It’s proven to be a successful program — until customers defect to autoship options from cheaper, online-only retailers.
“We tried to make things convenient for our customers by starting the whole thing,” Bailey says. “The internet made things even more convenient, and the customer doesn’t always stay loyal.”
Bringing the Brick-and-Mortar Experience Online
There is a common misconception in the hot tub industry that the vast majority of customers don’t, and likely never will, buy spas online.
While they’ll purchase accessories and chemicals online, people want to see and feel a big-ticket investment before they sign on the dotted line, the thinking goes. Both Bailey and Nelson relayed a common metaphor: People want to test drive a car before driving away from the dealership.
For Eric Neel, founder and CEO of Clearwater Pool & Spa, Inc. in Manchester, Tennessee, that conclusion doesn’t align with the facts on the ground.
“This year, online sales for spas will surpass brick-and-mortar sales nationally,” says Neel, who is projecting to sell 1,200 units in 2017 through his e-commerce platform, up from the 929 he sold online and in his store in 2016.
Neel operates a 5,000-square-foot local retail store that’s been in business for 16 years, and he recently purchased a larger adjacent property to accommodate future growth. He says a store its size should sell between 20 and 50 spas a year.
Instead, it did $4.4 million in revenue in 2016 and are one of the top three e-commerce dealers on the AquaRest national platform. The other two are their direct competitors: Home Depot and Wayfair.
So how did a small, local retail store use e-commerce to compete with the titans of the industry? Like most other big sellers, Neel started small.
After being disappointed with online kiosk technology he purchased from Dream Maker Spas, Neel consulted a friend and representative of the company, who asked him to consider selling cosmetically blemished spas. Business took off so quickly that Neel landed a contract giving him exclusive sales rights — but the contract also obligated him to make continuous bulk purchases regardless of whether he could sell the units.
Neel dealt with the pressure by launching the e-commerce site his web developer had been working on for a year.
“We continued to have to change,” Neel says. “You do reach a point where you saturate the market. You do have to find a broader area to cover.”
Neel envisioned giving online customers the consistency, personal experience and security that he offered customers in his retail store.
“What we’ve tried to do is make the internet intimate,” Neel says. “We want to communicate with a customer the way they choose to communicate.”
That includes offering social media, email and live chat, which Neel or a close associate personally staff. Neel himself appears on video describing each hot tub they sell.
“That’s communication on their terms,” Neel says. “You can cut me off at any point, never listen to me again or replay me if you choose. There’s no salesperson, but someone is guiding you through the experience and helping you determine the best fit.”
The formula worked, and it quickly found itself competing with the likes of Home Depot and Wayfair selling Dream Maker’s AquaRest brand, where they’re currently approaching the 1,000 mark for annual sales.
For Neel, e-commerce can be a powerful tool if you need it. The required investments in time, money, infrastructure and energy — along with a steep learning curve — can be a massive burden if the end result is e-commerce for the sake of e-commerce.
“You don’t need an e-commerce site to be relevant, and if you’re not interested in expanding behind a certain radius, you probably don’t need it,” Neel says. “The reason you do it and the purpose you have in life will determine whether you’re successful.”
Either way, Neel says it’s about bringing brick-and-mortar intimacy to the online sale.
“The test drive,” he says, “is not as important as the shopping experience and the level of comfort.”