Hot tub demand, supply chain issues leaving dealers in the hot seat
At the start of 2020, economy experts were focusing on ‘supply shocks’ — disruptions to the availability of goods sourced from countries like China. As the COVID-19 crisis deepened throughout the year and various states and communities began instituting lockdowns, supply chains began experiencing something completely new: systemic demand shocks. As you probably remember, consumers first obsessed with stocking up on home supply staples (we’re talking about you, Charmin) to comply with stay-at-home orders, but other priorities started to increase in value, too: The comforts of home.
Like many other industries, hot tub manufacturers and their suppliers were not prepared. Once they did receive miraculous partial shipments, illness and plant shutdowns hit the industry like the second shot of a one-two punch. Industry dealers were suddenly inundated with orders, with nothing to give but weeks or months-long waiting lists and apologies.
Increased Costs Means Increased Prices
Another dreaded — yet predictable — side effect of the hot tub supply chain chaos has been the need for price increases. For most dealers in the industry, price increases are just part of the current situation within the supply chain, not about taking advantage of the surge in demand.
“Our revised prices commensurate with the increased supply costs from the manufacturers,” says Audra Johnson, partner at Johnson’s Pools and Spas located in Owego, New York.
Johnson says freight charges have skyrocketed in all areas of her business, and hot tub manufacturers are charging extra fees to make up for losses stemming from outsourced parts and shipping increases.
“Not only has the cost of the products gone up, but we are also seeing supply-chain surcharges up to $400 per unit, as well as extra fees if color or model changes are made before units go into production,” Johnson says.
Bob Davis, president of Aqua Pros Pools & Spas Inc., in Bedford, Virginia, has experienced the same with his hot tub manufacturer, which is based in Oregon.
“They’ve got really stringent labor issues to deal with,” Davis explains. “They can’t have as many people in the plant, and they’re trying to get the components they need. That’s created problems getting the product [completed] and it’s just added to the cost of the hot tub on our end.”
Other retailers have sought to avoid raising hot tub prices. George Dalhamer, president of Hot Spring Spas of Dayton in Ohio, has halted special sales and promos, which he says were previously necessary to attract customers, as a way to curb the overhead and reduce wait-time frustrations.
“It’s important to be true to the standards your company has lived by before the pandemic and to be customer-oriented,” Dalhamer says.
Despite her best efforts, staffing issues have been another problem for Johnson throughout the pandemic, requiring her to increase wages to stand out in what she says is an extremely competitive employment market.
“Despite popular belief, there doesn’t seem to be a whole lot of candidates out there, even when offering premium pay and an array of benefits,” Johnson says. “And increased wages lead to an increase in sales prices of all goods and services.”
Johnson cites the additional Pandemic Emergency Unemployment Compensation benefits as the main competitor in her rural New York community.
“I am now competing for employees with the unemployment package, too,” Johnson says. “Most folks prefer to stay home than come to work when the benefits are that generous.”
To Gouge or Not to Gouge
With rising costs across the supply chain and the inflation that follows, price increases are often passed along to the consumer. But with the supply and demand so out of whack right now, how much is too much?
“There’s a real debate going on — because you could get really selfish, sticking it to [customers] and taking advantage of supply and demand,” says Mike Lahay, owner of Spas and More! in St. Louis.
Lahay says that even with incentives he’s giving to customers as a thank you for their long wait, he’s still selling at the upper end of his pricing.
“We will get a fair [price for the customer] but good price for us,” Lahay says. “When this is over and it gets back to normal, you don’t want somebody coming to you saying, ‘Hey, buddy — you sold this $3,000 higher than what they are now. You took advantage of me.’ I like to sleep at night, so we don’t do that.”
Since many customers can take months or even more than a year to make a decision on a hot tub or swim spa, a lot of times they’ve already been given a quote before they come in to make the purchase. “They have a quote of X amount of dollars and they ask, ‘What’s the price?’ and you come in 10, 15, 20, 30% higher — that doesn’t bode well for your credibility either,” Lahay says.
The next year will be telling for the future of the industry and the economy as a whole. While Davis says he’s concerned about a slowdown, he remains optimistic about the future.
“We are pretty well booked, and we’ve got quite a bit of work lined up for this upcoming year,” Davis says. “Seems like every load of hot tubs that we’ve got ordered is sold already.”