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Saskatoon Outdoor Living 2012

New or Used?

Some hot tub retailers find great success in the used market; for others it’s a headache

There was a time when retailers laughed and turned their noses up at the thought of carrying used
hot tubs. Though financial times appear to be better, there remains great consumer demand for an inexpensive path to spa ownership. But is it worth your time?

Let these words soak in. Billy Stallings moved to Nashville to follow his dream of taking country music by storm. While he still performs — though mostly for church and ministry gatherings —he found his calling 10 years ago by carving out a niche in the highly competitive world of retail spa sales under his marketing alter-ego known as The Spa Guy.

Stallings sells only used hot tubs. He also owns a successful spa cover manufacturing business.

Based in Hendersonville, Tennessee, Stallings says he quickly became weary of selling new spas. “I decided instead to focus exclusively on used spas because it’s an easier sell and has bigger margins,” Stallings says. “A used tub sells for about half the price of a new one. I’ll earn [roughly] three to four times what I would on a new model. I have about 20 used hot tubs for sale on my showroom floor right now; another 40 tubs are in the back awaiting refurbishment.”

Larry Jones owns Hot Spot Pools, Hot Tubs and BBQ, serving the Kansas City area with locations in Liberty, Missouri and Overland Park, Kansas. For Jones, used hot tubs are both a revenue stream and customer magnet for the short and long haul. “Used hot tubs are a profitable market for us,” Jones says. “The used spa customer in our store isn’t quite sure if they’re ready to purchase a new hot tub, mostly because they’re not sure it’s something they’ll get enough use out of. During our sales conversation, we also inform them of our trade-in program. When the customer knows that, down the road, they can trade in with us and step up to a new Jacuzzi model, it often closes the deal.”

INSPECT THY TRADE
Just as a car dealer will inspect your vehicle before telling you what you’ll get in trade, the same applies with used hot tubs. Hot Spot’s Jones says seeing is believing: “We inspect a potential trade before accepting it,” Jones says. “Our policy is to visit the customer’s home; we want to see the unit running. We also check to make sure it isn’t leaking and that it hasn’t been frozen.”

Stallings says the hot tubs with the most consumer demand vary from market to market. “A seven-foot tub with two pumps sells fast, and if you add lights and a waterfall, it sells even faster!” Stallings says. “If a tub is less than 10 years old and fits my criteria, that’s definitely one I’m going to grab. If it’s a Jacuzzi Premium, regardless of age, it won’t stay on my showroom floor longer than two days. Your potential inventory is likely based on the spa brands that sell well in your area as new models. Cal Spas sell very well as new inventory in my area, so I see a whole bunch of those.”

Selling used product also requires a certain degree of creativity. For Stallings, that meant reaching into his experience selling pre-owned cars. “I started a rent-to-own program a while back; basically it’s an in-house financing program,” Stallings says. “I started doing that because at one time I couldn’t find a company to finance the purchase of a fully refurbished hot tub. The rent-to-own program addressed a need and provides an entry to ownership for folks who couldn’t necessarily write a check for $3,000 or $4,000 but can afford a monthly payment of, say, $150.”

Big Fish Publications

Another way Stallings attempts to make spa ownership possible is with a line of hot tubs he calls The Handyman Special. He explains that, during the refurb process, cosmetic issues take the most time to work on — think side panels, paint and woodwork. “With this line,” he says, “I’ll make sure the unit is mechanically sound and sell it unpainted, unstained. Any cosmetic issues are the buyer’s responsibility.” He says he can sell those cheaper than fully restored models, which provide a good product option at a fraction of the price.

OFFER PEACE OF MIND
Because consumers don’t expect the same warranty they’d get with a new spa, a warranty often builds confidence and makes the sale. Stallings offers a standard one-year warranty covering pumps, motors, electronics and leaks; cosmetic items are not covered. Jones includes either a 30- or 60-day warranty, depending on the model of the used hot tub.

MIXED EMOTIONS
Kelly King started Hot Tubs for Health, a program which places used tubs with folks who have a medical or health need for warm water therapy but can’t afford a spa. “That started as a result of our used hot tub sales program,” King says. “As we took tubs in on trade, we’d have units we knew we could sell quickly. We had some that were in such terrible shape we put ’em to rest,” but it also had tubs that worked, yet didn’t meet its resale criteria. “We managed to get those tubs to people in need,” he says. “We still operate that program.”

A 104-DEGREE HOLDING PATTERN
King says his stores closed out 2014 with respectable used hot tub sales, but a nagging reality prompted him to press pause. “It takes so much of our resources to get those tubs refurbished and in resale condition,” King says. “Our standards are pretty high on resales, and we have to be very confident that spa is going to work properly and we’re not be called out to someone’s home in 30 days to fix something. We have plenty of work to keep our service staff busy as it is. Instead of hiring more service staff to keep up, it made sense to put the used hot tub sales program on hold for a bit and concentrate on the core competency of our business: new hot tubs.”

King was reluctant to cease used hot tub sales in his stores, but he couldn’t ignore the administrative toll. “When we were out of used inventory, people would want to be put on a list,” he says. “Now we have a customer who’s put in a holding pattern while waiting for the perfect used hot tub…. Quite often, the customer decides to buy an entry-level new spa.” He still takes used spas; now they go right into the Hot Tubs for Health program and customers are happy their old tub will help someone in need.

“Perhaps the moral here is that sometimes when a customer asks for a used hot tub, they’re really asking if we have anything that doesn’t cost $10,000,” King says. “For this customer, it’s all about price, so if we can accommodate their needs and budget with a new model instead of keeping them in that holding pattern…we’ve gained a happy customer.”

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