How does a retailer make servicing hot tubs a profitable part of their business?
Not all retailers provide service work to customers, but for Mario and Lori Hicks, owners of Hot Tub Sales in Stuart, Florida, there are a few pieces at play when it comes to making it profitable.
“We believe the key is to focus on building an aftercare relationship with your customers that encompasses every aspect of owning and maintaining a spa for its lifecycle,” Mario Hicks says.
The Hickses got their start in the hot tub industry in 2005 with a spa delivery and installation service in Toronto, Canada. This experience inspired them to open Hot Tub Sales in 2016. They saw an opportunity to not only sell quality hot tubs but to also improve the service aspects of the industry.
At first, they only offered service work to existing customers who had purchased a hot tub through them, Mario Hicks says.
“We believed this strategy would enable us to focus and deliver high-quality aftercare and build our reputation for excellence in our marketplace,” he says. “It was a strategic decision that would give us an advantage over our competitors.”
Hicks recalls the early days of the COVID-19 pandemic were when they decided to offer services for people outside of their existing customer base.
“We were overwhelmed with the opportunities this provided us, including repairs, disposals and new spa sales,” he says. “It has evolved into a focus of our operation ever since.”
Max Blaser, general manager of Mountain Hot Tub in Bozeman, Montana, says service work accounts for around 10% of the company’s total revenue. He says this percentage rose significantly over the last 10 years after they committed to making the service department profitable.
“Some of the changes we implemented to achieve this [were] better margins on parts, incentive structures for all service techs and managers, zone fees and part kits within our point-of-sale system,” Blaser says.
While part of offering service work includes helping customers still under warranty, Hicks and Blaser say it’s just part of having good customer service that pays off in the long run. “Obviously, warranty work is the least profitable as manufacturer labor rates generally keep us in the red, but that’s part of providing proper service after the sale and believing in the brand[s] you sell,” Blaser says.
According to Hicks, many believe warranty service does not become profitable until the warranty expires. While he admits “manufacturers need to step up in this area and provide a process that recognizes the true cost to dealers,” he also views warranty work as part of their aftercare approach and says it provides openings for additional sales.
“Make sure your techs bring chemicals, filters, jets and other accessories and offer them for sale,” Hicks says.
Nick Day, general manager at Gohlke Pools in Denton, Texas, says the business has been servicing pools for 65 years, but they got into selling and servicing hot tubs a few years ago.
“We saw how well the service business works, and it feels like we can do that with hot tubs,” Day says. “For us, the service part is a long-term play.”
Day also believes those warranty service calls are helping build their customer base.
“We know these hot tubs are going to go out of warranty eventually,” he says. “We feel like we have a lot less competition when it comes to spas compared to pools, and we think we can command the market and charge what we want.” Day adds that they’re open to servicing spas regardless of if they were bought through Gohlke Pools.
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When it comes to prepping and training for hot tub servicing, Day says they applied the same approach they used for the pool side of the business.
“We try to apply as much education as we can,” he explains. “Factory trainings, what the Pool and Hot Tub Alliance has to offer — anything like that we try to get involved in our training program.”
Day adds that creating good relationships with vendors has been important as well. “With one of the tubs we sell, we feel like we have a good partnership,” he says. “There’s a good support system with parts availability and how long they keep those parts available after the spa is manufactured.”
There are some challenges and considerations retailers should keep in mind before diving into service work.
Blaser says there are many potential pitfalls in servicing, one of them being the possibility of additional damage on older spas and equipment. Another unexpected challenge has been the complexity of keeping their pricing and rates up-to-date.
In the last few years, variable costs have changed dramatically and suddenly, focusing us to reevaluate our rates far more frequently than we’ve ever needed to. When suddenly your payroll costs, gas and insurance expenses and your part costs have all risen dramatically, quarter after quarter, you have to be ready to adjust your rates quickly.”
Max Blaser, Mountain Hot Tub
“In the last few years, variable costs have changed dramatically and suddenly, forcing us to reevaluate our rates far more frequently than we’ve ever needed to,” Blaser says. “When suddenly your payroll costs, gas and insurance expenses and your part costs have all risen dramatically, quarter after quarter, you have to be ready to adjust your rates quickly.”
He advises retailers adding service work to be mindful of their business model and consider the climate and competitive environment.
“Through the years, we’ve seen more than 20 spa companies come and go, but they were all selling spas. So, what happened?” Blaser asks. “Their business models revolved around selling and delivering but totally ignored service.”
According to Blaser, retailers should make plans to service what they sell. “And if you’re just looking to open a service business, make sure you are accounting for all of the hidden costs that can easily make even a high revenue company an unprofitable one,” he adds.
Hicks says one of the biggest challenges for retailers new on the service scene is the time and focus it takes to ramp up that part of your operation.
“Investing in service vehicles and the parts necessary to stock those vehicles — it’s a big investment,” he says, adding that another key to profitability is being able to resolve repairs on the first visit to the customer. Limiting service areas and troubleshooting with customers over the phone are just some of the ways to achieve a quick resolution on the initial visit, Hicks says.
Hicks recalls that once their service business started building, they needed to hire quality teammates to run the department. “This was our biggest challenge,” he says. “Ultimately, we found some fantastic people who shared our values and principles.”
Hicks also advises retailers who are considering adding service to their business to embrace the necessary tough parts because it separates them from big box or online stores.
When a potential new buyer sees that you offer sales and service, it is a huge boost in their confidence in your business. Anyone can buy or sell a spa, but not everyone knows how to maintain and service their spa once it’s in their backyard.”
Mario Hicks, Hot Tub Sales
“When a potential new buyer sees that you offer sales and service, it is a huge boost in their confidence in your business,” he says. “Anyone can buy or sell a spa, but not everyone knows how to maintain and service their spa once it’s in their backyard.” Hicks points back to aftercare and reminds retailers that it’s what contributes to revenue for many years to come.
“If you are considering adding service, you don’t have to start big,” Hicks says. “Take small steps, and provide services limited to your comfort level. You can build on this and over time, turn this into a new profit center for your business.