The Chemical Balance

Prepare your chemical offerings for the next hot tub season

Chemical sales are a guaranteed way to keep customers coming in your doors. If your chemical profit margins are struggling, however, it may help to examine your approach to this segment. Get things in the black again with these simple adjustments.

First, look at how you purchase chemicals from the manufacturer. Early-buy options — available from most manufacturers — are a popular choice for stocking up and saving money.

Aqua Quip, with several locations in the Seattle area, purchases approximately one-third of its annual chemical needs as an early buy, then places orders bimonthly on a just-in-time basis after those run out. “We will buy additional products in the fall if we are close to a volume rebate threshold,” says Aqua Quip president Brian Quint.

Combined Pool & Spa, Inc. in Sioux Falls, South Dakota, also does an early buy in the fall for the spring season, purchasing from 40 to 50 percent of the chemicals sold the year before. “Our early buy will last until about June,” says owner Tom Junck. “By the end of July, we place an order every Tuesday and order just what we need. We use our min/max feature in our Evosus software to reorder, along with a physical count on certain items.”

Jamie Novak, brand manager for NC Brands L.P. in Ontario and Norwalk, Connecticut (makers of Natural Chemistry, SeaKlear and Red Leopard), says many dealers participate in their suppliers’ early buy program in order to ensure its shelves will be stocked and ready to go when the busy season begins. “Being a weather-dependent business, our retailers have to be ready for spring whenever it arrives,” Novak says.

Several manufacturers offer other discounts in addition to early buys. Ontario-based Capo Industries, Ltd. — makers of the Spa Ball — offers bulk and pallet pricing, and early-payment discounts on early buys if the dealer can pay for the products ahead of the program’s extended terms. “We also offer volume rebates on annual purchases,” says Mark Ridpath, sales and marketing manager. “The rebate is a percentage of the purchases which is applied to the dealer’s account for next season’s purchases.”

How do you know how much to buy? Both Aqua Quip and Combined Pool & Spa use Evosus to keep track of inventory. Junck says Evosus helped him figure out which products were actually moving. “I always thought we were selling more than we actually were,” he says. “Evosus has allowed us to take a different approach to the items we sell and change our business. For example, we sold above-ground pools for 30 years, then after having the data to analyze that category, we got out of the above-ground pool business altogether.”

Evosus has integrations with many large chemical suppliers, making pricing and updating product offerings simpler, Junck says. The program tracks all purchases, by customer, product and/or date, and inventory levels by item, location and time period, allowing Junck to keep inventory as low as possible. Quint says Aqua Quip purchases chemicals based on sales history and recent sales trends analyzed in Evosus. “The beauty of using sales history to purchase these products is that the purchaser knows what to expect,” he says.

Junck says the chemicals at Combined Pool & Spa sit in the back right side of the store, requiring customers to walk past them before heading to the checkout counter. Aqua Quip also displays chemicals at the back of the store near the water-testing stations. “Customers need to pass by the new hot tubs, barbecue grills and fireplace products merchandised in the front of our showrooms,” Quint says, “similar to how the grocery store puts eggs and milk in the back of the store.”

Novak recommends retailers group products on displays that work together to address common issues, such as Natural Chemistry’s Spa Purge (which removes buildup of nonliving organic waste in the plumbing lines after draining a hot tub) and Spa Perfect (which improves water clarity). “These two products should be merchandised together to help the consumer quickly identify the components needed to solve a problem,” Novak says. He also suggests merchandising specialty chemicals at eye level. Commodity products, such as sanitizers and balancers, he says, can be placed above and below since consumers seek them out.

John Bereza, marketing manager for Haviland Enterprises in Grand Rapids, Michigan, says product displays should remain visually appealing, with a limited number of items on the shelf. “Replenish the spa water treatment bottles frequently, rather than having them 10 deep on a shelf,” he says. “It may sound simple, but retailers often forget the importance of keeping the shelves and bottles clean and dust-free. And try to keep good, bright lighting on the bottles so they are easy to read.”

He also recommends keeping a set of hot tub chemicals at the water-testing station and at the register so customers can ask questions. Novak says this is also a great place to put quick-fix items like water clarifiers and shocks, to subliminally persuade customers toward an impulse purchase.

When determining pricing for chemical products, find what is most profitable for your showroom. Combined Pool & Spa does a price comparison before setting its own, including checking prices on popular websites. “They usually advertise a really low price, but you have to buy a lot at once — so a lot of times, they are not great deals,” Junck says.

While the chlorine is always on sale, Junck says Combined Pool & Spa does a higher markup on the things people don’t look at closely. “Customers always know the price of the milk and eggs, which is our chlorine and shock,” he explains. “We make our greatest margins on all the other products.” It also does a lot of product bundling, which results in larger profit margins because the consumer purchases more.

Aqua Quip uses a set markup for chemicals. “The margin is lower on the more common, commodity-type products such as granular chlorine and bromine tablets,” Quint says. “But our set margins are higher on specialty products and balancing chemicals, due to the added costs for reagents used during in-store water testing.”

Just as important as pricing is how you offer your chemical products to the customers. Capo Industries offers a chemical starter kit. “We recommend that our dealers give a starter package of water-treatment products to all their new customers who have just spent thousands of dollars on a new hot tub,” Ridpath says. “Getting them started on the dealer’s chemical brand right away leads to a high retention rate of customers coming back for that same brand.”

Junck and Quint both say their showrooms provide startup kits with the purchase of a new hot tub. “I think the customer expects it,” Junck says, agreeing that it provides customer retention because “they assume they need it and will repurchase it.” He notes that it’s also important to show the value of the chemical kit in the sales presentation.

Nearly 10 percent of Combined Pool & Spa’s annual product margin is chemical sales; it’s 5 percent for Aqua Quip. While these numbers don’t seem large, this segment is vital for effective customer retention.

Chemical presentation is also important. “Focus on training your staff,” Junck says. “The reason most customers don’t buy from us is not high prices, it’s because they did not have a great experience in our store. We are working on the in-store experience and knowledge.” To that end, Junck says a staff with the desire to help people, proper training and tools at their disposal, along with accountability, results in more sales.

Offering specials and discounts — in addition to including a starter kit with a new hot tub purchase — is also a great way to get customers in the door. Aqua Quip has seasonal promotions that offer discounts on all chemicals, typically four times a year. “We also offer discounts periodically by way of our email blasts to over 10,000 of our customers who provided their email addresses,” Quint says. Aqua Quip also advertises by direct mail and in-store specials, but avoids outside advertising because of the lack of measurable return on investment.

Junck has success with an annual discount event. “One day a year, we do an extra discount and we cater food — burgers and beer — and our customers really like it,” he says. “We put the whole store on sale and sell a lot of chemicals that day. It’s easier to staff the store for one day than four days; it creates urgency and we can bring in outside sales help.”

Bereza recommends finding out about customers’ previous experiences with hot tubs, both good and bad. “This is the starting point to discuss your spa chemical-treatment program and allows the retailer to tailor chemical choices to meet the needs of the customer,” he says. “This is another way you’ll set your retail store apart as an expert supplier of spas and spa knowledge. And it will likely also lead to additional upsell opportunities for products other than chemicals, which is a bonus.”

Tips from the Experts

  • Continually modify your process based on customer feedback.
  • Hand out a simple, step-by-step, waterproof hot tub reference guide for water balance and maintenance, which also provides suggested chemicals for startup care and throughout the life of the hot tub.
  • Provide a customized water-care treatment program.
  • Offer free water testing.
  • Provide extra frills, like tote bags with chemical startup kits, to differentiate yourself.
  • Stock and support the products you know will be successful.
  • Don’t feel like you need to be the cheapest in town.
  • Refrain from carrying several brands. It will increase your inventory costs, dilute your buying power with suppliers and make training staff more difficult.
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