Buying Pool Equipment Online
Let's have a conversation about buying swimming pool equipment online. In recent years the availability of rock-bottom priced swimming pool equipment available online has sent shock waves through the pool and spa industry. As with pretty much every other product available on earth, people are turning by the millions to online retailers to get what they need with the lowest possible price markup. Online retailers of pool equipment sell massive volumes of product with next to no margin for profit. They have little in the way of overhead to carry, and provide little to nothing in terms of after sales support, which results in the lowest possible cost product to the consumer...but at a price.
On the surface this sounds like a fairly straight forward problem, and perhaps one that is not unique to the pool industry, but the rabbit hole actually goes quite deep. The pool industry used to protect installers, dealers and service workers by having a trade-only wholesale distribution level where pool owners were not able to purchase. The superpump that I could buy from a wholesaler would be $300 but the pool owner standing behind me in the line would be charged $600 for the same purchase. This was before cell phones, or a global marketplace, or most importantly, the internet.
The problem of pool equipment being sold online is a top-down problem with multiple levels. At the very top you have the product manufacturers such as Zodiac, Hayward and Pentair. These manufacturers do not sell direct to the public. If you show up at the Hayward plant trying to buy a pump for your pool you will be directed to purchase from a local brick and mortar dealer, of which there are many. Even if you are a pool company, you can not show up and just start buying products from the manufacturers. You can purchase from the manufacturers but the process is reserved for high volume dealers placing orders through sales managers that negotiate the process. These manufacturers sell to wholesale distributors and it is the distributors that sell to pool companies and smaller retail stores. In theory, distributors still should not be selling direct to pool owners and most of them do not unless you register an account with the distributor.
Journey Of A Pool Pump From Manufacturing To Installation
If we use a pump as an example of the manufacturing, distribution and sales process this can help to identify where the current problems exist. Starting with a pump being produced by a manufacturer this example will track the time line and path a pump takes to reach a swimming pool, including examples of the pricing structure. So a pump is made and then leaves the manufacturer and goes to the wholesale distributor. A wholesale distributor buys the pump, let's say for $300 per unit from the manufacturer, and then the distributor sells the pump for about 5% to 10% more than they paid for it. This means the pool company buys the pump through wholesale for $315 to $330. What a pool company then wants to do, and we used to do through the 60's, 70's 80's and 90's would be to double your cost. This makes the pump around $630 to $660 to the customer. This basic formula is how the industry has existed more or less since inception. In the current day market you would not expect to see margins like this any more.
It would be common today for pool equipment to be marked up around 30% over cost through an established brick and mortar retail store. This means that the pump would now be selling for around $400 to $415 which would allow for a modest $100 or so for the dealer. These reduced-margins, while a difficult pill to swallow for anyone who sells pool equipment, are not the problem. The problem is that customers have another option...buy the pump online. So how much could you buy this pump for online?
In the above example, the manufacturer sells the pump for $300 to distribution. Distribution sells for $330 to the pool company and the pool company sells for $415 to the customer but they really wish they could sell for $600 like they used to. So how much would this pump cost on Amazon.com? Probably about $295 including free shipping anywhere in the USA. Wait...what? Seriously? Yes, seriously.
Remember how I mentioned earlier that manufacturers do not sell directly to the public, or to pool companies, unless you buy a very large bulk order? Well, what if you did put a large order together? Well, for one thing, you will not be paying $300 per pump. If a wholesale distributor can buy pumps $300 at a time, it is expected that you will get a discount if you bought, say, 1000 pumps in a single order. This one person, or one company, has the ability to buy products cheaper than anyone else simply due to purchasing power. This is not all that unusual, and there are plenty of retail stores and franchises that have developed strong purchasing power...even purchasing groups have formed to increase the purchasing power of companies that have banded together.
Deep Pockets, Buying Groups & Low Margin Sales
The value in having deep pockets is obviously not exclusive to the pool industry. Pool buying groups exist to leverage the power of multiple companies who all will go in together to make bulk purchases, or to simply have access to specially negotiated prices. This is another way that pumps will end up for sale online for less than what a regular pool company can even buy them for. If you are a pool company you can pay a fee to join a buyers group and then you can also have access to cheaper pricing. Since selling online takes very little effort, or overhead, anyone with access to cheap pricing can choose to sell products with tiny margin for profit. If you buy direct, or through a buying group, you can sell the pump for less than anyone else and still manage to make a few dollars on each unit. A pool company would never sell a pump with that little margin, but an online retailer can, and will.
The situation is more complex than this. There is another way that prices can get cheaper for this pump...rebates. Rebates are something that most small and medium sized companies are not familiar with. As your purchasing volumes go up, rebates can be negotiated based on your annual purchase volumes. Both manufacturers as well as wholesale distributors both potentially will offer yearly rebates for larger accounts. 1% cash back on $100,000 of purchases, 2% on $200,000 and up to 5% on $500,000 or more of purchases is possible. There are some companies that have been known to sell products at or near their cost just to earn rebates, as well as to put pressure on competitors selling the same products.
Up until this point in the article I am really only talking about product pricing to show how it is possible that online prices for pool equipment can be at, or even below, wholesale costs to dealers. It sounds counter intuitive that a pool owner should be able to purchase a pump for even less than a pool contractor can purchase that same pump through wholesale distribution...but they can. Knowing that, it is easy to see why pool companies aggressively dislike online sales. Now, let's start to look deeper into the structure of the pool equipment sales, service and warranty industry to see how the problems of online equipment sales compound.
Benefits Of Buying Pool Equipment From An Industry Professional
So a pool owner gets a quote from their pool guy for a new pump. It is $415 plus installation. The very first thing a pool owner does is then look up the pump online to see how much they could buy it for. They find the pump on Amazon for $295 including free shipping and so they ask the pool company to provide the same price. Since that price is at, or below, the cost the pool company can buy the pump for, they say no. The pool company will try to do their best to explain that you should buy your equipment from a professional, but this is a hard sell to the pool owner. Now, every pool company in the world gets customers asking on a daily basis to install equipment that was ordered online. Since the equipment was not ordered by a industry professional, there is a very high rate of the wrong equipment being ordered, or missing parts or pieces preventing the job from being completed in an efficient way. What if the equipment is defective? Well, normally a pool company would pick up their phone, call their manufacturer or distributor sales rep, and arrange new equipment ASAP. If you bought the equipment online, the installer does not have this same flexibility. When you buy swimming pool equipment and need to get warranty coverage, then you need to go through the dealer that you purchased from.
At one point I worked in the technical support and warranty claims department for one of the big three manufacturers of pool equipment. It was standard operating procedure to defer all warranty claims from pool owners to go through the dealer that they purchased from. Normally, this would be the pool installer that is standing in your backyard. Now, since you bought online, you need to contact the seller and initiate a warranty claim which includes you shipping the product back, at your expense, to the place you bought it. Since online dealers sell with the thinnest of margins, they do not budget for after sales support or warranty considerations. This can mean that you can be left holding the bag, at least for longer than you want, all while your pool goes without the equipment you ordered for days or weeks at a time. A swimming pool professional knows that down time for a pool means lost time and money and the pressure is on to get a pool up and running if it is down while you work on it. An online retailer can simply not have the same appreciation and sense of urgency that pool companies have when it comes to sorting out issues with warranties, defective products or incorrect or incomplete orders.
How The Pool Industry Is Dealing With Online Sales
There have been a number of moves taken within the pool industry to help deal with the negative repercussions of online sales. The first of which was Hayward implementing MAP (minimum advertised pricing), at least in Canada, and this more or less results in all companies advertising products for the same price. Since pool dealers and contracting companies are putting continued pressure on the manufacturers to stop allowing their products to be sold online, or at least for so cheap, manufacturers have reacted with a new "exclusive to brick and mortar" product line that is not available for sale online.
Zodiac has the most established "trade series exclusive" product line, then Pentair came out with the "trade grade" product line, and Hayward now has introduced "expert line" products. All three manufacturers launched these product lines to combat the problems with pool equipment being sold online and to encourage the sales of their products to happen mostly through qualified dealers and installers. These products, which are not available for sale online, are intended to give pool dealers an unique sales advantage and more reasons to convince people to not buy their pool equipment online...even though it is cheaper. So does this mean that the big three pool equipment manufacturers all doubled their product lines in a single year? No, mostly this is a marketing angle. While some products are being given unique features over the original product line versions, most of these changes are inconsequential at best...designed to sound like it is better while really not being very different at all from the less expensive products sold online. The biggest real difference is how the warranty applies to these products.
Warranty For Pool Equipment Purchased Online
In addition to limiting the advertised prices for pool equipment, as well as offering "new" products that are only available to pool owners through authorized dealers, another way that the industry is discouraging online sales is to not offer full warranty protection to equipment bought online. Pool equipment typically will have between one to three years of warranty coverage however pool equipment purchased online can have as little as 30 to 90 days. This slashing of the warranty coverage is not just about manufacturers trying to push customers to shop from pool dealers and brick and mortar stores...they are protecting their own interests.
Pool equipment purchased online and then installed by someone with little or no swimming pool experience will have a much higher rate of failure than equipment supplied and installed by an industry professional. There are a ton of ways that installing your equipment incorrectly can cause premature equipment failure, as discussed in this article on common problems with pool equipment installations. In an effort to reduce the instances of poor equipment installation much of the equipment that you buy online will have a very short warranty window.
How To Get Full Warranty For Pool Equipment Bought Online
Can you get full warranty coverage for products purchased online? Yes, you can. You may not be able to get "extended" warranty protection (two or three year) as is offered with some brick and mortar only products but you can most likely get a year of coverage which has always been standard in the industry for pool equipment. Each manufacturer offers full warranty offerings for pool equipment purchased online so long as you have it "professionally installed". This sounds very official to pool owners, except for the fact that there is no such thing as professional pool equipment installers. Sometimes pool equipment is installed by a pool guy, but sometimes electricians or gasfitter technicians will supply and install some pool equipment...so does that count as professional installation? Yes, it does.
In fact, when I spoke with each of the big three manufacturers and asked them what constitutes "professional installation" all three gave me the distinct impression that this is a loose rule with them. All three said that they would be willing to accept any installation so long as the warranty registration includes a receipt for installation from someone. This could be a general contractor, a plumber, potentially a mechanic, an electrician, a pool company...basically any technical trade that offers contracting or installation services of any kind.
Now, do any of these "professionals" know how to install pool equipment properly so it will not fail early? No, probably not. So why do the manufacturers all require professional installation from people who are not industry professionals? The reason is that they are making pool companies and dealers happy by driving people away from online sales, but manufacturers also benefit by offering less warranty protection for their products being sold online...nothing like pleasing your customers with a policy that also happens to be self serving.
If the manufacturers were really interested in helping pool dealers then they would not allow their products to be sold through online retailers. That however would involve turning away millions of dollars of sales yearly, and would open the door for smaller companies with less market penetration to scoop some market share by selling online. If Hayward, Pentair and Zodiac stopped allowing their products to sell online tomorrow, then there would be a sudden increase in Waterways and Speck pumps being sold. If the big three want to hold the market then they need to figure out how to protect their dealers while not closing the sales channel to companies that sell their products online. 2017 is the first year with the big three manufacturers all offering brick and mortar exclusive product lines...it remains to be seen whether this starts to push sales back into the hands of pool dealers, or whether pool owners will recognize that the products they can buy online are almost identical to the ones being offered for more money by pool stores and pool dealers. The only real difference other than very minor feature variances, is the potential for longer warranties through brick and mortar only product lines.
In my opinion any attempt to curtail online purchasing is a wasted effort. Internet purchasing is here to stay for the pool industry as well as every other industry and this will only become more and more true as the population ages. If there is a solution to be found in this problem, it is in the pricing structure for products sold online. Online retailers should be forced to sell for MSRP prices, along with everyone else, which would drastically level the playing field.
If there is a lower price to be found anywhere, online or otherwise, pool owners by the thousands will seek it out. Until retail pricing is equalized, there will always be someone willing to sell something for almost no profit, and always a customer willing to roll the dice on their product purchase in order to save a few dollars.
How To Level The Playing Field For Pool Products Sold Online
It is my belief that the easiest, most comprehensive and mutually beneficial solution to the problem of pool equipment being sold online is to standardize prices. The MAP (minimum advertised pricing) system prevents any one retailer or dealer from dropping the price for a product out from under everyone else. If everyone is forced to advertise the same price for the same products, whether online or from a dealer, then why would a consumer ever buy online? There are actually a few good reasons...what if you live in an area where there are no pool stores, or the ones that are local to you you would prefer not to deal with? It sure would be nice if you could order product online and get full warranty coverage for it...even if you installed it yourself. What if you are a technical person who is extremely skilled with your hands...would you want to pay a less skilled person top dollar to install a pool pump for you even though you might very well be better able to "professionally" install it better than them? If you want full warranty then you are going to need to provide a receipt with the current online purchasing model. It would seem to me a better solution would be to even the prices out for everyone.
If the price of a pump was the same online as it was from a dealer then suddenly people would be more inclined to just give your pool guy the nod when it comes to replacing your equipment. Right now, since you can buy pool products online for so little, there is a strong pull for pool owners to try to order everything they need themselves. If MAP was introduced, the customer would actually be the ones who end up paying more in the end since MAP would prevent online retailers from advertising prices with tiny, unsustainable margins. Currently there will always be someone out there willing to run an unsustainable business model selling pumps for 2% over cost and when they go out of business then someone else will take their place. If the manufacturers decided on a reasonable MSRP and enforced these to anyone selling their products then this would effectively level the playing field.
MAP pricing would level the playing field since the same warranty and price is available everywhere. If you have a pool guy you like then you can buy from him without feeling like you are getting screwed over since the price on Amazon.com is the same price that they quoted you. If you don't have a local pool company to deal with then you could order online and get what you need, and the manufacturer could allow full warranty on those products since the number of people ordering online would be vastly reduced and the margins high enough to honor after sales support and warranty throughout the buying chain. As it currently stands 2017 is going to be a milestone year for how pool products are sold online and whether brick and mortar only product lines are the way of the future for the industry.
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