By Dan Schechner | 6.23.2011
The rate hikes, while not unheard-of for the summer months, have nonetheless raised eyebrows over their timing and the percentages involved. Increases range anywhere from 3 percent into double digits for some product categories.
Still, manufacturers maintained the move was all-but unavoidable, as the prices of raw goods such as oil, copper, ABS resin and polypropylene have skyrocketed over the past two years.
“This extraordinary rise in commodities has been news for a while, so the drivers of a price increase are no surprise,” said Kevin Potucek, vice president of product management at Hayward Pool Products in Elizabeth, N.J.
“A midseason price action, however, is out of sync and will nearly always present a challenge for most members of the channel,” he added. “It is toughest for those that face the consumer on a discretionary purchase.”
Most increases took effect in early to mid-June, though some weren’t enacted until July. Manufacturers such as Hayward, Zodiac Pool Systems and GLI Pool Products notified their customers across all channels — those purchasing direct, as well as through distribution and buying groups — from 45- to 90-days ahead of time, company officials said.
Products subject to the new higher prices run the gamut from safety covers and vinyl liners to motors and chemicals. Equipment with substantial metal content and resin has taken the biggest hit.
“Everyone does their best to try and soften it,” said Richard Garbee, vice president of sales and marketing at GLI Pool Products in Youngstown, Ohio. “But the point is that companies that have been in this industry a long time wouldn’t do something like this if it wasn’t absolutely necessary.”
Meantime, those running pool and spa retail operations have adopted various strategies to offset the increases. At Classic Pool & Spa, a three-store firm that also handles service and construction, the approach has tended toward a limited price hike.
“We’re raising [them] where we can in places that aren’t as price-sensitive, such as chemicals and accessories,” said Suzanne Heim, marketing director at the Gladstone, Ore.-based business.
“But we’re not raising our prices on the bigger items like pumps and heaters, because customers can just get them cheaper on the Internet,” she added.
Elsewhere, some retailers have chosen to simply absorb the increases: The prospect of raising prices never came into play for Cheryl McAlarney, co-owner of McAlarney Pools, Spas & Billiards in Marietta, Ohio.
Indeed, the notification from her suppliers came just ahead of an early summer rush, she recalled, as a particularly wet spring gave way to warmer Midwest temperatures.
“It all happened when we got swamped,” she added, “so we just didn’t give any thought to raising them.”
Management at Sunplay Pools & Spas in South Ogden, Utah, has tried to keep prices down on most products as well. Owner John Olsen is charging a bit more for salt cells and a select few pumps, he said, but overall his policy remains focused on increasing sales volume.
Still, Olsen has raised his rates — by some 5 to 10 percent — in other areas that may not be as closely scrutinized by consumers, namely service and labor on equipment installations.
Volume is the keyword for Phoenix-based B&L Pools as well. The five-store operation has leaned heavily on promotions and discounts to drive store traffic in recent months, said general manager Blaine Benson.
But that doesn’t mean prices have remained stagnant. After all, Benson noted, average cost hikes of 5 to 7 percent among his four major suppliers represents some 65 to 70 percent of his business.
“Our initial reaction has been to raise them by the same percentage,” he said. “Pretty much whatever I’m getting hit with, I’m following suit. But because we’re retail, we may also have to adjust back down at some point to suit the market.”
Service technicians are finding fewer opportunities for pricing flexibility, and most are reluctant to raise monthly rates, especially for longtime customers. Newer accounts, however, can be more easily trained to higher prices, said Al Mangin, owner of Dependable Pool Service in Temecula, Calif.
Mangin also now considers charging for extra services that he may have previously covered himself — phosphate removal, salt cell cleaning and adding conditioner among them.
Others, such as Brian Kelly of Shamrock Pool Services in N. Lauderdale, Fla., have chosen to add a fuel surcharge for each client visit. It’s a strategy that actually dates back to 2008, when gas prices shot above $4 a gallon for the first time ever.
That spring, Kelly explained to customers the need for a surcharge to offset his fuel costs. When gas fell a few months later, the additional charge was rescinded, he said. But the line item remained on his contract, and beginning last month, a $1.75 assessment per visit was re-incorporated.
“I think something like that is an acceptable sell to most people,” Kelly said. “We’re not making money on it — we’re just covering the cost of the price increase.”
Pool builders may well have had the toughest time adjusting to the new pricing, as many are tied into existing contracts. Some can counteract the increase by marking up items that were purchased at the previous price. But even that is a luxury not all builders can afford. Indeed, the majority are constrained by limited cash flow that prevents them from substantial early buys and extensive forecasting.
“I respect the manufacturers’ business and what they’re trying to do, but now is not the time to pass on increases if they can be avoided,” said Raymond Whitford, president of Lifetime Pools, aPool & Spa News Top Builder based in Palo Alto, Calif.
“We’re not out of the woods yet — the market is still soft in the Bay area,” he added. “Don’t get me wrong, I’m still optimistic, but it seems a little unreasonable given the economic situation and the timing.”