A silent competitor: the ups and downs of riding the e-commerce wave

Pool & Spa News, Nov 19, 2004 by Rin-rin Yu

As soon as e-commerce became a buzzword, Jay Smullen seized the opportunity. "The minute I found out about the Internet, I knew it would be another way to offer a product," says the president of Pool Mart and Poolmart.com in Stuart, Fla.

Today, Smullen's online business sells much more than his actual retail store. In fact, his online displays are limited only by the boundaries of cyberspace.

He's not the only retailer who has capitalized on the Internet. Since its inception in the late 1990s, many pool and spa retailers have rushed to grab a chunk of the growing phenomenon. Outlets such as eBay and Amazon provide the largest exposure to the general consumer, but cyberspace has its limitations. Though the e-commerce competition has spilled into pool and spa retailing and caused sellers to be on their toes, the threat is not as prevalent for the industry as once believed.

The rising swell

Retailers agree they cannot deny the presence of the Internet as a major competitor for customers. In the second quarter of 2004, retail sales conducted over the Internet accounted for 1.7 percent of all retail sales nationwide, or $15.7 billion, according to the U.S. Commerce Department. This figure excludes online travel services, ticket sales and services of financial brokers and dealers.

Pool-related purchases account for 3- to 4 percent of total aftermarket sales, according to PK Data, a Duluth, Ga.-based marketing research company.

The mere presence of Internet competition made many retailers nervous as they scrambled to meet new market demands. "It dramatically changed our thinking about the future of our products," says Kathleen Carlson, senior vice president of sales and marketing at Aqua Quip, a Pool & Spa News Top Builder. "We couldn't fight it, so we had to figure out how to deal with it."

The Seattle-based builder/retailer ended up jumping on the electronic bandwagon and setting up its own online store. However, Aqua Quip soon discovered the venture was not cost-effective to its sales, so it abandoned the idea. The company left the Web site up for information purposes only and resumed focus on its physical stores.

"One of our responsibilities as a retailer is to sell the customer on [an item they E-commerce continued from page 170 found online], match the price and upsell them on another item," Carlson says. "It's the other items not found on the Web that you can also sell."

For his part, Smullen had better luck. He says he was the second company in the country to open an online pool shop, which gave him a head start. However, he says it's become tougher competing with literally thousands of other online stores.

"Our piece of the pie has gotten much smaller, but fortunately, the pie's gotten bigger," he says. "We've seen an increase every year in Internet sales. There's a bigger market than the local five-mile radius."

Dan DeWoody's company also expanded into the Internet. Home and Leisure in Bakersfield, Calif., which started as a brick-and-mortar location bath shop, eventually added spas and pools to its inventory. With the growing competitiveness in the market, DeWoody soon became a regular retailer on eBay. He also operates several other Web sites.

The products he sells on eBay focus mainly on pool cleaners and pumps, but DeWoody also includes aboveground pool covers and fountains. "[These products] are easily accessible from local distributors," says the e-marketing manager. "Other products are harder to get and require large orders, so we only sell 'novelty items' during peak seasons."

Diminished returns

The competition is not as fierce for pool and spa retailers. PK Data's numbers show that more than half of all pool owners still buy their maintenance supplies at pool specialty stores rather than online or at big-box stores. Traditional pool specialists account for nearly two-thirds of the total aftermarket sales compared with the online sector's mere 3- to 4 percent.

"For the most part, people still prefer to buy a lot of things from pool specialists because they can get it right away," says Bil Kennedy, president of PK Data. "They also get the knowledge [from retailers] that can't always be accessed on the Internet."

Kennedy further points out that many pool owners may not be computer-savvy, particularly those in the baby boomer set. This demographic comprises a great portion of pool and spa owners.

Experts say the spenders will turn over with a generation of more computer-smart shoppers. But they believe cyber-shopping will taper off. This eventual slowing is evident by the burst of the dot-com bubble, which caused a once-promising market to slam on the brakes.

That's not to say the phenomenon will disappear. Doubtless online retailing will adapt to survive, notes Dr. William H. Crookston, professor of entrepreneurship at Marshall School of Business at the University of Southern California in Los Angeles. "There will be more specific niches," he notes, "lots of experts and lots of ways to judge the quality [of products]."