Hot Tub Forum
Original => Hot Tub Forum => Topic started by: bodguy on June 13, 2004, 12:57:11 pm
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I've been lurking boards for over 2 months and continue to be amazed how people insist to know the bottom line price and then expect to buy a tub $500.00 over dealer cost.
Does anyone realize what it takes to own a business...any business?
If you are in business and do not make a margin of 25% to 30% you will not be in business long.
Example: Spa "a" costs you $10000.00, 30% margin means the dealer made 3k....outraqeous you say!!
Dealer of Spa "a" sells 20 spas a year, gross profit of $60k!! outrageous again!!
Let's see here.....Delivery, lets be conservative here $100 per delivery......2k, gross margin down to $58k
Rent...Consevative again....$1000.00 per month = 12k...gross margin now down to $46k
Insurance...conservative again $200 per month $2.4k, we are down to approx $43k
Vehicle fleet...lets say a small fleet... 2 vehicles... insurance, gas, vehicle cost and maintenance....12k annually, down to 31k profit.
Oops we forgot hired help....lets say 2 people not counting the owner at $8.00 per hour, counting workmans comps and social security that number is closer to $12.00 per hour, lets make em part timers to cut costs......40 hours per week total between the 2, 2080 hours per year X $12.00 = $29k.....we are down to 2k net profit.
Forgot electricity and heating and cooling...we need to run the showroom models and have a comfortable environment for our customers.....thats gotta be 2k per year...looks like we are down to a net profit of ZERO.
Now me being the owner and assuming I am making 3k gross profit per $10000.00 sale I need to sell 20 more tubs to make myself, the owner, $60k BEFORE taxes.
Now if I am making 50% per tub ....really outrageous huh? I wont have to sell that additional 20 spas....if I want to make $40k before taxes......(I'm worth more than 40k per year)
Dont ask for dealers cost....they aren't trying to rip you off, they just know that the average consumer will not understand that a 30% markup is what is needed to run a business. Consumers who would know the true dealer cost would just be pissed off thinking they were ripped off......That folks is why they won't tell you and shouldn't tell you
BTW I am not in the spa business...or any business for that matter, just common sense economics here
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20 tubs a year is super conservative. My local HS dealer sold 300 last year. So, using your numbers and assumptions, he made about 540k !!! Does this sound right? A dealer should easily sell 50 in his sleep - thats only 1 per week.
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BTW I am not in the spa business...or any business for that matter, just common sense economics here
A helpful example of economics and why spas are so expensive; though one should keep in mind that they are example numbers not actual data from someone in the spa biz. And the HUGE assuption is that the dealer actually paid $7k for a spa sold for $10k.
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20 tubs a year is super conservative. My local HS dealer sold 300 last year. So, using your numbers and assumptions, he made about 540k !!! Does this sound right? A dealer should easily sell 50 in his sleep - thats only 1 per week.
Well maybe your dealer did sell 300 last year but they certainly all weren't $10, he certainly paid waaaay more for leasing, employing, etc. as the numbers used in the example were very low. The point I take from the post is your dealer isn't selling these out of the trunk of his/her car and he/she has some real expenses that have to be factored into the price.
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20 tubs a year is super conservative. My local HS dealer sold 300 last year. So, using your numbers and assumptions, he made about 540k !!! Does this sound right? A dealer should easily sell 50 in his sleep - thats only 1 per week.
All my numbers were conservative and not all inclusive of all the costs (computers, phones, advertising, stock, interest on your business loan etc etc)....but relative. A business selling 300 tubs a year certainly has a cost of doing business many times the numbers I was using. And by the way the values I was using were only very simplistic values used to make a point.
If you want to know the dealers cost so bad multiply the price you pay for your tub by 25 to 50 percent (probably right about 30%) if it makes you feel any better.
Bottom line, if you are in retail and aren't making 30% gross profit (not net), across your entire business, you are out of business....period end of discussion.
Now could accessories, chemicals etc help make up the difference, maybe. Chances are they are marked up 50 to 75%, but my guess is a spa dealerships bread and butter is the spas themselves.
And one more thing using my assumtions...I will bet the NET profit from a tub is right about $500 . So if Im right your 300 tub shop owner made a profit of $150,000 last year. About right for a medium sized business. I know I wouldn't want to own a business and make less than that.
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A helpful example of economics and why spas are so expensive; though one should keep in mind that they are example numbers not actual data from someone in the spa biz. And the HUGE assuption is that the dealer actually paid $7k for a spa sold for $10k.
Yes sir, it is a huge assumption, however, across the entire business there has to be a 25 to 35% gross profit to pay for overhead etc etc. I know money is made elsewhere in the spa business, I just don't know where or how much, and if Im overstating the dealer cost estimate then I apologize. But I will bet there are dealers on this board that will agree with me that their cost of doing business is in the 20 to 25% range. Whether they make that percentage on the tubs themselves or elswhere is really a mute point...cost is cost.
I also want to make it clear that I am not one of those people who want to overstate dealers costs etc. The point I am trying to make is that you as the customer never know the true cost of large ticket items.
And for the best analogy of all......When you buy a beer at a bar $2.50, the cost to the bar owner is about 50 cents, why does that ripoff artist need to make 500%???
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all I will add is that...If any business provides a service or a product that people see value in than that is all that matters...what may appear to someone as excessive profit may only be a small part of the business and its business cost....I hope that each dollar I spend that the owner there is making a good living and that he will be there tomorrow...becasue if I chose to spend my money with him there today....there is a good chance that I will desire to do so again....and the great part of things are...If I am unhappy with what he charges and do not see it as fair...I can simply choose to go else where....and that is why I strongly believe that the competitive balance of our market keeps most things in line.....just one more thing....I understand that there will be abuses by some....and at times the chance to go else where will not exsit....but in the big picture that is truly more of the anomaly of things...
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A helpful example of economics and why spas are so expensive; though one should keep in mind that they are example numbers not actual data from someone in the spa biz. And the HUGE assuption is that the dealer actually paid $7k for a spa sold for $10k.
I am very familiar with the numbers in the spa biz. I can assure you that a 30% percent margin on a spa is about normal.
\Although the expenses he used were WAY underestimated. $1000 for rent? That is ubsurdly less than most dealers pay.
2 employees totaling $29,000 per year. That is laughable. Would you want one of those 2 part time employees servicing your $8,000+ spa?
No cost for advertising. In my city a good size newspaper ad on a weekend costs close to $10,000. If you do that once a month its $120,000. A consevative yellow page ad is $10,000+ a year(if you only have 1 yellow page ad.)
I could go on
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that's quite funny...... thank you. I'm trying to hire a couple of high school students for the summer. At $8 and hour, most aren't interested. I've been told the fast food places are starting at $9 - $10
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I am very familiar with the numbers in the spa biz. I can assure you that a 30% percent margin on a spa is about normal.
\Although the expenses he used were WAY underestimated. $1000 for rent? That is ubsurdly less than most dealers pay.
2 employees totaling $29,000 per year. That is laughable. Would you want one of those 2 part time employees servicing your $8,000+ spa?
No cost for advertising. In my city a good size newspaper ad on a weekend costs close to $10,000. If you do that once a month its $120,000. A consevative yellow page ad is $10,000+ a year(if you only have 1 yellow page ad.)
I could go on
If you read up 2 posts you will see that I agree that the cost estimates were low...all the numbers were....I was using very generic and simple numerical values to state my point to those who are not as business savy as others.
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Nonsense.
As a buyer, unless you are loaded, you have an obligation to yourself to spend only what is necessary to get what you want - within reason - in fairness.
You also have an obligation to keep the dealer - whatever he may be selling honest and competitive too.
This thread is daffy.
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This thread is daffy.
Yeah... I'm duck'n out of this one! ;)
Other than to say that bodguy has brought up some great points as a useful guideline to give these people that think all spa dealers are making 100 points on each spa sold a small clue.
If you want to keep your local dealers honest, shop wisely and don't buy from the company you feel has poor value. Your decision to purchase elsewhere will be a loud voice to let them know that their pricing is out of line. It has nothing to do with knowing costs. That is so thoroughly laughable. Like the consumer has any clue what margins any one company needs to stay in business. ???
Yeah, lets let them decide what they want to spend and let them have it at whatever price they feel is fair? Seems to make great business sense to me!! ::)
Steve
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Nonsense.
As a buyer, unless you are loaded, you have an obligation to yourself to spend only what is necessary to get what you want - within reason - in fairness.
You also have an obligation to keep the dealer - whatever he may be selling honest and competitive too.
This thread is daffy.
Why is this thread daffy???
Never did I say you shouldn't get the best price possible >:(.
I believe the best way to do that is to research and find out what others are paying for the same tubs on sights like this and drive a price somewhere in that range.
Asking for dealer costs on Spas IS NOT the way to get your best price because there is not a chance on the planet anyone is going to sell you ANYTHING as large and expensive as a spa at 5% above their cost!!! All you as the consumer is going to do is walk away pissed off and spaless.....
see the older threads with the poster named needsaspa
If you think the best way to price a spa is to do so utilizing dealer cost tell the dealer you will pay him 20% above his ACTUAL cost, make him prove his cost and see if he bites. My guess is most dealers wont as a 20% margin is to low for them to sell at :)
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Who is needsaspa? Is he a dealer? I have seen alot of references to him/her.
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Yeah... I'm duck'n out of this one! ;)
Other than to say that bodguy has brought up some great points as a useful guideline to give these people that think all spa dealers are making 100 points on each spa sold a small clue.
If you want to keep your local dealers honest, shop wisely and don't buy from the company you feel has poor value. Your decision to purchase elsewhere will be a loud voice to let them know that their pricing is out of line. It has nothing to do with knowing costs. That is so thoroughly laughable. Like the consumer has any clue what margins any one company needs to stay in business. ???
Yeah, lets let them decide what they want to spend and let them have it at whatever price they feel is fair? Seems to make great business sense to me!! ::)
Steve
Steve Im dragging you back into this thread, I've been waiting for a dealer to repsond :)
I know your a Beachcomber sales person (can't wait to see one in real life btw)
Hypotheical question with a hypothetical spa.
Would you as a spa salesman sell me a new model year, unused $5000 (your cost) spa with all the fixin's (chemicals, delivery, steps, lifters etc) for $6000.00? (20% over your cost). Better yet just the spa, no fixins, for 20% over your $5000.00 cost?
Im not asking you to hold yourself to it if you would, but as many times as people ask what is dealer cost around here, I am just trying to provide a little reality check on what it takes to run a business, what real pricing is, and most of all how it is ABSOLUTLY not fair to use the dealer cost on something as expensive as a spa to base ones offer on.
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Who is needsaspa? Is he a dealer? I have seen alot of references to him/her.
Needsaspa was a guy that insisted spa markups were in the 70 to 80% over dealer cost. He inisted that he could get a spa that averaged around 8k from people who had bought them, for somewhere in the $5.5k range.
I bet he still needs a spa ;D
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how it is ABSOLUTLY not fair to use the dealer cost on something as expensive as a spa to base ones offer on.
Unless I missed something, I don't believe any post on this thread has suggested otherwise.
As i understand it folks are either talking apples or oranges:
- apples being that a dealer has real costs and needs to have about a 30% margin
- oranges being that there are dealers out there that are pricing unreasonably above a 30% margin
no need to present argument for grapefruits
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Steve Im dragging you back into this thread, I've been waiting for a dealer to repsond :)
I know your a Beachcomber sales person (can't wait to see one in real life btw)
Hypotheical question with a hypothetical spa.
Would you as a spa salesman sell me a new model year, unused $5000 (your cost) spa with all the fixin's (chemicals, delivery, steps, lifters etc) for $6000.00? (20% over your cost). Better yet just the spa, no fixins, for 20% over your $5000.00 cost?
Im not asking you to hold yourself to it if you would, but as many times as people ask what is dealer cost around here, I am just trying to provide a little reality check on what it takes to run a business, what real pricing is, and most of all how it is ABSOLUTLY not fair to use the dealer cost on something as expensive as a spa to base ones offer on.
To answer your question up front... NO!
Keeping in mind, we as a dealer don't negotiate price at all. We do have different promotions that run throughout the year that offer our customers great value, but I refuse to inflate pricing to give our customers perceived value.
People will either see the value in our product, or they don't. If they purchase somewhere else, I blame it on myself for not doing a good job in explaining the value's and benefits of our product.
When people want to negotiate, I explain the way we do business. It's not an issue generally and if anything, most appreciate it. In the event of more difficult people, the best thing I can do is explain that I want to be around to look after any service issues and help them in maintaining their spa for many years. Selling it at a margin below the mark we need to operate our store, is financial suicide and nobody wins in the long run.
I've had people bring out $1000.00 bills out their wallet and still the price doesn't change. Most everyone wants free stuff and we understand that. There's times where some additional products might be given, but these are generally inexpensive and more of a token.
As a side note for empolgation, it has been suggested in earlier posts by some that all dealers should disclose thier costs so consumers can decide value. A suggestion that makes no sense to me personally.
Steve
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Steve, i greatly appreciate your posts.
...I refuse to inflate pricing to give our customers perceived value. ...
When people want to negotiate, I explain the way we do business. It's not an issue generally and if anything, most appreciate it.
I certainly would appreciate it! That, from this customer perspective, is the way to do business as a spa dealer.
As a side note for empolgation, it has been suggested in earlier posts by some that all dealers should disclose thier costs so consumers can decide value. A suggestion that makes no sense to me personally.
True enough, there have been other topics with such suggestions, I was merely pointing out that from reading the posts in this topic I didn't believe anyone was disputing the sense of it. (Do keep in mind though, that while many of those suggestion posts didn't make sense and were simply ignorant, not every one was nonsensical and void of discernment)
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Understood. Thanks for your input.
Steve
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Several reasons for the daffieness. I do not think knowing what people pay is, or should be the sole criterial.
I do think that a level playing field allows for fair negotiation, and without sharing as much knowledge as possible it will never be fair, if the dealers know the facts and the buyers are left to assume then the dealer has the upper hand 100% of the time.
The (so called) dealer price (as we all know) in the auto world is not real - but it is a start - same deal here, or in any transaction designed to include the BS - and that is what it is B S, of negotiating a price.
Why do you not go to sears, pick up a pair of shorts and say, $19! that's too much, I'll give you $5.99 - because that is not how business is conducted in retailing - in general, you want the shorts you either wait for a sale, wait for end of season clearance or pay the price.
Only in tubs and cars (anything else?) do the dealers make up some B S price, have B S sales - week after week, and expect us to be idiot sheep for the slaughter.
Ok let's add mattresses and furniture to the list.
And, in general what do all these salesmen have in common - some present company excepted? They are all rather pushy people (can't use the b word here).
That is why not asking for a dealer price - as a STARTING point is D A F F Y.
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That makes sense to me.
The (so called) dealer price (as we all know) in the auto world is not real - but it is a start - same deal here, or in any transaction designed to include the BS - and that is what it is B S, of negotiating a price.
Very similar, but not the same - the auto industry has some regulation and at least the customer is given an idea of fair value based on a Dealer Invoice (or Blue Book for used). Blessed be to this forum and its kind folk for giving me an idea for spa prices.
If only Sears sold spas...
("Kenmore Kozy" has a nice ring to it)
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agreed not the same, but the purchasing scenario is the same, and the concept should be similar.
Hence preventing people from needing to share their prices, or dealers/mfrs from worrying about it - if they do at all.
My 'crusade' in this matter is simple. The buyer is expected to negotiate, but has no idea what real costs are, the seller knows what real costs are, but may not price their products accordingly and instead use some grossly inflated MSRP.
Does this sound fair to you?
Steve?
Chas?
Conspicuously quiet?
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I must say it would be highly unlikely that most people TRULY want to buy most anything if they feel that their negotiating skills will get them a better price.... a Regulated FEDERALLY enforced MSRP was supposed to do that for Autos and it only works for Saturn...I am still unsure of how many people fully understand that all you are paying for a Saturn is FULL MSRP which every car sold America has the same thing for their cars...Spas can very easily set a valid MSRP and than rest assured people will still want a better deal....which there is nothing wrong with...but how outside of autos do you find the invoice for most any other thing sold in america....again I say I do not think that you local spa dealer is the rich king pin of your town....more than likely it is a family business with someone just trying to make a living....perhaps I am just naive....
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No one wants to get stabbed on buying a spa.
I'm certainly willing to pay for value, including (yes, yes) good service and support after the sale.
But here's Spa Brand X that looks good and Spa Brand Y that looks good, and X is $7500 and Y is $8500. Is the difference that the Brand Y dealer has a 40 foot sailboat and the Brand X dealer doesn't, or what?
How to tell?
Hence the questions about "What markup is fair?" and the like. We know, for example, that Costco limits their markup (you can look this up) to 14%. We see the ProForm spa on their web page for $4799.99 (or whatever it is) and we're thinking, "Hmmm! That sounds like the features on the Brand X spa, but it's $2500 less... Could the difference be in the markup? What are the chances that the Brand X dealer will provide me goods and services after the sale with a fair market value of over $2500? What would those goods and services be, and how can I be sure that I will actually get them?"
The car situation go so bad that the federales had to step in and require MSRP stickers and the like. The spa industry isn't showing up on the legislative radar screen yet, so we're on our own.
I'd be the last person to say that a XX% markup is too high, but I'd hate to buy someone else a sailboat when I don't have mine yet!
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OUtside of autos and homes and a few other things (usually of significantly higher cost), what do you negotiate when buying?
Nothing. So, why is the field so unlevel? Why must the buyer be no different than a person playing a slot machine in vegas for pricing (all luck)?
Steve - how do we know you do or don't jack your prices - WE HAVE NOTHING TO COMPARE TO?
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so a guy with boat is now over charging and ripping everyone off....geez what happened to hard to work to make yourself better.....Please snap out of it...if someone is grossly over priced THEY WILL FAIL.....the competition will DEVOUR them....guess what......it is really competition that drives market prices....there are probably hundreds if not thousands of examples where someone feels they are paying to much.....last night my neighborer got a bid for a block fence......7 grand....had a bid from another guy for 5 grand....so he looks and both or gets another and than decides.....but if the guy bidding 7 never gets his or any other jobs guess what he is gone unless of course he independently wealthy and is in it for the fun....has anyone found the tyrant spa dealer yet who controls the purse strings of his town....I just do not think he exsits....
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Jaw.....
I know you golf....Have you ever asked for better price on clubs than what was listed.....I know I have....I think all of us negotiate more than realize only with larger ticket items we pay more attention to it.....lol......also you might not try to in Sears or Best Buy....but go to a local store that sells similar products and is an independent store and I bet you are more likely to ask for a better price.....
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First off, I do not buy clubs new - why pay the ridiculous mark-up?
Second, I think it rather bold for a person to assume they can negotiate because they are dealing with a mom and pop store.
Actually, I do 'negotiate' at sears (I like their service of certain items), I find my best price off the internet, and visit them saying beat this and I am yours. Or I amass various 10% off coupons - they have a deal where if the price is lower within 30 days they will credit you - but this is still apples and oranges.
Like cars - I think the best analogy, one cannot reasonably conpare ford to gm or honda, but they can compare ford to ford - for pricing and features.
If I want a Marquis Spa, with all having protected markets - to reduce competition and artificially keep prices high how am I to determine what is fair? Or, as more and more people are doing, shall I just save 4K up front and buy off internet or at Home Depot?
This is practice - spa secrecy in pricing that is doomed to failure and it will kill many companies - all of which ALL OF WHICH in the retail sector are mom and pops.
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.....the competition will DEVOUR them....guess what......it is really competition that drives market prices....
One slight flaw to this thought is that competition among a certain brand of spa is limited to the one that is allowed in your area. You can't just go around the block to see what price the other guy is selling the same tub for (heck, I haven't even been successful at getting a price quote on the phone); hence the number of topics concering price. The "competition" is in a completely different area driving his own "market price" (evident by the differences in prices posted on this forum).
An example, in my area, for a particular brand I am interested in purchasing the 2 closest dealers are about 175 miles apart (price difference $1300). Sure I can go check out a different brand of tub but it is just that, different. To make use of a favorite industry comparison on this board... would you go down the road to buy a Jaguar when you were shopping for a Mercedes?
As for traveling out of area to purchase a particular spa brand from "the competition", a different dealer, i believe there are plenty of other posts about how that works, search and read at will, but to summarize, it makes for a disgruntled dealer as well as adding complication and cost.
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First off, I do not buy clubs new - why pay the ridiculous mark-up?
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This is practice - spa secrecy in pricing that is doomed to failure and it will kill many companies - all of which ALL OF WHICH in the retail sector are mom and pops.
Jaw you are a wiser man than I ....I always seem to buy new clubs :D.....
I am not sure why the perception of spa pricing secrecy.....the real reason for protected Territory's is it is a very slow moving item which in many parts of the country are sold seasonly.....yet dealers must stay open year round.....the largest in the indusrty.....Watkins....Hotsprings.....is what 600,000 untis in 25 or so years.....that is an extremely low number for a the Industry sales leader to move in that amount of time....
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Well, let's say that I'm looking for a car. (Actually, the very bottom end of the car price spectrum overlaps the top end of the spa price spectrum, so this isn't a seriously inappropriate comparison.)
Let's say I'm looking for a Chevy. There's probably a dozen (seriously) Chevy dealers in my metro area. I promise you that I can know within 15 minutes what their invoice amount and their holdback both are on that vehicle. All the vehicles are manufactured in the same plant, to the same standards. (Insert derogatory comments here, if you're not a Chevy fan)
All I've gotta do is call the dealers, offer them $500 over invoice, let them keep the holdback, and I'm driving away with what I'd call a fair deal.
Now let's talk spas. There's at least a hundred different spa manufacturers in America. It's what Michael Porter would call a "low market entry barrier business." If you've got a vacuum former, a mold, an oven, and you're smart enough to glue pipe and pound nails, you're in the spa business.
There are no objective standards. How many horsepower is that pump? Well, it depends. It may have a "5HP" sticker on it, but the space on the motor that's usually used for "horsepower" has been left conveniently blank. It could be a "5 dollar Horizontal Plastic" pump, for all we know. How strong is the spa shell? Well, it's really strong. Really, really strong. Extra really strong. I promise!
With the lack of objective standards, we get an emphasis on "wet test." How does that make you feel? Does it make your toes tingle? A little? A lot? How about my toes? How much would they tingle? Would it be real fun? Real tingly fun? Or just kinda fun?
Clearly, the manufacturers have given dealers a protected territory. In the spa business, I see their point. Who wants to open a Brand X spa store, only to have the Brand X regional manager's brother-in-law open up a competing store selling the same spas half a block down the street? The dealers are supposed to be selling their brands based on features and benefits, without the distraction of readily available model-to-model price comparison. And I'm sure the Brand X regional sales reps make a big deal, when they're trying to set up a new dealer, of telling them they have an exclusive territory so they can make a fortune on every spa. (Reality invervenes rudely, I'm sure)
So, our options are to either focus on Brand X and pay whatever the dealer down the street wants that day, shop around at a distance for Brand X, or comparison shop between Brand X and Brand Y.
What other choice is there?
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Several reasons for the daffieness. I do not think knowing what people pay is, or should be the sole criterial.
I do think that a level playing field allows for fair negotiation, and without sharing as much knowledge as possible it will never be fair, if the dealers know the facts and the buyers are left to assume then the dealer has the upper hand 100% of the time.
The (so called) dealer price (as we all know) in the auto world is not real - but it is a start - same deal here, or in any transaction designed to include the BS - and that is what it is B S, of negotiating a price.
Why do you not go to sears, pick up a pair of shorts and say, $19! that's too much, I'll give you $5.99 - because that is not how business is conducted in retailing - in general, you want the shorts you either wait for a sale, wait for end of season clearance or pay the price.
Only in tubs and cars (anything else?) do the dealers make up some B S price, have B S sales - week after week, and expect us to be idiot sheep for the slaughter.
Ok let's add mattresses and furniture to the list.
And, in general what do all these salesmen have in common - some present company excepted? They are all rather pushy people (can't use the b word here).
That is why not asking for a dealer price - as a STARTING point is D A F F Y.
I'll bet ya the markup on those $19.95 shorts is over 100%!!!!
If I agree with you that the best starting point is dealers cost, would you agree with me, and agree to pay 30% above what the dealer paid, if he showed you?
I've already asked Steve if he would sell me a 5k dealer cost spa at a 20% markup...he emphatically said no. Why?? He can't stay in business at 20% over his cost....he doesn't have the volume of a car dealer, or the clothing department at sears.
If you look at the posts of people stating what they paid for tubs the spread is about $900.00 from low to high on an 8k tub. You have to take in the size of the dealer, location , etc to account for the price difference.
If you read this sight like I know you do and research the crap out of your tub, if you pay more than 1k higher than anyone else, then it's your own fault for lack of negotiating skills.
I'm moving to Mississippi in 2 weeks and will be purchasing a tub there. I know there are market variables, but it is a very economically depressed part of the country. When I research and decide on the tub that I want I am coming back here to reasearch and survey the costs people paid. Im going to open my negotiation at the lowest price in the spread, and will only move up very slightly. If I can't get the price I feel is fair, Ill walk. If I get the price I want to pay, I will do so gladly, knowing I paid 20 to 30% over his cost :)
Thanx for the reply Steve.....I looked at the Beachcomber sight when I put in the zipcode, the closest dealer to me was Canada :(
The zipcode is 39564 btw...if you can help :)
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Well, let's say that I'm looking for a car. (Actually, the very bottom end of the car price spectrum overlaps the top end of the spa price spectrum, so this isn't a seriously inappropriate comparison.)
Let's say I'm looking for a Chevy. There's probably a dozen (seriously) Chevy dealers in my metro area. I promise you that I can know within 15 minutes what their invoice amount and their holdback both are on that vehicle. All the vehicles are manufactured in the same plant, to the same standards. (Insert derogatory comments here, if you're not a Chevy fan)
All I've gotta do is call the dealers, offer them $500 over invoice, let them keep the holdback, and I'm driving away with what I'd call a fair deal.
Now let's talk spas. There's at least a hundred different spa manufacturers in America. It's what Michael Porter would call a "low market entry barrier business." If you've got a vacuum former, a mold, an oven, and you're smart enough to glue pipe and pound nails, you're in the spa business.
There are no objective standards. How many horsepower is that pump? Well, it depends. It may have a "5HP" sticker on it, but the space on the motor that's usually used for "horsepower" has been left conveniently blank. It could be a "5 dollar Horizontal Plastic" pump, for all we know. How strong is the spa shell? Well, it's really strong. Really, really strong. Extra really strong. I promise!
With the lack of objective standards, we get an emphasis on "wet test." How does that make you feel? Does it make your toes tingle? A little? A lot? How about my toes? How much would they tingle? Would it be real fun? Real tingly fun? Or just kinda fun?
Clearly, the manufacturers have given dealers a protected territory. In the spa business, I see their point. Who wants to open a Brand X spa store, only to have the Brand X regional manager's brother-in-law open up a competing store selling the same spas half a block down the street? The dealers are supposed to be selling their brands based on features and benefits, without the distraction of readily available model-to-model price comparison. And I'm sure the Brand X regional sales reps make a big deal, when they're trying to set up a new dealer, of telling them they have an exclusive territory so they can make a fortune on every spa. (Reality invervenes rudely, I'm sure)
So, our options are to either focus on Brand X and pay whatever the dealer down the street wants that day, shop around at a distance for Brand X, or comparison shop between Brand X and Brand Y.
What other choice is there?
First as to your reference to cars...there is more than just the hold back....there are also stair steps that a car dealers can meet for additional money....among several others....however both stair steps as well as hold back do not apply to spas....there are standards as well...watkins for example have to meet ISO 9000 manufacturing standards....You might also take notice the among what people consider to be the leaders in the Industry....Watkins...Marquis...Sundance...Jacuzzi....D-1, Beach Comber...most list of gallon per minute and not horse power.....also Home depot has lots of nails and pipes you can find a shell from several sources....why not have at it.....I have asked twice now for someone to show me the local spa dealer who is the "Bill Gates" of his town no response to from anyone....you made the referance...
"And I'm sure the Brand X regional sales reps make a big deal, when they're trying to set up a new dealer, of telling them they have an exclusive territory so they can make a fortune on every spa. (Reality invervenes rudely, I'm sure) .....I still do not see it.....I am someone who is looking into becoming a dealer due to an injury that forces a career change...my biggest question is will I be able to make it.....just enough so that I do not lose my home and all I have worked for....I am also confused by those who simply do not buy from Jim who's sells direct....or from many of those factory direct places....is it because the old saying you get what you pay for holds true......
also basic math works out to something like this.....as a example....common acceptance is that the sales leader Hot Springs has been around for about 25 years and has sold about 600,000 spas they have about 800 dealers from what I understand.....but lets be Conservative and say they have 400.....600,000 divided by 25 years is 24,000 spas a year divide by 400 dealers is 60 spas per dealer a year....of course this a very simple example but it points to why there simply can not be a dealer on every corner...the market is simply not there to surpport it..auto sales have be running about 17 million units per year each and every year for the past several years by the way....It is the industry that I am leaving...again due to an injury....I mean no disrespect to anyone....but in my research I do not think that dealers are out to rip someone off....and again as in all walks of life there will be those who do try but again they simply will not last for long....
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Having started out in the auto industry, I feal that you have left some things out.
Auto dealers do not pay factory invoice.
Most auto dealers would go out of business if they had to depend on new car sales for income.
Most auto dealers sell more cars in a month than the average spa dealer sells in 6 months.
Most auto dealers rely on service and used cars to make a profit.
Most auto manufacturers pay the majority towards warrantee repairs, where in the spa industry the dealer has to soak up most costs associated with warrantee repair.(this is why the manufacturer does not require them to fix spas they did not sell.)
I know 4 people who own new auto dealerships, and I know 5 people who own spa dealerships. The highest earning spa dealer makes only 1/5th of the income of the lowest earning car dealer.(I am talking about the owners personal income)
If you belive the federal standards in the auto industry has helped you the consumer, you should do better research.
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in this "new world capitalism" society that we live in I have compasion for spa dealers and understand the great challenge to be a "fair pricing" spa dealer. Everyone wants money. The customer wants a lower price so he keeps his money, while the dealer wants to justify a higher price to bring in more money.
For those of you who are not dealers...
Imagine being given a product targeted for disposable income with no price regulation and a territory giving you virtually exclusivity. You know the little devil is on every dealer shoulder. It takes great strength for a dealer to put a 30% margin price tag of $8000 knowing that the average customer is paying $9200 for that particular spa he sells because the touted retail price is $12,000.
Eeeks!
I wouldn't want to be in that position. :-/
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If I agree with you that the best starting point is dealers cost, would you agree with me, and agree to pay 30% above what the dealer paid, if he showed you?
If I'm not mistaken, i believe the issue being argued is that in many cases spas are priced unreasonably above a 30% margin because the consumer has no way of knowing the margin, not that 30% is unreasonable.
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If I'm not mistaken, i believe the issue being argued is that in many cases spas are priced unreasonably above a 30% margin because the consumer has no way of knowing the margin, not that 30% is unreasonable.
But since you cannot know the dealer cost you must assume that the average of what everyone else is paying is right in the ballpark correct?
You know the more I think about it I doubt very much that anyone in this thread, or reading it for that matter, will purchase a tub way above a normal retail markup, and normal, reasonable, retail markup has been the point of all of my posts. We HAVE to assume that the average price others are paying are again, in the ballpark of whats fair
The ones who are in danger of paying 40% or more above dealer cost (or whatever the REAL reasonable markup is, since we don't really know for sure LOL)are those who do not research, those who walk in and buy that $12000 list price crap, and pay $10500 and think they got a deal. Noone in this thread is going to do that, I can assure you ;)
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Having started out in the auto industry, I feal that you have left some things out.
Auto dealers do not pay factory invoice.
Most auto dealers would go out of business if they had to depend on new car sales for income.
Most auto dealers sell more cars in a month than the average spa dealer sells in 6 months.
Most auto dealers rely on service and used cars to make a profit.
Most auto manufacturers pay the majority towards warrantee repairs, where in the spa industry the dealer has to soak up most costs associated with warrantee repair.(this is why the manufacturer does not require them to fix spas they did not sell.)
I know 4 people who own new auto dealerships, and I know 5 people who own spa dealerships. The highest earning spa dealer makes only 1/5th of the income of the lowest earning car dealer.(I am talking about the owners personal income)
If you belive the federal standards in the auto industry has helped you the consumer, you should do better research.
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I am not quite sure what you mean.....it seems to me that we seem to be in total agreement that auto dealers make far more money and have far more ways for the dealer to make money....at least that was what I trying to share.....that from a dollar and profit stand point it is not a reasonable comparsion.....but I must ask....how do think federal standards hurt the consumer...
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And so this beggs the question, why in the world would you get into this business?!? It aint just about retailing hot tubs. Even though there are many of us here who are willing to give advice and assistance on troubleshooting spas, the service end of it is a B E A R. I find pleasure in getting on my hands and knees and discovering and repairing the problem with a hot tub. If you have no desire to sit in the pouring down rain with a plastic tarp over your head a flashlight and a screw driver, if that sounds miserable to you, then I'd advise not bothering. If you live in a cold climate, you better be prepared to sit in snow in sub freezing tempratures to repair one of you newly sold tubs before you get a freeze issue. If you think Naw, I aint gunna hafta deal with that cuz I'll have a fully staffed service department, guess again. Once you get 250 or 300 units out there, you will suddenly find that the service tech you have hired, however necessary, is costing you money. The only recourse is to get out of your leather chair and get into the field.
also basic math works out to something like this.....as a example....common acceptance is that the sales leader Hot Springs has been around for about 25 years and has sold about 600,000 spas they have about 800 dealers from what I understand.....but lets be Conservative and say they have 400.....600,000 divided by 25 years is 24,000 spas a year divide by 400 dealers is 60 spas per dealer a year....of course this a very simple example but it points to why there simply can not be a dealer on every corner...the market is simply not there to surpport it..auto sales have be running about 17 million units per year each and every year for the past several years by the way....It is the industry that I am leaving...again due to an injury....I mean no disrespect to anyone....but in my research I do not think that dealers are out to rip someone off....and again as in all walks of life there will be those who do try but again they simply will not last for long....
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I am not quite sure what you mean.....it seems to me that we seem to be in total agreement that auto dealers make far more money and have far more ways for the dealer to make money....at least that was what I trying to share.....that from a dollar and profit stand point it is not a reasonable comparsion.....but I must ask....how do think federal standards hurt the consumer...
Yes we are in agreement. I do not think that federal regulations have hurt the consumer, I just don't think they have helped.
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I would say they have helped in some ways...For example...at least people know that is MSRP is the same at every dealers lot in every state in the country...that dealers must pay the same for their cars....it does give a credible point of reference for price and cost......it may have hurt that some people think that 500.00 over invoice while being a good and fair price for certain autos...(one) that is not all the money the dealers are making for that sale and (two) it distsorts that 500.00 is a reasonable profit for other business that sell larger ticket items....the problem is the hold back money....stair step money among the other revenue sources that do apply to autos however do not apply to other industries such as spas... It did not solve the problem of mis- trust and some of the games that are played at auto dealers among others....nor did it put an end to that age old question of..." is this really your best deal"...
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True, but how much do the spa dealers have invested in their businesses, versus the average car dealer? We're talking "return on investment" here. I'll betcha I could open a spa store for $100K and have money left over. I'll also bet it would cost at least 10 times that to open an auto dealership for a major line...
Having started out in the auto industry, I feal that you have left some things out.
Auto dealers do not pay factory invoice.
Most auto dealers would go out of business if they had to depend on new car sales for income.
Most auto dealers sell more cars in a month than the average spa dealer sells in 6 months.
Most auto dealers rely on service and used cars to make a profit.
Most auto manufacturers pay the majority towards warrantee repairs, where in the spa industry the dealer has to soak up most costs associated with warrantee repair.(this is why the manufacturer does not require them to fix spas they did not sell.)
I know 4 people who own new auto dealerships, and I know 5 people who own spa dealerships. The highest earning spa dealer makes only 1/5th of the income of the lowest earning car dealer.(I am talking about the owners personal income)
If you belive the federal standards in the auto industry has helped you the consumer, you should do better research.
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That is very true Risk vs Reward....but your 100 K is still at risk for the opening of a spa store....and of course depending on what you carry and how the store is set up that number could also be much greater....I just guess my point is that, for the most part spa dealers are smaller local business, run by local people who are not trying to grossly over charge the people who frequent their busniess....I have mentioned before that I personally think that fairs...home shows may perhaps lend themselves more to that as you have traveling sales teams who are there to earn as much money as possbile...but will be gone when the event closes.....
( some local dealers may also participate at these shows..)
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One question for everyone reading this thread...What is stopping you from saying no to the price offered by a dealer? If you don't like it, don't buy it. It's that simple. What is the point of getting worked up because you perceive the dealer to be price gouging.
Everyone has the right to say no to the product being offered and that right is what keeps dealers in check. If you feel a dealer's pricing is completely out of line for whatever reason DO NOT BUY FROM THEM!!!
If you find that ALL hot tubs are too expensive you should probably consider how important owning a hot tub is. When you consider that a two week vacation for a family of four costs about the same as a hot tub, the price doesn't seem so outrageous.
Unless you live in a town with a very limited number of dealers, the competition will keep people more or less honest. Why? Beacuase if your prices are outrageous you are out of business.period.end of story.
This is true of any business whether it be hot tubs, cars or bubble gum.
Joe
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Thank you Joe....We totally agree.... ;D
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True, but how much do the spa dealers have invested in their businesses, versus the average car dealer? We're talking "return on investment" here. I'll betcha I could open a spa store for $100K and have money left over. I'll also bet it would cost at least 10 times that to open an auto dealership for a major line...
While you point is valid you fail to understand that in both industries most of the costs of starting a business are financed.
The only way you could start a spa store for a $100,000 is if your inventory was financed and you leased a building instead of bought one.
One of the auto dealers I know started out on a vacant corner lot with less than a dozen used cars. This person makes more than any spa dealer I know.
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There are many innovative ways to start a business...All I am saying is that I do not believe most of the spa dealers across the country are there to rip off...grossly over charge.... or simply abuse their customers.... I do understand that yes some may abuse a situation at times but I think that they will quickly fail...and again I just think that for the most part you have a local person trying to make a living as a dealer.... if so, he goes to work each day with no guarantee that he will make a single dime.... As I have said before, it is my sincere hope that any business I frequent does prosper...since I am spending money there, they must be offering me something that I consider to be of value.... and I hope that they are smart enough to do so and still earn a great living, while at the same time keeping me happy...
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Another example of this reality occurs to me. For everyone who may work for an employer, ask yourself what "profit" you make on the work that you do for your employer? Do you charge your employer a profitable rate for your services, or do you say, "Ya know, its just plain immoral for someone to make more than a 5% profit on anything, so I'm only going to charge my employer my cost for gas to get to and from work, plus 5%."
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Here's a real number:
When we had three stores, we were paying just a tad over $12,000 per month in rent. That was rent alone, not any utilities, insurance, maint. costs, or other costs associated with keeping the doors open on three buildings. One of them had my warehouse attached - an additional 3000 square feet of space - in California - you get the idea. One of the stores was up for a lease renewal - we ended up choosing to close that location due to the poor economy - but the landlord wanted to jack the rent up $10,000 per month. That's right: he wanted us to pay him an ADDITIONAL $120,000 per year. We countered with half that, and ended up not renewing at all.
The thing is - many dealers could come into this thread and mention their biggest costs of doing business, and it might not be the same thing. For most of us it is staff - employees, contractors, commissioned sales people or whatever. But depending upon which part of the country they are in, it may be heating costs, cooling costs, or other costs which you or I would never even think of unless we tried to do business there.
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