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Swimming Pool \ Spa Age Magazine - March 1999

Selling on the Internet
Written by Heather Siegel

THIS YEAR WILL BE Pool Mart’s fourth selling season on the internet. The site (www.poolmart.com) offers visitors 300 pages of pumps, filters, above-ground pools, chemicals, heaters and toys—500 inventory items in all. The site is bright, animated, easy to navigate and it’s making money.While owner Jay Smullen says the number of Web orders varies tremendously from week to week, overall Internet sales are rising.

"Half of the secret to success on the Internet is persistence and patience," says Smullen, who also has an 8-year-old physical store in Stewart, Fla. It’s not a get rich quick proposition. You can’t go spend $10,000 to $50,000 and expect big retail sales immediately"

What he does admit to is that 50 percent of his Web customers are repeat customers and 1 percent to 2 percent of his Web visitors make a purchase. Pool Mart is just one of many successful e-commerce ventures in the pool and spa industry. Four years ago.when Smullen started, there were significantly fewer. But now, many of today’s businesses are evaluating how they can add a profitable transactional site to their current operations. truth is, more people are buying on the Internet.

According to  Ed Bogel,Constructive Software Solutions(www.poolspaworld .com) (Clearwater, ft.) annual sales on the Internet grew 200 percent from 1997 to 1998, and online holiday sales were up 230 percent in 1998 over 1997.You also can take note that there was a 545 percent Increase in spending for the over 50 age grnup, a particularly important demographic for the pool and spa industry.Part of this growth is a resut of more visitors surfing the Web. In April 1996 20 million Americans used the Internet and in September 1997 —just 17 months later — that number jumped to 55 million, Bogel says.

FUNDING FOR GROWTH
The Web sales explosion can be attributed to the number of Internet businesses receiving the necessary capital funds to grow. Right now, Wall Street is pouring money into Internet-based businesses, and Internet stocks. such as Ebay, the online auction site. and Yahoo are posting high values.But will this trend translate into cyber dollars for the pool and spa industry?

Some retailers — like Smullen —already have discovered that it can. Not only are annual Internet sales sites increasing, but those sites also are opening up new Opportunities, including catalog sales and increased store traffic.

"The Internet is driving sales,both online and in retail stores,"says Jaclyn Easton, author of Striking It Rich.corn Profilles of 23 Incredibly Successful Websites You’ve Probably never Heard Of (McGraw-Hill 1999) (www.strikingitrich.com) and a columnist for The Los Angeles Times on Internet issues. ‘People are learning about more and more great products [on the Internet] that they want to buy."

Pool Mart’s Smullen recently launched a catalog business as a result of his Internet site. "I was getting catalog requests daily," be says. "Internet customers are telling their friends about the site, and some of those people don’t have access to the Internet. They want a catalog."And, while single family pool owners are a large portion of his customer base, Smullen says his Internet presence has attracted a small base of customers that he wouldn’t have herd from otherwise."There was a government agency that wanted some commercial Hayward pumps that found me on the Internet," Smullen says. ‘Also, a company in the motion picture industry ‘came to me for 350 floating blossom lights. It might seem like an unusual request for a single store retailer, but for someone on the Internet., it was business as usual."

Why? Because the Internet levels the playing field where competition is concerned. A small retailer with a Web site can appear as large as a manufacturer, distributor or multistore retailer. In Smullen’s case, the Internet customer may or may not know how big his operation is, and in truth, really doesn’t need to as long as the site can support its service and inventory needs.‘The fences are down," says David Sykes, managing partner. The Remington Group www.remingtongroup.com). ‘Internet retailers can sell anywhere. The market area becomes null and void."

Sykes, whose business is based in Cambridge, Mass., says the Internet may enable retailers to purchase and sell larger amounts of a product because the Internet offers a wider market area than a Local store or even a national chain of stores. This can help the retailer increase profit margins on products because of the potential to buy at a cheaper, bulk discounted rate from the manufacturer Retailers can pass this savings along to customers in the form of lower prices.  "If you’ve got a model, then you can price goods more effectively to the consumer, Sykes says, adding that in some industries distributors have felt the crunch because retailers can buy direct from the manufacturer."Office supplies and computers have gone that way already," he says,noting that computer prices continue to drop. "Last year a PC cost $2,500. It costs less than $2,000 now. Look at Dell Computers, a company that has helped to really revoutionize Internet purchasing. Consumers can go to the site, specify the computer they want order it and it will be assembled and delivered in 24 hours — perfect for computer shoppers who know what they want.

POOLS ANYONE?
OK. So pools and spas aren’t computers. Many products in the pool and spa industry are technical and labor intensive to install and service, and many customers don’t want to do it.if they buy a pool from an on-line retailer in New York and live in Colorado, they’d have to ask a Local retailer or service technician for installation or service anyway,"The category that’s really taking off is products under $25," Easton says. ‘Those are commodity items, like CDs. books and videos. Where consumers purchase those products doesn’t matter. Wherever they buy them, they will be the same," Namco (Manchester, Conn.), has plans to offter pool packages on the Net, but adds that pools are like cars —a product that you have to see, says Jack Rua, controller.

Namco, which has 34 stores in nine states in nine mid-Adantic region,is hoping for 10 percent of total sales from the Internet busiuess, which it hopes to have online this year, Rua says. The site will be a source of information for consumers, but they probably will visit a retailer to purchase" he says. "The opposite is true for accessories. There is a growing market on the Internet for accessories because they are a small purchase item.

But there may be a market for the larger products, such as spas, if a retailer decides to offer them. Dan Harrison, owner, Long Island Hot Tubs (www.lihottubs.com), receives a number of customers everyday looking to buy a hot tub on the Net, although he does not sell them on his site.

"Very few manufacturers are interested in direct to consumer order fullillinent." he says. "Many don’t want to hinder their dealers in a certain area. I was a spa dealer and I understand and appreciate that," Harrison had an actual store until 1992 when he closed it to focus on his mail order and service businesses, based in Long Island, N.Y. In 1994, he started his Internet business, which now features 400 pages and 50,000 items,"At that time, if I had one order a week I was jumping up and down,," he says, now, orders hover between 30 and 50 per week.

Last November — the off-season —Harrison was getting 20 to 30 orders per day. He says 1998 sales will be double 1997 tallies. To keep up with the orders, Harrison has developed relationships with more than 100 vendors—a mix of manufacturers and distributors. He says that’s one of the keys to his success.

"You cant hit stumbling blocks with suppliers," he says. "You have to be able to get the inventory when you need it,"Recently, Harrison revamped his site, adding more articles, pool and spa photos and accessory purchase choices. He says his selection, coupled with the ease of shopping cart technology, increases the amount of money spent per customer. About 80 percent of his sales are spa related and the other 20 percent are pool related."The more you show the more you sell’ he says. "And with the shopping cart technology, they end up buying more stuff than they would have if they had called".

MANUFACTURERS IN THE MIX
Sure, many manufacturers haven’t ventured into online selling because of order fulfillment issues or the possibility of irking dealers or distributors, but some are looking into it, and others are planning transactional sites.

Aqua Clear (www.aqua-clear.com), one of the largest chemical manufacturers, has thought about it, says John Stiglmeier, president. To date, they’ve passed on adding the transactional piece to the Web site."We've given a lot of thought to all of it," he says. "We are prepared from an operational and electronic standpoint to sell direct to consumers." Aqua Clear (Watervliet, NY) owns the Sun brand, which is very recognizable among consumers and could potentially perform well direct. "We have chosen not to [sell direct to consumers on the Internet] though, because we feel it would be at the expense of our dealers," he continues. He also says shipping to consumers would be cost prohibitive because of the restrictions on chemicals. ‘Chemicals are a different animal," he says. "But I think it’s inevitable that there will be more business transacted that way [via the Web]. At this time, though, we can’t justify our doing it,"

Kover Krete (www.koverkrete.com), which operates a network of distributors, has devised a plan to avoid infringing on distributor sales, while cashing in on the direct-to-consumer dollar.

By mid-1999, Kover Krete (Orlando, Fla.) willl transform its site into a transactional one, offering business-to-business and consumer sales, says Monica Stamper, national sales director. While the site will feature shopping cart tecimology and secured transactions for consumers, it will ferret out orders that come from areas where there are Kover Krete distributors and hand those sales over to the distributor. For example, site visitors will load up their shopping carts, enter their credit card number and send their order to the company. If there is no distributor in the area, the company will call the customer back to let them know their total shipping charges and when the product will arive, Stamper says. If there’s one, the company will call the area distributor and let them take over the sale from there.

Kover Krete has had it's view-only site up and running since july 1997. "over the last year and a half, we have done a lot of work on it "he says. "it's not just informatoin. there are a lot of graphics and links to other construction-related sites." And while Stamper doesn't have internet sales projections, she estimates they could lead to as much as a 20 percent increase in overall sales.

NO MORE PARKING
With more companies offering transactional sites and more consumers willing to shop from home the question becomes will cyber shoping replace sneaker shopping?, or will it at least put a dent in its treads? Long Island Hot Tub's Harrison says that while e-commerce will grow, it won't ever replace instore sales "it's is going to grow as more people gain access to the internet" he says "but there will be people who will not shop by mail or by the Internet. I don’t think it will put the local pool retailer out of business. There’s a niche for the local pool store in the industry and there’s a niche for internet retailing.

The key to success is finding the type of product that will generate the most Internet sales and marketing that product to a potential buyer for example, customers who need help with purchase choices, have very technical questions or don’t want to assemble or install the product themselves, may not be ideal Internet candidates. And some businesses are retail operations offering service as part of the package. That, too, may present some obstacles on the Net.

On the other side, customers who are "do-it-yourselfers" use the Internet for fast service and competitive prices, Harrison says. "They know what they want and how to install it,’ he says. "They don’t need the help of a pool service technician or retail store owner."

Constructive Software Solutions Bogel says the Internet isn’t necessarily an ideal shopping mall, and causes some consumer discontent.according to Bogel, in a recent survey of holiday shoppers chief consumer complaints included shoddy customer service, down sites and late deliveries, And, there’s still some concern among consumers about credit card security, although that concern has been reduced dramatically. And while sales numbers are up for e-commerce, Bogel reports that only 5 percent of visitors to a site purchase anything.

Easton says the trick for companies interested in e-commerce isn’t to treat an internet venture as an all or nothing proposition."I like to remind business owners that the Internet isn’t in place of their current business, but in addition to it," Easton says. "Some small retailers in niche businesses make the mistake of seeing the Internet that way."Marc Rush, vice president, Pool-A-Rarna. a Smith Holland, Ill., retailer with 14 locations, is taking heed. "We will treat it like a division," he says of the Internet showroom the company plans to open this year. "Well hire full-time staff members and treat it like a totally separate business."

Rush says the site won’t take the place of the physical stores, but will enhance them. "People who shop our stores come with direct and specific questions, which is something that is difficult to offer on the Internet," Rush says.Whether it’s a complement, or the sole bread winner for a retailer, success will depend on several things, Easton says. "People who shop online want convenience, savings, selection and safety," says Easton, adding that today, there’s little credit card fraud on the Web.

The formula for a successful Internet retailing venture can be summed up in nine words: Be the first, be the best or be different. ‘And in a perfect world, be all three," she says. For example, consider sites such as Amazon.com, she says. ‘They were the first mega bookstore to come online and they’re the best, which can be quantified because they offer more than 2.5 million book titles. you won't be the first because others are already there," she continues, ‘Being the best means having the best inventory and being different is how you can package and bundle the product" Smullen suggests that webpreneurs keep moving foward. "what is working now probulay won't a year from now " he says "internet technology is advancing at a rapid pace. what is a great site now probaly won't be in three years. it's going to get more competitive and grow."

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