Outdoor living manufacturers and retailers have worked hard and have largely succeeded in demonstrating the value of their products. They've convinced many buyers that the backyard and patio should be an outdoor destination, another room for entertaining and one to spruce up with products like hot tubs, casual furniture and gazebos. Good news, right?
Here's the hitch. Consumers have bit so hard that they want the lifestyle. They want their very own outdoor oases for relaxing and entertaining. But the state of the economy and the current costs of domestic products are in their way.
So how do consumers finance their desires and dreams?
This quandary is increasingly leaving the spa enclosure and gazebo market vulnerable. Just as with other industries, overseas products and production may spell trouble by offering consumers what they want at reduced prices and effort.
Will an influx of imported Chinese enclosures, gazebos and other backyard products put pressure on North American producers? Will anything — including a potential for reduced product quality — trump the big motivator of price? Are manufacturers making the move to overseas production, following the mass exodus led by other manufacturing industries?
The Push Of Price
The state of the market is one we all know well. Many dealers and manufacturers are contending with declining sales and are searching diligently for sales opportunities. The industry may have done a good job of creating the demand, but perhaps not of addressing one of the central issues: price.
"Demand for gazebos is high, as they offer protection from the elements, privacy and convenience," says John Olson of A&B Accessories. "But consumer interest wanes when the cost of the gazebo exceeds the price of 85 percent of the hot tubs on the market. The lowest-priced spa and gazebo combination can easily surpass $15,000 at retail. Consumers will definitely be motivated by price when enhancing their spa experience."
Other manufacturers agree that price is more and more a factor when it comes to sales of gazebos and enclosures.
"It's a product of the economic tide as it moves through the country," says Colin Hobbs of Sequoia Works. "Consider one of our enclosures, which could be between $5,000 and $7,000. For a freestanding room, like a gazebo, it's up to $12,000. Add to that the price of a spa or hot tub. Combine it with our questionable economy, and you can see it just doesn't add up."
Consumers determined to make their outdoor area an idyllic getaway may seek other options to make their dreams come true. The boom of online retailers means a little research and price comparison can yield massive savings. Online vendors like made-in-china.com or global sources.com have sprung up, offering the hottest imports from China across a wide variety of products. A preliminary search of gazebos on made-inchina.com yielded over 537 matches, ranging from do-it-yourself to fully assembled gazebos. At globalsources.com, more than 140 companies offer gazebos and enclosure products. Nearly all are made of some sort of synthetic or metallic material, including polyester, steel and aluminum. All offer reduced prices compared to North American manufacturers.
This means a significant challenge for producers that sell higher-priced products.
The power of price is formidable, but some manufacturers discount the power and potential of imported products to cut into their sales. Why? Quality.
"The quality just isn't there," says Ted Visscher, founder of Visscher Specialty. "It may be cheaper, but the quality and the service for the products are absent."
Other manufacturers suggest that what constitutes quality for consumers may have changed. Consumer tastes increasingly favor products with greater ease in use. They covet materials that promise low maintenance in addition to being attractive. Many synthetic products and those made of composites fit the bill nicely. And when they're sold from an overseas company, the price is smaller. It's a win-win situation for buyers.
"One of the things we've seen in this synthetic age is the consumer does not want to work too hard on keeping their products, any products, looking nice," says Ruth Hunter of Sylvan Woods. "With redwood, for example, you have a maintenance regimen to stick to. Plastic enclosures and other products are so easy in contrast. So for dealers, it becomes very difficult. How do you explain to them why they should buy expensive and harder-to-maintain products like redwood steps?"
Taking The Plunge
When looking at these challenges and considerations, many U.S. and Canadian enclosure and gazebo manufacturers think along the lines of the old adage, "If you can't beat 'em, join 'em."
Companies striving to cut costs and compete with imported products may look to altering their product lines with cheaper materials. Others see a way to beat market conditions and realize cost savings by moving their entire production out of North America.
Companies like Sylvan Woods have looked seriously at moving production facilities — at least in part — overseas. Others have taken the plunge, like A&B Accessories, and partnered with overseas companies in production and sales measures.
In 2005, faced with the choice of taking the manufacturing offshore or forgoing the American market altogether, A&B Accessories formed a partnership with Cascadia Products of China. Cascadia had the resources to produce high-quality products, manufacturing wood, steel and aluminum furniture for international customers for over 17 years. What it lacked was the guidance and path to the American market.
For A&B Accessories, the partnership has afforded the opportunity to solve historical hassles, catering to new consumer tastes with materials like boot-glazed, tempered-bronze glass in vinyl-framed windows and doors; stainless-steel hardware; polycarbonate roof systems and Ultrawood (a synthetic material made from polyvinyl chloride and wood chips). The products attract consumers due to their durability and ease in use. The partnership also allows the company to directly participate in and control the quality of products that come from its Chinese factories.
Sylvan Woods was initially attracted to overseas production as a cost-saving venture. They looked for an opportunity to open a new Sylvan plant rather than a partnership. Looking pragmatically at the labor situation in the United States versus in other countries, costs per employee are significantly lower in China and elsewhere in the East. This has been a driving force behind the wave of industries flocking to international locales, and it's just as potent a drive for the enclosures and gazebos market.
"We pay our guys pretty good money, with workers' compensation and all the things you do," says Hunter. "With some overseas manufacturing, you're able to pay less money. It's that reality."
Sylvan Woods ultimately opted to keep production in the States, since the initial costs were prohibitive. It's a similar problem many manufacturers face when considering moving overseas or partnering with overseas production teams. In addition to major upfront costs of establishing new factories, accepting or assigning products manufactured in China is a scary thought for some, signifying a lack of control over the finished product.
"The logistics of moving production overseas is very difficult," says Visscher, whose company has no plans to open a factory in China. "It's also difficult to control — you need someone to make sure everything is done properly and ensure finished quality. It's a lot of work."
The Hard Sell
Companies that decide against entering international waters face a tricky market and the need to determine their major selling points over imported and cheaper competition. In short, they're left with a hard sell.
Sylvan Woods emphasizes its unique selling proposition in the singular material it uses in crafting enclosures and gazebos: redwood trees. Other companies look to emphasize their products' durability and overall quality. Point of origin for competing products may offer these companies a selling point in opposition.
"The most important factor in enclosures is quality," says Hobbs. "Products from China may represent less quality. We've always had a reputation for making these quality products, and that makes us competitive."
In addition, manufacturers and retailers may look to the old stand-by that still remains important to many consumers: quality of service.
"We're very carefully dealing with this challenge with continuing service, friendliness and all those personal touches," said Hunter. "We've streamlined the line of products to what sells best, and we're sticking with our formula of success. We've been doing it for over 16 years, so we've got some of it figured out."
As Chinese products in more categories enter the United States' marketplace and more American manufacturers seek lower labor costs overseas, American and Canadian enclosure and gazebo manufacturers increasingly need to be flexible and innovative. At the very least, awareness of the China pattern should inform business practice.
Olson sums up the future for the enclosure and gazebo market.
"The health of our spa dealers and the market is critical to manufacturer existence," says Olson. "We're constantly searching for solutions to the issues our customers encounter and to improving the spa experience. It is imperative that we continue to seek ways to drive down costs, improve quality and improve service — wherever those opportunities are."
