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Here's some good news: The hot tub industry has finally regained some of its swagger.
After the recession in 2007, hot tub dealers were in a scramble. Sales of high-end tubs were slipping as buyers made an effort to stretch every dollar possible. But what do you do when you’re forced in a corner? Try a new way out.
That’s exactly when Bill Carter, owner of Spa Heaven in the Kansas City area, ventured into used hot tubs.
“Years ago, we would never do a used tub,” he says. “But when the economy changed in 2007, everybody had to try to find new ways to make money. Used spas turned out to be really good.”
So good, in fact, that used tubs now account for 60 percent of Carter’s hot tub sales, making them the driving force of his business.
For others, like Steve Escarcega of Spa Pro in Las Vegas, used spas are a way of supplementing new spa sales — a last resort if customer can’t afford to go new.
“I’m not really pushing the used spas because I am a Catalina dealer,” he says.
At Spa Pro, the difference between used and new isn’t just metaphorical — it’s physical. Before customers even enter the store, they have a choice: walk through one door to the used spa selection or walk through another door to the new spa selection.
“I have found that if I have a used spa on the same side as the new spas, the customers dive toward the used one when they see the difference in price,” he says.
However, closing a deal is better than closing no deal. With this in mind, Escarcega says having a used hot tub selection is helpful when a customer’s budget is limited.
“Some come in the new side and go, ‘Oh, I can’t afford this.’ If I can’t get them into a brand new spa on the lower end, then I normally try to maneuver them to the other side with the used spas,” he says.
In terms of his used hot tub lineup, Escarcega welcomes all brands — he finds carrying an assortment is a helpful tool when coaxing customers into a new tub.
“One of the key things that convinces my customers that my spa is the best is not by knocking somebody else’s product, but by letting them walk over to the used stuff and saying, ‘Okay, this is a 5-year-old of this brand,’ or, ‘This is a 5-year-old of that brand.’ They go, ‘Wow, it looks really bad.’ And I go, ‘Well, you’ve got to take that into consideration when you buy a spa. They might look pretty when you first purchase them, but what are they going to look like in five years?” he says.
Spa Heaven has been around for 28 years now, and has been a Catalina dealer the entire time. You could say Carter is loyal — as all his new and used hot tubs are Catalina spas — but he says sticking to what he knows is easier on the business and enables him to offer better customer service.
“That way, we know everything about them,” he says. “We’ve got about 18,000 tubs we’ve sold over the years out there, and we know we’ve got the parts on the truck, we know how they work, what we’re supposed to have.”
Trade-ins aside, it’s not hard for dealers to get their hands on used tubs, and often for free. It’s just a hit-or-miss proposition; like sifting in a river, you get some junk, but sometimes, you strike gold.
When the recession hit the Las Vegas area, used tubs — and good ones at that — were easy to come by for Escarcega.
“During the recession, we were picking up 6-month-old spas for free,” he says. “People left their homes — how are you going to move and take a hot tub with you? They didn’t want to spend any more money, so they just walked away.”
Realtors also caught wind that Escarcega would take old hot tubs, and word spread. Soon, he was getting regular calls for hot tub pickups — and even requests to pick up batches of them.
“Realtors are a close-knit group. They’ll tell each other, ‘Oh, this guy doesn’t charge to remove a spa,’” he says. “The only time I charge to remove a spa is if I know it’s strictly going to the landfill.”
It works similarly for Carter. When people know you’ll take a hot tub off their hands, word gets around.
“We get people who will just call and say, ‘We’ve got this tub sitting out here that we don’t use anymore, will you buy it? Will you take it?’ We don’t really go out and solicit to get used tubs, but we get a lot of phone calls from people saying ‘if you want it, you can have it,’” he says.
While word-of-mouth and phone inquiries can be a great source of used hot tubs, retailers across the board say most used tubs will come from people looking for an upgrade — and hoping their used tub will help them get a better deal.
Most dealers handle this through the trade-in process: They take a look at a tub (considering the year, make and model details), assess its value and make an offer that is applied to the cost of a new tub.
“Trade-in is kind of nice because it keeps the new sales going by giving customers a nice value on their used tub,” Carter says.
While trade-in is common, others, like Brad Brady, CEO of Brady’s, an Idaho-based spa dealer, opt for a consignment model — meaning after fixing up a hot tub and selling it, a customer will get a check for the sale after labor, parts and a consignment fee have been applied. (See sidebar for an example.) Part of the reason Brady goes this route: to distance himself from tactics found in sleazy used car dealerships.
“If you ever go buy a car, the first question they ask you is, ‘Do you have a trade-in?’ That’s because the price of the car goes up if you have a trade-in,” he says. “They jack up the price to cover it.”
With that in mind, the consignment model makes things transparent for both parties and reduces the risk to Brady if a tub doesn’t sell.
“If it turns out the tub’s garbage, I didn’t lose anything because I gave them an honest evaluation and said, ‘Hey, this isn’t worth putting the money into.’”
He adds: “I really want to be straight up with people. That’s why I quit doing trade-in and only do the consignment deal now. If we can fix the tub, we will, and we’ll give every nickel we can to the customer. My philosophy is that the more I can do for that customer, the more likely he’s going to tell his buddies or his co-worker, ‘Boy, those guys did a great job for me. I thought my tub was worthless, and they got me actual money for it.’ And it’s working, too.”
When it comes to the refurbishment process, it’s simple: You’re going to get what you give.
For example, Escarcega doesn’t do “pretty.” Instead of going all-out with cosmetic fixes, he cleans them, makes sure they work and throws them on the floor — and collects a small, but reliable profit.
“My prices are about half of what my competitor’s are, and the reason is because he makes them look like a brand new spa. I don’t try to do that because I don’t want to keep them. I sell them as cheap as I can sell them, usually just to cover my cost. If we can make $100 or $200 on them after all the expenses, then that’s what we go for because it’s money in the right direction.”
Carter, on the other hand, does a head-to-toe fix-up with a complete refurbishment.
“Even if records show we just put in a heater six months ago, we automatically put in a new heater, a new pressure switch, new rebuilt pump, replace any jets, new filters and new headrests,” he says. The pump gets a 1-year warranty, and everything else gets a 6-month bumper-to-bumper warranty.
Factoring in materials and labor, this process of gutting, cleaning and fixing takes a week and about $600 per tub. Once you add in the cost of the tub itself — which for Cater ranges from free to $500 — and the cost of new covers and filters (standard with his used tubs), and he estimates he spends roughly $1,100 to $1,200 on each used hot tub.
But on the floor, they sell for $2,500 to $4,500.
Carter says the time and effort are worth it not only because they keep costs down later and maintain his business’ reputation.
“Time is money, and if you have to go back to replace a heater, a pressure switch or a pump or a jet one or two times, when you’re putting a warranty on it, that’s a lot of time and a lot of profit,” he says.
“There’s peace of mind when you’re selling the product,” he adds. “We can tell customers that everything’s new and redone on it.”
Across the board, retailers say the used spa buyer is a cost-focused buyer. But they’re also more likely to be first-time buyers, meaning it’s important to educate them about the initial short-term discount vs. longterm costs of used tubs; it may encourage a customer to go new.
“Most used tubs are going to have a higher operating cost because they don’t have the same quality as the new ones. So it’s less money up front, but at some point, you’ll eventually break even,” Brady says.
However, not everyone who purchases a used tub does so because of cost. Brady says people who don’t plan to use the spa frequently, or people looking for a spa for a vacation home where they’ll winterize more than they run, are also drawn to used spas.
As first time buyers, Carter notes that used tub buyers are new to the hot tub lifestyle — and they don’t know if it’s right for them.
“Customers say, ‘We’re not sure if we’re going to enjoy a hot tub.’ So they’re getting a nice tub for less money and it fits into their budget easier.”
In that sense, the used hot tub is the “gateway tub,” so to speak, to a new model down the line. And Carter knows that with great customer service, it’s likely a used spa customer will go back to him personally for a new one — it’s the circle of life.
“They know that because they’re buying a refurbished tub from us, we’re going to give them a great value down the road when they decide they really are hot tubbers and they trade that tub in for a new one,” he says.
Here’s a sample of how a consignment deal would work at Brady’s:
1. Brady gets a hot tub, puts $1,000 of parts and labor into it and sells it for $4,000. 2. He takes off $1,000 for his costs, leaving the customer’s return at $3,000. 3. Brady charges a consignment fee, in this case 20 percent, meaning the customer leaves with $2,400 to keep or invest in a new tub.
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