Sunday, June 17, 2007

How Low Can You Go?

I thought that I had nailed it two weeks ago with the report that Wal Mart was selling chlorine generators for $186.00, and E-Bay had them for $199.00. The reason I figured I’d nailed it is because Leslie’s, pretty much the low price leader around these parts, is running a special right now. They’re selling a chlorine generator for $1,100.00 and they’re throwing in the installation for free.

Now, the difference is that this $186.00 Intex system is only for above ground pools. It has no electrical bonding and it relies on the homeowner to do everything exactly right when installing it and using it; don’t use extension cords, only plug into GFCI protected outlets, never use the pool while the unit is operating. That last one is a biggie to me and more than a little bit scary.

BUT it produces an amazing amount of chlorine. Its output, at 24 grams per hour, matches or exceeds just about anything you might be selling right now for permanent in ground pools.

I mean, this is a cost savings of 83% on the acquisition price of that Leslie’s system. The funniest thing is, Leslie's sells Intex above ground pools. They're helping the company that's cutting their throat on salt systems to be successful by shilling their pools.

Another glaring example of this price disparity; one of my customers with a Zodiac LM2-24 spent more than twice that much this week over the phone with Zodiac just to buy a replacement cell UNDER WARRANTY. Her nearly three year old cell went south and Zodiac is nicking her for “66% of the current list price”.

An Intex replacement cell is $99.00 at the Intex website.

Now, I’ve ranted about this closed loop warranty deal in previous blog entries:

Read the Circle Game for the full story, but it goes something like this: You sell a salt system. If you’re stuck competing with a nationwide chain like Leslie’s, you’re selling it for $1,100.00, installed. Now, subtract your labor, parts, PVC glue, mileage, etc. and you’re lucky to clear $250.00. That’s $250.00 net on a rather sizeable investment in material. Because we all know how much WE pay for salt systems.

But, in three to five years when that salt cell fails, Cha-Ching, right? You get to sell another cell. That’s the payoff you’re waiting for, right?

Well, forget it. The folks at Zodiac will not only sell your customer a salt cell under warranty right up until the end of the third year, but the 1-800 tech told my customer that after the warranty expired HE’D SELL HER ONE FOR THE CURRENT LIST PRICE.

Now, go check your price on a replacement cell. It’s about 20% less than the current list price. And it’s most likely a special order, which means that your customer can get it from Zodiac faster than you can get it from distribution. And the reason it’s a special order is because the customer’s are buying replacement cells directly from the manufacturers.

Whatever happened to the idea of manufacturers not competing with distribution and the retail stores and the service providers? When did we all start giving them a pass on that? Why do we all keep selling their stuff when they so blatantly cut us out of the deal? Why do the major distributors sit still for being bypassed like this?

And to be honest with you, I wouldn’t mind all of this – I don’t sell salt systems anyway – if the manufacturers would step up and assume responsibility for all the damage that salt’s doing to the pools. But except for Goldline’s letter:

where they made the startling admission that stone deterioration has been going on “since the dawn of time” - yeah, yeah. And water made the Grand Canyon, too. So what’s that got to do with salt damage to pools? – Except for that, no one on the money-making end of this deal has done anything but watch their stock go up.

To review: You find the customer. You sell them on the idea of converting their pool to salt. You install the salt system. You make $250.00. You invest that $250.00 in a high yield instrument so you’ll have the money when they call back three years later saying their coping has all dissolved into the pool and it’s your fault and you better fix it and oh, by the way, they just bought a new salt cell from the manufacturer over the phone and it was so easy they just charged it to their credit card and another oh, by the way, they told all their friends how you ruined their pool.

Oh… So that’s why your phone stopped ringing…

But it get’s worse. In the not too distant future, all these people you sold salt systems to are going to start telling all their friends how you screwed them like stump-tied sheep because, Honest-to-God, Cabella’s has that Intex salt system for $144.99…

…and it produces exactly the same amount of chlorine as just nearly every salt system that you can buy right now for $1,100.00, installation included. So, why, oh , why, oh, why do salt systems for in ground pools cost 83% more than that?

Because somebody – not you – is making a ton of money. For now. And when the Gravy Train stops, it’s your reputation that’ll take the hit for all the coping and decks and heaters and ladders and rails and light niches that got ruined when you installed $1,100.00, $1,200.00, $1,500.00, $2,000.00 salt systems. Remember those prices? I do. It’s like it was just yesterday… Wait a minute. It was yesterday. And what about tomorrow? $400.00. You heard it here first. You will see $400.00 salt systems for in-ground pools within the next two years. It’s called Keeping Up With The Jones’, or The Cabela’s, as the case may be.

There is a selective quality to the screwing you’re taking, though. Think about this for a minute. A salt system pretty much has four components; power supply, control board, flow switch and salt cell. The power supply, control board and flow switch aren’t modular. They require someone who’s been to the school, or worked on pool equipment for a while, to get in and replace them without making the problem worse. And the flow switches usually require basic plumbing skills. But the cell, which is where all the profit is centered, is usually modular; union connections and an easily accessible plug that even a homeowner can handle.

So, here’s the scenario. The homeowner calls the 1-800 tech and says, “I don’t think my salt system is making chlorine”. The tech has the homeowner push a few buttons, check a few indicators and then tells them, “you have a bad cell”, and then sells them a new one, bypassing you and distribution.

Try that with a Lo NOX heater. “Oh, yeah, it sounds like you have a failed flame sensor and a faulty keypad. I’ll overnight the parts to you.”

You see, they still need you for that, and so they make sure distribution has those parts available and they tour the country teaching you how to fix that stuff and they even sell the parts with room left for you to mark them up so that you can do all that crazy rich guy stuff like feed your family and pay your mortgage.

But when it comes to that Plug And Play salt cell, all that profit is for them.

So, tell me again. How is salt such a good deal for you and me and the consumer? In the final analysis, the only winner is the manufacturer, as long as they can continue to dodge the liability of salt damage to swimming pools, and as long as you keep letting them screw you on the salt systems while you fix their heaters and pumps and filters.

I know. I know. What can you do about it?

Well, for starters, you can quit shilling for these guys and start holding their feet to the fire. Next time you’re at one of your association meetings, ask the manufacturer’s rep in the room – after all, they’re always there – why you’re good enough to fix their heaters but not good enough to profit on their salt cell replacements.

Or, the next time you read a three page advertising spread dressed up as an “information article” in one of your trade magazines, go to the computer and fire off a Letter to the Editor about how they missed pointing out The Down Sides of Salt Pools.

A perfect example is the May 31st edition of Service Industry News. Most of that edition is dedicated to a review of alternatives to traditional chlorine. On page 7, they say that the “articles will look at each of the alternative systems’ advantages and disadvantages from a service professional’s perspective”. Then, the first, and longest, and most prominent article is about - you guessed it - salt chlorine generators. And the article reads like a marketing brochure. They talk about how 2,700 to 3,400 ppm salt is “a mild saline solution so low that it is almost impossible to taste”.

Then, to make that sound like it’s even less than it is they use the big scary sea water salinity number – normally quoted as 35,000 but amplified to 40,000 ppm for this article – even though the EPA level of taste has been established at 250 ppm.

Listen, whenever someone compares salt pool water to sea water, or to the salinity of a tear, you’re being marketed. You’re no longer having a technical discussion about salt systems. You’re listening to a sales pitch.

The article goes on for two pages and doesn’t address a single one of the down sides that we see on a daily basis with salt pools. There’s not a word of caution about any of the issues that have been emerging with salt pools across the country. And the strangest thing; nobody wrote this article. There’s not a byline anywhere in sight.

And this is the Service Industry News!

But if you go to page 20 of the very same issue, in the Show & Tell section, you’ll see the article introducing “Two new anti-electrolysis zinc anodes by Pool Tool”.

They go on to say that service “professionals experiencing problems with plaster discoloration or metal erosion in salt water pools should look into two new devices from Pool Tool of Ventura, Calif.”

I mentioned those zinc anodes and linked to the Pooltoolco website here:

in the blog entry titled “Stray Currents Are Still Dissolving Your Salt Water Swimming Pool, Part 3”.

So, which is it? Either staining of plaster and metal erosion is a disadvantage and should have been included in the “information article” on salt systems, or it really isn’t an issue and so why would they print info about anti-electrolysis zinc anodes?

And all these guys will continue to get away with this stuff as long as you sit there quietly and read this blog and then go back to business as usual Monday morning. The only people who can make our industry and our manufacturers more accountable for straight information are us.

Which reminds me; weren’t the Group of Seven salt system manufacturers supposed to be releasing their research about the down sides of salt systems this year? The year’s more than half over and not a hint of info has been forthcoming.

Hmmm… I guess they’re not done making money yet.

And you thought I was talking about prices when I asked, How Low Can You Go?

No comments: