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.

http://www.intexcorp.com/store/ProductList.aspx?categoryID=22

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

http://thepoolbiz.blogspot.com/2006_11_01_archive.html

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:

http://www.wfaa.com/sharedcontent/dws/wfaa/latestnews/stories/wfaa070511_lj_pools.5c53d476.html

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…

http://www.cabelas.com/prod-1/0030731017455a.shtml

…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:

http://thepoolbiz.blogspot.com/2007_03_01_archive.html

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?

The Wal-Mart Effect

According to Word Spy - a web site devoted to lexpionage, the sleuthing of new words and phrases - the term Wal-Mart effect is defined as follows;

Wal-Mart effect n. The economic effects attributable to the Wal-Mart retail chain, including local effects such as forcing smaller competitors out of business and driving down wages, and broader effects such as helping to keep inflation low and productivity high. Also: WalMart effect.

I’ve always felt rather immune to it, myself. That, and those other things in this day and age that seem to go hand in hand with it. Like the time that AOL sent someone to my house to troubleshoot a DSL download speed problem. We got to talking and it turned out he had a degree in software engineering and his job had been offshored - once again, back to Word Spy:

offshorable (awf.SHOR.uh.bul) adj. Capable of being moved to another country, especially to reduce costs; capable of being performed by a person in another country, especially at a lower wage or salary.—offshore v.—offshoring pp.

- and he had been reduced to $20 service calls, using his own vehicle and gas, to fix people’s AOL problems.

Being a Pool Guy has always made me feel immune to all of that. I still sympathize with folks who get stuck in those crunches - like losing your job to an Indian guy who makes $3,500 a year for doing what you were charging $100,000 - but I don’t see them figuring out a way to offshore pool cleaning. Yet. And until filters and pumps and heaters are plug and play devices, I’m safe.

I hear guys all the time complaining about the Mass Marketers hurting their business, about Home Depot cutting into their chemical sales, about Sam’s Club having tablets cheaper than their wholesale distributors, about The Internet selling stuff cheaper than they can buy it. Their argument is that people want bargains, and that they can’t compete with that.

My answer has always been not to compete. If a customer says to me, "I can get that filter for five hundred dollars less at the IMA POOLWHORE Internet Pool Store", I say, "Be my guest!" and move on.

They are obviously not in my market. Because if they were in my market, they would be My Customer, and they would trust that the price I was quoting them was fair, based on a fair mark up and a fair price for installation labor, and the fact that I’ll be there - probably the same day - if anything goes wrong. They wouldn’t be looking at some low ball price on the internet and wondering if they could beat me up with it.

You see, I’m their Service Provider, and that’s really what I’m selling and that’s really what they’re buying. And the smart ones know that. And the not-so-smart ones find themselves looking for a new Pool Guy.

So, how does all of this relate to the Wal Mar effect? Like this:

I’ll still be here when salt systems are nothing more than a bad memory. Because I’m the constant in this business. Me and the guys like me; the Service Providers. And the reason I’ll still be here is because I provide the service to the End User; the Pool Owner. And currently, part of that service includes a stiff warning to my customers not to waste their money on a salt system, for all the reasons I’ve spent the last nine months writing about.

Because you knew that some day this had to happen, when there was enough money in that salt system market, Wal Mart would throw their hat into that big, fat, profit bloated ring, like this:

http://www.walmart.com/catalog/product.do?product_id=5601479

Introducing the new Intex Heavy Duty Saltwater Pool Filter System for $186.00. It includes the electronics, the salt cell and a flow switch. Here’s what they say in the product description:

"This saltwater system easily connects to most above ground pool filters and sets up in five minutes or less. Just add an undetectable amount of pure, natural salt to your pool water and set the automatic timer to get fresh, clean water using no packaged chemicals. Since this pool filter doesn't use chlorine, it is an attractive and environmentally responsible product."

How many lies did you count? I counted four. As you can see, they are hewing close to the marketing path blazed by their salt system predecessors.

My favorite lie is "since this pool filter doesn’t use chlorine..." That’s how little Wal Mart knows about a device whose byproducts include explosive hydrogen gas. It’s a pool filter that doesn’t use chlorine. The salt business has become even more dangerous.

You know, there’s a warning in the owner’s manual on page two that reads, "Do not operate this product when pool is occupied". I assume the reason is because the system isn’t bonded and it doesn’t even have a GFCI built into the plug, like my wife’s hair dryer does - which we bought at Target, by the way. It bridges a couple of amps (2.5, to be exact) through the water with only a glancing nod to electrical safety, by warning not to use extension cords and only plugging it into a GFCI receptacle.

Yeah, that’ll happen. A guy will spend $186.00 for a salt system and then how many hundred more for an electrician to come out and install a code compliant GFCI outlet within reach of the unit’s power cord so he doesn’t have to use an extension. Sure. And I’m sure they’ll always remember to turn the system off every time the kids want to jump into the pool.

But it’s okay because in bold print they’ve added, "FAILURE TO FOLLOW THESE WARNINGS MAY RESULT IN PROPERTY DAMAGE, ELECTRICAL SHOCK, ENTANGLEMENT, OR OTHER SERIOUS INJURY OR DEATH." So, you see, if anything happens, it’s okay, because they put in on page two of the owner’s manual, and everybody reads page two of the owner’s manual.

I mean, what do you want? Low prices or safety? Give a Wal-Mart High Five! Slap, Slap!

BUT, when you compare this thing’s performance side by side to say, the Jandy AquaPure 1400, it produces the exact same amount of chlorine. The Intex owner’s manual claims 24 grams per hour maximum chlorine output, and the Jandy AquaPure 1400 tech manual claims 567 grams in 24 hours, or 23.63 grams per hour. Zodiac’s LM2-24 is the same. Their LM2-40 is higher, up to 40 grams per hour, but it’s Duo Clear is lower, only 15 grams per hour. The Intellichlor IC 20 is lowest, at 13.2 grams per hour, and their IC 40 is highest at 26.45 grams per hour. I couldn’t find Goldline’s output in their tech manual, and all the rest of the in-line salt systems have such a small segment of the market that I could really care less.

Of course, all these fat rich guys selling these brand name salt systems will crow about how Intex is producing that higher level at the cost of burning out their cells all that much faster. Intex has an answer for that, too:

http://www.intexcorp.com/store/ProductList.aspx?categoryID=22

Replacement electrolytic cells for $119.00, as opposed to somewhere around $450 at one of the rock bottom pool whore websites, and as much as $800 retail - which, if you’re paying attention, is enough to buy four Intex systems and have enough left over to take the kids to Chuck E. Cheese.

So, hey! All you Salt Peddlers. Time to get a new gadget. Maybe you can dust off ionizers, or buy the rights to the old Laars corona discharge ozonator. Or maybe you could start pouring liquid copper in the pools again, and call it an alternative-sanitizer-never-mind-the-stains.

But you really ought to listen to me on this one. At this point, the only people left selling salt to their customers are in it for the money, and once that "money" gets under fifty bucks a unit, even they won’t stick around.

It doesn’t matter much to me what you do. I’ll still be here, watching over my pools, keeping you guys and your next gadget out of my backyards.

Oh, and one more thing... Bu-bye.