A convergence of factors has led to a new dynamic in the swimming pool industry. It’s not my intention to be dramatic, but we are witnessing a new state of the swimming pool industry.
It’s not only because of the pandemic.
DYNAMIC NO. 1: COMPETITION
Competition is nothing new, and it has been around ever since the first company opened its doors. The dynamic has changed a bit this year thanks to the pandemic.
In the past I have written that many homeowners who would have purchased new pools in the future, in 2023 or in 2024, went into panic mode and bought them in 2020 or 2021. While pool builders in the United States spooled and boosted their operations to deal with the “fire hose” demand, the flow has slowed down.
There are a lot of well-equipped, large pool contractors and a decreasing supply of pool buyers. This is not a good thing.
It’s possible to pivot your business towards renovations, as recommended by AQUA Magazine in March 2023, but this won’t be the best option for all. If you want to avoid being overwhelmed by too much competition, in 2023, and beyond, then you will need to clean up the components of a good marketing campaign, such as:
- Clear and compelling messages
- Website content that is powerful
- Hyper-responsiveness in response to inquiries
- Intelligent advertising / lead generation
- A respectable online reputation
Summary: While you may have experienced minimal competition in recent years, expect to see more in the months ahead, unless you’re a niche market that is underserved.
DYNAMIC NO. 2: CONCENTRATION
Here, I am not talking about being attentive and using your brain power. I’m referring to the shockingly unequal transfer of wealth across society in the past three years.
When the rich become richer, this often has a positive impact on other social strata. The old saying “a rising sea lifts all ships” is true, but this did not happen during the pandemic. The top 1% of the population enjoyed a wealth increase, which was on average twice as much as they had before.
This is a large concentration of wealth in a few uber-rich individuals.
If you serve the top 1%, this is good news. If you run a more “middle of the road” operation and target more middle class and upper middle class homeowners, then there is no way around it. Your market has just shrunk.
Now you must make a choice. Will you continue to target the same demographic as you did in the past or will you change it? Are you going to focus your efforts on a narrower, but more profitable and viable niche?
SUMMARY I cannot tell you which niche will work best for your business. I encourage you to look closely at the demographics, micro-markets and niches in your area and focus your strategies and tactics there.
DYNAMIC NO. 3: CONSOLIDATION
We have one last dynamic that is completely unrelated to the pandemic. This has more to do with the long-awaited but slow maturation of swimming pool industry. Let’s look at the life cycle of an industry to understand its impact. There are four stages in any industry: (1) Emergence (2) Growth (3) Maturity (4) Decline.
Residential swimming pools were first introduced in the United States during the 1920s. The industry grew rapidly after World War II and continued to grow until the 1980s. When there are many competitors in your area and no new territory to expand into, you reach the third stage of industry maturity. The best way to grow your company, increase revenue and gain market share is by buying your favorite competitor. We’re talking mergers and purchases.
The pool industry has finally reached this point today.
It is evident in the pool services industry where five national pool companies are acquiring local operations coast to coast with the goal of becoming major players in the country in the coming years.
The pool construction industry is also following a similar path, but at a slower pace, and on a regional basis. Major players are now active in Texas Florida, and the Northeast. There are no signs that this trend will slow down.
What does this mean for you? If you are a businessman who is approaching the 50-year mark, an “exit plan” will become a more important part of your thinking. Selling to a consolidator could be your golden parachute.
It’s perfectly reasonable to worry that the next generation will not be able to handle the company the same way as the founder. The company could collapse. Everyone is in for bad news.
If, however, one of these regional and national consolidators were to take over your business, they might (1) want your descendants to remain with the company and become a part of the organization at the national level. Their chances of success are significantly increased when they’re coached and nurtured in a national environment by professionals with experience who have worked on operations similar to yours across the country.
Keep in mind that you’ll need (1) a profitable, successful business and (2) clean, detailed books to back up this story. You won’t get any offers for your business if you don’t have a successful, profitable business.
Summary: Consolidators are everywhere, and they’ll knock on your door one day. You may or may not be a good fit for this, but you must make sure that your books are accurate and professional.
BOTTOM LINE
In 2023 we will see a convergence of 3 distinct dynamics which will present challenges to pool business owners over the coming months and years. You’ll need to tighten all aspects of marketing to protect yourself from the increased competition. This includes messaging, websites, reputation, and responsiveness. You should focus your efforts in a specific niche that has still got money to protect yourself from the shrinking middle-class. If you are interested in consolidation, it would be a good idea to meet with several consolidators and learn about your options for selling your business and its value.
Knowing the current state of the industry can pay off handsomely in the future.
The article was first published in AQUA Magazine, the leading resource for pool and spa retailers, builders, and service professionals. All industry professionals can subscribe to the print edition of AQUA Magazine for free. Subscribe by clicking here.
