After a year that can only be described as a rollercoaster ride, what can we expect from 2021, writes Rob Carlin, managing director of Superior Wellness. 2020 has seen a huge increase in new start-ups and also established companies, moving into the hot tub market, typically in the entry range of products which are sold online. These companies have specialised in the £3k-£3.5k price point, which I dare say, have done outstandingly well to sell in impressive volumes. However, some of these companies may find themselves in hot water over the coming months, especially if they have already secured sales that they must now ship and fulfil. I believe we look to mourn the loss of the competitive price points between £3k and £3.5k for online retailers.
INCREASED COSTS
Shipping costs from China to the UK have seen catastrophic increases over the last few months, with average shipping prices increasing from $1000-2000 US to approximately $2500 over a period of 12 months. Forecasts of shipping costs are set to be between $8000-10,000 US for containers between December 2020 and February 2021. With a container holding an average of 12 hot tubs, these forecasted prices leave hot tub importers with a potential increase of $650US per hot tub in shipping costs. With a 400% increase in hot tub sales in 2020, the rise of manufacturing costs was inevitable and unavoidable. Many hot tub factories worldwide have already sent price increases to their customers. A lack of raw materials for the components: jets, panels, topsides, packs, pumps etc has resulted in the supply not being able to match the demand. The raw material costs have increased across the industry, leaving manufacturers no choice but to implement price increases down the supply chain. Increases for raw materials are set to add an extra $150- 200US on the cost of every hot tub.
ON-LINE MARKET
An online retailer selling stock for £3k-£3.5k before it is shipped, will rely on advance orders. Following shipping the containers from China, they will then find their profit margins drastically diminish. For hot tub retailers, these increases of approximately $800 per hot tub will leave many breaking even or potentially selling at a loss. Sadly, many retailers including myself, could not have predicted these price increases and we are forced to be reactive to the changes.
HEALTHY MARGINS
With the increase in both production and shipping costs for the first quarter of 2021, I predict that the £3k-£3.5k price point for a new hot tub will be impossible to sustain and will no longer have a place in the market. I would expect a minimum retail price of around £4k for an entry level hot tub with decent components such as Balboa / Gecko. My only fear will be that some companies will sacrifice quality in the product to reduce costs. The industry continues to face supply challenges as well as a continued backlog of orders, my advice to dealers is to build in a healthier margin. It will not only be the entry level hot tubs that will be affected for 2021, all RRP will need to be increased by around £1k in order that dealers to maintain a healthy margin. Swim spas shipping alone would increase to approximately $4000 extra per swim spa as you can only get two in each container. The first quarter of 2021 may prove to be a challenge to many in the industry, but it is also important to celebrate the success of 2020 and to make the necessary adjustments to your businesses to ensure 2021 is prosperous.
