Why you shouldn't ask dealers cost

[bodguy]

I've been lurking boards for over 2 months and continue to be amazed how people insist to know the bottom line price and then expect to buy a tub $500.00 over dealer cost.

Does anyone realize what it takes to own a business...any business?

If you are in business and do not make a margin of 25% to 30% you will not be in business long.

Example: Spa "a" costs you $10000.00, 30% margin means  the dealer made 3k....outraqeous you say!!

Dealer of Spa "a" sells 20 spas a year, gross profit of $60k!!  outrageous again!!

Let's see here.....Delivery, lets be conservative here $100 per delivery......2k, gross margin down to $58k

Rent...Consevative again....$1000.00 per month = 12k...gross margin now down to $46k

Insurance...conservative again $200 per month $2.4k, we are down to approx $43k

Vehicle fleet...lets say a small fleet... 2 vehicles... insurance, gas, vehicle cost and maintenance....12k annually, down to 31k profit.

Oops we forgot hired help....lets say 2 people not counting the owner at $8.00 per hour, counting workmans comps and social security that number is closer to $12.00 per hour, lets make em part timers to cut costs......40 hours per week total between the 2, 2080 hours per year X $12.00 = $29k.....we are down to 2k net profit.

Forgot electricity and heating and cooling...we need to run the showroom models and have a comfortable environment for our customers.....thats gotta be 2k per year...looks like we are down to a net profit of ZERO.

Now me being the owner and assuming I am making 3k gross profit per $10000.00 sale I need to sell 20 more tubs to make myself, the owner, $60k BEFORE taxes.

Now if I am making 50% per tub ....really outrageous huh?  I wont have to sell that additional 20 spas....if I want to make $40k before taxes......(I'm worth more than 40k per year)

Dont ask for dealers cost....they aren't trying to rip you off, they just know that the average consumer will not understand that a 30% markup is what is needed to run a business. Consumers who would know the true dealer cost would just be pissed off thinking they were ripped off......That folks is why they won't tell you and shouldn't tell you  

BTW I am not in the spa business...or any business for that matter, just common sense economics here

[dazedandconfused]

20 tubs a year is super conservative.  My local HS dealer sold 300 last year.  So, using your numbers and assumptions, he made about 540k !!!  Does this sound right?  A dealer should easily sell 50 in his sleep - thats only 1 per week.

[empolgation]

BTW I am not in the spa business...or any business for that matter, just common sense economics here

A helpful example of economics and why spas are so expensive; though one should keep in mind that they are example numbers not actual data from someone in the spa biz. And the HUGE assuption is that the dealer actually paid $7k for a spa sold for $10k.

[Spatech_tuo]

20 tubs a year is super conservative.  My local HS dealer sold 300 last year.  So, using your numbers and assumptions, he made about 540k !!!  Does this sound right?  A dealer should easily sell 50 in his sleep - thats only 1 per week.

Well maybe your dealer did sell 300 last year but they certainly all weren't $10, he certainly paid waaaay more for leasing, employing, etc. as the numbers used in the example were very low. The point I take from the post is your dealer isn't selling these out of the trunk of his/her car and he/she has some real expenses that have to be factored into the price.

[bodguy]

20 tubs a year is super conservative.  My local HS dealer sold 300 last year.  So, using your numbers and assumptions, he made about 540k !!!  Does this sound right?  A dealer should easily sell 50 in his sleep - thats only 1 per week.

All my numbers were conservative and not all inclusive of all the costs (computers, phones, advertising, stock, interest on your business loan etc etc)....but relative.   A business selling 300 tubs a year certainly has a cost of doing business many times the numbers I was using. And by the way the values I was using were only very simplistic values used to make a point.

If you want to know the dealers cost so bad multiply the price you pay for your tub by 25 to 50 percent (probably right about 30%) if it makes you feel any better.

Bottom line, if you are in retail and aren't making 30% gross profit (not net), across your entire business, you are out of business....period end of discussion.

Now could accessories, chemicals etc help make up the difference, maybe. Chances are they are marked up 50 to 75%, but my guess is a spa dealerships bread and butter is the spas themselves.

And one more thing using my assumtions...I will bet the NET profit from a tub is right about $500 . So if Im right your 300 tub shop owner made a profit of $150,000 last year. About right for a medium sized business. I know I wouldn't want to own a business and make less than that.

[bodguy]

A helpful example of economics and why spas are so expensive; though one should keep in mind that they are example numbers not actual data from someone in the spa biz. And the HUGE assuption is that the dealer actually paid $7k for a spa sold for $10k.

Yes sir, it is a huge assumption, however, across the entire business there has to be a 25 to 35% gross profit to pay for overhead etc etc. I know money is made elsewhere in the spa business, I just don't know where or how much, and if Im overstating the dealer cost estimate then I apologize. But I will bet there are dealers on this board that will agree with me that their cost of doing business is in the 20 to 25% range. Whether they make that percentage on the tubs themselves or elswhere is really a mute point...cost is cost.

I also want to make it clear that I am not one of those people who want to overstate dealers costs etc.  The point I am trying to make is that you as the customer never know the true cost of large ticket items.

And for the best analogy of all......When you buy a beer at a bar $2.50, the cost to the bar owner is about 50 cents, why does that ripoff artist need to make 500%???  

[Mendocino101]

all I will add is that...If any business provides a service or a product that people see value in than that is all that matters...what may appear to someone as excessive profit may only be a small part of the business and its business cost....I hope that each dollar I spend that the owner there is making a good living and that he will be there tomorrow...becasue if I chose to spend my money with him there today....there is a good chance that I will desire to do so again....and the great part of things are...If I am unhappy with what he charges and do not see it as fair...I can simply choose to go else where....and that is why I strongly believe that the competitive balance of our market keeps most things in line.....just one more thing....I understand that there will be abuses by some....and at times the chance to go else where will not exsit....but in the big picture that is truly more of the anomaly of things...

[Rboehme]

A helpful example of economics and why spas are so expensive; though one should keep in mind that they are example numbers not actual data from someone in the spa biz. And the HUGE assuption is that the dealer actually paid $7k for a spa sold for $10k.

I am very familiar with the numbers in the spa biz. I can assure you that a 30% percent margin on a spa is about normal.

\Although the expenses he used were WAY underestimated. $1000 for rent? That is ubsurdly less than most dealers pay.

2 employees totaling $29,000 per year. That is laughable. Would you want one of those 2 part time employees servicing your $8,000+ spa?

No cost for advertising. In my city a good size newspaper ad on a weekend costs close to $10,000. If you do that once a month its $120,000. A consevative yellow page ad is $10,000+ a year(if you only have 1 yellow page ad.)

I could go on

[Dr. Spa™ Ret.]

that's quite funny...... thank you. I'm trying to hire a couple of high school students for the summer. At $8 and hour, most aren't interested. I've been told the fast food places are starting at $9 - $10

[bodguy]

I am very familiar with the numbers in the spa biz. I can assure you that a 30% percent margin on a spa is about normal.

\Although the expenses he used were WAY underestimated. $1000 for rent? That is ubsurdly less than most dealers pay.

2 employees totaling $29,000 per year. That is laughable. Would you want one of those 2 part time employees servicing your $8,000+ spa?

No cost for advertising. In my city a good size newspaper ad on a weekend costs close to $10,000. If you do that once a month its $120,000. A consevative yellow page ad is $10,000+ a year(if you only have 1 yellow page ad.)

I could go on

If you read up 2 posts you will see that I agree that the cost estimates were low...all the numbers were....I was using very generic and simple numerical values to state my point to those who are not as business savy as others.

[jaw]

Nonsense.

As a buyer, unless you are loaded, you have an obligation to yourself to spend only what is necessary to get what you want - within reason - in fairness.

You also have an obligation to keep the dealer - whatever he may be selling honest and competitive too.

This thread is daffy.

[Steve]

This thread is daffy.

Yeah... I'm duck'n out of this one!

Other than to say that bodguy has brought up some great points as a useful guideline to give these people that think all spa dealers are making 100 points on each spa sold a small clue.

If you want to keep your local dealers honest, shop wisely and don't buy from the company you feel has poor value. Your decision to purchase elsewhere will be a loud voice to let them know that their pricing is out of line. It has nothing to do with knowing costs. That is so thoroughly laughable. Like the consumer has any clue what margins any one company needs to stay in business.  

Yeah, lets let them decide what they want to spend and let them have it at whatever price they feel is fair? Seems to make great business sense to me!!

Steve

[bodguy]

Nonsense.

As a buyer, unless you are loaded, you have an obligation to yourself to spend only what is necessary to get what you want - within reason - in fairness.

You also have an obligation to keep the dealer - whatever he may be selling honest and competitive too.

This thread is daffy.

Why is this thread daffy???

Never did I say you shouldn't get the best price possible  .

I believe the best way to do that is to research and find out what others are paying for the same tubs on sights like this and drive a price somewhere in that range.

Asking for dealer costs on Spas IS NOT the way to get your best price because there is not a chance on the planet anyone is going to sell you ANYTHING as large and expensive as a spa at 5% above their cost!!! All you as the consumer is going to do is walk away pissed off and spaless.....

see the older threads with the poster named needsaspa

If you think the best way to price a spa is to do so utilizing dealer cost tell the dealer you will pay him 20% above his ACTUAL cost, make him prove his cost and see if he bites.  My guess is most dealers wont as a 20% margin is to low for them to sell at

[dazedandconfused]

Who is needsaspa?  Is he a dealer?  I have seen alot of references to him/her.

[bodguy]

Yeah... I'm duck'n out of this one!

Other than to say that bodguy has brought up some great points as a useful guideline to give these people that think all spa dealers are making 100 points on each spa sold a small clue.

If you want to keep your local dealers honest, shop wisely and don't buy from the company you feel has poor value. Your decision to purchase elsewhere will be a loud voice to let them know that their pricing is out of line. It has nothing to do with knowing costs. That is so thoroughly laughable. Like the consumer has any clue what margins any one company needs to stay in business.  

Yeah, lets let them decide what they want to spend and let them have it at whatever price they feel is fair? Seems to make great business sense to me!!

Steve

Steve Im dragging you back into this thread, I've been waiting for a dealer to repsond

I know your a Beachcomber sales person (can't wait to see one in real life btw)

Hypotheical question with a hypothetical spa.

Would you as a spa salesman sell me a new model year, unused $5000 (your cost) spa with all the fixin's (chemicals, delivery, steps, lifters etc) for $6000.00? (20% over your cost).  Better yet just the spa, no fixins, for 20% over your $5000.00 cost?

Im not asking you to hold yourself to it if you would, but as many times as people ask what is dealer cost around here, I am just trying to provide a little reality check on what it takes to run a business, what real pricing is, and most of all how it is ABSOLUTLY not fair to use the dealer cost on something as expensive as a spa to base ones offer on.