How Much Mark Up Is Their On Spas?

[hot_water]

I work for a major manufacturing company, and when we start producing a new product, we are literally $BILLIONS in the red, selling product in a sense for way less than cost, for the first 3-5+ years, but assuming we stay in business, make that up as time goes on, without actually changing our prices, but production costs go down. A start up Spa company may very well be gambling on the same production model, but of course on a smaller scale. So what if it is flawed business model...I might as well try to profit on their "flawed model"

...I am attempting to use this forum to determine if that extra $3k gets me real, and substantial value, or $500 in more value (which I would pay for) and $2000 in higher overhead and commissions...which I dont want.

arf, I also am an engineer. I used to work for a military aircraft subcontract (electronics) supplier and we would develop and outfit the first squadron for $1. The units would sell for about $250k each, it took about 24 months to develop the device (tailored to the jet), and that was real aerospace engineering and flight qualification, not LED lights. It did take a long time (years) to get from red to black on those deals... but then it went *very* black. And the spares and logistics would account for about 50% of the total revenue for the company... that stuff stays in service for a loooong time. Nowadays in the military world, the FAR (Fed Acquisition Regs) preclude a lot of that sort of "$1 bid" behavior.... the gov't is trying to make a level playing field for all manufacturers, not just those that have the cash. Still, the scenario you describe happened and I believe it will continue to happen in comercial manufacturing.

With spas, though... I don't think so. The manufacturing is on a different scale, the products are very labor intensive, and frankly a spa manufacturer (not exactly cranking them out like paper clips) would have to be out of their mind to purposely sell at a loss.... negative profit aside, cash flow would kill 'em. So yes I agree with your point of taking advantage of such a scenario.... but there is no way that this class of product is going to ever be sold, intentionally, by a manufacturer at below cost unless it is some sort of closeout or blem. So I don't see that scenario as being in the cards.

I also fully agree with your question on the extra $3k getting you value or being mostly overhead. Again, different spas represent different value to diferent consumers. But it seems somewhat obvious that a business that maintains a dedicated showroom will have a very substantial overhead. In my area, rent alone for the showroom would be $8-10k per month.... then add insurance, utilities, maintenance, phone, etc. Throw in payroll for a couple of sales people, couple $k per month for the accountant and lawyer, $10-12k per month profit for the owner, something for debt service (he has to pay for his inventory somehow, I doubt he can afford to pay in cash) and one can see a spa dealer has a lot of expense. THere's no getting around it.

Costco on the other hand.... 14% markup, which is about $500 on a $4k spa or $615 on a $5k model. Basically no profits off of sales, just cover their very low warehouse and internet overhead. No sales people, no advertising, no glossy paper brochures, no after sale support expense, no delivery service. In other words, tiny overhead compared to a traditional dealer.

You are probably never going to get the detailed info you seek on the detailed differences in equipment. Sundance, for example, uses spec parts, made for them (probably by the same companies, such as Balboa or gecko). This is my second spa... about the best I've been able to do is make sure that the stuff in the Costco spa was good (my Hydro had good parts, as does this Strong).

The Strong isn't the best thing out there. But for many people it probably *is* the best $4800 spa. If for no reason other than the pricing structure. It has to be! No dealer can compete with Costco in terms of buying power or overhead. All the arguments to the contrary don't make any sense... and you seem to be some one that's rooted in reality.

It all comes down to finding the best spa (for YOU) for the money - the value proposition. For some, it might be Hotspring or Artesian or Marquis - with the dealer, specific model they love, etc. I really liked my last spa (Costco Hydrospa). It did what I needed it to do. And I think this CSXi80, while not quite as fancy, has better workmanship and still represents (for me) the best value out there.

In other words, you're asking the right questions but you're asking the wrong people. Your going to get some nebulous statements about quality that can't be verified, and a lot of smokescreen about Costco's business model, as well as misinformation about warranty support and the Costco return policy. I can't say I blame them.... Costco is impossible to top IF the other aspects of the deal fall into place for you. If the Strong spa suits your needs, and your happy with the total package (short track record, no dealer support, no delivery or install support, etc) then it's going to be a great value... in my view far better than a high-overhead dealer can ever hope to touch.

[arf1410]

One of the reasons I was trying to educate myself about the components in Strong, and other spas, was to determine if they were custom designed stuff, and if the Spa manufacturer went out of business there or would no hope for parts. Fortunately, it does appear with Strong, and others, that they are all fairly standard parts, not dependent on the spa dealer or manufacturer for spares. That lessens my concern about buying a spa from a company without a 40 years history...

[spatech (the unreal one)]

One of the reasons I was trying to educate myself about the components in Strong, and other spas, was to determine if they were custom designed stuff, and if the Spa manufacturer went out of business there or would no hope for parts. Fortunately, it does appear with Strong, and others, that they are all fairly standard parts, not dependent on the spa dealer or manufacturer for spares. That lessens my concern about buying a spa from a company without a 40 years history...

I've said it a million times but one of the important things if your'e going to buy a spa from Costco is that you REALLY need to be a true DIYer. They won't be overly complicated spas and you'll be your own service guy but for some thats fine. You really seem to want to go that way and spend less so as long as you go with your eyes wide open then maybe it'll work for you.

[hot_water]

One of the reasons I was trying to educate myself about the components in Strong, and other spas, was to determine if they were custom designed stuff, and if the Spa manufacturer went out of business there or would no hope for parts. Fortunately, it does appear with Strong, and others, that they are all fairly standard parts, not dependent on the spa dealer or manufacturer for spares. That lessens my concern about buying a spa from a company without a 40 years history...

I get your concern. But with you being an engineer, even if they used custom stuff.... so what? You would be able to retrofit in just about any available stuff and make it work. Maybe even better! But the fact is, most spas, except for the few largest makers that have enough volume to justify their own custom branded parts (like Sundance & Hotspring and a few others) use off-the-shelf parts - Balboa or Gecko, Waterway, etc.

My biggest concern is always the shell. It's something that is fully unique to each maker, can cause a lot of grief if you are chasing blisters every time you drain, and is impractical to replace. The parts... not such a big deal, custom or otherwise. As long as you haven't goten a full-foam model... which would be like buying a car with the hood welded on. At least that's my view of it.

[arf1410]

I get your concern. But with you being an engineer, even if they used custom stuff.... so what? You would be able to retrofit in just about any available stuff and make it work. Maybe even better! But the fact is, most spas, except for the few largest makers that have enough volume to justify their own custom branded parts (like Sundance & Hotspring and a few others) use off-the-shelf parts - Balboa or Gecko, Waterway, etc.

My biggest concern is always the shell. It's something that is fully unique to each maker, can cause a lot of grief if you are chasing blisters every time you drain, and is impractical to replace. The parts... not such a big deal, custom or otherwise. As long as you haven't goten a full-foam model... which would be like buying a car with the hood welded on. At least that's my view of it.

While I am an engineer, and don't mind tinkering a bit, I have my limits. I am not too concerned about having to order and replace a pump or valve or sensor, but don't have the skills or desire to rebuild a pump, or deal with a delaminated tub, or any sort of custom repair, rather than simple part replacement. I agree with you on the foam issue... If I lived in Montana I would be much more concerned about the potential energy savings from a fully foamed tub, but being in Seattle, I'm willing to sacrifice a bit of energy efficiency, and maybe even a little extra noise, to have the accessibility. I am guessing the guy who came out heavily in favor of foam is a salesman who sells only that type...

But the most important question of all - Which model tub will attract the most buxom blonds in bikinis (or less!) to my tub?

[Dan.The.Spa.Man]

I look at foam filled as a big negative - the minor possible energy savings is far out weighed by the tremendous added difficulty in access for repair. One recent post in this forum mentioned $1100 minimum to repair a leak in a foam filled tub. Also, I didn't think there was a correlation between foam and price - some manufacturers do, some don't, and others give you the choice. A local (Seattle area) dealer, not Costco, recommended to me against that option. Certainly a longer warranty has value, however only if the store or manufacturer is there to support it. I have more confidence Costco will be around in 5 years than the corner Spa dealer. Spa dealers generally provide free delivery and setup, which is worth a couple hundred dollars. The Spa dealers I have spoken with did not mention any other free support, that they would offer unlike Costco. I would think their sales pitch would have mentioned it, if they provided it.

You have things backwards though. There is a major definite savings on a full foamed quality tub v.s. the slight possibility that the tub may leak. For that person that paid $1100 for their leak repair there is another 99 people that paid $1100 extra in electricity in a year or two.

Also, foam costs a lot of money. A dealer that offers you a choice may lead you towards "no-foam" because it costs a lot of money and they can make it seem like it's not a big deal and make more selling a tub without foam if they make you think insulation is not important.

[hottubdan]

I get your concern. But with you being an engineer, even if they used custom stuff.... so what? You would be able to retrofit in just about any available stuff and make it work. Maybe even better! But the fact is, most spas, except for the few largest makers that have enough volume to justify their own custom branded parts (like Sundance & Hotspring and a few others) use off-the-shelf parts - Balboa or Gecko, Waterway, etc.

My biggest concern is always the shell. It's something that is fully unique to each maker, can cause a lot of grief if you are chasing blisters every time you drain, and is impractical to replace. The parts... not such a big deal, custom or otherwise. As long as you haven't goten a full-foam model... which would be like buying a car with the hood welded on. At least that's my view of it.

While I am an engineer, and don't mind tinkering a bit, I have my limits. I am not too concerned about having to order and replace a pump or valve or sensor, but don't have the skills or desire to rebuild a pump, or deal with a delaminated tub, or any sort of custom repair, rather than simple part replacement. I agree with you on the foam issue... If I lived in Montana I would be much more concerned about the potential energy savings from a fully foamed tub, but being in Seattle, I'm willing to sacrifice a bit of energy efficiency, and maybe even a little extra noise, to have the accessibility. I am guessing the guy who came out heavily in favor of foam is a salesman who sells only that type...

But the most important question of all - Which model tub will attract the most buxom blonds in bikinis (or less!) to my tub?

At least 2 guys in this thread touted full foam. I sell 'em and the other bought one.

Fact is, you are correct to want to buy a questionable tub without full foam. No track record, as you say. So, chances of plumbing leak are what? Don't know.

I do know with my customer base of thousands of in place spas, odds are pretty good you will not get a plumbing leak. It can happen; not saying it doesn't. Just less likely in my opinion.

So, if planning to repair plumbing leaks is a decision in your buying process, then you seem to be leaning in the right direction.

[great white]

At least 2 guys in this thread touted full foam. I sell 'em and the other bought one.

Fact is, you are correct to want to buy a questionable tub without full foam. No track record, as you say. So, chances of plumbing leak are what? Don't know.

I do know with my customer base of thousands of in place spas, odds are pretty good you will not get a plumbing leak. It can happen; not saying it doesn't. Just less likely in my opinion.

So, if planning to repair plumbing leaks is a decision in your buying process, then you seem to be leaning in the right direction.

I don't know if I'd say I "touted them", but I do see the advantages and disadvantages of a fully foamed design. Other than the hassle of servicing leaks in the plumbing, it's hard to see any other drawbacks.

I was willing to take the chance on the design given the length of the warranty. Less of a warranty or where construction is in question would be a different story.

With an across the board 5 year warranty (my dealer "tops up" everything on the waranty except the cover to a minimum of 5 years) I'll be picking up that phone at the first signs of any trouble...

[hot_water]

But the most important question of all - Which model tub will attract the most buxom blonds in bikinis (or less!) to my tub?

The answer to that critical question:

The tub with freshly made cosmopolitans close by, of course! Just keep a pitcher of regular martinis on hand for yourself.

[Curioprop]

Just a question... Have you wet tested the Strong or any other tubs? For my wife and I that was the deciding factor. We both got in the tub and found our "comfort" zones. We probably wet tested 8 or nine tubs. I never met a dealer that wouldn’t bend over backwards to let you test a tub. Did we pay too much? Well, as Newbie’s, we have been soaking every night this month and sleeping like babies. So what was the price of happiness? The engineering differences are there for you to test. Just get in and turn on the jets. For instance, every jet in our tub is variable from off to full throttle. What is the quality of the cover and other components? If you do not test them, you really are not comparing them.

I was an accountant at a large retailer and I can tell you they have more than a 14% markup. You have to include volume rebates, co-op advertising kick backs, etc. I shop at Costco quite often, but you really have to know your prices. They have great deals and sucker deals (like all retailers) and they move them around. I always found the pricing was best when they first sell a product but the margin is increased when you go back to restock. Home Depot is the same. All large retailers are. If you really want to know then get there latest financial statements and look for gross margin percentages. I would be surprised if Costco would take up that much floor/wall space for a product with minimal margin. They, like all retailers, are there to maximize $/sq ft of retail space. If it isn’t producing, they won’t stock it. Simple as that.

Now look what you guys have done. You’ve gone and riled up the accountant in me. Oh, well…. I’ll just have to take a plastic glass of wine out to the tub (maybe a can of beer by the time I get to the fridge) and smooth those tense nerves away.

PS. Life is just better in a tub!

[hot_water]

Just a question... Have you wet tested the Strong or any other tubs? For my wife and I that was the deciding factor. We both got in the tub and found our "comfort" zones. We probably wet tested 8 or nine tubs. I never met a dealer that wouldn’t bend over backwards to let you test a tub. Did we pay too much? Well, as Newbie’s, we have been soaking every night this month and sleeping like babies. So what was the price of happiness? The engineering differences are there for you to test. Just get in and turn on the jets. For instance, every jet in our tub is variable from off to full throttle. What is the quality of the cover and other components? If you do not test them, you really are not comparing them.

I was an accountant at a large retailer and I can tell you they have more than a 14% markup. You have to include volume rebates, co-op advertising kick backs, etc. I shop at Costco quite often, but you really have to know your prices. They have great deals and sucker deals (like all retailers) and they move them around. I always found the pricing was best when they first sell a product but the margin is increased when you go back to restock. Home Depot is the same. All large retailers are. If you really want to know then get there latest financial statements and look for gross margin percentages. I would be surprised if Costco would take up that much floor/wall space for a product with minimal margin. They, like all retailers, are there to maximize $/sq ft of retail space. If it isn’t producing, they won’t stock it. Simple as that.

Now look what you guys have done. You’ve gone and riled up the accountant in me. Oh, well…. I’ll just have to take a plastic glass of wine out to the tub (maybe a can of beer by the time I get to the fridge) and smooth those tense nerves away.

PS. Life is just better in a tub!

Gross margin for Costco, 52 week period ending 31 Aug 2008, from their website investor relations page, was $7.47B on sales of $70.97B. Merchandise costs are reported as $63.5B. These figures seem to support the markups being more like 12% on average.

I haven't seen the prices increase in general at Costco, any more than the general cost of living. The CSXi80 spa was introduced at $5500 but has been selling for $4800 for the past few months. Some posters that paid the higher price report that Costco has refunded them the difference. Not bad. But then again their business model is to keep members happy so they renew their membership. They brag more about their 87% renewal rate in their financial report than they do about their earnings from operations.

You can only wet test a Strong at a Strong dealer, and that would be a slightly different jet configuration than the Costco version. I shopped all the majors and yes I wet tested several. I had a tub before. And I have friends with tubs, my good friend has a Sundance. Of course I would have liked the opportunity to test the Strong, but there is no dealer nearby. The gamble paid off for me... I find it to be very comfortable.

Costco doesn't stock Strong tubs on the floor in their retail stores. They are ordered online, and shipped direct from the Strong factory to the Costco member. So there is no retail floor space occupied by the spa.

I'm glad you have a tub that you enjoy. If you're happy, then no, you didn't pay too much. If I'm happy, does that mean I should have paid more? I guess I'll learn to live with the shame.

[Roger]

These figures seem to support the markups being more like 12% on average.

Margins of 12% do not support markups of 12% All bills are paid to arrive at margins. 12% is an awsome number for margins and if any spa dealers around here are getting 12% margins I would be suprised. We strive for 10% That's 10% after everyones paid, including the owner.

[hottubdan]

Gross margin for Costco, 52 week period ending 31 Aug 2008, from their website investor relations page, was $7.47B on sales of $70.97B. Merchandise costs are reported as $63.5B. These figures seem to support the markups being more like 12% on average.

I haven't seen the prices increase in general at Costco, any more than the general cost of living. The CSXi80 spa was introduced at $5500 but has been selling for $4800 for the past few months.

The manufacturer covers the coupon discount, not Costco. So, Costco maintains their margin, the manufacturer increases volume at the expense of their small margin. So, if they get returned, the cycle of failing spa manufacturers and Costco may continue.

You should be happy with whatever spa you get. Some people will be snobby because they bought a spa at Costco at a low price. Others because they bought a brand name for a high price. So be it.

One more thing. As a dealer, I cannot imagine anyone carrying Strong Spas as long as they sell them at Costco.

[hot_water]

>> "Margins of 12% do not support markups of 12% All bills are paid to arrive at margins. "

Roger, gross margin does not include "all bills".

>> "The manufacturer covers the coupon discount, not Costco. So, Costco maintains their margin, the manufacturer increases volume at the expense of their small margin. So, if they get returned, the cycle of failing spa manufacturers and Costco may continue."

Dan, you're right. My point was that prices do not seem to be increasing, as the poster suggested. It's true that if a manufacturer makes good decisions and agreements, they do well. With bad business decisions, they may have trouble or go under. That's the entire challenge of business.

>> "You should be happy with whatever spa you get. Some people will be snobby because they bought a spa at Costco at a low price. Others because they bought a brand name for a high price. So be it."

I agree with you. I see "most" of the discussion in the Strong threads as being discussions of the merits and failings of the spa more than snobbery. But yes, some have said the equivalent of "haha, you paid too much". I interpret some of the nebulous arguments about "quality" being snobbery and defending an expensive purchase. As I see it, once the water's in and hot, very few of our family and guests will care whether a spa is this brand or that one.... spas are a niche item and the manufacturer names aren't household terms, anyway. Bu if the price paid (high or low) adds to someone's gratification, then...whatever.

>> One more thing. As a dealer, I cannot imagine anyone carrying Strong Spas as long as they sell them at Costco."

Yup. I don't see how any private dealer would be happy about that.

[Dnepr Dave]

Building the tub shell can't be very expensive. A friend has a boat company. His eight foot dingy is comparable to a spa shell. It is made in two parts, the outside hull and the inside shell with seating. The hull and inside shell are vacuum formed ABS. The space in between is filled with urethane foam. They cost him a couple hundred dollars each to make. The production process is completely automated, he loads the "Boat machine" with materials and it spits out an eight foot dingy every six minutes.

I would guess that the mark up on spas is close to fifty percent.

Dave

[Roger]

>> "Margins of 12% do not support markups of 12% All bills are paid to arrive at margins. "

Roger, gross margin does not include "all bills".

So i'm glad we agree it has nothing to do with markups.

[hot_water]

>> "Margins of 12% do not support markups of 12% All bills are paid to arrive at margins. "

Roger, gross margin does not include "all bills".

So i'm glad we agree it has nothing to do with markups.

You have to discriminate between gross and net. The poster I was responding to advised a look at gross numbers. They are actually about 10.5% gross margin based on sales, which is a gross markup of about 12%. If you look at NET markup, which is the everything-in number you're talking about (I think) ... well, why don't you take a look at the financial statement and report back what you learn, based on the actual numbers? It might be an eye-opener for you. Costco's net earnings are something like $1.1B (don't remember exactly) on sales of over $70B. Their revenue from MEMBERSHIP FEES is just over $1.5B. Hmmmm. That's after-tax... but it sure looks to me like they don't make much off of sales.

I think the point of the markup question is twofold. First, what is the real negotiating room on a dealer spa. And second, is the higher price from a dealer due to higher markups or is their spa more expensive to manufacture, and therefore "better". Not necessarily in that order.

Is this important? No. What is important is that the product in question offers the value that an individual is looking for.

For many of us, and you have expressed this yourself in other posts, some of the high-end models just flat out cost too much for what you get. You just draw the line at a different place than a Costco buyer does. I am very much convinced that a Costco Strong for $4800 is the best value I can get, relative to what I am looking for in a tub. Others may reach different conclusions.

>> "The hull and inside shell are vacuum formed ABS. The space in between is filled with urethane foam. They cost him a couple hundred dollars each to make. The production process is completely automated, he loads the "Boat machine" with materials and it spits out an eight foot dingy every six minutes."

Dave, the process you describe is pretty far from that used in a spa. The acrylic costs quite a bit more than abs; the acrylic then has to be reinforced with (preferably) hand rolled fiberglass, which is both expensive material and labor intensive. Strong uses acrylobond as teh reinforcement, which is still manually applied (sprayed on, takes a while) becasue the robot that size would cost a fortune. There are many more parts to a spa, much more compex tooling.... and a ton of not-insubstantial components, all of which are assembled by hand. Then there is the testing. What you describe is more like a big igloo cooler... with all due respect, not really like a spa at all.

Talking markups is confusing unless you specify whether it's gross or net. Also remember that a 50% markup is only a 33% margin. I would think that for the manufacturer, the gross markup would need to be much higher than 50%, but the net will be much lower... it's very expensive to run a low-volume, labor intensive factory. One of the reasons I sold my low-volume, labor intensive business was that parts costs crept up, and internet sales (which I had to compete with) forced my margins into the dirt. Not a recipe for a lucrative business.

Based on the general poor financial health of many spa manufacturers, I would guess that margins are pretty tight on the manufacturing side due to competition from the large number of makers vying for a limited market.... and of course the Costco thing which has got to hurt.

[Roger]

Gross margin for Costco, 52 week period ending 31 Aug 2008, from their website investor relations page, was $7.47B on sales of $70.97B. Merchandise costs are reported as $63.5B. These figures seem to support the markups being more like 12% on average.

I was commenting on this false and missleading statement by you. Comments like this just generate FU&D in dealer buyers.

[hot_water]

Gross margin for Costco, 52 week period ending 31 Aug 2008, from their website investor relations page, was $7.47B on sales of $70.97B. Merchandise costs are reported as $63.5B. These figures seem to support the markups being more like 12% on average.

I was commenting on this false and missleading statement by you. Comments like this just generate FU&D in dealer buyers.

My statements are neither false nor misleading. Those are the numbers, which I pulled directly from the annual report. You pull your numbers outta somewhere else, apparently.

[Roger]

Gross margin for Costco, 52 week period ending 31 Aug 2008, from their website investor relations page, was $7.47B on sales of $70.97B. Merchandise costs are reported as $63.5B. These figures seem to support the markups being more like 12% on average.

I was commenting on this false and missleading statement by you. Comments like this just generate FU&D in dealer buyers.

My statements are neither false nor misleading. Those are the numbers, which I pulled directly from the annual report. You pull your numbers outta somewhere else, apparently.

No, my numbers take into acount all income to create a margin. Markup on product in some cases at Costco could be higher than 100 percent. Take all income into account and recalculate for me. Any income that's left out of a report on profits is missleading.

Guy buys a pallet of laundry soap from Costco, 24 bottles on a pallet. It's a buck cheaper than ma and pa supermarket down the street he saves 24 bucks. His membership cost 100 bucks. How much markup was on each bottle of laundry soap?

[hot_water]

Gross margin for Costco, 52 week period ending 31 Aug 2008, from their website investor relations page, was $7.47B on sales of $70.97B. Merchandise costs are reported as $63.5B. These figures seem to support the markups being more like 12% on average.

I was commenting on this false and missleading statement by you. Comments like this just generate FU&D in dealer buyers.

My statements are neither false nor misleading. Those are the numbers, which I pulled directly from the annual report. You pull your numbers outta somewhere else, apparently.

No, my numbers take into acount all income to create a margin. Markup on product in some cases at Costco could be higher than 100 percent. Take all income into account and recalculate for me. Any income that's left out of a report on profits is missleading.

Guy buys a pallet of laundry soap from Costco, 24 bottles on a pallet. It's a buck cheaper than ma and pa supermarket down the street he saves 24 bucks. His membership cost 100 bucks. How much markup was on each bottle of laundry soap?

Rather than give absurd examples, why don't you just look at the financial statements? They're in the public record. You'll see that Costco's net after tax earnings are are something like $1.1B or thereabouts on sales of over $70B. If you go a little deeper you'll see that they're very efficient, with low operating expenses. Why are you arguing this point when the numbers are right there for all to see??? If you think Costco is lying to the SEC in their report.... well I guess you can think whatever you want. But I'm done arguing with you.

[D.P. Roberts]

This argument reminds me of the ones about the Hydro Spas from a few years ago, or the H20 spas from a few years before that, or even the Keys Backyard spas that Lowe's and Home Depot used to sell 10 years ago.

I'll bet you could resurrect those old threads, and the arguments there would be exactly the same. "Box box" tubs are sold at a lower cost and lower margin. They may or may not be as "good" as the national brands, but the track record from the big box stores says that today's brand won't be around tomorrow. Know what you're getting yourself into.

National brands cost more. For some people, dealer support, manufacturer longevity, and the ability to try out the spa before you buy it are worth the extra price. For some people, that sort of stuff isn't worth paying for.

Is anyone really arguing that mom'n'pop local dealers are as cost-efficient as a big box store? Is anyone else really arguing that Strong spas is just as likely to be around in 10 years as Watkins or Jacuzzi, just because they're being sold at Costco?

We're now arguing about the exact amount of Costco's margin? Is any of this minutiae really helpful? Some people think wet testing and dealer support are important; if you're one of those people, buy the national brand. If those sorts of things aren't important to you, buy whatever brand Costco is selling today. End of story.

[hot_water]

Is any of this minutiae really helpful? Some people think wet testing and dealer support are important; if you're one of those people, buy the national brand. If those sorts of things aren't important to you, buy whatever brand Costco is selling today. End of story.

I couldn't agree more.

The only reason markups are worth mentioning at all is because the original poster asked about it. You can see what Costco does , it's right there in the annual report.

But of course in the end it makes no difference, as you said and as I said earlier in the thread. You should pick the tub that you like, with the support you like, for money that you think is fair. That will be your best value.

[Shaamus]

I've never understood why it's important what the margin is when it comes to a consumer making the decision. All they should care about is price and value. If a specialty retailer has higher overhead per unit, it's up to them to decide whether they cut their margin to hit a price point or add value-added services to make up the difference. When I read about someone caring about margin, I read "well I don't necessarily want them to lose money but I don't want to be paying for their BMW." I don't understand why that matters. Make a determination on price versus what you're getting including the after-sale support.

On the other side of the argument, dealers could go a long way toward bridging the gap by bringing in competitive models. It's obvious for a certain segment of the hot tub buying public that the "well our stuff is just a lot better" pitch isn't working. I know for a fact that there are hot tubs that can be sold in a specialty retail environment to compete with the $4000-$6000 spas at Costco. Just off the top of my head there are 7' models with comparable features to those found at Costco from Artesian Island Series, Dynasty, Viking, Cal Spa, Four Winds, QCA and Emerald. I can count on one hand how many times I've seen a dealer on this forum counter the Costco question with "come into our store we have a spa like that." When you just say they aren't as good, customers are naturally skeptical.

BTW - Happy Thanksgiving everybody!

[arf1410]

Shamas, trying to understand margins and operating expenses is important because it gives the consumer information helpful when negotiating prices. Though I am a Costco fan, I certainly admit not being able to wet test, or even see the tubs, is a major disadvantage, so I am trying to get as much additional factual info as possible.

You state that specialty retailers do carry a variety of models that compete on price with Costco. Can you give a few specific examples - ie manufacturer and model number, that you can buy for ~$5000 range to compete with costco on price? I just haven't seen that in the seattle area, though admittedly, I have not done on exhaustive search.

Happy Turkey!