Like the banking and housing industries, the entire pool industry is on the edge of what may be the largest retraction in the history of the industry. Even now the sales of pools are seriously down, but the volume does not even begin to tell the story.
We have just exited a period of time where credit flowed like water. But instead of water it was alcohol and we became drunk on the availability. We bought newer larger homes, we built incredible pools, we owned exotic cars. We entered a time where the average "middle class" family lived at levels only available to the ultra rich fifty years ago. But lets focus on the pool industry specifically and see what we can learn.
The pool industry was born in the fifties, as post war affluence moved to the middle class. The idea of owning a pool moved from being the possession of the ultra rich, down to the upper middle class. This trend continued until by the late '70's a pool was affordable and readily available to the middle class American.
In the '80's we saw the birth of the middle class residential "luxury pool" market, and the idea of "style and design" became more prevalent. So far, though there certainly had been ups and downs, (such as the savings and loan failures), the pool industry maintained the ability to continue it;s pattern of growth.
In the late '90's with interest rats maintained at artificially low levels, the seeds of a "housing boom" were planted. Easy credit, (120% plus LTV on pools), made it possible for any family with two incomes to be able to afford a pool. WOW, what a boom! The industry rocketed to new levels of success, but another problem began to occur.
With housing booming, there were some large pool builders who aligned themselves with home builders and built pools together with the homes. These pool companies prospered, (though not without some difficulty), as it became easy to buy a new home complete with a pool.
As the "pool boom" ensued, new players entered the market in droves. As the industry had a very low threshold of entry, many of those who entered were not qualified, trained, or experienced in the sales and construction of pools. Due to the rapid "market growth", coupled with a disproportionate number of unqualified pool builders, the margins began to dwindle. Now in some ways there were benefits of this, and in a normal market the benefits would counter balance the problems. Benefits included the use of new and more cost effective construction techniques, and the availability of high quality low cost materials.
Then in the heat of the "boom", with America still drunk on the flow of easy credit, materials took a sharp turn upward. Concrete became hard to find, and steel doubled and tripled in price. The events happened so fast that much of the increase in cost was not captured by a relative increase in the price of the sale, further crippling margins.
Then in November 2005, at the peak of the housing boom, the "speculators" began a mass sell off of houses in Florida, Nevada, Arizona, and California. It was these "speculators who "bid up" the housing prices to a climax, then dumped then rapidly causing the market to bottom. This was the same strategy used by "day traders" in the stock market where it is affectionately called, "pump and dump". By this they mean, "pump" the price high by buying fast, knowing that the market, like sheep will follow. The market that follows drives the prices up fast, and the investors who started the trend sit back and just wait for a bit. While waiting they rent out the properties to cover the majority of the costs. Then at the right time, they "dump", selling off as fast as they originally bought. Since the average mom and dad who bought homes during this frenzy had to actually live in the home, they were neither motivated, or even aware enough of what was happening to respond to the "dump" and also sell their home.
The fact is that so many investors entered the market at this time, that more homes were built and sold than there were families to house them. And the families who bought during this time thought their investment would increase just as it have in the prior three years.
After the "dump", the "real value" of homes plummeted. Homeowners caught in homes worth less than they owed were stuck.
So here we are, with the current crisis, now being bailed by Congress and the Fed, it appears we are entering a new period of time. But actually, we are reentering an old period of time. We are reentering the "70's. Pool sales volumes will plummet as people need a home and food far more than a pool. Though pools will be sold, it will only be a fraction of the current companies that make it. Companies will need regional and product diversification to protect against future economic swings that will surely follow.
Also the market has shifted. The buyer demographic has changed, and is unlikely to return for a very long time.
So now more than ever in the history of the pool industry, is the time to study and prepare. It is time to master marketing, and demographic studies. It is time to build strategic alliances to help you through this time. In deed, there will be some companies that not only survive, but will be highly successful. Will it be you?