By Peter Censky

What follows is my personal opinion and not necessarily the opinion of individual members of my board or of the Water Quality Association itself. These opinions are based on trends that I see and information I come across as executive director of the association. It’s important to know that I could be wrong. It’s happened before. It’s also important to realize that I might be right—or partially right. And, if I am, then this information is important to factor into your plans for the future.

Whether you are the CEO of your company, marketing manager, sales manager or you do it all as owner of a dealership—you need information. Sometimes that information comes in the form of opinions. This is one of those times.

Consolidation & new channels
Our industry continues to go through change. Some would call these changes “consolidation,” but I’m no longer sure that this is the best word to use. Of course, a number of companies continue to buy up smaller ones, sometimes for the purpose of opening new channels to market or gaining a bigger share of an existing channel. When that happens, consolidation is taking place. But there are new entrants to the industry each year and some of these are whole new channels to the consumer. Is it “consolidation” when new channels to market emerge and new competitors enter the market? Take, for instance, the faucet manufacturer’s product lines. A few years ago there were no “in-the-faucet” products, but now nearly every manufacturer offers at least one model. This isn’t consolidation. Nor was it consolidation when Brita entered the industry and created an entirely new product—pour through carafe—and channel to market—department stores.

By now, we’re all aware of the joint venture between the San Jose, Calif., water utility and Kinetico. They aren’t offering a new product, but this joint venture certainly is testing a new channel to market. Within the next few months, we’ll hear that more utilities are going to start selling water softeners and reverse osmosis (RO) equipment. Certainly, not every city or utility will eventually try to sell equipment, but some will. And, of those that do, a number will fail miserably, some will barely succeed and others will be quite successful.

Bright side for dealers
I don’t think these changes necessarily mean that existing dealers will lose out in the end. Softeners and iron filters are different from most drinking water filters in that they are more difficult to service. I’ve heard water utility managers refer to hard water as “problem water.” Most utility managers are smart enough to realize that selling, installing and servicing softeners is a specialized business that they aren’t set up to do.

This fact reinforces the importance of the dealership. Many consumers feel that convenience and dependability are at least as important as price. In fact, the next big trend in home center retailing can be seen in stores like Expo. There, the business model puts the customer in touch with local contractors and service companies to handle whatever chore the customer has. This new trend also reinforces the importance of the dealer.

Privatization and you
Privatization is another change that I’ve spoken about before. Unfortunately, some people also have misunderstood what that word means. Privatization has nothing to do with utilities selling point-of-use/point-of-entry (POU/POE) water treatment equipment. What I spoke of in the preceding paragraph is not “privatization.” Privatization is when a public utility sells or contracts with a private company to run the utility. In the beginning, little appears to change at the utility except that some economies of scale and savings are realized. It’s important for dealers to understand this because although their market doesn’t appear to change as a result of the privatization of the utility, a very important but subtle change in attitude may have taken place. Simply put, private utility operators are driven by profit; after all, they’re companies, not governmental entities. In time, this attitude change at the utility level could lead them to become competitors.

Or they could become collaborators! Here’s the important thing to understand—these utilities still have to acquire the product, install it, service it and handle consumer inquiries. They don’t know how to do that—but you do. If ever there was an opportunity to jump on, this is it. The other thing you need to understand and believe with all your heart is this—the market is not finite! The untapped potential market is huge. The entry of these new competitors doesn’t necessarily slice the same pie into ever smaller pieces; rather, it grows the pie.

Best available technology
There’s news in other areas, too. Take for instance the issue of arsenic. The American Water Works Research Foundation has proposed a study to determine how (not if) POU/POE water treatment technologies can be used to treat arsenic by municipalities. WQA is working with others to propose a study to validate not only that the equipment can do the job but, more importantly, that servicing and maintaining the equipment is easily accomplishable. In fact, it’s something that our members do every day. There are many thousands of communities that will need this kind of treatment and for the first time in history the U.S. Environmental Protection Agency is contemplating doing the necessary treatment in each home.

Conclusion
Who’s better situated to partner with the utilities—be they private or public—than you? Who would be better situated to partner with companies like Expo? No one knows more about the art or science of treating water in the home than you. As these changes occur look at them as opportunities, not threats. Today’s trends all suggest to me that the dealer will flourish in the future on the strength of training and expertise, service and dependability as well as a good product line. Of these, your main advantages are your knowledge, dependability and flexibility to react more quickly in the marketplace. Have at it.

About the author
Peter Censky has been executive director of the Water Quality Association since 1987. Censky is a graduate of the University of Wisconsin at Milwaukee and holds a bachelor’s degree in political science. The WQA can be reached at (630) 505-0160, (630) 505-9637 (fax), email: info@mail.wqa.org or website: http://www.wqa.org

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