The Great Recession
There’s no denying the long-term impact the 2008 “Great Recession” had on the pool and hot tub industry. As a result, many companies closed shop, and countless employees were out of work. New residential inground pool construction fell almost 60% in 2009, and the industry has struggled to regain volumes seen before the recession.
However, pool construction and hot tub sales improved unexpectedly in 2020. The Covid-19 pandemic forced families to stay at home, ultimately providing a much-needed spark for the industry. Who would have thought that a pandemic would be the catalyst?
While, in many ways, the pandemic revived the pool and spa industry, it created bottlenecks that would force companies to change their approach. Shortages of labor, materials, and equipment caused significant impacts on the pool construction industry. But this article is not about Covid or the pandemic – it is about the potential of a looming recession, its impact on our industry, and how your company can prepare for it.
In 2008, the U.S. housing bubble popped, causing a massive ripple in the global economy. Businesses closed, employees were laid-off, and disposable income became scarce. U.S. consumers were less likely to spend on luxuries like an inground pool causing new pool construction to decline significantly. In fact, from 2005 to 2009, pool construction dropped nearly 70%! Like consumers, businesses with accumulated debt could not weather the storm and had to sell or foreclose. A typical survival tactic for companies during this time was decreasing spending, and many companies chose to cut their Research & Development (R&D) budgets. However, this decision would ultimately end up hurting businesses, not helping them.
How can your business prepare?
History has shown that businesses that invest in market research during economic downturns fare much better than their competition. In 2010, The Harvard Business Review analyzed the outcomes of 4,700 companies across three recessions. Their results? Companies that invested in marketing and R&D during a recession increased their chances of becoming an industry leader by 37% after the recession (Roaring Out of Recession, hbr.org, 2010).
Take Apple, for instance. In 2001, during the dot-com bubble, Apple increased its R&D budget (as % of their revenue), taking advantage of the market’s situation (Apple R&D Expenses by Year: FY 1990 – 2020, Dazeinfo.com, 2021). What happened next? Apple unveiled its iTunes platform in the following years, put a smartphone in everyone’s pocket by the end of the decade, and became one of this generation’s most successful tech companies. Likewise, other notable companies such as Airbnb and Uber became recession success stories due to wise decisions backed by intelligent research.
So, are we in a recession? Technically, not yet. However, recent inflation and the decrease in GDP are causes for concern. In addition, many businesses struggled to adapt to issues caused by the pandemic, and there will undoubtedly be more economic hardships on the horizon. However, based on experience, companies that are prepared will have the best outcome. Businesses can learn from the mistakes of previous downturns and utilize the critical role of market research to facilitate their success.
As a market research company, Pkdata’s mission is to provide the pool and spa industry with valuable resources to plan for the future. Efficient and effective research studies can help a business target new customers, improve current products and services, and develop appropriate services for unique needs.