INVESTMENT OR BOONDOGGLE? >
One of Two Parts >(part Two is Here)
Conditioning & Purification,
June 1986 >by
Gene Shaparenko, Aqua Technology >
was the defining article which kicked off the national rush to
build independently owned as well as franchised water stores.
The concept in 1983 was altogether new and radically different
from any water treatment operation in existence at that time.
the initial article, our telephone rang day and night, from all
over the US to Europe, Asia and Australia with requests for our
assistance in starting stores in those areas.
idea of water stores caught on first in California, around the
area of the first Aqua Technology stores. The expansion in these
areas was primarily through employees who cut their teeth on
the initial Aqua Technology stores---learning merchandising as
well as operational aspects of this new and exciting business.
various manufacturers were putting together "water store"
packages to sell to prospective store owners.. These were simply
hardware packages and came with little or no advise or business
operational information. During the late 1980's and early 1990's
the business landscape was littered with failures from these
initial startups---some ill-designed "franchise" operations
losing upwards of $15 million on such programs.
the successful water stores in America are primarily independently
owned and operated. Here and there one can find a "franchised"
operation selling a significant amount of water but whose bottom
line is severely limited by nature of the franchise activities
and the tendency to focus on water sales or relatively other
today's competitive retail economy, simply dropping a bunch of
water processing and dispensing equipments into a conveniently
located shopping center is not enough for prudent investors nor
is it justified by the bottom line. It is necessary to evaluate
the strategic position of that business(via computer models)
in the community at large as well as with respect to existing
or hypothetical competitors.
may seem extraneous to the typical "wanna be" store
owner but as larger business owners and industrial concerns will
rapidly concede, these business modeling activities are absolutely
essential in determining if specific investments are indeed justifiable,
based on a variety of environmental and operational conditions
which may affect the business.
water store owners and "store builders" push these
concerns to the side as "extraneous to getting a store operation"
and thus consign the operation to red ink faster than one can
get out the red pen. Successful retail operations, including
water stores, today run by more than the seat of their pants---they
use tools which larger corporations use on a regular basis to
keep their operations on track.
of these planning and modeling considerations are
presented in an overview form HERE.
hope you enjoy these original articles on water stores. Your
comments and questions are always welcome. You can contact us
at the phone or e-mail connections noted at the bottom of any
page on this website.
is a short story about how the West Coast's first "water
store" was born---how it became very successful---some reasons
why you might want to consider building one---and finally, why
not everyone who is trying to duplicate it is succeeding.
with every growing small business which starts in the home or
garage, one must always make a decision as to whether or not
greater public exposure will increase sales and thereby help
justify the additional advertising expenses, etc.
outside forces (the city fathers, for example) help you make
that decision. Such was the case with Aqua Technology in the
summer of 1983. Having sold hundreds of POU systems since 1977
from the back of a garage on a quiet residential street, increased
retail foot traffic to and from the garage, the roar of shipping
and receiving vehicles competing for parking space on the residential
street next to our house and other notable neighborhood discomforts
led us (with the gentle prodding of the city fathers) to find
adequate room (i.e. "please find another place") for
the growing business.
from the garage to a retail store meant changing gears from a
"preference" to a "commitment" regarding
purified drinking water. It also meant selecting new and more
sophisticated types of equipment, increasing the quality and
quantity of advertising, training outside salespersons, etc.
first, we really didn't know what we were looking for in terms
of a retail showroom. After all, we had no role model or example
to follow---other distiller, filter and other POU salespersons
still worked out of a small shed (or)garage, the trunk of the
in 1983, the technology for producing distilled water in "commercial
quantities" for resale to the general public was just being
developed. Therefore, the first retail store started in September,
1983 with just standard POU items (distillers, filters, reverse
osmosis, ultraviolet, micro filters, etc.).
within six weeks, on the strength of POU system sales alone,
the West Coast's first water store was operating in the black.
these early weeks and months, on several occasions customers
asked whether or not we had some samples of distilled water to
"try before I buy." My wife, the smart businesswoman
that she is, said,
. . Gene, you know there's a future in selling distilled water---you'd
better get a few distillers running in the back room so we can
have some (distilled water) on hand for clients who are considering
a water purifier."
the next week, literally every spare square foot and electrical
outlet was tied up making distilled water (with small 8-gallon/day
units). Somehow, the water disappeared faster than it could be
made. At the end of that first week, close of business found
us completely exhausted from carrying distilled water around
the facility, and the entire showroom floor was again filled
with more empty customer's jugs awaiting water which was to be
made that evening.
my wife said,
you'd better do something about these jugs."
of course, she was right. We had to get those jugs filled and
out of the way so customers could see our retail products.
fortune would have it, (Steven & Michael Sears at)Superstill
Technology Inc. was completing initial production models of a
400 gallon per day vapor compression distiller.
really knowing much about what technical risks might lay ahead,
but seeing the need, we accepted the opportunity to have Superstill's
first production units in our retail store.
first models operated on 100 volts AC-made a healthy 400 gallons
per day and some of the key components were constructed of copper
and nickel alloys. As such, these (initial)units required careful
pre-conditioning of the incoming tap water so as not to destroy
the delicate heat exchange plates. Commercial water softeners
were verboten-a messy acid feed system was required.
computer-based controls were built to carefully meter concentrated
sulfamic acid into the feed water to restrict scale buildup in
the tight heat exchange plate areas of the distiller. Bags of
high-grade sulfamic acid, plastic gloves, protective eyeglasses,
etc. were commonplace in the distiller work area.
hundreds of hours were spent trying to find that ideal "operating
point" where production rate, output water quality and automatic
descaling would occur.
for all concerned, along came 400 and 600 gallon stainless-steel
and titanium versions of the Superstill- and with it came fewer
sleepless nights. Properly sized water softeners preceding the
distiller, combined with the monitoring of a limited number of
"externals" such as carbon dioxide, conductivity, water
pressure, flow rates, etc., and the first retail store was thrust
into large scale automated distilled water production.
the biggest problem became water storage---more and larger tanks,
sterilization and dispensing. Specialized, fully-accessible storage
tanks were built to specifications and placed directly in the
showroom area. Custom dispenser systems built to health department
standards were fabricated and the distillation and pre-conditioning
equipments were moved to rear areas for noise abatement and for
reasons of physical security and safety.
equipment displays for maximum "merchandising" effects
were developed together with new "distilled water"
brochures, consumer guides to both local water quality and POU
equipments, were written to facilitate customer dialogue. Young
men with strong backs and arms were hired to carry customer's
water containers-and the race was on!
the same time, a carefully-selected set of POU equipment was
selected and marketed to individuals seeking home use systems.
Water testing equipment ranging from the mundane to full biological
laboratory capabilities were assembled.
dispensers, coolers, jugs, and other miscellany were gradually
added to the inventory when it was determined that those items
were profitable and added leverage to the merchandising efforts.
hundreds of POU systems and hundreds of thousands of gallons
of distilled water are sold yearly at each of Aqua Technology's
A WATER STORE A SMART INVESTMENT?
all the technical footwork basically done, there is really no
magic formula for physically constructing a water store. Virtually
all the vendors needed to supply prime equipment and 80% of the
retail inventory are readily available. The few additional items
needed to put a store together can be assembled with a few visits
or phone calls to current store owners.
difficult parts come later. We'll explain.
is a full-service "water store"? Our definition is
one which limits the scope of retail operations to water purification
equipment and the sale of purified drinking water. We do not
include water conditioning equipment in our water stores for
(in 1983)we believed that to be financially successful, the water
store had to be a "specialty" store-not just another
place to buy a water softener.
we observed that because of slow growth rates, the water conditioning
industry was itself adding POU systems to its inventory to bolster
their bottom line. We questioned the intelligence of our adding
equipment (softeners) and trying to compete in an already overcrowded
water conditioning market which itself was having problems expanding.
(Note: some of these conditions have changed in the last decade---and
the water store designs have adapted to those changes).
(in 1983) only a single brand of steam distiller, a single reverse
osmosis brand, a set of filtration systems built around a single,
high-performance cartridge, a single micro filtration and single
ultraviolet system were selected for mass merchandising.
found out very early in this endeavor(1983) that convincing an
individual that he/she needs a POU system is a difficult enough
task and that the last thing one would want to do would be to
further confuse the customer by making him/her choose between
two types of distillers, three R/O systems, three types of filters,
single-product POU concept works, and very profitably, provided
you have selected the proper POU manufacturers, suppliers and
supporting vendors to do business with.
THE MONEY IS MADE
full-service water store is composed of several profit centers---water
sales to walk-in traffic and commercial accounts; in-store POU
equipment sales; outside sales by commissioned and/or salaried
salespersons; wholesale activities to other local retailers or
distributors; warranty and service work; and the sales of accessories
(jugs, coolers, containers, pumps, etc.).
first profit center (water) is easily constructed as we have
noted above. In a subsequent article for this magazine we will
give you schematics and simple guidelines for putting a water
store into operation.(See
Water Store Article #2).
second profit center for a full service water store relies solely
on POU water purification equipment. We found that as soon as
we began considering items such as water softeners, iron filters,
hot-tubs and other "water items," the water store became
virtually indistinguishable from a long list of other water conditioning
outlets or nondescript retail stores in the yellow pages.
would become a business which has one of everything, but whose
management and salespersons knew little or nothing about drinking
water quality or details about any of the products.
the scope of retail operations solves additional headaches with
inventory, cash flow and startup costs, insurance, storage, chemicals
(and state and local restrictions on these chemicals in retail
shopping centers), valuable showroom and storage space for bulky
equipment, to name a few.
many new store owners who have not followed this formula or who
constructed no business plan to work from ended up selling flowers,
candy, newspapers, teddy bears, balloons, phone cards, lotto
tickets and other paraphernalia in addition to water and water
products. Today, most of these stores are either out of business
or are being sold to the next unfortunate owner with the same
retail baggage---poorly defined products.)
fallacy we will now dispel about a full-service retail store
is that the largest percentage of profits do not come from the
sale of water, they come through the sale of POU equipment! The
amount of foot-traffic generated by the availability of distilled
or reverse osmosis water at 40 cents per gallon tends to give
the casual observer the opposite view of fiscal reality in the
is another mistake prospective water store owners make. Sitting
in their car in the parking l of(and we see lots of them doing
this) and observing hundreds of customers come through the door
daily, they get the impression that water makes the store profitable.
They then go about making that their sole priority---and then
wonder later why they can't make rent payments.
a well-operated, full-service water store can net in the high
five or low six figures in water profits, profits from equipment
sales generally tend to be greater. That's if you have chosen
the right equipment to sell.
have mentioned "right equipment" many times. After
selling home distillers for several years and finding that continually
repairing poorly designed systems can virtually eat you alive
in both profits and referrals, we took a different approach to
select a system based on better engineering rather than fancy
brochures or marketing programs;
select a system that, if service is needed, it can be done rapidly
without wasting an hour to disassemble the entire unit; and
look for systems that the customer will recognize as an "appliance,"
rather than just a water distiller.
the equipment looks like it belongs in a laboratory we suggest
that you leave it there! Retail customers are looking for appliances,
not toys, gimmicks or lab equipment.
a retailer with a myriad of additional expenses, your sales perspective
now must change from that of being a "distributor"
with perhaps a "partisanship" view toward a vendor
to a perspective which focuses on your own profitability. If
the vendor cannot deliver you will suffer.
the other hand, if their equipment operates without failures
or excessive maintenance costs, customers will be happy, you
will spend less time fixing things and more time selling things.
You will profit and, thus, survive.
questions we always encounter from people interested in the Water
Store concept include:
much does it take to get started?"
prepared to lay out $45,000 to $60,000 for a turn-key operation
capable of generating $200,000-300,000 yearly gross sales. If
your vision is bigger, the required investment will obviously
big should the store be?"
comfortable size would be about 13001500 square feet-half in
showroom and half dedicated to offices, shop and inventory storage.
Plan for growth and be prepared to pay dearly for that extra
space in a good area. Lease terms of 5-10 years are common for
good retail spaces. Unless the sidewalk is gold-plated, stay
away from lease rates exceeding $1.50 per square foot per year.
the other hand, if the agent is "trying to give the place
away," you probably will be as unsuccessful in that location
as was the prior tenant.
type of location is best?"
medium-sized shopping center that caters to a regular, local
clientele but is readily accessible to major traffic patterns.
Remember, customers will be carrying 5-gallon jugs of water to
their car so don't locate right next to a major store where no
parking is ever available.
in and quick out is very important. Stay away from shopping malls.
No one will ever carry a 40 pound jug of water through a shopping
mall to a distant parking spot.
type of overhead expenses can you expect?"
a new store, expect between $2000-3000 per month (not including
salaries). As the store grows, this number will probably peak
do you generate retail POU sales?"
are active in many local advertising media-write for several
papers, give lectures, have door-to-door salesmen, cover the
Yellow Pages, direct mail, flyers, the standard advertising circuit.
However, we are very careful to evaluate the effectiveness of
each of our advertising efforts and, thus, maximize our ROI by
promptly eliminating "losers" in the media.
our stores are strategically located to draw from larger "anchor"
stores such as Safeway, chain drug stores, and are located on
major thoroughfares using highly-visible, street-front signs.
in-store water sales, do you recommend selling distilled water,
reverse osmosis water or both?"
Aqua Technology, we sell steam-distilled water(we went to two
types in 1999). Other water stores around the country use R/O,
and some are now considering or now offering both. A lot is personal
preference. We find that selling only one type of water is less
confusing to new customers. On the other hand having two types
of water might eliminate some of the "mineral" arguments
one might encounter with new customers.
a technical standpoint, maintaining two different systems, storing,
sterilizing and dispensing two types of water complicates the
store design and maintenance. On the other hand, one system could
serve as a backup for the other during scheduled or unscheduled
maintenance (downtime) periods.
we have found that a high-volume, high-purity distiller will
provide a better return on investment (ROI) than reverse osmosis.
The tradeoff is equipment complexity---a high volume R/O system
will provide a smaller ROI with less equipment complexity.
do you find is the biggest center in the store?"
question, the point-of-use (POU) systems. In the POU category,
steam distillers are by far the leader in our stores, with carbon
filters second and R/O systems third. The "aftermarket"
for all three systems should not be ignored. We have a strong
referral and filter replacement program that reaches throughout
the health-related "networks" (holistic, chiropractic,
about licensing and health approvals?"
state will have regulations on vending-type operations such as
a water store. Periodic health inspections as well as biological,
organic and inorganic tests will be required. It is wise to have
your own bacteriological lab to be able to periodically verify
the design integrity of your water production, storage and dispensing
system and any changes made in these subsystems.
are some of the problems one will encounter in the water store?"
management. It is hard to resist expanding the basic water store
concept into related areas such as water delivery services, water
conditioning equipment, selected health items, selling books,
and the list goes on and on.
it is imperative to have accurate and readily available answers
to customer's questions. The woods are full of all types of POU
salespersons and to effectively compete with these other products
you and your sales staff must be up to date on new products and
their strong and weak points.
is the bottom line for success with customers?"
have to act as a broker of information. On one hand, each customer
will have different needs, based on personal preference and water
conditions. As an information and water conditions. As an information
"broker," you demonstrate an understanding of his/her
peculiar water conditions, and the available purification technologies,
thus permitting the customer to select a perfect match between
his need, budget and available techniques.
of all, be honest. It doesn't take much research on the part
of a curious customer to find out if you are pulling their leg
about some water purifier. Good news will travel fast, but bad
news will travel faster!
remember, as with any other type of retail activity, the products
you select to sell should sell on their own merits. If you have
to downgrade the competition in order to sell those products
you have, it's likely you are selling the wrong products.
A WATER STORE FOR YOU?
a water store requires that you have a commitment to better health
through better water. The types of customer you attract will
doubt your sincerity and honesty if you try to sell them a home
water purifier and at the same time puff on a cigarette.
a water store requires that you not overestimate the profits
you will make in the short haul. A water store is a long haul
activity if you want big profits. There are no "quick kills"
in this business.
a water store means having the best equipment you can put your
hands on. Then you don't have to make excuses for not having
what the competition offers.
a water store means running a business, with all the controls
and paperwork that would go along with selling balloons, ballistic
you can handle these items, we look forward to seeing you become
a part of one of the fastest growing small businesses in the
and operator of Aqua Technology of San Jose, CA, Gene Shaparenko
built his first, full-service retail water store in San Jose
in 1983 and the second one in Sunnyvale in 1985. Since then,
he has consulted for investors and assisted in the construction
of several dozen other stores nationwide.
stores which he creates not only use advanced equipment technologies
but have available powerful business and strategic planning software
to assist business owners in the evaluation of new business opportunities
as well as provide business strategies to deal with competitive
business activities which may affect their retail or development
is a EE graduate of the University of North Dakota with advanced
degrees from Purdue University and with post-doctoral fellowship
work in satellite communications at Stanford University's Electronic
Research Laboratory. He spent a dozen years in the aerospace
industry in satellite, navigation and reconnaissance system design
has been President and CEO of a major bottling company and Vice
President of Research and Development for advanced chemical polymer
design and far infrared technologies.
research company, Pacific Intertech Corporation, investigates
new and emerging technologies worldwide and brings together investors
and technologists to create new and advanced products.
two of this two part series on water store development can
be found HERE.