New Wave

Water stores that cater to budget-minded, health-conscious families are making a splash.

Magazine Contributor

January 1, 1997 7 min read

This story appears in the January 1997 issue of Entrepreneur. Subscribe »

Fredrick Bozin's product has no taste. And that's just fine: Tastelessness is, to him, the very point--although his product is also pure, economical, and usable in every household in his selling area.

What's Bozin selling? Try water. That's right; the inventory at his Watermarket store in Fallbrook, California, consists of gallons of clear, clean, inexpensive water. While other entrepreneurs try their hands at new, cutting-edge products, Bozin and a groundswell of water retailers like him are selling a product as old as the hills.

Devoting an entire store to water isn't as strange as it sounds. Water is a hot commodity. Why? People aren't entirely satisfied with the water that comes from their taps. Sure, it's supposed to be safe. But in some cities it's brown. Or it smells. Or it has particles in it. And who knows what secret lead or silent carcinogen lurks undetected in your glass?

Traditionally, the alternative has been bottled water. In 1995, Americans consumed some 2.7 billion gallons of bottled water--a whopping 1,025 percent increase over 1975 figures, according to the International Bottled Water Association. (And that doesn't even include water sold out of stores like Bozin's because statistics for this sector don't yet exist.) But standard bottled water is rarely cheap. In some areas, five gallons of home-delivered water cost $7.50. At the market, the least-expensive generic brands sell for 50 cents or more.

Bozin's water, by contrast, costs a mere 25 cents a gallon. And Bozin says the quality is as good as or better than more expensive alternatives--a claim his customers seem likely to back. On an average day, he sells between 950 and 1,100 gallons in spite of the fact that Fallbrook has a population of just 32,000. Bozin's secret: value, service and genuine quality. "Our water is very clean," he says, "and it tastes good."

Waterlogged

In an era when business concepts seem to get more complicated every day, discovering an enterprise based on such a simple product is, well, refreshing. "We don't have any product waste, and there are no styles to go out of date," says Julie Chaves, who co-owns Drinking Water Depot in Canoga Park, California, with her husband, Joe.

What makes water a hot seller? One reason is consumers' continuing emphasis on value. However well the economy is growing, everyone's always looking to save a buck.

Another important factor is health consciousness. Water isn't fattening, alcoholic or loaded with caffeine. Dieters and fitness buffs are urged to drink two quarts or more of water daily to help the body function properly. That means high per-capita consumption and a desire for water that tastes pure.

The key word here, of course, is "pure." For water to be absolutely healthy, it should be free of carcinogens, minerals, chlorine and bacterial critters. Water retailers don't accuse municipal water supplies of outright contamination. But they do note that bad-smelling, bad-tasting, suspicious-looking tap water isn't exactly uncommon.

How is water-store water difference? Though the purification process varies among stores, most employ rigorous filtration and reverse osmosis systems to remove virtually all foreign particles. Bozin, for instance, reckons his local tap water contains about 450 parts per million total dissolved solids. After processing, the Watermarket's water contains only four to five parts per million.

From The Ground Up

This is an unusually low-cost business to operate. At the center of operations is a purification system. After going through the filtration process, the water is collected in giant tanks and dispensed to customers via self-serve spigots. Except during the busiest of times, one employee can easily man the store, operating the cash register and helping customers out to their cars.

Water stores work well as very small or even solo operations (usually with the help of a part-time employee). Absentee ownership is also highly feasible, which is why many store owners branch out into multiple sites.

Start-up costs are modest for retail. With some frugality, it's possible to open a 1,000-square-foot location for less than $40,000, and start-up funds of $50,000 to $75,000 are apparently ample. Other than the usual leasing and buildout costs, the only major expense is the purification equipment, which runs close to $30,000. The main inventory--water--comes at rock-bottom prices; moreover, you make your own as you need it. Most water stores also sell coolers, bottles and miscellaneous filtration gadgets.

The Site To See

Two key factors in a water store's success are location and marketing. According to Bruce Wilkinson, co-founder of Water Business Interna-tional, an Escondido, California, manu-facturer of purification equipment, water stores can make a splash in almost any part of the country. "Warmer climates have greater demand because people drink more water there," Wilkinson says, "but we've seen stores opening just about everywhere."

The ideal site is in a strip center anchored by a supermarket--exactly the kind of site Bozin chose for his shop. "Being near the supermarket is a big advantage," says Bozin. "It's easy for people to stop in at the same time they do their weekly shopping," and that extra measure of convenience can spell the difference between a sale and a pass.

In this business, an upscale neighborhood won't necessarily translate into rising sales. On the contrary, says Joe Chaves, whose store is earning monthly sales of approximately $4,000, "I don't think this business does as well in high-income areas [because people there] don't care about saving 75 cents a gallon on water. We're in an area that caters to families; they're the ones who want to save money."

Interestingly enough, locating in an area with a significant immigrant population can be a plus. "People in other countries are used to drinking bottled water," says Donna Compton, owner of H2O2Go in Vista, California. "Many people from other cultures simply won't drink water from the tap."

Whatever the demographics, population density is an important consideration. "You want a high-visibility, high-density location," says Wilkinson. Areas with a preponderance of apartment buildings are especially desirable. Notes Wilkinson, "Renters aren't going to invest in their own home purification systems, and they're less likely to want to pay for home water delivery."

Flow Of Customers

Even the best location won't draw people to a water store without marketing. Compton, who opened her store in 1995, says the early months were tough sledding. "Once you get people in the door and explain your operation, they understand and are likely to become steady customers," she says. "But getting them in the door wasn't easy. Advertising did nothing for us. People would see the ad and not understand what we were doing."

What's the answer? To some extent, it's patience. New retailers should be prepared for a few slow months during start-up. But it also pays to have a plan. Although newspaper ads flopped for Compton, door hangers and coupons have been successful in bringing people to the store.

The Chaveses are constantly marketing. "When apartment managers come into the store, we give them coupons for their tenants for 5 free gallons of water," says Joe. "That encourages people to come in and try us." They also sponsor fund-raisers and donate a percentage of sales on a designated day to a local school or sports team. The community groups get a great, effortless fund-raiser, while the Chaveses get flier distribution, community support and foot traffic.

For entrepreneurs who understand marketing--and the market for purified water--water stores represent a unique opportunity. Essentially, all it takes to succeed is the right equipment, a plum location, promotional savvy, the blessing of your health department, and a commitment to quality and service. You don't need a fortune in start-up capital or layers of corporate bureaucracy. And you certainly don't need taste.

Want To Know More?

The Water Quality Association is a trade organization for manufacturers and distributors of point-of-use water treatment equipment. Their annual trade show will be held this year in Albuquerque, New Mexico, from March 17 to 23. For information, call (800) 749-0234, or write to Water Quality Association, 4151 Naperville Rd., Lisle, IL 60532.

Water Conditioning & Purification is a monthly magazine covering the water business. Subscriptions are $39 annually and are available by calling (520) 323-6144 or writing to Water Conditioning & Purification, 2800 E. Ft. Lowell Rd., Tucson, AZ 85716.

Gayle Sato Stodder covers entrepreneurship for various publications. She lives and works in Manhattan Beach, California.