Tapping New Markets
By Bill Sendelback
Most hearth dealers do a bit of advertising, then wait for customers to walk through the door. But when hearth sales tank, as they did for many in 2015, those dealers are hit hard and scramble to survive. Some hearth dealers, however, don’t rely on consumers coming through the door; they actively pursue new markets for their hearth products. In most cases, those dealers are thriving, even during tough times.
Hearth products in commercial and hospitality installations such as hotels, restaurants, shopping malls and office buildings used to be a very small part of the business for Dreifuss Fireplaces in Philadelphia, Pennsylvania, according to president David Waldman. “But it has skyrocketed in the last three years,” he says, “to be 40 percent of our business. This extra business has been particularly helpful since retail sales were almost non-existent last year.”
Since beginning commercial and hospitality sales efforts seven years ago, fireplaces now represent 90 percent of the company’s commercial sales efforts, with fire pits making up the other 10 percent. “We’ve experienced a real boom in fireplaces in commercial installations in the last couple of years as these venues try to one-up each other,” Waldman says. He points out that although the margins are “not that robust, the dollars are quite significant.”
|Installation by Dreifuss Fireplaces in the National Hockey League’s Stanley Cup-winning Pittsburgh Penguins facility.|
Recent installations for Dreifuss Fireplaces include universities and club houses such as those of the National Football League’s Pittsburgh Steelers and the National Hockey League’s recent Stanley Cup-winning Pittsburgh Penguins.
“Commercial business does not happen overnight,” says Waldman. “You have to plant the seeds by talking to designers, architects and contractors. It can take up to two years after quoting a job for it to finally go to bid. For just one sale, you might have five pieces of paper involved in the billing alone. For most of our commercial jobs, we might have a two-in. thick folder of information and details. We have a high-rise job where I bought a new filing cabinet just to house the paperwork for that one project!
“In most cases, we’re installing very sophisticated products, for very sophisticated customers, that involve specific procedures. It might take five pages of paperwork just to get paid. It also takes a few jobs before feeling comfortable with all the procedures.” Waldman points out that he always uses at least “two sets of eyes” scrutinizing the quotes before they are released.
Hearth & Home Distributors of Utah also has found commercial and hospitality installations welcome additions to its sales.
“This business has been awesome for us,” says Gary Reuter, Salt Lake City area manager. “These fire features are big ticket items with outstanding margins. It’s now 20 percent of our business and growing.”
Reuter is selling electric and gas hearth products for both indoor and outdoor installations, and fire pits as turnkey jobs sold by his regular sales staff. One recent job included a fireplace in a hotel lobby with a $60,000 price tag.
Home & Hearth Distributors works with local architects and contractors to get in on the bidding processes. “We now get a lot of jobs because of our reputation,” he says. “It really boils down to relationships.” In addition to referrals, Reuter’s sales staff finds opportunities in the field by following up on signage for projects that include redoing hotel lobbies and placing electric fireplaces in apartment complexes. Other opportunities are found in a local Construction Monitor publication.
“Some of these jobs take months, even years, to come to fruition,” according to Reuter. “We bid a big hotel project a year ago, and it may not happen for a couple more years.”
|Installation in New York City by Westbury Stove & Fireplace.|
Westbury Stove & Fireplace, Westbury and Huntington, New York, is doing “more and more” commercial hearth installations, all gas fireplaces and gas fire pits.
“This is a fast-growing area for us, now totaling 20 percent of our sales,” according to owner Bill Brunner, “and the margins are by far the best we see.” Brunner cautions retailers on pricing. “It’s very easy to drop your prices to get these jobs. But in these competitive bids that range from maybe $30,000 to $300,000, it’s not the dollars that secure the job. It’s the client’s confidence in you.”
Traditional models have given way to linear contemporary gas fireplaces for Westbury. As an example, Brunner recently bid on a 90-ft. (yes, FOOT!) linear gas fireplace for the entry of a New York City condo complex.
That kind of business may be “dangerous for ‘mom and pop’ operations,” warns Brunner. “You really have to have a professional team because mistakes can crush you.” He explains that on one large job, there were 28 call-backs to remedy problems on the job. “We lost money on that job, but we more than made up for it on future jobs we got as a result of handling the problems.”
Brunner uses his regular store staff for this work, with selected personnel with “extensive training” on the products and job procedures as point persons for each job. All commercial jobs are organized over the telephone and the Internet.
“In 75 percent of the cases, the client never even comes into our store,” he says. It usually takes one year for Westbury to secure a job after bidding it. “But once you’ve successfully completed a job with an architect or builder, the procedure goes much quicker,” says Brunner.
He cautions retailers about recommending fireplace models that produce too much heat. “If the unit makes too much heat, you’ll never get traction with that client because of the liability of the heat, and they want to use them year-round. With these units in restaurants and lobbies, you want to make certain the units are cool to the touch.”
Brunner is also installing “a lot” of the larger, linear, gas fireplaces in the very high-end residences in his area.
Marc Mata, owner of Four Corners Stoves & Spas in Durango, Colorado, also is having success with the large, expensive custom homes in his market, as well as commercial and hospitality jobs. High-end custom homes are now 50 percent of Mata’s business, and commercial and hospitality installations represent 15 percent. “These opportunities are growing,” he says, “especially of late, and margins are pretty good, maybe a little less, but at least 30 percent.”
Gas fireplaces are 80 percent of Four Corners’ commercial sales with electric models at 20 percent. The diversity of installations includes hospital lobbies, great rooms at assisted living centers, and university dormitories. Four corners is located in a tourist area, and bed and breakfast operations and remodels of small motels have become big business for Mata. “They want the ambiance and a nostalgic look, and most are gas models.”
Architects and designers are “more and more key” to these jobs, says Mata, who believes that “You need a relationship with commercial developers.” He uses his regular sales force to learn about and arrange jobs, using down-time in the store to be on the phone and handling sales mailings. While some jobs have taken 1-1/2 years to come to pass, most now take three to six months from “conversation to the job. Some jurisdictions are very strict on paperwork. Some not so much,” he says.
Mata views his specialty grill business as “add-on” sales; it now represents 10 percent of his business. “We don’t push them, but no one else in town sells them,” he says. “The appliances and grill accessories are recurring revenue for us, bringing customers in the door over and over.”
Not every hearth retailer is looking for new sales channels such as commercial and hospitality. Some are diversifying into other product categories, and others are working to increase each sale with other products the customer may not have considered.
“Diversification has been a key for us; the smartest thing we’ve done is to bring on patio products a few years ago,” according to Wayne Stritsman, former owner and now consultant to Best Fire in Albany, New York. “Our service and installation department is a true profit center, bringing in $650,000 a year. While doing installations, our people often identify things like chimneys that need repair or replacing.”
Best Fire also handles insurance inspections, and charges $200 for a Level One inspection, which may lead to new flues or even new stoves or fireplaces.
Best Fire’s stove sales may be down, but its fireplace sales are “going through the roof,” according to Stritsman. “You have to sell more than just stoves. And you have to change your sales messaging – today you can’t sell on high heating-fuel costs. We’re now selling more than what the customer is looking for after we really get engaged with the homeowner.”
Stritsman points out the many times that, in addition to the hearth product the customer came in for, Best Fire finds out about their need for a grill, outdoor kitchen items or fire pits. “You sell a customer once. But you sell a client again and again. We make sure our customers become clients.”
Best Fire also sells commercial and hospitality installations. “We go out and meet the homebuilders and contractors. Once they get to know us, they start specing us.” Best Fire offers training sessions for architects that include CEU credits. “Yes, we sell commercial installations,” he says, “but there are more sales opportunities with homeowners. There are tons of opportunities out there, and you can’t sit on your butt just waiting for sales to happen!”