Hearth Retailing: Past & Future — A Fair Year
By Bill Sendelback
The consensus is that the hearth industry is steadily recovering in a still-soft economy. It’s not a recovery to shout about, but a slow and steady improvement. It certainly doesn’t look or feel like the boom years of the early 2000s, but it’s not reminiscent of the doldrums of the recent downturn years either.
While the recovery generally is across the U.S. and a little slower in Canada, retailer comments reveal that the strength of the recovery varies by region and product category. Gas fireplaces, especially contemporary linear models, are leading the sales charge, fueled by the upswings in new home construction and remodeling.
Wood-burning appliances and freestanding stove sales generally appear stagnant, except in certain regions such as the Northeast. Pellet stoves continue their sales growth, especially in the Northeast and Upper Midwest, as consumers there prepare for the possibility of another rugged winter. Hearth retailers remain silent about electric fireplaces, apparently conceding the category to mass merchants, furniture outlets and Internet sales.
“We’re as busy as can be,” says Dave Coppinger, president of Taproot Hearth & Patio, Williamsburg, Virginia. “Consumers are buying, but home builders are not.” What Coppinger sees is a “wave of replacements” across all categories, such as new fireplace inserts, new gas logs, taking out old fireplaces and replacing them with new direct-vent models. “For 10 years we’ve been selling ‘garage door openers’ for gas products. Now remote controls can really do anything the customer wants.”
Wood-burning products are not selling in Coppinger’s area, where almost everyone has natural gas. He also says that vent-free gas product sales are “just idling.” At one point, he had to decide exactly what Taproot was going to be, so he decided to move more toward hearth products and keep patio products only as a sideline. “To be significant in patio, you have to go high-end with a large showroom. Plus it’s hard to compete with the Big Box stores.”
Coppinger doesn’t see 2016 as being much different than 2015. “We don’t see any clouds on the horizon, but it’s always squirrely in an election year. We don’t have a handle on the Millenials. Baby boomers are our customers.”
“Sales have not been good, down 10 percent,” says Jon Bergeron, president of Hearth Works Fireside Systems, Hooksett, New Hampshire. “There are way too many hearth products dealers in southern New Hampshire, plus Big Box stores, farm stores and even sweeps that are taking sales. We had a terrible spring and a rotten summer. If it had not been for other products, we would not have made it.”
Bergeron says no categories are hot in sales at Hearth Works. Wood-burning appliance sales are stable, and he has seen a “drastic change” from pellet models to gas products. Specifically down in sales are glass doors, fireplace accessories and wood-burning zero clearance fireplaces.
“The problem with our hearth industry is that there is too much consolidation and no industry promotional efforts,” according to Bergeron. “We need to promote to consumers what we have to offer in hearth products. I’m now going with manufacturers that are driving consumers to my three showrooms.”
“This year didn’t take off as we had hoped,” says John Meeker, president of Fire Glow Distributors, Jefferson Valley, New York, “but we’re on par with last year. We’ve had warm weather until now. Traffic has definitely picked up. Our economy is not booming. People seem more comfortable, but they’re not spending freely and are making purchases with savings in mind.”
Despite no new home construction, sales of gas fireplaces, wood-burning fireplace inserts, and pellet stoves are doing well, says Meeker; he is “avoiding” wood-burning fireplaces. Outdoor Room products are a small portion of Meeker’s sales, but what they do sell is priced at the higher end. Fire pits are “no big deal and are not worth the effort because we’re competing with the Big Box stores.”
For 2016, Meeker plans to cut back on inventory. “We’ve been pouring money back into the business and carrying considerable inventory,” he says, “so we are stretched pretty thin. We need to sell that inventory, not keep it in the warehouse.”
“The interest in hearth products is picking up,” says Gloria Slater, owner of The Fireplace Shoppe, Wilmington, Delaware. “People feel they can now spend, but they have so many other things to spend money on that they have put off hearth products purchases until now.
“For years and years, wood-burners were our main product category, but wood fell off and gas has become more prevalent. Now we’re seeing more traffic interested in wood stoves.” Gas fireplace inserts are Slater’s number-one product. She can sell gas stoves only if she can convince the customer that a stove heats better than a fireplace.
Her hearth accessory business is now very limited since people can get those items on the Internet. Pellet stoves are not big in Slater’s area, and electric fireplaces also are not big “because too many are selling them,” she adds. Slater does not sell grills because outdoor living is “not a biggie” in her area.
She is still digging out from the economic downturn and has not been able to spend money on her business. Her forecast for 2016 is “to hang on day-to-day.”
The Central Region
“Our retail business is in complete transition from how it was 20 years ago,” according to Steve Sweet, president of Fireplace & Bar-B-Q Center, Overland Park, Kansas. “We used to be heavy into hearth accessories, but now, to survive the mass merchants and Internet sales, we’re selling products that need expertise, customization, installation and service. It’s do that or close our doors.”
Hot hearth products for Sweet are gas fireplace inserts. “They are going into old, high-value Kansas City homes because they are cheaper than complete chimney repairs,” he says. Direct-vent gas fireplaces are going into new home construction, and grill islands are selling well.
“Customers are spending tremendous amounts of dollars on islands, $4,000 to $5,000.” What are not selling for Sweet are grills, fireplace screens and gas logs, “anything available on the Internet.”
Sweet expects 2016 to be a year of a continuous, but gradual, uptrend in sales. “If interest rates go up, it will cause more remodels, and that might help our business,” he says.
“We’ve had decent stove sales, but the hot weather doesn’t help,” says Gene Henry, president of Georgetown Fireplace & Patio, Georgetown, Texas. “However, we’re two weeks out on installations. The big, very expensive, linear gas products are our biggest star; they’re going crazy with sales ranging from $20,000 to $50,000. That makes up for a slow patio year.” Henry is amazed at how many fire pits he’s selling.
“Grill sales are a little soft,” he says. “The $10,000 grill customer is just not there. We’re averaging $3,000 to $4,000 for grills.” Sales of gas logs are slow right now, “until the weather cools.” The mood of consumers in central Texas is “pretty good. Oil is important, and we’ll feel the pull-back in oil production.”
Henry is now emphasizing the design side of his business, establishing Georgetown Fireplace as a design center rather than just a hearth and patio retailer. “This neutralizes price as a factor,” he says. “The tickets are larger and it has made us more profitable.” He expects 2016 to be down somewhat since it’s an election year.
“The economy in Evansville is pretty good, and we had a really good summer,” says John Bassemier, president of Bassemier’s Fireplace, Patio & Spas, Evansville, Indiana, “and it got cold earlier this fall to help sales on this, our 47th year in business.” Sales of gas models and wood-burning models are about equal, but pellet stoves have not taken off in that market. Higher-end hearth products, however, are doing well, especially direct-vent gas fireplaces and fireplace inserts. Outdoor kitchen product sales are “so, so, but have not taken off like they have in California.”
Bassemier is very community-minded with a wide array of advertising and promotions. As an example, he recently hosted a “first responders’ day” with food, live entertainment and demonstrations. Bassemier’s also hosts Friday night tailgate parties which are covered by local TV stations with John doing the grilling.
“Our economy has improved greatly,” according to Megan Thomas, store manager at "Antique Brick Outdoors," Little Rock, Arkansas. “Housing starts are up, including more custom homes. We’re not doing as much in hearth products as we once did, but overall our sales are doing very well. Customers are still a little scared, but traffic is up with a lot of tire kickers not yet ready to jump.”
Patio is the strongest category for Antique Brick, but that wasn’t always the case. Three years ago gas log sales were “out of this world – we couldn’t get enough.” Two years ago, grills were hot, but last year and this year, patio items are king. Hearth accessories such as glass doors, fireplace screens and toolsets are just not selling, so Thomas brought in high-end designer fireplace screens.
“They are more trendy, neither traditional nor modern, but we can’t keep them in stock,” she says. Antique Brick experienced a substantial decline this year in built-in grills. “People are not going in that direction,” says Thomas.
Three-day, progressive discount sales leading up to Labor Day were the “best ever,” according to Thomas. The first day the discount was 40 percent, second day 50 percent and third day 60 percent. “The results were amazing, huge. We cleared out our warehouse and then some. Some people came back every day of the sale.”
Antique Brick also demolished its outdoor showroom, remodeling it in two tiers with landscaping, waterfalls, lighting, outdoor fireplaces and fire pits, but “less patio furniture.”
“Our hearth products sales are up somewhat, and it seems we’re selling higher-priced models,” says Mark Kindred, Hearth Department manager for Axmen, Missoula, Montana. “Our economy is good and steady, and consumers are in the mood to buy.” High dollar wood-burning appliances are up, and gas products are up slightly. Hot tubs are big, earning a number-two ranking with Axmen, which “dabbles” in grills and patio furniture.
According to Kindred, Axmen received “lots of exposure” when employees donned Speedos while riding in a decorated hot tub float in a local veterans’ homecoming parade. “We’re optimistic about 2016, but we’re always expecting better,” says Kindred.
“New Mexico is not participating in the economic recovery, but we’re doing fairly well,” says Gene Butler, president of The Firebird, Santa Fe, New Mexico. “Employment is flat, and we’ve lost population. Santa Fe is 320 out of 326 cities for growth, but our business is pretty steady.” With few mid-range homes being built, what is keeping The Firebird going are the many higher-end homes under construction.
“Linear contemporary gas fireplaces are flying out the door because of those upper-end houses,” Butler adds. “Those people are not blinking an eye at prices ranging from $4,000 to $5,000.” Wood stoves are also selling well, particularly larger models, but wood fireplace inserts and pellet stoves are not selling.
Butler beefed up his offering of grills to now include gas and charcoal in the mid-range of $1,100 to $2,500, and those products are moving. “People seem ready to buy good quality at a reasonable price,” he says. Butler promoted fire pits, but with little success. “People don’t want the ready-made ones,” he says.
Butler shifted away from print advertising to more Internet and social media. He’s even hired a social-media marketing firm, and is switching his TV advertising from local broadcast to cable because “it’s so much cheaper.” He’s also upgrading his showroom displays to feature more contemporary models.
“We’ll see the same growth in 2016, but 2017 will be our year for growth,” according to Butler. “We hope our economy picks up and mid-range housing comes back. Next year is an election year, so we’re concerned about consumer confidence. In an election year, consumers tend to be conservative about purchases.”
“Despite a weak economy, our hearth products sales are up 10 to 15 percent after our worst year ever,” says Gary Spinuzzi, owner of Big Horn Stove & Spa in Pueblo, Colorado. “Southern Colorado is fairly poor, and we’re seeing a disturbing trend of people buying and restoring old stuff like spas. Wish we could be more upbeat, but we’ve had a real warm fall.”
Woodburning appliances are still “king” for Spinuzzi. Not selling are grills, smokers and fire pits, plus he’s losing some sales because wood pellets and name-brand grills are now being sold in area mass merchants. Customers also are buying gas fire rings and making their own fire pits.
“The days of grilling all day Saturday to sell grills are over,” says Spinuzzi, who sees the spa and hot tub business coming back, but is still cutting expenses to improve margins. “We discovered we were paying $16,000 a year on credit card fees, so now we don’t accept cards, and it hasn’t affected our business.”
“We’re seeing a slight sales increase in hearth products, driven by new home construction,” according to Mitch Heller, president of Custom Fireside, Sacramento, California. “Even though the California economy is stronger, we’re not seeing our retail side grow at the same rate as our new construction business.” Heller says that consumers are more careful about spending since the recession, and are looking for good value.
Sales of wood and pellet models remain the same as last year at Custom Fireside. Significant California restrictions on woodburning are driving sales to gas models, now the majority of Custom Fireside’s hearth product sales. Heller expects the economy in his area to slowly improve next year, and he hopes to focus more on marketing. He’s looking for new ways to reach consumers “now that print media is not as effective as it once was.” He plans to make better use of the Internet and social media.
“Hearth product sales are pretty good after a mild winter and a rocky start to the year, but we’ve had a great third quarter,” says Matt Brownell, hearth buyer for Coastal, Albany, Oregon, a rural, mixed-product department store-type retailer with 15 locations in Oregon and Washington. “During a normally slow third quarter, we had our best July and August ever, sparked by a major manufacturer’s promotion.”
While wood-burning product sales have slowed due to environmental challenges, gas hearth products, especially fireplace inserts, have shown the most sales growth at Coastal. Wood-burning products, gas products and pellet models now share equal sales at Coastal – one third each.
Coastal sells a “ton” of grills, mostly pellet models, while gas grill sales are flat. But total grill sales have doubled over the past year, with the average pellet grill selling for $900. Fire pits are another category that is doing well. “We see continued growth in hearth in 2016,” says Brownell. “We don’t do much in new home construction, but we want to go after the gas fireplace market since we see more remodeling going on.”
Apparently not feeling the effects of any recession, hearth product sales at Capo Fireside, San Juan Capistrano, California, are up almost 38 percent this year, says CEO Eric Peterson. Now with five locations and two more in the works, Peterson has changed directions from a hearth products and outdoor living retailer into residential design centers catering to architects, designers and custom homebuilders.
“The concept is working,” he says. “We opened a new location in Palm Desert and did $100,000 in sales the first month.” He also points out that there are now 25 fewer hearth retailers within 20 miles of his San Juan Capistrano headquarters.
“People are still remodeling, and home equities are climbing, so discretionary dollars are available. Outdoor living sales are very strong, and our research says that is where dollars will be spent.” Woodburning is pretty much “out” in Southern California, Peterson says, but sales of linear gas fireplaces are “off the charts, up 400 percent.”
Ken Lund, owner of Earth Energy’s Hearth & Patio, Tucson, Arizona, hoped to see hearth product sales up this year, but instead they are “on par” with 2014. “Tucson is lagging behind in employment,” he says. “There are not enough jobs. Customers are feeling pretty good, but they’re not spending like they used to.”
Gas hearth products are doing “extremely well” for Lund, but electric fireplaces have not taken hold and are the least of his hearth products sales. Grill sales are up, but outdoor fireplaces, fire pits and patio furniture are not gaining ground. “The last several years, modern styling for hearth products is getting bigger. It’s the real deal.
“We’re always remodeling,” Lund says. “We change our displays out monthly,” and Lund is putting his promotional dollars into Internet exposure. In 2016, he believes Tucson will make a comeback and he’s hoping for a 10 percent sales increase.
“Generally, everything in Alberta is down about 40 percent because of the slowing in oil production in this area,” says Cliff Tyminski, owner of Hearth Fireplace Distributors, Calgary, Alberta. Gas hearth products are 90 percent of Tyminski’s business, with wood-burning products representing 10 percent. Clean-faced, linear gas fireplaces are big sellers, but Tyminski sees logs coming back in these models in his area, replacing glass and other ember bed media. Freestanding stoves are “not as important,” and sales of fireplace inserts are “off dramatically. Outdoor living product sales are a challenge with all the Big Box stores carrying them. It hurts sales if they are made in China.
“Because of the Big Box stores, we’re now in the service industry,” says Tyminski. “Our competitors for consumer dollars are no longer other hearth products dealers, but furniture stores and car dealers.”
With a soft Canadian economy and mid-October federal elections, Alex Soubliere, co-owner of Friendly Fires, with four locations in Ontario, is surprised that his sales are up four percent this year, especially after he had a “phenomenal 2014” with a 22 percent sales increase. Sales of gas hearth products and solar are way up, and wood hearth products sales are up seven percent. Grills are up 10 to 15 percent. Pellet appliances are down 27 percent, “but that is after a 50 percent increase the last two years.”
With such strong business, Friendly Fires opened a new location this year, and sales already are more than double what was expected, even with no advertising for that location. More than a year ago Soubliere cut all traditional advertising – print, radio and TV – but retained some Yellow Pages ads. Sales are still increasing.
He’s optimistic about 2016, but concerned about the constant flow of new competitors that pop up. “Competition is brutal out there,” he says, “even at the manufacturer and distributor levels. Manufacturers used to specialize in a specific, vertical line-up, but now most have full lines so their distribution is overlapping.
“At some point, it would not surprise me to see manufacturers going consumer direct,” he says. “There are only so many retail stores, and those stores already have too many lines.” On that note, Friendly Fires carries fewer brands than most hearth shops, allowing better inventory turns and more profit, according to Soubliere.
The economy in Quebec is “not the greatest,” according to Connie Romeo, salesperson for Foyer Lambert, Montreal, Quebec. “Our unemployment is the highest in Canada. We’re supposed to be in a recession, but so far our company is not feeling it. October was very busy, and overall we’re up 15 percent.”
Romeo is seeing a steady increase in fireplace sales, particularly gas models since Montreal has limited wood-burning. Foyer Lambert is selling “quite a bit” of pellet stoves. Not selling well are gas logs, glass doors and outdoor living products. “People are now buying for heat rather than ambiance, and our weather is too harsh for Outdoor Rooms.”
Like many hearth products retailers, Foyer Lambert is doing more advertising through the Internet and social media. “Seventy-five percent of our customers say they saw us on Google,” says Romeo. And the company advertises “quite a bit” in local newspapers.
Foyer Lambert in March moved to a new, smaller location. “We downsized our products, too. We’re concentrating only on products we want in our homes.” The coming year will be Foyer Lambert’s 50th year in business. “We think 2016 will be better, and our sales will be up five percent.”