By Bill Sendelback
Some call it the greatest innovation in human history. Others call it the work of the devil. Some say that the Internet is a bit of both. While it can be an extremely valuable tool for consumer education and product awareness, it’s affecting almost every retailer, not always in the best ways, as an increasing number of consumers bypass brick-and-mortar stores for Internet shopping and purchasing.
While the rapid growth of the Internet is affecting giant retailers such as Macy’s and JC Penney’s, it’s also affecting hearth, patio and barbecue dealers. Fortunately for hearth dealers, most of their products require professional installation and service, so they don’t appear to be as harmed by Internet sales as patio and barbecue dealers. Still, the Internet has definitely taken a toll on hearth dealers, and many are outspoken about the causes, the results and the remedies.
Online sales overall are growing at about three times the rate of brick-and-mortar stores, according to an October, 2017, issue of Bloomberg Businessweek. That’s punctuated by the report that 59% of consumers WILL shop online for Christmas, according to the National Retail Federation. Cyber Monday alone was reported to have garnered some $6.6 billion in Internet sales.
Closer to home, Hearth & Home recently surveyed 150 hearth, patio and barbecue retailers to learn how the Internet is affecting their businesses. The survey found that 64% of those retailers have been negatively impacted by sales lost to Internet sites. Focusing on hearth product dealers, 18% reported significant or major sales impact from Internet sites on sales of wood-burning fireplaces, while 67% said the impact was minimal.
Twenty-seven percent of hearth dealers surveyed reported significant or major sales impact from the Internet on their gas fireplace sales, while 58% felt only a minimal impact. Seventeen percent of hearth dealers reported significant or major sales impact from Internet sites on their stove sales, with 65% reporting minimal Internet sales impact.
However, 50% of hearth dealers reported significant or major impact from Internet sales of electric fireplaces, while 31% noticed only a minimal Internet impact on that product category. This appears to demonstrate that Internet sales have much less impact on hearth products that require professional installation and service.
“The Internet has been a blessing for the most part,” says Philip Hechler, co-owner of Hechler’s Mainstreet Hearth & Home, Troy, Michigan. “It has increased the consumers’ awareness of hearth products, and it’s a great tool to bring customers into our showroom. On the negative side, it makes it easier for the customer to shop online retailers once we, as brick-and-mortar dealers, have done the hard work in our showroom by determining exactly what the customer wants and needs.”
But not every retailer is adamant that online sales are harmful to brick-and-mortar hearth dealers. “We have both a brick-and-mortar store, and we sell online. (Note: Only 11% of surveyed hearth, patio and barbecue dealers say they sell products online.) Between advertising expenses and freight costs, our Internet sales cost us far more per unit delivered than anything sold through our showroom,“ says Jeffrey Caracristi, owner of Captain Soot Chimney & Stove, Copiague, New York. “The Internet is how more and more people shop for anything these days, and that trend is growing. Manufacturers need to take a closer look at Internet sales if they are interested in growth. Time to wake up and smell the coffee. We are a society becoming more and more reliant on online shopping.”
|Preparing to clean a fireplace.|
Installation & Service
The most heated controversy about hearth Internet sales revolves around whether or not to install and service Internet-purchased products. Sixty-three percent of all surveyed hearth, patio and barbecue dealers say they do not service products purchased online.
“We do not service products bought online because we don’t want to ‘own’ the product by touching it,” says Karin Pierce, Sales and Office manager at Stove & Fireplace Works, Ashland, Wisconsin. “More importantly, we don’t care to warranty it. The credit for service work from manufacturers does not begin to cover our travel time, let alone our labor. We spend a lot of time educating our customers, and in the end, the majority decides they would rather pay extra and have us do the installation. Those who shop purely on price quite often are the kind of customer we do not want.”
“We need to handle our customers first,” says John Meeker, Jr., president of Fire Glow Distributors, Yorktown Heights, New York. “Part of our sales pitch is that we are the authorized dealer for this product, and we stand behind what we sell. If the product is sold by others, we will gladly help, but we will not extend the same level of coverage that our customers get.”
“We don’t service products purchased online,” says Steve Dumais, owner of Energy Savers, Meredith, New Hampshire. “I have found in the last 30 years that if you service what they bought online or elsewhere, they don’t necessarily come back and purchase anything from you in the future. They probably bought it on price, and they will continue to buy on price.”
“A lot of customers have purchased online only to find out it’s not what they thought it was, or something is missing or wrong,” according to Kim Anderson, owner of Gull Lake Brick & Fireplace, Brainerd- Baxter, Minnesota. “Then they want to know if we can help them make it right. Sometimes we can, and that can open up the door for a future sale. These consumers need to realize that some things are better purchased locally so they can be serviced locally.”
“Once you touch a product for service, you ‘own’ it and the problems that may develop,” according to Eleanor Butchart, owner of On Fire, Santa Rosa, California. “Installations by unqualified installers or DIY homeowners are full of potential problems.”
“Gee, I’m really sorry, but I can’t help you due to liability issues,” Pat O’Donnell, president and co-owner of Hearth & Home, Mount Prospect, Illinois, tells consumers wanting him to install or service Internet- purchased products. “That manufacturer is not one of the manufacturers we work with. We are not an official dealer of that manufacturer, so we can’t help you.”
While no dealer wants to lose any sale, large or small, to any online site, more expensive hearth appliances that require installation and service appear to be less affected by Internet “sirens.” Surveyed hearth dealers indicate that only 15% of hearth products priced at more than $2,000 are vulnerable to Internet sales. Twenty-six percent of products priced from $1,000 to $1,999 are vulnerable, and a whopping 40% of products priced at less than $1,000 are vulnerable to Internet sales.
“Brick-and-mortar stores can only be successful now and in the future by selling products that require installation expertise,” says Bill Mathewson, president of Home Comfort Warehouse, White River Junction, Vermont. “The hearth category that has been impacted the most by online sales is fireplace accessories such as tool sets and screens. We’ve had to lower our accessory prices to match Internet prices and then settle for 20 to 25% margins.”
“Our fireplace accessories business is down about 98% because of the Internet,” says Sherry Kozikowski, owner of Valley Fireplace & Stove, Canton, Connecticut. “Because of that, we have stopped ordering most fireplace accessories and have had to downsize our showroom by 1,000 sq. ft.”
“The Internet affects us not so much on hearth appliances, but parts are a big problem,” according to Doug Parkinson, owner, Parky’s Heating & Cooling, Golden, British Columbia. “People are trouble shooting their products themselves and then going online to look up needed parts. Then they come to our store with the part number and expect us to match the Internet price.”
“We don’t bother trying to match Internet pricing for like products,” says Eleanor Butchart, of On Fire. “We simply move on to the next customer who is appreciative of our service and is committed to buying locally.”
Impact of Internet Sites on Sales of Fireplaces
Taxes & Policies
One complaint most brick-and-mortar retailers have against online sellers is that the sales playing field is not always level. “We as a brick-and-mortar store are forced to collect and pay sales taxes because of the state in which we live, while most Internet operations do not,” according to Fire Glow Distributors’ John Meeker, Jr. “This is difficult for us to overcome while trying to be price competitive.”
Manufacturers, too, are feeling the pressure from increasing Internet sales activity. A few simply turn a blind eye to the Internet sales of their products. But most hearth products manufacturers have developed policies and programs to control Internet sales and protect their brick-and-mortar dealers.
One way hearth manufacturers are attempting to reduce the negative effects of Internet sales is with an industry-recognized Minimum Advertised Price, or MAP policy, that establishes the minimum price at which sellers are allowed to advertise. Each manufacturer has its own policy determining actions they take against dealers violating MAP policy and advertised pricing.
Eighty-eight percent of surveyed hearth retailers have discussed Internet policies with their manufacturer suppliers. But 58% of those dealers were not satisfied with the results of those discussions, and 59% of surveyed hearth dealers have dropped manufacturers because of their Internet policies or lack thereof.
However, 60% of surveyed hearth dealers feel their manufacturer suppliers are trying to protect their brick-and-mortar dealers from online competition.
“Internet problems start with the manufacturers,” says David Waldman, president of Dreifuss Fireplaces, Philadelphia, Pennsylvania. “They know where their products are going. If they really want to keep their products off the Internet, they can stop shipping to online distributors.”
“I research products for Internet prices before I commit to purchasing them,” says Don Roper, owner of Don’s Heating and Cooling, Orangeville, Ontario. “If they don’t show a MAP that allows us an acceptable operating margin, we don’t get involved. MAP prices do work on larger ticket items.”
“Without us brick-and-mortar stores, manufacturers would have a hard time selling their products,” says Margo Goodwin, president of United Brick & Fireplace, Madison, Wisconsin. “We advertise, educate our staff, maintain showrooms and have a large dollar amount of their products on display. They don’t get that exposure with online outlets.”
Impact of Internet Sites on Sales of Stoves
Travis Industries, the hearth manufacturer mentioned most by surveyed hearth dealers for supporting its brick-and-mortar dealers, does not sell its hearth products to online sites, and it limits sales by its dealers to exclusive service areas.
“We don’t make plug-and-play products, so we support our brick-and-mortar dealers because if our products are not sold and installed correctly, it can cause tremendous damage,” says Perry Ranes, director of Sales. “Our products have to be installed by professionals, and that dealer has to physically see the product before it’s installed.
“With gas appliances, for instance, you have to know how to install and set them up for an acceptable yellow flame. And given most architects’ lack of knowledge about where a fireplace can be installed, they really need a professional hearth dealer for a safe installation.”
Ranes agrees with dealers who do not install or service Internet-purchased hearth appliances. “The second you put a wrench on a product, you ‘own’ it,” he says. “Dealers have to protect themselves. Our dealers have service areas, and we won’t ship products outside of that dealer’s service area. We certainly encourage our dealers to use the Internet to promote themselves and educate their consumers, but our dealers are aware that they have their own service areas,” adds Ranes.
Another top-rated hearth manufacturer, according to surveyed dealers, is Jøtul North America. “We have a legal Authorized Dealer Profile with each of our hearth dealers, and this allows no pricing on any website. This is tied into exclusive distribution areas for our dealers. Our two-step distributors follow the same policies,” according to Bret Watson, president. “Part of that policy is that our dealers must be able to service what they sell, and that takes Internet sales sites out of play.”
Jøtul does not see many violations of its Internet sales policies. “We’ve only seen two or three violations in the last 20 years,” says Watson. “If we do see a violation, we serve that dealer a ‘cease and desist’ order.”
“Some dealers are part of the problem, getting orders they wouldn’t otherwise have gotten, taking the money without having to handle, install or service the product,” according to Patricia Giumarra, owner of Vineyard Hearth, Patio & Spa, Vineyard Haven, Massachusetts. “We sell a high-end fireplace that supposedly can only be purchased through a distributor. Our distributor recently told me that 17 of these fireplaces were shipped into our territory this year, heavily discounted, and that dealer has no intention of servicing them.
“The manufacturer and the distributor are doing nothing about it. It’s frustrating when, as a dealer, you make a commitment to a product and then the manufacturer and distributor don’t support you.”
“We have dropped all manufacturers that sell online,” says Marty Gillespie, owner of Fireplace & Gas Center, Anderson, Indiana. “We sell only products that are not sold direct to our customers.”
Philip Hechler of Hechler’s Mainstreet Hearth & Home, sums up his approach to overcoming Internet sales. “If your customers look hard enough, they can always find a cheaper price somewhere. Brick-and-mortar stores need to partner with manufacturers that will truly partner with them.
“Give your customers valid reasons to buy from you rather than from Internet sites – honesty, integrity, service, competitive prices and a friendly smile with a helping hand. At the end of the day, that’s all we can really do anyway.”