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Hearth & Home March 2018

Hearth Rebounds!

Following two years of dismal sales, hearth products post a darn good year in 2017.

“This is your chance to tell us how you feel, what problems you have, how manufacturers could help you more, etc. Anything goes!”

NORTHEAST

Delaware: “We’re concerned about the last two moderate temperature seasons and the amount of sales replacing stoves.”

Massachusetts: “Internet sales are taking more and more sales from small business companies.”

New Hampshire: “For gas appliances, return from IPI to CPI (millivolt valve-thermostat) valve systems. The remote controlled IPI systems are a constant aggravation, requiring service calls and destroying customer support. Millivolt systems operate indefinitely without unexpected interruptions in service.”

New Jersey: “Better technical support from manufacturers across all lines. Reps shown to be more knowledgeable about the products they sell.”

New York: “We were backlogged on installations five weeks out October through December; the survey doesn’t allow us to enter anything more than 30 days. Our biggest challenge is being able to provide service on gas products for our customers in a timely manner – not enough technicians who are willing to work on a seasonal basis. How do we educate our customers that preventive maintenance in the spring is a smart move?”

New York: “We were backlogged for more than 30 days in each month of September, October and November.”

New York: “Manufacturers need some more creativity. Stop copying the other manufacturers and just being average.”

New York: “The biggest problem we have is finding new employees. I am not talking about skilled in the hearth industry people, just people that are willing to work, can be trained, want to learn, and show up to work everyday.”

U.S. Sales of Hearth Products
Year to Year — 2003 to 2017
U.S. Sales of Hearth Products

Coming off two disappointing years, sales of hearth products increased by 11% in 2017. In many regions of the country, cold weather was the spur that brought consumers into stores.

Hearth Products Sales by Region
Year to Year — 2017 Compared to 2016
Hearth Products Sales by Region

During the past two years (2015 & 2016), hearth product sales in the Northeast had plummeted 18%. In 2017, hearth product sales in the Northeast increased by 13%, as did hearth product sales in the South.

Pennsylvania: “High pellet stove prices and high pellet prices continue to drive down the sales of both products. Manufacturers continued to cut back or even eliminate other solid fuel-burning products in 2017. Not sure if this is to promote and sway more people to buy pellet fuel, or just an overall lack of sales in the marketplace. Gas continues to be cheap and readily available to most homes here in Western Pennsylvania, and continues to be king when it comes to any heating fuel source.

“We’ve only sold one brand, and it has dropped its product line from five different fuel sources (coal, wood, pellet, gas, corn) down to just one (pellet) going forward in 2018. We are now being forced to consider adding different brands to our sales portfolio, but have to be careful. We don’t want to add a brand with a bad service or track record and tarnish the good reputation we have built over the years of selling reliable, quality products that are worth the money, thus creating value in our store brand.

“My overall fear is that the endlessly increasing costs of pellet stoves and fuel will continue to shrink the sales market to that of a niche product. Hopefully I’m wrong!”

Pennsylvania: “We’ve been having more than our fair share of damage from shipping and hidden damages from the manufacturer. Manufacturers for the most part have issues and don’t communicate well with the dealers when they make changes to products or manuals. The parts business is getting more competitive – I can go and look online for a part or part number quicker than I can on a manufacturers’ dealer site.

“Were starting to see more customers purchasing parts on line and then having problems because they are not always the right part and then they call us to try to resolve the issue. Our parts a lot of times are less money but people think they can get it cheaper on line. It’s also frustrating when consumers go to private chat groups on line and make false statements about your business or services and you can’t reply.

“On the bright side, we have had extremely cold weather and sales are strong; we are booked out for about seven weeks. New construction and remodeling is very strong and people are looking at outdoor entertainment products for spring.”

Retailer Sales by Region
2017 Compared to 2016
Retailer Sales by Region

Eighty-six percent of retailers in the South had an UP year. In Canada, however, only 38% of retailers could say the same.

2017 U.S. Hearth Appliance Market Share
2017 U.S. Hearth Appliance Market Share

Vented and vent-free gas products account for 55% of the market in the specialty hearth channel.

South

Georgia: “The availability of items is a problem. Specifically from Empire and IHP. Some items were taking over six weeks with no ETA given when we ordered. Had to make multiple calls.”

North Carolina: “The last 10 years have been gut wrenching. The ARRA helped us stay in business, but it was not enough to create demand from gutless consumers, while lenders strangled our builder business. No assistance from government to restrain deflation like in the Great Depression, though we were definitely in depression with the exception of Raleigh.

“Most manufacturers reduced our buying levels; one ended our relationship due to low sales. So when we needed to have good buying levels to compensate for low sales, our levels became worse thus adding to our difficulties. With a few exceptions, there were not enough efforts by manufacturers and distributors, who had the good fortune of drawing business from less affected areas, to assist those of us who were in depressed markets.

“This is a sad commentary on our small industry. We took it harder because we wanted to be proud of the decisions we made during difficult times regarding paying our bills and not asking staff or landlord to take pay/rent cuts.”

Virginia: “Internet sales cost comparison. However, if every good manufacturer would do what Empire Comfort Systems has done (No warranty if product was purchased on the Internet), then cost comparisons would be nothing.”

Retailers Planning to Place Early-buy Orders
Retailers Planning to Place Early-buy Orders

It’s a rebound! For 2018, 60% of specialty retailers plan to place early-buy orders.

Early-buy Orders
Early-buy Orders

Thirteen percent of retailers plan to increase their early-buy orders from the prior year; that increase will average 13%. Of the 5% who plan to decrease their orders, they will do so by 14%.

Midwest

Illinois: “Wood burning is almost dead.”

Minnesota: “The manufacturers in this industry do not support their warranties. They neither compensate their dealers well nor do they offer third-party repair. Overall, the products we carry are high quality and do not require warranty work, but when they have problems we struggle with the manufacturers. Many times we work hard to resolve the problem with our customer while struggling to get timely information and replacement parts from the manufacturers.

“After all that, the manufacturers’ pay is low, typically a credit that is slow to show up. We all too often need to remind them to get parts and labor paid for. This seems to be a hearth industry-wide issue. We were well over 31 days out for October, November and December with our retail customers’ installations, but your form does not allow answers over 31 days. Another category you might consider adding in your questionnaire is hearth sales in commercial spaces. These can be large ticket items ($10K to $100K) and they seem to be growing.”

Ohio: “While most of the foundational products that require professional installation have been safe from the Internet, we have almost given up completely on hearth accessories like toolsets, screens, log racks, etc. We have seen a dramatic decrease in foot traffic for these items, and the stocked products we do bring in are mostly collecting dust. Wood grates still do well and a lot of the cleaning supplies are consistent movers.

“We believe the installation and service aspects of this industry are what will keep it thriving. Every month some national retailer is closing up locations because Amazon and other Internet-based companies make it so easy to order product on the phone. Dealers who think they can just sell product to make a living are going to really struggle.

“NFI certified technicians that can fix products when they should be fixed and recommend replacing products when they should be replaced will play an even more important role in keeping dealers doors open.”

Wisconsin: “Looking for an additional employee that is young, strong, shows up for work, willing to be trained, flexible and committed. We pay very well for our area – people jump jobs so much nowadays.

2017 Gross Revenues
2017 Gross Revenues

The average hearth retailer receives 72% of his/her income from hearth products; barbecue and “other” are the next main sources of revenue.

Days Backlogged for Installation
Days Backlogged for Installation

Backlogged days usually peak in November. In 2017, the average hearth dealer was 17 days behind in that month.

West

California: “We have a great relationship with our distributors and manufacturers. We wish they could move products to us faster but we understand their logistical issues. We are hoping the government presence as it pertains to regulations is less than in 2017. We’re selling fewer products because of their lack of reality findings (via EPA and other watchdogs).”

California: “This year was a difficult year for finding good help. The manufacturers could help by having training that is cost effective. We send the guys to training and they stay for a year then leave; it’s not cost effective for us to send them to the training. We have the roundup in California that may be a good time to have the training and save the retailers money.”

California: “Some manufacturers need to produce products that do not heat up walls and finish material to the level that they cannot be touched and get their heat extraction and distribution much better. Manufacturers need to compensate dealer/distributors more than $50 to take care of their warranty issues. Labor is the most expensive cost we have and $50 in California is not the same as it is in other areas in the nation. A minimum of $100 would be much more reasonable, which still does not cover the cost of the repair.

“We always need better quality control; some high-end manufacturers should produce the best quality product because it is the most expensive, but that is not the case. Some manufacturers have ridiculous mantel clearance charts. Not perfectly clear of where to measure from is mostly the issue. Montigo!”

Colorado: “Move away from electronic ignition. Too hard to troubleshoot. Technicians aren’t getting trained; customers can’t figure out how to reboot the system. We spend a lot of time explaining to fireplace owners how to change batteries, recode the remotes, clean the sense rod so the igniter will work because they don’t want to spend $165 for a service call.

“If we must replace blowers or modules in the full view models the service charges can be $300-$500 plus parts. Manufacturers should have training classes online so our technicians can study the materials and take tests to help them improve their skills. It would also be helpful to have YouTube videos for cleaning glass, making minor tune ups, and explaining remote.”

Montana: “Early-buys add stress to the operation. Simpler and more generous co-op terms would be helpful to allow more advertising (more sales). A majority of our sales are Tulikivi masonry heaters - there is no category for masonry heaters in this survey so they are lumped in with our wood stove sales. HPBA should direct educational efforts to the general workforce – what holds us back is skilled labor for installing wood and gas appliances.”

Oregon: “Seemed to be a lot of warranty issues this year. Quality of product not as good as in past years.”

Oregon: “Manufacturers could communicate better about 2020 regulations and their intentions about production.”

Oregon: “This was a record year in every way; we can’t wait for what the future holds. Most problems that I see are self-created by businesses not stepping into what the new landscape of business is giving us. This is the time to invest and innovate, the best is yet to come.”

Expected Purchases for the 2018 Season
Expected Purchases for the 2018 Season

Fifty-four percent of hearth retailers have been in business over 20 years.

2017 Hearth Appliances Replacing Existing Hearth Products
2017 Hearth Appliances Replacing Existing Hearth Products

In 2017, 36% of hearth product sales were to replace an inefficient wood fireplace, and 25% were to replace a pre-EPA stove.

2018 Sales Outlook
2018 Sales Outlook

Sixty-eight percent of hearth retailers expect sales in 2018 to be better than those in 2017.

New Installations vs. Hearth Replacements
New Installations vs. Hearth Replacements

Sixty percent of hearth product sales were for new installations.

Canada

Alberta: “Probably the biggest complaint we have is still the sale of barbecue products in Box stores. Very hard to compete against them even if you only offer high-end items.”

British Columbia: “Warranty issues on new units with poor supply of replacement parts, back-ordered heating units (poor supply from manufacturer).”

British Columbia: “The economy is strong, which makes labor incredibly tight; we can’t seem to find any decent people. Wages are going up faster than prices so profitability is at risk. Now interest rates are up, new mortgage rules have yet to show their full impact, and I am in a wait-and-see mode. After four years of strong growth I am the least optimistic I have been in a long time.”

British Columbia: “Isolation cost us more in shipping as we are not on a main highway; we are in a rural community that is also a resort area. Isolation is also an asset as we have no competitors closer than 50 miles, and being on the largest ice free lake in Canada home and seasonal construction will always continue. Since we have been in business for 105 years, customers travel over 100 miles to shop for hearth products.”

British Columbia: “For the first time in a while supply of wood stoves was a big problem!”

Nova Scotia: “We could have sold more of less expensive quality wood stoves this season; unfortunately, the manufacturer we are talking about could not supply. Also the Canadian dollar is playing a part with decrease of pellet stove sales.”

Ontario: “We will aim for higher gross margins this year and streamline/reduce lines to focus on the bottom line.”

Ontario: “Stop selling products to Home Depot, Canadian Tire and other Big Box stores. Do not sell online directly to the consumer for the same price as me or less. Do something about the shipping cost.”

Ontario: “Have them stay out of the Big Box stores as the customers come to the specialty shops for our information.”

Quebec: “We are missing staff and it will be a challenge for next year.”

Quebec: “A good season.”

Individual Hearth Product Sales 2017 Compared to 2016
% Hearth Retailers Reporting INCREASE in 2017
% Hearth Retailers Reporting INCREASE in 2017

In 2016, 21% of hearth retailers reported an increase in sales of electric hearth products; in 2017, that figure rose to 53%, which was the largest increase in all categories.

Individual Hearth Product Sales 2017 Compared to 2016
% Hearth Retailers Reporting DECREASE in 2017
% Hearth Retailers Reporting INCREASE in 2017

Electric fireplaces, wood inserts, and wood stoves were the three weakest products in the market. It seems that some retailers know how to sell electric products, and some don’t.

More Industry Data

2018 June Business Climate

In early July, Hearth & Home faxed a survey to 2,500 specialty retailers of hearth, patio, and barbecue products, asking them to compare June 2018 sales to June 2017. The accompanying charts and selected comments are from the 216 useable returns.

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2018 May Business Climate

In early June, Hearth & Home faxed a survey to 2,500 specialty retailers of hearth, patio, and barbecue products, asking them to compare May 2018 sales to May 2017. The accompanying charts and selected comments are from the 219 useable returns.

» Continue