A Different Approach
By Bill Sendelback
Given the historic seasonality of hearth product sales, dealers long have been trying to diversify their product offerings for year ’round sales. In most cases this diversification effort has involved taking on counter-seasonal product categories such as patio furniture, grills, and/or hot tubs. But all of those products require more inventory, and more display and warehouse space. Fireplace Warehouse Etc., headquartered in Denver, Colorado, has taken a different approach to diversification – taking its hearth product offerings to more marketing channels.
That approach seems to be working quite well. Today, walk-in customers for hearth products represent only 30% of Fireplace Warehouse’s sales, and its sales have grown to more than $10 million, up 200%, and averaging a 33% sales increase each year, since 2014.
Diversification for the company now includes working with both custom and production tract homebuilders, Internet sales, commercial sales, and two-step distribution. While 80% of Fireplace Warehouse’s offerings are hearth products, the company also offers grills, patio heaters, and residential “organized living closets” – all products aimed at homebuilders, remodeling contractors, architects, designers, and hearth dealers, as well as homeowners.
“We want to make certain that we’re diversified into all hearth product marketing channels,” says Pete Schoenfeld, senior vice president of Sales and Marketing. “We’re very big with production tract homebuilders, but we offset that by being in Internet sales and distribution, plus diversification of our product mix with items such as organized living closet systems in order to provide more than just fireplaces.”
Fireplace Warehouse traces its origins back to 1988, when Wes Fulton started an HVAC installation operation in his basement. Business grew, and in 1991 Fulton opened an HVAC and hearth product showroom in Golden, Colorado – Metropolis Heating and Cooling. Sales continued growing, up 350% from 1991 to 2004 when Bob Khan joined the company as Operations manager and bookkeeper.
In 2006, the company was renamed Fireplace Warehouse Etc. and moved to a new showroom in Denver. By 2007, 50% of the company’s sales were via the Internet. Then, with the downturn in the national economy from 2008 to 2010, Fireplace Warehouse collapsed, closing its doors in December 2010.
In April 2011, the company was purchased and the rebuilding and re-growth began. In 2013, Bob Khan became general manager. In December 2014, the company was sold once more, this time to Joe Womack, a former executive with Sun Microsystems who brought that corporate expertise to Fireplace Warehouse.
“Joe had been a financial backer of the company,” says Schoenfeld. “At first he knew very little about hearth products, but he saw good bones in the company, and a great opportunity in the hearth industry.” Today, Womack is CEO, and majority owner with partners Bob Khan, now Builder Development manager, and Mark Humphrey, president.
|L to R: Pete Schoenfeld, senior VP Sales and Marketing; Mark Humphrey, President/Owner; Bob Khan, Owner/Executive VP Builder Development.|
Schoenfeld joined the management team in 2017 after selling to Fireplace Warehouse as a salesman for a large, West Coast hearth and grill distributor. Now, in addition to the Denver store and headquarters, Fireplace Warehouse also has showrooms in Colorado Springs and Fort Collins, Colorado, and two sales offices in the Eagle and Vail, Colorado, areas.
Fireplace Warehouse’s hearth product lineup includes wood, gas, electric, and pellet-burning stoves, inserts, and fireplaces, and gas logs. In addition to its retail showroom business, the company also distributes Napoleon and Innovative Hearth Products lines throughout Colorado, and other hearth products into Wyoming and South Dakota. Its online store offers grills, fire pits and accessories. “In our online business, we focus on products that can be shipped in a box,” says Schoenfeld. “We don’t sell many hearth appliances online because it’s so difficult and expensive to ship those heavy, single items.”
Another part of Fireplace Warehouse’s online efforts is its online buying guide. “Early on we got a lot of online sales through E-Bay and other online outlets,” says Schoenfeld. “We had very good success engaging customers that way and getting them into our stores. Although we rarely do full transactions over the Internet, our online buying guide helps the customer understand the products before we talk with them.”
Fireplace Warehouse learned from customers who previously purchased items online, from other retailers, that products often arrived damaged or with missing parts, and in some cases local dealers would not install hearth products purchased online.
“So our buying guide helps the customer understand the online process. Many dealers sell online, so we want to educate our online customers.” Fireplace Warehouse also makes its online buying guide available to walk-in customers in each of its three showrooms.
The booming economy in Colorado certainly has affected the success of Fireplace Warehouse. “Our economy is fantastic, one of the most robust in the country,” according to Schoenfeld. But it has not always been that way. A construction defect law put on the Colorado books nine years ago slowed the construction of multifamily homes such as apartments, condos, and townhouses.
The law allowed the homeowners’ associations to sue a builder for any supposed defect even after the product liability had expired. Builders decided not to take that liability risk, so they stopped building new multifamily units. That created a big void in Colorado’s new-home market and caused single-family homes to become very expensive, but only new homes were being built, says Schoenfeld.
That law recently was overturned, causing an “incredible boom” in multi-family projects. Last year saw Colorado’s homebuilding market “level out,” but with new homes now much more expensive, homebuilders are making fireplaces an extra cost option where last year they were standard, says Schoenfeld.
Fireplace Warehouse has dedicated contractor sales teams working with homebuilders, architects, and designers throughout Colorado and into Wyoming, hence the two new sales offices in the Eagle and Vail, Colorado, areas. “We are very much involved with the homebuilders associations throughout Colorado in order to develop relationships with builders,” says Schoenfeld.
Fireplace Warehouse uses its three showrooms as design centers to encourage builders, architects, and designers to see and learn about its products. “We use our retail showrooms to help us grow our builder business. We want their customers to come in and see what we offer, but we ask each customer who they are working with, so we don’t take the sale away from the builder, architect, or designer,” says Schoenfeld.
Fireplace Warehouse is a strong proponent of Napoleon Fireplaces’ Hot Spots design guide that “shows how key areas of a home can be transformed into hubs for memorable moments,” according to the guide, and, of course, it promotes the fact that hearth products can do just that. “This has been a huge resource for us,” says Schoenfeld. “Forget that this is from a manufacturer. Every dealer should use it. We use it on a daily basis with our builders, architects, designers, and customers to help us promote fireplaces.”
Fireplace Warehouse staff members designed the company’s three 3,500 sq. ft. showrooms using vignettes to display full price ranges from inexpensive builder models up to very high-end products. “Three years ago, when we opened our Colorado Springs location, people told us that the area would not support high-end models,” says Schoenfeld. “We put in high-end products and found that this market was just as strong for high-end models as Denver. Customers will let you know what they want to spend, so we concentrate on showing all price points.”
Traditional-styled, zero-clearance fireplaces are displayed on one side of each showroom, and linear models are on the other side. Wood, pellet, and gas stoves are displayed in a separate area, and electric fireplaces, sales of which Schoenfeld says are booming, have their own section. Between Fireplace Warehouse’s three showrooms, there are more than 120 burning models on display. Each of the three showrooms also has a dedicated display area for grills.
Fireplace Warehouse seems a fitting name for the operation. The company’s Denver showroom and warehouse building actually is in a warehouse area and was a World War I warehouse depot. Today the location retains the old tongue-and-groove wood walls and high ceilings. Taking a clue from automobile dealers, the three Fireplace Warehouse showrooms are located near their competition.
“We really consider this as an advantage,” says Schoenfeld. “Auto dealers learned that people don’t want to drive all over town to shop, so by being near the other guy, we think we stand a better chance of getting the business.”
While its showrooms are located near competitors, Fireplace Warehouse is really not concerned about competition. “We are very comfortable telling a customer how and why they should buy a quality hearth product from us,” Schoenfeld explains. “So we hope they will see what we offer and buy a good product from us, not a cheap and inefficient model from a competitor.” The company also has competition for its builder business. “That is another reason we sell in multiple marketing channels. We can balance our low-end builder sales with our high-end, more profitable custom fireplaces.”
Rather than counting mass merchants as competition, Fireplace Warehouse actually engages them. “We do really well against mass merchants,” says Schoenfeld. “We leave our business cards with them and suggest that if a customer is looking for a product they don’t have, send them to us.” Schoenfeld relates that one of his better sales people actually came from a Lowe’s store after saying that he wanted to join Fireplace Warehouse. “There is no one at a mass merchant who can answer questions, and they don’t have a complete selection. We don’t fear mass merchants even when selling grills.”
The strongest sales growth category for Fireplace Warehouse is its commercial business, such as restaurants, hotels, and offices. “A lot of our competitors don’t play in this arena because of the bond liability insurance needed. We are really dedicated to the commercial business. It’s a difficult business, but one of our most profitable channels.”
It is a “huge commitment in time and money,” says Schoenfeld, but Fireplace Warehouse does all of its installations and service using in-house staff. “But it’s well worth it to control how these things are done and make sure it’s all done correctly.”
The company always tries to discourage customers from do-it-yourself installations. “These almost always come back to bite the customer, so we try to talk them out of it.” All of the company’s service staff are NFI certified. “The service side of this business can be profitable, but our main focus is making sure the products are installed correctly and safely and operating properly.”
Fireplace Warehouse has 51 full-time employees and no part timers. Some have been with the company for more than 13 years, but most began in 2014 with the company reorganization. Many have long-time experience in hearth products, and that’s just fine with Schoenfeld.
“We really like having employees who understand the hearth industry and are strong advocates for hearth products,” he says. “We are definitely a team, and it has taken every one of us pulling together to get us to the level we have achieved.”
The company’s key personnel are dedicated to the hearth industry through their involvement with the HPBA. Schoenfeld is president of the Rocky Mountain HPBA affiliate, and is on the HPBA board of directors. Company president Mark Humphrey is on the board of directors of the Rocky Mountain affiliate.
Fireplace Warehouse mixes some media advertising with its Internet efforts, and hands-on efforts with homebuilders associations. That includes sponsoring product and safety classes, and special events for builders, architects, and designers. The company took a group of its homebuilders to this year’s International Builders Show in Las Vegas.
“Working with homebuilders, architects, and designers is the majority of our marketing efforts,” says Schoenfeld. “But we also do some radio and TV spots, and a limited amount of print media including ads in homebuilders association publications and local luxury home magazines.”
Schoenfeld now has a new concern. Right now it’s unique to Colorado in the U.S., but the HPBA is concerned that it may spread to other cities or states. The newly-elected governor of Colorado is attempting to put limits on the use of natural gas in an effort to reduce greenhouse gases, similar to the restrictions now in effect in Vancouver, British Columbia. “As a result, we’re seeing a swing back to electric houses,” says Schoenfeld, but the state is willing to allow more woodburning. Seems we’ve gone full circle, back to 1978 and 1979 when wood was prevalent. We’re already selling a lot more wood-burners.
“If I were to give advice to hearth product dealers, in fact, to any retailer, it would be to have the integrity to not let customers take shortcuts. We see people every day trying to take the easy route, such as one customer who wanted to remove the damper clamp for his gas log set. We emphatically said, ‘Absolutely not!’ and explained the danger involved. Dealers have to be able to sometimes have uncomfortable conversations with customers so they understand the safety necessary with the hearth products we all sell.”
Store Name: Fireplace Warehouse Etc.
Address: Denver, Colorado Springs, Fort Collins, Eagle, Colorado
Number of Stores: 4
Owner: Joe Womack, Bob Khan, Mark Humphrey
Key People: Pete Schoenfeld, Michelle Humphrey
Year Established: 2014 (originally 1991)
Web Site: www.fpwhs.com
Phone: (303) 296-3823
Number of Employees: Full-time: 51
Gross Annual Sales by Product Category:
% of Annual Gross Sales for Advertising: