Hearthlist Digest #505 - Wednesday, October 4, 2000
 
commodity fireplaces, round 6
  by "Tim Nissen" <[email protected]>
 

(back)
Subject: commodity fireplaces, round 6
From: "Tim Nissen" <[email protected]>
Date: Tue, 3 Oct 2000 20:12:30 -0400
 
 
I am willing to concede Roger Sanders the last word on commodity
fireplaces....but not yet.
 
I think Roger would agree that sound business decisions require a =
situation
analysis, including the overall market, economic conditions, a competitive
analysis, internal company analysis, buyer analysis, and so on, basic
business planning 101.   The better the analysis, the better the decisions
about product, price, promotion and distribution.  You have a certain =
amount
of time and money and showroom space and you want to make decisions that
lead to a good return on investment.
 
  Market conditions and competition are important but, gee whiz, I've been
feeling sorry for myself for years, competing with half a dozen one step
distributors 45 minutes up the freeway, as well as all of those "Gold"
HVAC'ers, as well as "Bubba" in his van, plus the big bad gas utility =
retail
operation, not to mention Suburban Propane's new 7,000 sq. ft. retail =
chain
store, and the usual lineup of specialty hearth stores out there.  I was
thinking Roger had it easy over there in Aspen-I mean Bend-with all of =
those
rich people moving into God's country, but that is not the case.
 
O.K. I'll concede that there are many markets where conditions are such =
that
the specialty hearth dealer has better places to spend his money than
chasing spec. builders with low end fireplaces.  However, if you want to =
go
after some of that business, here's the deal: volume counts for a lot.
 
Let's say that Bubba, the HVAC'er operating out of his truck, buys a Heat =
N
Glo SL 750 from Distributor G at 40% off a $1,199 list price or $719.  He
marks it up $100 and sells it at $819.  Ace fireplace dealer buys in
truckload quantities from Distributor F at 50 & 5% off or $570 for the =
same
fireplace.  Let's say he lacks confidence in his ability to add value to
that fireplace so he meets Bubba's price.  He still makes a 30% gross
profit.
 
Now, as the Hearth Education Foundation retail finance study, (available =
for
just $49 from HEARTH, 703-524-8030 or [email protected]) makes clear,
profitable hearth specialty dealers cannot make a living at 30% gross
margins.
 
However, if you sell the new homeowner a fan and some trim and a remote
control and sign them up for annual service in the springtime, you can
really boost both your dollar margin and your gross margin percentage.
Maybe you sell the builder a tile surround and hearth and mantel and do =
the
same thing.  That's what I mean by "living off the mix."
 
Even more important and lucrative, think about the custom home products =
you
sell:  See-throughs, corners, piers, new Designer Series, Grand 50's,
8000's.  Think about the retrofit products:  AT Grand Inserts with gold
plated fronts, CFX inserts with smoked glass doors, enameled cast iron
stoves...and work the math with 50 & 5% discounts as opposed to 40%.  =
That's
also what I mean by "living off the mix."
 
And then think about floor traffic and how having a strong, broad, =
fireplace
business leads to other sales.  All of those commodity fireplaces need =
doors
or fans or logs or trim or annual service or remotes or upgrades.  All of
those commodity fireplace homeowners need grills and patio furniture and
spas.  That's also what I mean by "living off the mix."
 
O.K.  back to work.  Bubba just sent someone in to see our burn model
commodity fireplace and I've got to make them see the light.
 
Tim Nissen
Home Fire Stove
Salem, Oregon
[email protected]