Hearthlist Digest #509 - Monday, October 9, 2000 Commodity fireplaces continued ... by "Roger Sanders" <[email protected]>
(back) Subject: Commodity fireplaces continued ... From: "Roger Sanders" <[email protected]> Date: Sun, 8 Oct 2000 20:47:55 -0400 Tim Nissen, in his last posting, implies that he has not had to actually compete with HVACers and distributors that also buy at his discount or lower and sell for $100 gross. He has only had to compete with the buy one at a time =93Bubbas=94. Tim, said that he (Ace fireplace dealer) can survive selling commodity fireplaces, because he has a much better margin than Bubba the HVACer operating from a Pick up and giving away commodity Heat-N-Glo (HNG) fireplaces for $100 gross to get the HVAC business. Well that maybe true when competing with Bubba, but in competitive markets, the large HVACers get the same 50 & 5% HNG discount that large hearth stores do. And, a hearth store cannot stay in business competing against the large HVACers, all selling commodity HNG fireplaces for $100 gross and getting a 50 and 5% discount. HVACers can do it because they get the HVAC contract. Tim also talks about being profitable selling the HNG niche fireplaces. That is great as long as the large HVACers don=92t want the Grand 50s and pier business. In competitive markets, most HVACers, insulators and installing distributors want the business and those niche SKUs are also sold for low margins. HNG has worked very hard to get those alternate distribution channels pumped up to sell their entire line. The specialty retailer cannot compete in a 20% margin (or lower) niche product market and survive either. Tim talks about being profitable selling niche HNG options and accessories. Terrific if the HVACers and installing distributors are not competing with him in accessories sales. In most competitive markets, HNG tries hard to get their accessories sold through the other distribution channels. Which means no margin for the hearth retailer. Also, in selling the nice $300 HNG gold face, Tim missed the opportunity to sell a $1200 FPX face because Tim originally sold his customer a commodity HNG fireplace by mistake, instead of a more profitable, non-commodity fireplace. Tim goes on to talk about hearth retailers =93living off the mix=94 by = being able to get grill, patio furniture and spa business off those builders and remodelers that were sold a commodity fireplace. In my experience over the last 12 years of selling those other products, very few, if any commodity fireplace buyers ever buy quality, non-commodity grills, patio furniture or spas. They are, in fact, exactly the wrong demographics for high end specialty grills, patio furniture and spas. Those contractors and commodity fireplace buyers will buy at Costco and Home Depot. The non-commodity fireplace customers however, are the perfect demographics for high end, non commodity specialty grills, patio furniture and spas. The only profitable mix to "live off of" for specialty retailers in most markets, turns out to be getting that additional non-commodity grill, patio furniture and spa business from those non-commodity fireplace customers. I=92m still waiting for Bubba's customer to buy that $3500 grill. Hey, more customers . . . . Bubba's customer came back in. Tim, if she buys a $3500 grill from us, I=92ll admit defeat and shut up. Roger Sanders Fireside Spa & Patio Bachelor Spa & Stove Bend, Oregon [email protected]