From the Center
Hearth Industry News and Gossip

1. Feb. 25, 1996 - The Dream is Over - the hearth industry is changing - but is it for the better ?

2. March 1, 1996 - Danger Ahead - Are the current gas appliances safe ?

3. March 5, 1996 - Terminal Case ? - One dealer thinks we are already there !

Feb 25, 1996

The Dream is over !

Boy, am I old fashioned ! When I got into this business, money was not the only object. I was stricken by the desire to save folks money and energy, while also providing them a safe way to heat and/or grace their hearth. I now am quickly discovering that I may be a dinosaur, destined to become extinct as surely as our reptile friends did.

Why do I say this ? -- to sum it up in one word - greed. Let me give you just one example - the Industry leader, Vermont Castings. Our store has sold millions of dollars worth of these products over the past 12 years, and we always paid our bills and did right by them. In the words of the infamous Stephen Morris (Vermont Castings original sales manager) " Our relationship with our dealers is like a marriage, we pull together thru thick and thin and support each other". But , as with many failed relationships, I have failed to notice that the marriage ended a long time ago !

I spoke to my Vermont Castings rep today, about why they opened a dealer 5 miles away from one of my locations. I also asked him why I don't see him more than once a year, and why he can't show me the new products, etc. Seems like the factory has given him standing orders to "do more business, outside of our core network" (translation - spend your energy on others besides your long term dealers). I listened for 45 minutes while he told me how they wanted to "do 100 million" and "create shareholder value" and "maybe go public so the investors can make real money".

It's scary, cause I know these words had to come straight from the top ! Not one word (in 45 minutes) was mentioned about making a good product, continuing a good relationship, supporting us better or educating us more.

Also today, I found out a shipment of desperately needed enamel pipe was delayed because we were put on "credit hold" for $1600 worth of invoices. Of course, they didn't tell me this when I called to ask if the pipe was in stock, and could be shipped right away. They also failed to notice that they hadn't given me credit for a defective stove sent back three months ago ! and to think..my credit limit is a paltry $100,000.

Guys, take a hint from Saturn Cars - act like you care about the customers and dealers. Communicate with them - do this and you'll automatically make the millions you seek.

I recently spoke to the rep from Yankee Candle Company - a concern that is doing 10's of millions worth of business and is probably larger than Vermont Castings. I visited their Mass headquarters, where I was amazed by the Employee Tennis Courts and Fitness Center (indoors). Why, look at all that wasted money that could have went to shareholders !
Same story - they started in a garage...and sold to the mom and pop stores. The big guys laughed at them...department stores would not even let them in the doors.
Now, Macy's and everyone else is begging for the line. The rep said the word came down from on high - " The mom and pop shops made us, and we will continue to help make them" -- they have decided to take a stand - for the specialty shop !

Vermont Castings and others do not believe in the future of the specialty shop - sure they want our business while they can get it, but like a playboy with a wandering eye, when the see something that (looks) better , they'll be after it like a dog in heat !

In all fairness, Vermont Castings is by no means the only dog in heat - most of the Hearth Industry companies are following the same track - they want to sell to all the HVAC guys, the LP guys, the Utilities, the Builders, etc. It will remain to be seen if they can keep all their new "wives" happy.
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Danger Ahead !


Why the Gas Industry must police itself better.

It's an accident waiting to happen. The explosive growth of gas decorative products has brought a proliferation of products to the marketplace. All of these products have testing labels of some sort on them, but from what I've seen, I question the extent of the testing. It looks to me like it's only a matter of time until the "explosion" stories start running on the national media. Case-in-point - Gas logs. First of all, it's sinful to allow these units to be tested and sold without the use of a safety pilot setup, but yet it appears that a great number of them are leaving the stores this way. Worse yet, many are tested without a safety pilot kit, and then sold along with a kit -- when the specific combination has not been tested. Some of the installation manuals are poor (and that's putting it nicely), and the hardware given with the valve and log set next to impossible to set up. Who's responsible ? When the lawsuits start rolling in, the whole industry will be paying BIG.

We have a "tested log set" in our store from one prominent manufacturer which has caused us a lot of grief this year. One major problem..gas shoots out of an orifice OUTSIDE of the burner pan. This gas contacts the pilot and thermocouple tubes...so my installers are worried about these tubes burning thru from these flames. "OK", I said "if the pilot tube burns through, the thermocouple will sense that the pilot is not working and shout the gas supply down". To prove my point, I went over to the logs set in question (on our showroom floor)..and while it was burning, disconnected the pilot tube. Needless to say, the fire did not go out. Seems the log set has a burner flame which impinges heavily on the thermocouple -- therefore keeping it on despite a pilot failure. Now, I'm no gas expert but I don't think this is the way it's supposed to be.

I could tell quite a few more stories of what seems to be "field testing" of not-ready-for-prime-time gas appliances. I consider these appliances very dangerous, much more so than wood fueled units, cause the fuel is explosive. Who is watching the store here? Can the AGA standards and test schemes be improved? Should third parties, completely outside of the Gas industry create some smarter standards ? These are questions that should be addressed by the AGA, HPA and the appliance makers.

Some basic suggestions:

1. Require total and complete manuals - woodstoves have been reuired to have these for many years.
2. Require factory assembly of ALL safety devices - this is a no-brainer
3. Do more destructive testing - no reason the plastic knobs should melt off of certain log sets due to high temperatures. The lab should do worse by them than any homeowner.
4. Do more "real world" studies of ventless appliances. Despite my pleas to some of the big names, it appears there have been no long term tests of these appliances in homes. This type of testing was done with wood stoves and pellet stoves - why not with gas ? I have heard that the Gas Research Institute does not have the money budgeted for such studies.....sure seems to me like a small price to pay for customers and dealers piece of mind.
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Terminal Case !

Editors Note : The sender of this note wishes to remain unnamed, but I can vouch that he is a true human being.

It is with interest that I read "The Dream is Over" from The Centre. This forum could be an important stimulus for discussion, and from that, perhaps even some change that could "save" our industry. I wish to remain anonymous because I fear for my business and possible retaliation from manufacturers.

I am quitting this industry - and this saddens me. I still have a small manufacturing concern, and several retail stores, have acted as a sales rep for a major, distributed a couple of what are now major lines (when they were not and helped make their presence important), have written and taught fellow dealers, been partners with other retail outlets, spoken at conferences, consulted for the government on wood burning, acted as an inspector for sold fuel, voluntarily served our industry association, served on safety and emissions standards bodies - in short seen every side of our industry. I know that retail store owners don't get return on their investment, and that manufacturers have no idea of what it is that retailers really do, or how the market is changing, or where it is changing into.

I completely agree with the author of "The Dream Is Over." I wouldn't change a word. The quote from Stephen Morris is most apt is delineating how far we have come. It's sad that manufacturers (mostly) see retailers as all Mom and Pop - no matter how sophisticated their expertise, reputation or sales.

I would like to extrapolate further from where "Dream" left off. Without exclusive product, specialty dealers with displaying, operating showrooms and trained staff will go out of business. If the market is turned over to the HVAC dealers, utilities, and builders, manufacturers will spend more on warranty and will not have the customer satisfaction level they currently enjoy. They will face more lawsuits, liability claims, and be forced to replace more units, onceº they lose the safety net currently provided by displaying, experienced dealers. Manufacturer's margins will decline as the remaining places to buy stuff (I will not call them retailers) will force lower prices.

Specialty dealers cannot currently get the margins needed to hold our showrooms and staff together. We will disappear. In our area, banks will not support new retail endeavours (startups). There will be fewer and fewer showrooms in which manufacturers have their products displayed. There are already too many models of fireplaces and stoves (that look too much alike) chasing too few customers through too many dealerships (500 models of gas burning fireplaces, stove and inserts are available in our market right now). The current retail malaise will spread to the manufacturing level, and they will fail, or be bought out. In general, our industry will decline to levels not seen in our history. Some manufacturers will cut deals with the Big box stores who will further drive their margins down. Gas furnace people will knock the gas fireplace manufacturing industry into the next century. The lowest common denominator will prevail. The progress in our industry will decline as demand for unique products fades. Fireplaces will succumb to the pressure from the likes of home theatre, death star satellites, computers, and other high visibility home products,(not to mention government action), and will fall into the doldrums from which the current industry grew. The finesse and grace that a properly designed and installed hearth can bring to people's lives will become harder to find "in a cold world."

This may already be terminal. The specialty dealer is caught in the greed crossfire, as the "Dream" author said. Be confident that it is greed. I know manufacturers who have vastly exceeded their owner's fondest dreams in terms of sales, growth , profitability, personal income, possessions, time off, prestige etc, but they are the first to stab us in the back. They set up multiple dealers in each town. They tell us gas sales are way up, but their wood sales were down. They found a bunch of HVAC places to sell gas - 3 times the number of dealers from the previous year - and doubled their sales. They are thrilled. Wood is down - we get blamed because we didn't do our job, when in reality we sold all our inventory - for the first time in 15 years. Their unnecessary and callous ignorance of our financial situation is disconcerting. Like "Dream's" author we have these issues, but no one at the manufacturing end knows, or apparently cares. This ignorance is terminal. Manufacturers generally don't listen, don't really care about the customer, and seem myopically focussed only on increasing sales. Saturn indeed! I wanted to work with companies who wanted steady incremental, planned growth with us.

I know that we have (for the past 3 years) had to concentrate on cutting expenses because we could not maintain our margins, or increase our sales in a declining, increasingly discounted retail market. Our sales were fewer, and the margins less as we discounted to get what sales we could. In this very climate, every manufacturer has raised retails about 5% a year. They have a steady planned margin provided that they can get us to buy the merchandise. As we cut inventory to reduce expenses, they see that our purchases fall and they begin to look elsewhere rather than learn what we are up to, and how they could help.

Vermont Casting sends us (at least) 20 letters per week - clearly they are not concentrating on cutting every possible expense. I've been there - when things were good we concentrated on getting sales and let expenses rise. It almost killed us, and now with our sales down over 40% from our biggest year, if we didn't implement such cuts we wouldn't even be here. We cannot get manufacturers to understand that we need their assistance to cut our expenses by coordinating freight, deal with warranty expeditiously instead of delaying and putting off credits (as VC apparently did to the "Dreams" author). We can help each other out. Most retailers do not speak to one another. Your competitor is one of the few people on this planet to understand your plight - he shares it. Have full confidence that this malaise is endemic. We can help each other to reduce our inventory by buying from each other. Do booking only so far as it is your considered best interest. Do not keep manufacturers profitable by hurting yourself. Delay, and reduce their sales - and maybe they will come around so that we can speak about how we can be partners. Retailers are weak, but we retain one major weapon - the Purchase Order. Manufacturers have little knowledge of, or respect for our businesses, know very little about our plight and their ignorance is our downfall. If we can get to them now perhaps we can save both our businesses. Don't give the PO - there is a vague chance that we could (with the manufacturer and distributors aid) turn this around. I doubt it, but without major immediate change, it is our only chance, and worth the effort.

Warranty is another issue that needs to be discussed in this forum as some manufacturers (and we should be specific) are using us - plain and simple - and are sure careful about not spending money (VC is not one). Warranty is killing the retailer with more arcane rules, which have no discernible function except to show their dominance over retailers, and rates which ensure that retailers lose money or do shoddy work. This industry needs a fair warranty policy - universally.

How does the internet affect retail sales? I am pleased that Craig at HearthNet answers questions so properly and diplomatically. However, despite this and the possibility that it could increase public awareness of our industry, I fear the internet is harmful to the "specialty" aspect of our business. Now, here is a place to go anonymously to get answers to questions that the chain (where he bought his discounted chimney and / or stove) couldn't answer. In other words, it demeans our carefully and expensively earned knowledge, making it more common. In all this, who makes money? Is HearthNet not just another expense we retailers must make to keep up, but which has no method of increasing sales or reducing expenses?

Won't the internet be a way for a customer to get information to enable them to buy from the cheapest source? When will we see the 800 numbers on the Net with mail order deep discounters selling quality products at slightly above cost with little inventory, warranty, liability insurance, or service issues at all? Maybe the manufacturers will do it direct! Check a stereo magazine if you think I'm paranoid. There it is - complicated product, technical issues (like installation and warranty) - bought from an 800 # in NJ, or CA. Why would YOUR customers not buy there - especially if they can kick the tires at your shop and pick your staff's brain (and Craig's) before purchasing?




The views expressed above opinions only - rebuttals and articles are welcome ! Email to [email protected]
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