Brilliant Execution
By Bill Sendelback
Photos: ©2016 Paul Turang Photography. www.paulturang.com.
More than two-dozen hearth dealers in Southern California have gone out of business in the last few years. Blame it on the economy, or California’s increasing environmental regulations, or the state’s seemingly unfriendly business climate. In the midst of all these failures, CAPO Fireside, headquartered in San Juan Capistrano, not only has survived, but has thrived and expanded.
CAPO Fireside is not your usual hearth dealer, and that may be one of the secrets of its success. It has transitioned into a five-location chain of design centers aimed at designers, architects, custom homebuilders and, yes, consumers. Owner and CEO Eric Peterson was a contractor installing fireplaces in the early 1980s but wanted a retail showroom and design center in which to showcase fireplaces for his customers. The then-named Capo Valley Fireside, an Earth Stove factory outlet in Mission Viejo, California, since 1978, came up for sale, so Peterson purchased it in the mid-1980s.
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| L to R: Eric Peterson, Owner and CEO; Suzanne Singh, CFO; Gavin Peterson, COO. | |
Renamed CAPO Fireside, in 2001 the business was relocated to San Juan Capistrano. Since then, Peterson’s operations have grown into five design centers – more are on the way – throughout Southern California, experiencing phenomenal sales growth even in a declining hearth products market. In 2015, CAPO Fireside (all five design centers) showed sales growth of more than 37 percent, topping $28 million in sales after a 24 percent sales increase in 2014.
“We’ve been blessed to acquire and open new markets throughout the recent recession of 2005 to 2009,” Peterson says. “We have not had a down year. From a small company of just me and a pickup truck, to five employees later that first year, we’ve grown to 100 employees now 30 years later.”
Most of CAPO Fireside’s success Peterson attributes to those 100 employees. “As I look back, one of my objectives was to create an environment for everyone to grow personally and professionally. I call it the CAPO Fireside culture, which places strong value on individual and corporate success. That has attracted the finest talent in our industry. I have a wonderful staff. I am surrounded by very talented and loyal people.”
Peterson uses the CAPO name to illustrate more of his business philosophy. “’C’ stands for Comprehensive products, handling hearth products almost exclusively; ‘A’ stands for an Accomplished staff; ‘P’ stands for Professional turnkey installations, and ‘O’ stands for Outstanding value for our customers, suppliers and employees.”
CAPO Fireside’s design centers have taken hearth products retailing to a new level. “Our markets have never seen anything like this,” Peterson says. “For example, our San Juan Capistrano store has more than 70 burning displays ranging from $2,000 entry level fireplaces to $30,000 fireplaces. Our competition, many of whom are no longer in business, might have had four or five burning displays. They never really capitalized on the designs and multitude of hearth products that are now available. There are now 25 fewer hearth dealers within 20 miles of us than just a couple of years ago.”
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| With 6,000 sq. ft., the San Juan Capistrano store has ample room for 70 burning units as well as a bit of barbecue and fire pits. | |
But Peterson sees no competition for his design center concept. “We do have some competition selling to builders, but they are more of your traditional hearth dealer with maybe several displays, but certainly not on the scale of what we’re showing.”
Hearth products represent 95 percent of CAPO Fireside’s sales, with outdoor items such as fire pits, fire features and grills making up five percent of the business. Nearly 90 percent of CAPO Fireside’s hearth product sales are gas direct-vent models. Even though the company concentrates on designers, architects and builders, 20 percent of its business is directly with consumers. In its builder business, about 55 percent goes to production homes and 45 percent toward custom homes and remodels.
While still a small part of CAPO Fireside’s business, Peterson sees outdoor living as a growing category. “All the research we have found has shown that billions of dollars are going to be spent on outdoor living products and what we call California Living. Outdoor Rooms are very popular here, and recently we have invested dramatically in these products. Even our large production builders have made a move to standardize outdoor fireplaces or offer them as an option.”
Each of CAPO Fireside’s five design centers is unique in order to service five very different markets. “When setting up each showroom, we analyzed what was being purchased in that market,” Peterson says. “Then we took into account the available floor space and tried to create a comfortable traffic flow.” The San Juan Capistrano showroom is the largest at 6,000 sq. ft. to house those 70 burning fireplaces plus a mix of freestanding stoves and fireplace inserts.
The Santa Cruz store, because it’s in the cold and moist coastal area, shows plenty of stoves and more inserts. The Palm Desert location doesn’t display stove or inserts because Peterson considers it more of an outdoor market. The Concord center has more than 30 display vignettes featuring more inserts. The Riverside location is a smaller operation with a limited showroom because of the demographics of that market and its relative closeness to the San Juan Capistrano store.
CAPO Fireside staff handles all service and installations; Peterson counts this ability as a necessary profit center. Currently the company has 50 service vehicles to handle the need for service and installations. “Doing our own service and installs gives us control of our costs and our quality,” he says. “Our communications with the customer are much more succinct than if we used ‘rented’ installers. Most of our customers purchase from us because their purchase is ‘turnkey,’ and they don’t have to worry about dealing with a third party.”
Peterson explains that his skilled installers allow the company to do anything and everything to finish a fireplace, inside or outside. “We can sell a customer a $5,000 fireplace, then add a $4,000 mantel and maybe a $1,000 chimney shroud. Sales like that have enabled us to grow.”
Peterson says that, besides a “little bit” of newspaper and magazine ads in each of his markets, he “dabbles” in social media but is focusing more and more on it. CAPO Fireside is active on Facebook, and each location is on Houzz.com featuring more than 2,000 photos of product installations.
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| Unlike most other hearth dealers, CAPO Fireside specifically targets designers, architects and custom builders. | |
But Peterson says most of his promotional efforts as coming through his 17 person direct sales force, called Builder Sales managers. “They do much more than manage builder sales,” he says. “They are out promoting the CAPO brand with architects and designers, people who specify the products, calling on those folks on a weekly basis.”
CAPO Fireside is flying high right now, but Peterson sees clouds on the horizon for hearth products in California. Net Zero is slated to take effect in 2020 as part of California’s building codes requiring new residential and commercial buildings to produce all of their needed power. Currently, most hearth products are considered a negative, requiring that more power be produced off the grid to offset the purchase of a hearth product.
The HPBA and its regional affiliates are actively challenging that part of Net Zero in an effort to salvage the California hearth products market and fend off other states that may be considering such a regulation.
“California is the largest fireplace market on the planet,” says Peterson, “so I’m looking to 2020 auspiciously. I don’t think consumers will stand for electric fireplaces only. Our entire industry must be aggressively attacking Net Zero and regulatory activities such as this. It’s a little unnerving at just how our legislators have gotten out of control, and California leads the way in this.”
Peterson’s advice for retailers is textbook. “If you are going to succeed, you have to work hard. You can’t sit back any longer and let things or customers come to you. You have to push yourself out of your comfort zones and away from the old ways of doing things. With the advent of the internet, which tends to drive down margins, you have to pursue business and not wait for it to come to you.”
That philosophy appears to have worked well for Peterson and CAPO Fireside.
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Store Name: CAPO Fireside Location: Headquarters, 26401 Via de Anza, San Juan Capistrano, CA 92675. Other locations are in Santa Cruz, CA; Concord, CA; Palm Desert, CA; and Riverside, CA Owners: Eric Peterson, CEO Year Established: 1978 Web Site: www.capofireside.com E-mail: epeterson@capofireside.com Phone: (949) 364-5118 Number of Stores: 5 Number of Employees: Gross Annual Sales: $28 million Square Footage: Four showrooms total 15,000 sq. ft. Five warehouses total 23,600 sq. ft. Product Categories Sold: Brands Carried: % of Annual Gross Sales for Advertising: 2%, including 1% newspaper, 1% magazines. Direct Sales Force costs 7%.
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