See 2015 Hearth Retail Survey Report — Part II

Following an increase of 12 percent in 2014, sales of hearth products through the specialty retail channel remained about flat (+1%) in 2015. Sales in the West were up six percent, while sales in the Northeast declined by eight percent. In the Midwest and South, sales increased slightly, by two percent in both areas.

When it comes to early-buy for 2016, 58 percent of hearth dealers plan to place early orders, down slightly from 2015. Sixteen percent of retailers plan to Increase their early-buy orders, and by an average of 15 percent. Sixty-five percent say they will make No Change, and 19 percent plan to decrease their early-buy by 21 percent.

A whopping 41 percent of hearth specialty retailers who sell pellets had more than 25 tons of pellets remaining in stock at the end of the year. That compares to only 12 percent of retailers in 2014.

In 2015, the percentage of retailers reporting sales of more than 250 tons of pellets (40%) declined by 18 percent.

Only two areas of the country are forecasting growth in their wood-burning appliance sales in 2016 – the South (up 10%) and the West (up 6%). Midwestern hearth dealers believe wood-burning sales in 2016 will be the same as in 2015, but dealers in the Northeast are forecasting a decline of 10 percent.

Expectations for sales of pellet appliances are dismal in every region. Northeastern dealers expect a decline of 11 percent and the same is true of southern dealers. Western dealers are the most optimistic, and expect a slight decline of four percent, but Midwestern dealers tell us the bottom is going to fall out; they feel their sales of pellet appliances will decline by 29 percent.

Now for a positive note: All four regions of the country believe that sales of gas hearth appliances will increase strongly. Western dealers tell us sales will be up by 10 percent; southern dealers say their sales will be up by 12 percent; midwestern dealers believe sales will be up by 15 percent; and northeastern dealers say their sales will be up by a whopping 18 percent (hey, they’ve got to sell something!).

U.S. Sales of Hearth Products Year to Year – 2002 to 2015
Following a strong sales year in 2014, specialty retailers built on that success with a positive nine percent increase in 2015.

Hearth Products Sales by Region Year to Year – 2015 Compared to 2014
In 2015, sales in the Northeast plummeted 11 percent from the prior year, while sales in the West increased by that same percentage.

Retailer Comments

Northeast

Connecticut: “All down 27 percent. No urgency.”

Delaware: “Wood down 34 percent. Pellet down 34 percent. Yes, more discounts did help.”

Maine: “When a customer is looking for a backup heat source that runs without grid power, a wood appliance sells even when fuel prices are down. We demonstrate and explain this to customers to pitch the sale. We use all the manufacturers’ promotions to help generate sales along with local advertising on a regular basis.”

Maryland: “Indeed, these factors do present major challenges, but after 40 years in business we have a strong customer base that appreciates honest dealing with quality products. Wood-burning is hard work and the industry must not price itself beyond the level of common sense. Moderate weather and low oil prices will not generate sales.”

Massachusetts: “Our wood stove sales increased about 20 percent. Pellet stove sales about the same. The long winter of 2014-15 stressed many older stoves and decisions to upgrade were made early in the season. Promos and better web and social media contributed.”

New Hampshire: “Wood sales were up and pellet sales were down. Taking the biggest part of market share is the goal. I have made it a goal over the past six years to get as many of my customers as I can to post reviews on any of the social media talking about their whole buying experience. We now steer customers to the reviews so they can see what they’re getting themselves into. It seems to have made a difference and retail sales are as strong as ever.”

New Jersey: “Too warm! Cash and carry items are not selling. Waiting on cold weather.”

New Jersey: “Pellet and wood stoves down. Wood inserts up. Gas direct-vent fireplaces up.”

New York: “I sold 116 units last season, this season seven. Not looking forward to the rest of the year.”

New York: “Pellet down 50 percent. Wood down 55 percent. We were able to close sales by lowering our margins, but those people were in the market. No additional sales were gained due to lowering price. People are not going to buy biomass if they don’t have to.”

Pennsylvania: “The high price of pellets continued from winter 2014 and on into spring of 2015. Our pellet prices actually went up in spring when they normally would go down. We sold almost 600 tons of pellets and 67 stoves/inserts in 2014. In 2015 we sold 82 tons and 30 stoves. The price of pellets make the fuel source one of the most expensive in our area. Natural gas is cheap. I’ve turned my own pellet stove off to save money. The price of stoves along with the price of pellets have made those appliances extremely unattractive!”

Vermont: “Large projects made up the difference.”

South

Arkansas: “Wood sales were up 50 percent; pellet sales were down 75 percent. Wood sales were generated by an increase in new customers relocating to our retirement area.”

North Carolina: “In our area it seems the cost of adding a generator puts pellet products at a standstill. The low cost of LP gas helped a lot in the gas insert market, and wood is just a hit and a miss in the South.”

Tennessee: “We had a heavy ice storm that drove wood sales up about five percent. Pellet appliances have always been very slow - people lose interest when they realize they require electricity.”

Texas: “We had a cold/wet January to March to begin 2015, which drove good sales volume. The fall 2015 season started off very strong as people prepared for a repeat of those conditions. When cold weather did not materialize by December, sales began to really flatten out. It was probably my worst December in the business. We will consider running big promotions in late January if slow business persists.”

Virginia: “Sales seemed to be slightly up for wood. We did use manufacturer promotions. We do not sell pellet products.”

Retailers Planning to Place Early-buy Orders
This year, 58 percent of hearth specialty dealers plan to place early-buy orders, a decline of eight percent from the prior year.

Early-buy Orders
Sixteen percent of hearth specialty retailers plan to increase their early-buy orders, by an average amount of 15 percent. However, 19 percent plan to decrease their early-buy by an average of 21 percent.

Midwest

Illinois: “In the year of the 30 percent energy tax credit, sales were 50/50 wood/gas. Since then wood has gradually declined as gas has increased.”

Indiana: “The weather was a real factor for wood and pellet stoves. We are located in an area that has a lot of natural gas, so sales of gas fireplaces, inserts and logs were about the same as last year.”

Iowa: “Wood and gas stayed prettylevel. Multi-fuel and pellet dropped by 85-95 percent. We remodeled and added outdoor products and contemporary fireplaces to our showroom.”

Michigan: “Wood was up 14 percent. Pellet was down 45 percent. Not much you can do when the price of pellets is the same or more than gas.”

Minnesota: “Wood sales were up slightly because of economic concerns. People are leery of the economic situation and some are looking for alternative heating sources. If they have wood available then they are going in that direction even in an urban environment. We did nothing to encourage this. The government did.”

Missouri: “Sales were about the same as last year.”

Ohio: “We are primarily a service company so I don’t feel that the weather affects us as much as a primarily retail location. We make our sales on the THREAT of it getting cold, not on it actually getting cold. We also forward-schedule many jobs, which increases our off-season sales and lowers our in-season sales. What makes a product worth more in the winter time? Some call it supply and demand; I call it gouging. If we were to sell water to Hurricane Katrina victims at $30 a gallon we would be called price gougers, yet it is OK to increase the price of a heating appliance in the colder months.”

Wisconsin: “Wood was down around 20 percent. Pellet was down by 50 percent. We did not discount. We were able to maintain our position in the market as wood-heating experts and saw growth in new construction. Freestanding units were down but ZCs were holding their own as homeowners remodeled or built new. We do sell cordwood and we are normally sold out right about now, but we have more than 75 percent of our inventory of wood still here.”

Wisconsin: “Wood was up approximately 12 percent. Pellet sales down 30 percent. Pellet sales were dead. ZC high-efficiency wood units were up by 20 percent.”

Tons of Pellets at End of 2015
A whopping 41 percent of hearth retailers who sell pellets had more than 25 tons of pellets remaining in stock at the end of the year. That compares to 12 percent in 2014.

Tons of Pellets Sold Comparing – 2014 to 2015
In 2015, the percentage of retailers reporting sales of more than 250 tons (40%) declined by 18 percent.

West

Alaska: “We have done a lot of TV advertising over the whole state of Alaska. We keep a strong website updated. We do a lot of goodwill. Also a lot of consultation.”

Arizona: “The past year was a great year for us, despite the warmer weather and pricing for fuel at a low. Our sales were up 26 percent.”

California: “We are having a normal wet winter after two years of no rain. Sales are good.”

California: “Wood-burning was down 15-20 percent. Pellet sales up 10-15 percent. We are located in the Bay Area Air Quality Management region. They have made wood-burning a crime. Our hands are tied so we have to promote gas burning products.”

Colorado: “Wood was up 20 percent. Colorado is a good market for wood in the mountains. Fuel is all around us. Pellet too.”

New Mexico: “Cold weather and high fossil fuel prices are not the driver for wood-burning appliances; wood stoves have been in peoples’ homes for 40 years; they are a tradition. People like to have alternatives and to update their homes. How often do people buy new TVs, cars, computers, etc.? The hearth business is competing with those items. We sell fire all year long. Promos only turn a few heads. Always selling quality products with intelligence is our goal.”

Oregon: “Retail keeps getting harder with online sales taking chunks of our business. We cannot compete with the margins that people are finding online. Overall, business is steady and we see slow growth in our area.”

Washington: “Wood was up seven percent. Pellet down 17 percent. We did NOT lower prices/margin. We did not increase or decrease advertising on hearth; we did not feel we could change the trend. We did increase the focus on patio and spa, significantly increasing those sales, and ended up with total growth for the year.”

Canada

British Columbia: “Wood appliance sales are up by 75 percent. Pellet appliance sales down by 50 percent. Didn’t attempt to create sales. I rely on word of mouth and an excellent sales/service reputation. Only advertising is the occasional public service ad during Fire Prevention Month in the local weekly paper.”

British Columbia: “Wood sales were down 20 percent, pellet about the same. It was an average year in 2015, just that 2014 was the best in our history so we are pretty happy. We didn’t drop prices but used manufacturer specials all year.”

Quebec: “Wood 20 percent down. Pellet 100 percent down. Did a special promotion on wood only.”

Ontario: “Wood sales were up by promoting WETT-certified information and installation which Big Box stores don’t provide. We’re giving discounts if the client pays by cash, check or debit rather than credit card. We have a knowledgeable sales staff and crews that can describe product with advantages and disadvantages. We’re qualifying customers to find their actual needs, not just selling them a product to make a sale. Friendly service.”

EXPECTATIONS FOR 2016

Wood-burning Appliances
Southern hearth specialty dealers are the most bullish on the coming year; they’re forecasting 10 percent growth. Those in the Northeast believe sales will be 10 percent down.

Pellet-burning Appliances
Let’s face it, the bottom fell out of the pellet appliance market in 2015, so it’s no surprise that hearth retailers in all four regions of the country believe 2016 will be another horrible year. Midwesterners are the most pessimistic, forecasting a decline of 29 percent.

Gas-burning Appliances
Gas-burning appliances will be the salvation of the hearth industry in 2016, according to survey respondents in every region. Those in the Northeast region are the most bullish, forecasting 18 percent growth; those in the West are the least bullish, but still are forecasting 10 percent growth.