The event happens on occasion, but rarely does Mark Holloway encounter a Modern Gas customer who’s visiting the company’s Leesburg, Ga., showroom to see the latest water heater to hit the market.
Don’t get Holloway wrong. Water heaters have a place in the propane world, but customers aren’t typically strolling through his store on a Saturday pondering their next water heater purchase. Instead, Holloway says, Modern Gas customers are shopping for lifestyle products to make their homes more visually appealing and comfortable.
“They want to see something that’s going to make their house pretty,” says Holloway, Modern Gas president. “Something like a new set of logs or their choice of a fireplace.”
Or, perhaps customers are visiting Modern Gas because they’re interested in fire pits or high-end grills to enhance their outdoor rooms. The outdoor room is a relatively new concept that stems from the Great Recession, forcing many Americans to cut spending on luxuries like vacations. Even the wealthiest homeowners cut back, but many shifted their spending to other areas – including their backyards.
“People are doing all kinds of things in their backyard,” says Mike Hopsicker, president and CEO of distributor Ray Murray Inc. “It used to be that decks were the big thing. Now it’s the outdoor room. The equipment is a major expense, but a lot of people are putting money into it.”
Some of the projects Hopsicker references range between $35,000 and $40,000 for homeowners, with an average sale for Ray Murray ranging between $6,000 and $8,000 on items such as outdoor fire pits, fireplaces and high-end grills. Many of Ray Murray’s customers in the outdoor living arena are specialty retail shops – not necessarily propane retailers, Hopsicker says. But there is room for propane retailers to get involved.
“I think it makes sense for propane retailers,” Hopsicker says. “I’ve seen a trend of guys getting away from retailing [products] altogether, especially the majors. As a result, they’re not bringing in new customers with new applications [with which] they’re using more gas. I do think there’s an opportunity for guys to get back into doing more product installations, product marketing and retailing of product. When they get into that area, maybe you expand from there.”
Outdoor living can be an opportunity, but propane retailers have largely ignored the outdoor living trend because they assume box stores and specialty retailers have things covered. Or, they don’t want to run their businesses on the thin margins low-end grills and related products have historically generated.
Times have changed, though. Tom Jaenicke, owner and principal adviser at ATomiK Creative Solutions LLC, says retailers have an opportunity to cash in on the new interest in high-end grills, fire pits and outdoor fireplaces for a special clientele.
“Fire pits and outdoor fireplaces can all become, in many cases, cash-and-carry items in which a propane retailer can set up a display in the store,” he says. “They can become a cash-and-carry item just like gas grills have been.”
According to Jaenicke, retailers have three ways to get involved in the outdoor living category. They can sell and service their own products, support the use of products through statements and encouragement, or work with a trade ally.
“Even if you don’t install and service, maybe there is a fireplace shop you can work with,” Jaenicke says. “If I were a propane retailer on the edge of town and there were great fire shops and box stores in town, I might look at the trade ally route rather than sell and service out of my store.
“But heck, if there were no box store or specialty retailer around, that’s a golden opportunity from a product standpoint, as well as an opportunity to hook to your propane tank or do a tank exchange.”
The American Society of Landscape Architects’ (ASLA) annual survey is further evidence that an opportunity exists for propane retailers.
According to ASLA, which surveys its members each year about the popularity of more than 15 outdoor living features, fire pits and fireplaces are the most sought-after items this year. Grills ranked second in popularity, according to ASLA’s survey.
In addition, ASLA annually asks landscape architects to rate the popularity of several areas of the home.
Gardens and landscaped spaces are one of the most popular areas, as 94.4 percent of the ASLA members surveyed this year say this is a very in-demand category. But outdoor living spaces, which include kitchens and entertainment areas where propane products can be housed, rated even higher in popularity at 94.5 percent.
Landscape architects aren’t the only ones experiencing increased demand in outdoor living. Manufacturers are seeing significant increases, as well.
“Our outdoor category is jumping up 30 percent each year,” says Greg Thomas, director of sales at Napoleon, a Canadian company that manufactures fireplaces and grills. “It’s becoming part of [home] design now in markets like California, Texas and Arizona.”
The interest has spread to Georgia, where Modern Gas has seen growing interest in features that can enhance their customers’ outdoor living spaces.
“We were able to display one fire pit before we moved to our new location,” Holloway says. “Now, we have about seven fire pits – and we’ve sold a lot more. Fire pits don’t use a lot of gas, but it’s a whole new market [in which] we might sell one or two every year. I’ll bet we sold 20 this year.”
The key to selling those 20 fire pits, Holloway says, was showcasing them to customers.
“If we weren’t able to display them, we’d probably sell one a year again,” he says.
One factor that makes Modern Gas a draw for fire pits, fireplaces and grills, Holloway adds, is that many of the models his store carries are made in the U.S. The company doesn’t limit itself to propane products, either. It realizes customers want to shop where they can complete their outdoor living areas – not just fulfill their propane-related needs.
“We try to look at the whole picture,” says Wendy Salter, office manager at Modern Gas. “Not only do you want your [outdoor] kitchen, but you want something to sit in and you want a table. So we brought in patio furniture.”
Then, Modern Gas can introduce customers shopping specifically for patio furniture to fire pits, fireplaces or another propane-powered product to use outdoors.
“Not a lot of people have seen a propane company like ours,” Holloway says. “We feel like we’ve grown our business by listening to what customers want.”
The business model Modern Gas employs is indeed a unique one for a propane retailer. But that’s not to say retailers in other parts of the country can’t successfully adopt the Modern Gas model – or a part of it – for their own businesses. Adopting the Modern Gas model requires a vastly different mindset, though.
“There’s a role for propane retailers with outdoor fire pits and fireplaces to provide expertise,” Hopsicker says. “But if you’re not doing any of it, you’re not going to find new opportunities. Sometimes, you have to look at the whole package.”
According to Napoleon’s Thomas, Ray Murray is a good example of a company that’s shifted its business into the growing outdoor living area. Ray Murray isn’t a retailer, of course, but its decision to focus more intently on outdoor living shows rewards can result from change.
“Ray Murray is making a concentrated effort to focus on some of these smaller, regional propane guys and get them excited,” Thomas says. “Indoor and outdoor fireplaces is the fastest-growing category they have. Mike is really targeting this stuff. He’s really seen the numbers going up.”
Ray Murray changed its company philosophy on gas grills in recent years, too, to better meet interest in outdoor living applications.
“We really evolved selling lower-end gas grills to very high-end equipment,” Hopsicker says. “Housing has been pretty poor the last five years. [Outdoor living] is one of the categories that’s bucked the housing trend.”
Still, is it realistic to expect propane retailers to become more appliance oriented and move their businesses into outdoor living?
“I really think it is realistic,” Jaenicke says. “It’s not going to work for everybody, but I think it’s realistic that it could happen. There are great manufacturers out there who would support it, and there is a great distributor group dedicated to the propane industry.
“If we figure the current percentage of propane retailers dabbling in it in some form is 10 to 15 percent, there’s no reason why that percent can’t double,” he says.
Photo courtesy of RH Peterson Co.