Many first-time homebuyers have a grill on their decks or patios, but their experiences using propane outdoors are largely limited to that lone propane appliance. An opportunity has emerged with second-time homebuyers, though, according to Greg Thomas, director of sales at Canada-based Napoleon.
In Thomas’ experiences, second-time homebuyers are often recent retirees or empty nesters seeking a lifestyle change of sorts. Many of these people want to spend more time outdoors, Thomas says, and their new desire has led to the evolution of the “outdoor room” – many of which resemble kitchens with high-end grills, refrigerators and counter space.
At the same time, Thomas says, many of these outdoor rooms are morphing into entertainment areas that contain televisions and stereo systems, as well as fireplaces and fire pits.
LP Gas recently explored this evolution and propane’s role in it during separate interviews with Thomas and Mike Hopsicker, a Napoleon customer who’s president and CEO of Ray Murray Inc.
LP Gas: Where did this new-look outdoor living category originate?
Thomas: I can’t speak for the outdoor grill side, but we have outdoor fireplaces and fire pits. And the whole category is growing every year.
People are staying in their homes more. They’ve cut down on yearly vacations. We’re seeing this up here in Canada. You wouldn’t think that in a colder climate, but people want to extend their seasons.
A lot of builders, especially on the West Coast, are incorporating outdoor living features as a standard part of house design. Every part of the house is getting an outdoor area. In some cases, instead of having a 3,000-square-foot house, there’s now a 2,000-square-foot house but a significantly larger area outside.
A lot of brands have introduced some great products to make the awareness [of outdoor living] stronger. The emphasis on the outdoors is greater. You’re seeing more fireplaces on the outside, where [homeowners] are spending some considerable amount of money. You’ve got outdoor grills being built into more of a cooking area.
If you’re talking entertaining, the fireplace becomes more of the focal point. We’re designing fireplaces for the outdoors. We’re getting into a modern linear style with lights built into them.
Hopsicker: We’ve seen the outdoor kitchen become much more popular. It’s spread across the country now. I think it started in California. It’s a big trend in the areas we operate in.
People are doing all kinds of things in their backyard. 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. We’re seeing high-end grills – stainless steel grills – along with refrigerators and the bar sink. People are doing outdoor TVs.
Thomas: With a lot of these products, there’s a little more of a glamour side and comfort to them. A lot goes well with women. When you get into these design elements and doing something different outside, generally females get more involved because they’re watching the shows on TV. Just about all of these shows now are promoting the outdoor lifestyle.
Right now, we’re appealing to a pretty good market. Second-time homebuyers are getting a little more excited with some different features. A year or two after they [buy], they are starting to spend some money on the backyard.
The demographic is probably about 35 to 60, but the core is 45 to 55. They have the disposable income. They already have the big-screen TV, and maybe they’ve renovated the kitchen and bathroom. Then they look to the backyard and ask what they can do.
LP Gas: How are you incorporating outdoor living into your business and what kind of categorical growth have you seen?
Thomas: We’ve had a much higher percentage of increase each year. Our outdoor category is jumping up 30 percent each year. It’s becoming part of [home] design now in markets like California, Texas and Arizona. It’s caught on with landscape architects.
People are willing to spend to do a major backyard job that’s maybe $40,000 to $80,000. We’ve got a fireplace that’s $2,700. If you’re going to [embark on] this, you’re putting one of these in and they’re very affordable.
Hopsicker: An average sale might be $6,000 or $8,000 – for us – of a $35,000 to $40,000 project. We’re selling to specialty retail shops and propane retailers who would be using this. We’re selling to landscapers who would be using it. A lot of leads come from them because they’ll be doing projects in the backyard.
We really evolved selling lower-end gas grills to very high-end equipment. Housing has been pretty poor the last five years. [Outdoor living] is one of the categories that’s bucked the housing trend.
LP Gas: Do you see many propane retailers exploring this area?
Hopsicker: Not a lot. We’re seeing some guys doing it who already have some retail hard goods products. They might have a hard goods shop, or something attached to their facility. Those guys are doing it to some degree, but we’re not seeing a lot of the propane guys getting into this.
I used to be on the retail side of the propane business. Gas grills for a lot of guys were a nuisance because they didn’t burn a lot of gallons. If you sold them the grill, you had to put it together. There wasn’t a lot of profit margin in it. The propane grill really wasn’t a significant business.
LP Gas: Does it make sense for propane retailers to get involved now that outdoor living has evolved to include higher-end products that can offer better margins?
Hopsicker: I think it makes sense. 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. Maybe the starting point for retailers isn’t the outdoor kitchen, but 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 they expand from there.
There’s a role for propane retailers with outdoor fire pits and fireplaces to provide expertise – that’s where I think the propane [retailer] still has a role. 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.
Thomas: The propane [retailers] are a little bit on the outer edge of this stuff. But your landscape and fireplace guys seem to be doing a lot of this. The fireplace guys are getting a lot of requests to do outdoor stone. Most of these guys will take it on themselves. They can hire a gas fitter to do the plumbing, and they’ll [subcontract] out the stone jobs.
I think the next 10 years are going to be strong. It’s still a relatively new category. People had no idea this was available if you’re not tuned into this industry.
Photo courtesy of Napoleon