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Hearth Retailer Profile

A Blueprint for Success

Not long ago, fireplace distributors of nevada was at the top of its game. Owners Doug and Sandy Houston had just moved their Reno, Nev., store into a gorgeous new 4,500–square-foot showroom; their satellite stores in Fallon, Nev., and Chester, Calif., were turning a profit; and they had a loyal customer base. Times were good.

In 2007, all of that changed. The squeeze of the economy started to set in, so the Houstons had to step back, take a serious look at the way they were doing business, and then make some tough decisions about how to ride out the storm.

The company (established in 1972) has gone through its share of adversity, but has always come out on top. The Houstons encountered their first test not long after they bought the business, in 1988. The company’s main products were wood-burning stoves, and in 1990, wood-burning stoves were banned in Reno and surrounding Washoe County. “I thought, great—I just bought the business, and now this is going to put me out of business,” Doug Houston remembers.

Instead of panicking, he decided that the best thing to do was to look for another category of products to sell. Several of his employees who also installed garage doors encouraged him to try the residential garage-door business. “That’s what I did,” he says. The new division, D&D Overhead Door, is still going strong today.

The company’s sales were soaring 15 years later, after it upgraded its image and changed its focus to high-end hearth products for custom, remodeling, and tract builders, as well as retail sales. In March 2005, Houston opened a new 4,500–square-foot designer showroom that rivaled anything that the area had ever seen.

He worked with an architect and a designer to create a warm, modern urban space with stained-bronze concrete floors, a mixture of wooden and metal fixtures, and fireplace vignettes (featuring 32 burning units) showcasing the latest trends in hearth products and materials, including cultured stone, marble, and precast mantels.

“It’s jaw dropping when people walk through the door for the first time,” Jim Ogle, general manager, explains. He says that the company created the showroom primarily to appeal to designers, architects, and custom homebuilders who want to see the newest products and design ideas. It also serves as a place to educate retail customers visually, showing them that a fireplace is not just a little black box anymore. “Builders used to avoid sending clients to our old, outdated showroom, but now, they urge their clients to stop by,” Ogle says.

In 2007, the company added a 500–square-foot outdoor showroom featuring a live gas firepit, a fireplace, and two barbecues. “We had many requests, over the years, from people wanting to see outdoor products, and we never had anyplace to show them,” Ogle says. The outdoor space doubles as a place to entertain customers and hold promotional events.

For a few years, the Houstons and their team enjoyed the added attention and business that the new showroom was generating, but it wasn’t long before the economy started to slide. Since the end of 2006, the new housing market has dropped 78 percent in Reno; contractors weren’t paying their bills, and bad debt was on the rise. “We knew we needed to take some drastic measures quickly,” Ogle says.

One of the first things that the company did was to reach out to other hearth dealers for their ideas. A number of dealers from across the country flew into Reno for a week to brainstorm and discuss ways to cut costs. “We really value our partnerships,” Ogle says. “I’ve flown to other locations and done the same exercise. We’re all in the same boat, so it benefits everybody.”

The Houstons and Ogle took a number of actions to help get the business back on track. They looked first at every single monthly bill to see where they could cut back or renegotiate. They significantly reduced their inventory by getting rid of products that hadn’t moved for a long time; now, they only bring in product as needed, not by the truckload.

The company doesn’t participate in early-buy programs any longer, either. “In this economy, it doesn’t make sense to put money into a crystal-ball sale,” Ogle says. It also had to make the tough decision to lay off 25 employees, mostly on the service and installation side. Many of the employees who remained took cuts in pay and benefits. “It was really hard on everyone,” Ogle says.

One of the company’s biggest daily battles now is collections. Retail customers are defaulting, and long-time contractors aren’t paying their bills. As a result, the company has been forced to tighten its accounts-receivable expectations. Before the downturn in the economy, it would rarely ask for deposits from retail and custom customers; it now requires a 50-percent deposit.

Doug Houston says that this hasn’t deterred anyone from making purchases. “We could have started doing this five years ago, and I don’t think people would have complained,” he says. On the contractor side, the company is no longer shipping product to contractors who aren’t keeping their commitments.

There is no doubt that this whole experience has made Fireplace Distributors of Nevada leaner, healthier, and more operationally efficient. “It’s going to be two or three years before we fully recover,” Ogle says, “but this new way of doing business is going to be a part of our culture.”

Looking back, he is confident that the company has done a lot of things correctly, but he wishes that it could have done them six months earlier. He vows that, going forward, it will continue to look for ways to do things more efficiently, to cut costs, and to bring in more revenue.

Houston knows that the road ahead will always have bumps, but he is confident that the company is more prepared to handle them. “We have stayed strong, over the years, because of our knowledgeable staff, our service, and our products,” he says. “That is never going to change.”

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