By Bill Sendelback
Photos: ©2017 J. Bara Photography. www.jbaraphoto.com.
There is an old saying that “You gotta have heart.” Retailer Pat O’Donnell, co-owner and president of Hearth & Home in Mount Prospect, Illinois, certainly does have heart, and it has contributed to his success in business for 46 years.
“We run our business according to the Golden Rule,” he says, “treat your customers the way you wish to be treated, and you will do well in business.”
O’Donnell says that Sam Yoder, owner of Berlin Gardens, a manufacturer of poly furniture, gazebos and pergolas, and a current supplier to Hearth & Home, told O’Donnell that his core values were “HEART” – Honesty, Efficiency, Attitude, Respect and Trust. That had a big impact on O’Donnell, but he added the final “H” to make it HEARTH – Helpfulness.
“It’s really a way to live your life,” says O’Donnell. “The retail business is difficult and has its challenges, but if you work within these ideals, it makes life a lot easier.”
Hearth & Home sells hearth products, grills and barbecue accessories, outdoor furniture, retractable awnings and patio heaters. If the store name sounds familiar, the O’Donnell’s were one of the first in the country to use that name, so even this magazine asked permission to use it.
Pat’s father, Bob O’Donnell, started Hearth & Home in 1971. He had been working for a local gas utility selling gas appliances, gas grills and space heaters, as well as early vent-free fireplaces. In August, 1971, the utility closed its appliance sales division, and within a month, Bob and a partner opened a small appliance store, adding gas logs and factory-built fireplaces. Their vision at the time was simply to keep food on their tables, says Pat.
|L to R: Ryan O’Donnell, general manager; Ed Schappert, sales manager; Mary O’Donnell Schappert, co-owner and vice president; Anne O’Donnell, office manager; Patrick O’Donnell, co-owner and president.|
Bob’s partner passed away four years later, and Bob’s wife (Pat’s mother) Marilyn left her profession as a nurse to join the business as bookkeeper. Over the summers and during college breaks in the mid- to late- 70s, son Pat worked in the business. In 1978, with a business degree in finance and marketing, Pat quit looking for a job and joined Hearth & Home full time.
Shortly after, a neighbor who was soon to retire from being a Samsonite furniture salesman, offered the outdoor furniture category to the O’Donnell’s and suggested the store be moved to a larger location. At the same time, an area street redevelopment plan forced the O’Donnell’s to either move or shut down. They moved. But they soon outgrew even the new, larger location, so Hearth & Home moved into its current location in 1988. Father Bob passed away in 2007, and mother Marilyn passed in 2016.
“We had some strong years from 1988, after moving, until the economic downturn of 2008,” said Pat O’Donnell. “Then, in early 2010, I was diagnosed with a very aggressive, advanced stage of lung cancer even though I had never smoked. The prognosis was fairly bleak, but by the blessings of God, I not only survived but I’m cancer free today.”
At about the same time, Pat’s son, Ryan, graduated from college, also with a business degree in finance and marketing, and entered the banking industry. After five years as a banker, Ryan also joined Hearth & Home, becoming the third generation of O’Donnell’s in the business.
Today, Pat O’Donnell is co-owner and president, his sister Mary O’Donnell-Schappert is an owner and vice president, and Pat’s son Ryan is general manager. Pat’s wife Anne is the office manager, and Mary’s husband, Ed Schappert, is sales manager. The company has 13 employees and two part-timers, said Pat.
“All of our employees are very important and integral to our success. We have a strong staff here for the long term.” One service tech has 24 years of service with Hearth & Home, and the rest of the employees have been with the company for between four and 20 years.
While Pat and most of his staff are NFI certified, the company invests in additional training for the staff including product training by various manufacturer suppliers. “I’m proud to be associated with the good people we have,” he says. “They are all very hard working and good at their trades and skills.”
|Hargrove gas logs have a commanding presence at Hearth & Home.|
Hearth & Home is located in Mount Prospect, a northwest suburb of Chicago, a predominantly upper-middle class market of single-family residences built after WWII through the 1970s. “We have very few new construction developments in our market of a 20-mile radius from our showroom, so we’re seeing mostly tear downs or remodels of older houses,” according to Pat.
The economy in the Chicago area is based on many different industries and service providers. “With very little true manufacturing, the market is mostly financial and service related, so we’re not dependent on any one manufacturer or industry. Our economy is doing okay because of our diversity.”
But the area is facing a “dwindling middle class, with stagnant wages and heavy taxation,” according to Pat. “We’re in Cook County or, as some call it, ‘Crook’ County. We’re taxed ridiculously. The property taxes on our building are $65,000 a year! It’s crazy, and people are fed up with the taxation we have. Just think of how much we have to sell just to pay our property taxes.”
Pat says he has a lot of competition in his market, from independent dealers to what he calls “whotailers.” But with the high property taxes everyone faces, he finds “nobody can afford to undercut the others by very much. Still, it’s best to display products that are not available elsewhere.”
The same goes for mass merchants, he says. “We buy brands that are not in the mass merchants, and if a manufacturer starts to sell the mass merchants, we will look for a different supplier. Manufacturers cannot have it both ways.”
|Glass doors from Stoll and Design Specialties are easily viewed in this compact display area.|
He sees a big problem facing our industry as the proliferation of super stores, mass merchants, home centers and e-commerce sites continues to grow. “They’re killing the need for anyone to shop for anything small, and the problem exists on everything except installable items. Particularly for barbecue and accessories, and even patio furniture, people come into the store, see what they like, and then they try to buy it online.
“We can try to adjust our prices, but we have much more overhead per square foot, and online buyers don’t have to pay the 10% sales tax. The best way to compete is to provide as good as possible service to the customer. But when you already are working on limited margins, how do you give free delivery, free service calls, free exchange and still have huge taxes to pay? So, do what you do best, do it to the best of your ability and don’t look back.”
What Pat does best includes installations and service. He was among the first to have his service techs and installers NFI certified. Today, Pat and most of his staff are NFI certified. Although some aspects of jobs are contracted out, Hearth & Home maintains full-time installers and service techs to control and make certain that the installations and service are the best quality.
“Having most of us NFI certified is really an advantage, conveying to the customer the message of our concerns for safety and that we know what we’re doing. I like to sleep at night. I have every confidence that when a job is done, it’s done safely and done right. It probably costs me more to do this with in-house staff rather than to job it out, but we have control, and we know that the job is done right the first time.”
Even with few large-scale homebuilding projects in his market area, Pat works with many custom homebuilders. “Any large scale projects are dominated by the builder wholesalers with margins that are far too low for us to get involved in. We prefer to work on a more intimate, one-on-one basis with homebuilders, remodelers, decorators and their clients. It takes a lot of time, communications, expertise, coordination and knowledge, but it works for us.”
|A display of stoves has a number of burning units lined up against the wall, and a few in the center of the floor.|
Most of Pat’s purchases are done dealer-direct including membership in the United Buying Group and a few purchases through two-step distributors. “One of a hearth retailer’s greatest allies is a manufacturer with an exceptional customer service department and an even better technical service department,” he says. He sees this relationship between the retailer and the manufacturer as potentially being lost or diminished when dealing with two-step distributors.
While he praises some distributors that maintain good inventories and provide great service, he has no use for “distributors that are distributors in name only. They don’t stock what you need, don’t know their products and don’t support their products. Then they add their 20% margin. Where is the added value to me in that?”
The same applies to sales representatives, he says. “I have worked with some great sales reps. They come into the store often, help train my employees on new products, and will even help out on the sales floor if it gets busy. I have no problem with any commission those reps receive because they earn it.”
But what about the reps who don’t earn it? “There are products on the market that we cannot sell because any margin is eaten away by distributors and reps. There is no added value to me in that. Imagine if we had that extra 30%! We could make our margins and still sell the products at less expensive prices, making them more enticing to the consumer.”
What started off in 1957 as a Volkswagen auto dealership is now Hearth & Home’s 13,500 sq. ft. building. When Pat and his father purchased the building in 1985, the car agency had moved, and they had to contend with 17 different office leases then in the building. When those leases finally were cleared out, the O’Donnell’s gutted the building and designed their new store, finally moving in in 1988. “But 30 years later, nothing is the same on the inside or the outside,” says Pat. “Our showroom is a constantly evolving work in progress. With the constant changes in our industry, we’re continually adding and subtracting products and changing our showroom.”
Product categories such as fireplaces, grills, stoves and inserts are grouped together. When it works, manufacturers’ displays are separated. Patio and casual outdoor products are “strewn” throughout the store.
The barbecue area was completely redone earlier this year, and as a result, Pat has seen a “dramatic” sales increase in the category. “We could completely redesign and redo our showroom and replace everything, but that would be expensive, and in another two years the showroom would be totally obsolete. So it’s a work in progress.” The outside of the building was completely renovated with a new, up-to-date look in 2016.
|Barbecue may account for only 15% of gross sales, nevertheless, Hearth & Home carries product from 10 manufacturers.|
Pat spends about 4% of his annual gross sales on advertising, but he’s “half tempted” to stop all advertising and see what happens. “We’ve all heard about merchants who stopped advertising only to see their business fail. So I guess we’ll keep advertising, but I’ll look to do things differently.” That means he doesn’t see the need for most old, traditional advertising.
“We used to spend tons of money on Yellow Pages,” he says. “That’s now all gone.” Cable TV is his major advertising expense. “You can hit your target customers, but it can be very expensive,” he says. To reach specific market niches, Pat also uses radio spots.
“Our future customers are the Millennials and beyond,” he says, “meaning we need to get more involved in social media. That’s the direction we need to go. But the number one best way to get new customers, new business, is through direct referrals from happy previous customers, and working with those previous customers on new projects or new products.”
To be successful, Pat’s advice is to stick to core values as outlined in his HEARTH
philosophy. “I recommend that you purchase your building and work to pay it off as soon as possible. That will give you the ability to take cash discounts, and the flexibility to pay all your bills even when times are lean. It also keeps you from being held hostage by
landlords who will either raise your rent too high or cause you to move.”
Pat also suggests picking suppliers carefully, again relying on his HEARTH core values. “That will help you develop relationships with your suppliers that will last for years. We have been dealing with some of our vendors for more than 35 years, and they have played integral parts in keeping us in business.
“If I had taken a corporate job rather than coming into the family hearth business, I might be financially better off, but this industry has afforded me a nice lifestyle and allowed me to put my three kids through college. So I have no complaints or regrets.”
Store Name: Hearth & Home
Location: 530 W. Northwest Highway, Mount Prospect, IL 60056
Number of Stores: One
Owner: Pat O’Donnell, president
Key People: Mary O’Donnell Schappert, VP and co-owner; Ryan O’Donnell, general manager; Anne O’Donnell, office manager; Ed Schappert, sales manager.
Year Established: 1971
Web Site: www.hearthandhomeusa.com
Phone: (847) 259-7550
Fax: (847) 259-7570
Number of Employees:
% of Gross Sales by Product Category: Hearth – 70%, Barbecue – 15%, Patio – 15%
% of Annual Sales that goes for Advertising: 4%. Radio, 13%; newspapers, 3%; cable TV, 44%; direct mail, 35%; other, 1%