Threat or Promise?
By Lisa Readie Mayer
Ask independent barbecue retailers about their biggest business challenge today, and you undoubtedly will hear a familiar refrain: the Internet. Like brick-and-mortar retailers everywhere, barbecue dealers are trying to figure out how to compete and thrive amid the growing consumer shift to online shopping.
Some barbecue retailers see the Internet as an opportunity to grow their business; others see it as a corrosive, undermining threat. A recent survey by Hearth & Home magazine reveals 40% of specialty barbecue retailers have experienced a significant or major negative impact due to Internet competition.
Findings from the Hearth, Patio & Barbecue Association’s latest consumer study suggest that number may be on the increase. It shows that although 80% of grills are still purchased in a physical store (2% at specialty retailers), versus 14% purchased online, in-store purchases declined 5% between 2015 and 2017, while online purchases increased 4% during that period.
Retailers say grills priced between $200 and $999 are most vulnerable to encroachment from Internet sellers. But consumers are buying even premium gas grills, smokers, kamados, pellet grills, pizza ovens, and outdoor kitchen components and islands online today – categories that were nurtured by, and once exclusive to, the independent brick-and-mortar channel.
These specialty outdoor-cooking products are now just a click away through third-party marketplaces such as Amazon, eBay, Overstock.com, and Walmart.com; e-commerce homewares stores such as Wayfair.com and Frontgate.com; and Big Box-affiliated websites such as Costco.com.
In addition, specialized barbecue sites, such as BestofBackyard.com, GrillMen.com, BBQGrillPeople.com, BBQGuys.com, KickAssGrills.com, IslandsintheSunBBQ.com, and GrillsandOutdoorLiving.com are capturing a growing chunk of sales. Some manufacturers sell grills on their own websites, as well as at traditional retailers. Others, such as pellet grill manufacturers MAK and REC TEC, have cut out the brick-and-mortar middlemen and sell exclusively direct-to-consumers online.
What’s Happening in the Trenches?
Paul Gomes of Custom Fireplace, Patio & BBQ in Dublin, California, expresses the sentiments of many fellow retailers when he says, “The Internet is a killer.”
A retailer from British Columbia, Canada, says lost sales of barbecues, patio furniture, and pool and spa parts have had a major impact on his business. “Most times we don’t have the opportunity to make a sale; the purchase is simply done online and we never see the customer,” he says. “If we retain the sale, it’s with reduced margins. If anyone says, ‘This does not happen where I am,’ they have blinders on. It’s happening everywhere.”
It’s definitely happening at Jack Wills Outdoor Living stores in Tulsa, Oklahoma, and Tontitown, Arkansas. Company president Jack Wills, III says his nearly 80-year-old, third-generation business has lost sales, been asked to match low-ball prices, and seen margins shrink in recent years due to Internet competition. “People shopping online are our biggest hurdle,” he says.
A New Hampshire retailer explains the fallout in his store by saying, “Customers used to come in to the store to shop. This gave us the opportunity to ‘sell’ them. We would show them the quality of the products and the quality of the companies behind them. Many times, if the customer wanted something that would not make them happy, we could guide them to the proper appliance. Now they price-shop at home and even get free shipping, and want us to step in to install and fix the problems for (little money).”
A Canadian retailer believes some barbecues are at risk of “becoming a commodity, where you don’t have to go to a store to get them.” A New Jersey dealer complains his accessories sales have plummeted because people are buying them online. “It’s the small things that people used to come in for – and the fun stuff people would look at when they were in the store,” he says. “I hardly do any early-buys and don’t stock as much anymore.”
|A customer checking under the hood.|
The Pain of Price Matching
One of retailers’ biggest Internet-related grievances is the growing number of consumer requests for price matching. It’s a trend not isolated to the barbecue industry – in fact, recent segments on NBC’s “Today Show” and CBS News encouraged consumers to routinely ask every retailer for lower prices on everything they buy, as a way to save money. Barbecue retailers say the practice is painful because it further shaves already thin margins.
Hash Ghanma of Bay Area Fireplace in San Jose, California, says, “Customers are well aware of the pricing on any item instantly by cell. Older (customers) still don’t understand the Internet, but that will be short-lived. The brand names are all available online, authorized or not, and there is no room for retail margin since Internet sellers have no overhead or inventory and basically just drop-ship. We can’t compete with that.”
Rob Schenz, owner of Specialty Gas House in Columbus, Ohio, also has experienced customers comparison-shopping on their phones while in his store, and then asking him to beat the price. A retailer from Ontario, Canada, believes manufacturers’ dealer-locators might actually contribute to the price-matching problem. “They allow customers to contact many dealers for price comparisons,” he says.
“I believe every person who walks in our door would prefer to buy from us, but they hand us a paper printed from the Internet and say, ‘I can get it for less,’” says Andy Tuohy, co-owner with Brian Graf of Grill & Hearth in Palm Coast, Florida. Despite pointing out the value their store adds by providing service, in-store displays, and licensed, certified and knowledgeable staff, Tuohy says, “It’s always a negotiation.”
He blames manufacturers for “aiding and abetting” the issue with confusing and unenforced pricing policies. “If you have a Manufacturer’s Suggested Retail Price (MSRP), why not use that as your Minimum Advertised Price (MAP)? We can’t sell at MSRP today. Why even have it?”
He appreciates vendors who try to level the playing field by establishing Internet Minimum Advertised Prices (IMAP) for online sellers that are higher than the Minimum Advertised Prices (MAP) allowed at brick-and-mortar stores. But, he says, manufacturers don’t always do a good job of policing Internet sellers who use loopholes to undercut minimums by inviting consumers to “call or email for best price,” or click for “best price in cart.”
Tuohy and Graf say they have dropped grill vendors over Internet pricing issues. “It’s frustrating because specialty retailers built these brands,” Tuohy says. “Manufacturers like to tell us how important independent dealers are, but they’re hurting the market by (allowing grills to be sold online).”
Other retailers believe MAP pricing helps them compete with online sellers. A Maryland retailer says, “We have lost sales to the Internet, and we have had to price match, however, we work with vendors who enforce MAP, so Internet pricing has helped us.”
Brock Arter of The Grill Center in Edgewater, Maryland, says MAP pricing helps reduce price-matching requests and showrooming (when a customer checks out a product in-store but leaves to buy online). If asked, Arter will sometimes match a price “if it is not too far off,” but typically he throws in an upgrade like a cover, bag of pellets or charcoal, or free local delivery. He calls these freebies the “cherry on top” that persuades customers to buy from him.
Brian Eskew, Marketing Director for Twin Eagles, says issues with MAP pricing violations are improving thanks to online algorithms and apps like Shopzilla that scour the Internet and report the best prices on a particular product. “It’s very easy to see who is violating the pricing policy, says Eskew. “The dealers police each other and will call us to report anyone breaking the rules. It’s becoming self-policing.”
There’s another frustration for barbecue retailers: since sales tax is not charged on most Internet purchases, consumers can save significantly by shopping online. “Internet competition is not too bad when online sellers adhere to the MAP, but people still leave to avoid sales tax,” says a Michigan retailer.
Retailers such as Wills say the policy hurts not just small businesses, but local communities. According to shop-local advocates, $68 of every $100 spent at an independent small business is returned to the local economy through employee salaries, contributions to local charities, and tax-based funding of education, emergency services, infrastructure, and more. About $45 of every $100 spent at a national chain is reinvested locally; it’s zero for most Internet purchases.
“It’s unfair that Internet sales are not taxed,” says Wills. “The sales tax rate is 9.75% in our Arkansas store and 8.6% in the Tulsa store. That adds a lot to the sale and motivates consumers to buy online to avoid the tax. But if the country doesn’t figure out how to get tax money back to the local communities, we will all be in trouble.
“Sales tax revenues are down in Oklahoma, and as a result, schools are losing teachers.” (The Oklahoma Gazette estimates the state lost between $185 million and $225 million in uncollected state and local taxes on Internet sales last year.) “Those funds are used to pay for parks, libraries, education, police, fire departments, infrastructure, and other services,” says Wills. “People don’t realize how far the impact extends. We just want to compete on a level playing field.”
“Why would manufacturers sell through online vendors who collect no taxes?” adds Tuohy. “It’s a huge disadvantage, not just for retailers, but eventually this will trickle down to no storefronts on Main Street and no advertising on Little League fields.”
Impact of Internet Sites on Sales of Gas and Charcoal Grills
At Your Service – Or Not
While most retailers are united on the belief that the lopsided tax issue hurts, they have conflicting opinions on whether installing or servicing products bought from online competitors is a good idea. Barry Charbonneau of Woodstove, Fireplace & Patio Shop in Littleton, Massachusetts, declines to do so for “philosophical reasons” and because “there is too much risk in installing products we don’t sell into settings we haven’t vetted.”
A Pennsylvania retailer concurs, “We don’t want our name ruined on another company’s less-than-quality product.”
Shawn LaForest of Cobra Fireplace and Grill in Canada says, “We are a Weber service dealer so we fix grills we haven’t sold, but only when the manufacturer verifies it as a legitimate purchase. We’ve had a lot of people ask us to fix a barbecue they bought online and we won’t service that.”
A Texas dealer says, “When you buy from us, we will go above and beyond to service any issues that arise. That is one of the benefits of dealing with a local dealer. Any problems that come up with a product bought online, the customer needs to go back to the distributor or manufacturer.”
An Indiana retailer agrees, “If we give service no matter where they buy, we lose our competitive advantage.”
Other retailers, however, see service as a gateway to growth. An Ontario, Canada, retailer says, “We hope customers will be happy with our service and then purchase from us in the future.”
Phil Squarie of Luxe Barbeque in Winnipeg, Canada, charges extra to repair products bought elsewhere. “It’s a revenue stream,” he says. “By the time we fix it, it would have been less expensive to buy from us and get the warranty.” Ken Fargason of Nashville Fireplace in Tennessee, also charges extra to service something he did not sell or install.
A New Jersey retailer will service products bought online because, he says, “I don’t want to lose business. I don’t love to do it, and I’m always explaining I may not be able to purchase the parts needed, but people don’t care.”
Eric Wallace of Wallace’s Stove & Fireplace in Tacoma, Washington, will service or repair any product. He says, “We’re all capitalists,” but he refuses to install a product purchased online. “Each installation slot is a precious commodity during the busy season, and we will never fill that spot with a product purchased online,” he says.
Every Cloud Has a Silver Lining
Like Wallace, many dealers see nuances in the complicated Internet issue. It’s not just good or bad, but sometimes a little of both. Although Marika of Fairview Hardware in Fairview, Michigan, says her store has lost sales to online competitors selling below MAP pricing, she feels the Internet provides consumers better access to information about the products they sell and drives customers to the store.
“For all that we complain about online retailing – I have my complaints, too – we come out very far ahead if we leverage the opportunity right,” says Tim Reed of Fireside Home Solutions with five stores in Oregon and Washington. He credits the stores’ online video content, email marketing, social media, and web page with helping to educate and build relationships with customers.
“We never had this before, and it has taken our company to unprecedented heights, all without actually selling anything online,” he says. “The Internet has grossly grown our business and everyone else’s over the last 15 years. People taking advantage are growing exponentially,” he says, but only a few are doing it.
Squarie says the Internet has been instrumental in helping consumers “see the lifestyle we are trying to encourage. The negative side is that people think they are getting a better deal online. We often have no problem overcoming this in the store, though a small percentage will still leave and buy online. But it’s the people who don’t make it in our door that concerns me; we have no idea how many of those sales we lose.” To compete, he focuses on higher-end products, and manufacturers that protect their brand and dealers.
Impact of Internet Sites on Sales of Outdoor Kitchens
Squarie is not the only retailer getting selective when it comes to vendor partners. Some have kicked to the curb manufacturers who don’t protect dealers with strong Internet policies or enforce MAP pricing. But retailers also praise manufacturers they believe “have their back.”
Many cite Twin Eagles as a company that “gets it.” Twin Eagles’ Internet policy allows brick-and-mortar dealers who display its products to sell online, but sets the minimum Internet price about 10% higher than the minimum in-store price.
“This is designed to offset the tax advantage that online sellers have,” explains Eskew. “We want consumers to see the higher price online, so they’ll go to the brick-and-mortar retailer to buy. We feel it’s the right way to support independent retailers, and ensure consumers get the best service, education and support.
“There is nothing more important than our brick-and-mortar dealers. They make an investment in us and we make an investment in them. We want the transaction to stay with the brick-and-mortar dealer, but because we live in a world where some people prefer to buy online, we believe it’s important to also have an online presence. The Internet is an opportunity to grow our brand.”
Eskew believes it’s also important to dispel the myth that all Internet sellers have little financial skin in the game. “To do it right, e-commerce grill sellers make a significant investment in search-engine optimization; buying ad words, and pay-per-click advertising. They also create content to drive consumers to their sites,” he explains. “For many, the Internet is an overwhelmingly frustrating situation, but others have found great success in it.”
Big Green Egg has earned the loyalty of its brick-and-mortar network by not allowing its products to be sold online, according to Business Development manager Jerry Stone. “From the beginning, Ed Fisher knew the product needed to be explained and demonstrated, and the best way to do that is at an independent dealer,” Stone says. “The Internet is an easy way to get a product to market and sell a large volume, but it’s not a good way to build a brand. It’s tempting for some manufacturers, but it’s a short-term view. Our feeling is the Internet is a race to the bottom and the lowest price. We are loyal to our dealers and that’s why dealers love the brand.”
Green Mountain Grills recently started allowing its brick-and-mortar dealers to sell its least expensive model online at MAP pricing. Jason Baker says the move was a “necessary evil” that turned out to be a good strategy for the brand.
“It’s somewhat of a loss-leader, but it’s helped gain exposure online,” says Baker. “It’s the world we live in. There are legitimate concerns (about Internet competition), but there are retailers out there who are killing it by following old-fashioned selling principles, creating a warm, welcoming and fun retail environment, and treating customers right.”
Jeff Kozak, vice president Grill Sales, North America, at Napoleon, says, “Our strategy is to have an everyday right price with a very strong MAP policy, so when the consumer researches online and compares prices, they see the same price online as in stores. We also manage distribution and support our dealers with exclusive products.”
Retailers praise Napoleon’s investment in consumer advertising, saying it drives traffic to their stores and generates sales. “From our perspective, the Internet is a challenge, but it’s a legitimate channel,” Kozak continues. “Independent dealers need to figure out how to adapt with a digital presence. If they don’t, they will not even be part of the consumer’s choice.”
To Sell or Not To Sell
More and more retailers are adopting an if-you-can’t-beat-em-join-em attitude, and starting to sell online. Mike West, owner of BBQ Island with three stores in Tempe, Scottsdale and Peoria, Arizona, now dedicates three employees to his online operation, and says sales have grown 40% in the past year. “We believe strongly in brick-and-mortar stores in the specialty market,” he says, “but you have to recognize the way retail is changing and be willing to change with it. We think progressively. Old-school retailers are having a harder time with it, but the Internet is the way of the world.”
Rather than considering Amazon and eBay as the enemy, West sells on those sites. “They take 15%, but handle the marketing and promotion, and assume the credit-card risks,” he explains. “I figure making something is better than making nothing.”
West says his biggest challenge with selling online is pricing. He utilizes third-party software to constantly monitor grill and accessory prices across the Internet, and adjusts his online prices accordingly, sometimes up to 20 times a day, to be competitive.
A New Jersey retailer now selling parts online through Amazon says, “It’s been a good option for us. Although we won’t be retiring on funds from Internet sales, it fills in the gaps and keeps employees busy who need to be in-house anyway for walk-in customers.”
Jimmy Shotwell, owner of Memphis Barbeque Supply, channels his store’s social media followers – 8,000-plus on Facebook alone – into customers for his online business. “The Internet is both an opportunity and a challenge,” he says.
|Example of a “GoInStore” experience.|
Retailers are not shy about suggesting solutions for leveling the playing field – or better yet, providing an advantage – over Internet competitors. Some would like to see manufacturers create exclusive brands for brick-and-mortar stores, believing that would ease comparison-shopping and price-matching. Others demand better policing and enforcement of pricing policies.
Retailers such as Dann Carnes of Fireplace Editions in Chapel Hill, North Carolina, wish the industry would fight for laws requiring online sellers to charge sales tax.
Chris Borowski of Desert Fireplaces & BBQs in Palm Desert, California, believes retailers should educate customers about the disadvantages of buying fireplaces and high-end grills online by incorporating buyer-beware warnings into every sales conversation.
Hash Ghanma agrees. “We have to let customers know they are messing with gas and fire. This is not something you buy online and just expect it to work out of the box – it has to be installed by a reputable and qualified installer or you’re putting your family at risk.”
Jason Baker says these conversations should also include reminders that damage can occur in shipping, and should that happen, your store will not assemble or service a product bought online, or may charge extra to do so.
Brick-and-mortar retailers can gain advantage by being able to “satisfy consumers’ desire for immediate gratification,” according to Eric Wallace. “You have to fill that need by having parts and barbecues in stock so you can give them what they need right then and there.”
According to a report by furniture industry consultant Jerry Epperson, 94% of shoppers say their purchase decisions are more likely to be influenced by in-store demos than advertisements. That’s a compelling reason to demo regularly, and something Internet sellers can’t do.
Baker says even retailers not engaged in selling online need to use Internet technology to their advantage. He suggests incorporating software that targets the IP address of every website visitor with a bounce-back email saying, “We noticed you were checking out XYZ product. You don’t have to buy this from an online vendor. We have it in-stock and you can have it today.”
In addition, Baker advises adding software that tracks customer purchases for rewards programs, offering a free bottle of sauce, or a bag of pellets, charcoal or wood chips, after the purchase of a specified number. “When customers reach their quota, send them an email saying, ‘Hey, you earned a freebie! Stop in and show this email on your phone to claim.’”
A study by the International Council of Shopping Centers found that more than half of consumers would like to virtually see how home furnishings and accessories would look in their home before buying. With that in mind, retailers should utilize the latest outdoor- design software to help consumers visualize an outdoor kitchen, fire pit, and other elements in their backyard.
Engage website visitors with on-screen pop-ups encouraging them to pose questions to a live salesperson. Also keep an eye on next-generation technology such as “GoInStore,” a hybrid sales experience where an in-store salesperson can show a product’s features, and even demonstrate it live via interactive video, to a customer watching remotely on a laptop, tablet or mobile device.
Some retailers want manufacturers to implement click-and-collect programs that would allow consumers to order a product on the manufacturer’s website and pick up and pay at a local dealer.
Experts say that, in this competitive climate, it’s critical for retailers to take stock of their operations and assess areas that need improving. “The Internet has become an easy excuse on which to blame declining sales,” says Stone. “It’s a good opportunity for retailers to take a step back and ask themselves if they’re doing everything they can to provide what customers can’t get online.
“Look at the store’s presentation – is it clean, attractive, inviting? Are displays creative? Do I offer delivery, assembly and service? Are salespeople knowledgeable and well trained? Do I use vendors that don’t sell online or have Internet policies that protect dealers? Do I offer services such as annual grill cleanings and maintenance? Do I build relationships with customers and the local community?”
Reed of Fireside Home Solutions says, “As much as I hate that some brands cheapen themselves by playing in both brick-and-mortar and online, I understand why they do it. Many vendors have dealers that don’t represent their product well, or invest in training their sales teams to be effective.
“This has forced vendors into the position of moving online because they don’t see value in their dealers. It’s up to us as retailers to invest in our people so we have the best sales team around and prove our value to manufacturers.”
“Online will continue to grow,” adds Baker, “but so will good retailers.”