In August, as Hurricane Irene aimed for the U.S.'s Eastern Seaboard, residents along the coast went shopping. Stores were cleaned out as people bought essentials to help them get through the storm and clean up in the aftermath. In a few hours, flashlights, batteries and essential food items were in short supply across the region. At independent dealers and big box stores, a full year's supply of small, portable generators were selling out in a single day. Even the larger, more expensive automatic standby generators were finding new homes, purchased by people who were already tired of living in the dark.
Extreme weather can be good for sales of certain types of equipment. Human nature being what it is, most homeowners who have been putting off the purchase will finally decide it's time to buy when conditions have put the supply in high demand.
For a power equipment dealer, adding a generator line to the mix can make sense. Generators are powered by engines, which a servicing dealer is already comfortable supporting out in the field, and there's a built-in market of consumers who visit the store to buy other equipment.
Small, portable power generators are sold at big box stores by the hundreds for running power tools at jobsites or providing power at hunting camps. Once the homeowner knows where the fuel shut-off valve is located, the portable generator requires very little specialized training to operate.
It's the next level of generator, the stationary backup generator, where a servicing dealership may find the greatest opportunity for expanding its business with rural lifestylers and other homeowners. Available from a number of well-known manufacturers, the backup generator's air- or water-cooled automobile-style engine connects to a home's natural gas or LP fuel supply. It automatically turns on after the electrical power goes out and will supply power to the house (ranging from a few appliances to the entire house, depending on the size of the system) until power is restored to the electrical grid.
For dealers, generators represent an opportunity for significant off-season sales. However, much like stocking snow blowers to sell during a blizzard, keeping an adequate inventory of generators on hand for a natural disaster can be difficult and costly.
Brownouts: Good for Business
"It's a matter of supply and demand," says David Courtney, who covers the back-up power industry in his blog, Generator Dealer Market News. "Even with all of the models that have been developed using data from the hurricane-prone area that runs from Brownsville, Texas, up to the Carolinas, it's dangerous for dealers to plan for hurricanes. I've seen people get stuck with too much inventory many times."
After Irene battered the Eastern U.S. in August, generators were put into service up and down the coast, where more than 5 million people were without power. They joined an estimated 21 million people throughout the U.S. who experienced a power outage in 2011. Strong storms accounted for only 57% of the more than 7,000 regional power outages in the U.S. For most of the U.S., power outages aren't a matter of "if," but when.
There's an interesting fact about emergency generators: While sales can increase when extreme weather hits an area, rolling blackouts due to an aging electrical grid have contributed to most power outages across the U.S. In some cases, the outages are planned in advance. The frustration over being without electricity sells generators.
Power companies in the territory covered by Masurek Service & Repair in Utopia, Texas, told their customers in advance. David Masurek says business can be good before and after a hurricane, but it's the rolling blackouts that really helps move equipment. "The utility companies have been boosting my sales, telling users to expect these blackouts. With power usage high during the hot, dry summer, there were several blackouts, and they're predicting more during the winter."
Masurek's territory starts just north of San Antonio and runs all the way to Brownsville. "We carry almost the entire southern end of Texas. I have a mix of farmers and a lot of people in the city. About a month ago, we looked at what percentage went to rural customers or to the city and we're about 50/50 in sales of generators."
As part of the information he provides to dealers and generator manufacturers, Courtney compares commodity maps with locations of power outages to identify the worst places to be without power — and the best markets for generators. California leads the way, followed by New York, Texas, Ohio and Washington.
"In California, heat is more of a problem than earthquakes. When you go north in the U.S. you'll get tornadoes but it's the cold weather that can have a more widespread effect," says Courtney. "The problems in Texas last season have been all heat-related. Air-conditioning and irrigation pumps pull the electrical system down."
Generators Prevent Emergencies
"There aren't a lot of outdoor power guys working with backup generators," says Steve Meyer, Midwest Equipment, Peoria, Ill., "but it's been a great part of our business."
Midwest Equipment started as a single-brand lawn mower dealer and service shop in 1988. Meyer joined the organization in 1992, and the business moved into the small outdoor power equipment business.
"We sold portable generators to farmers and hunters, but toward the late 1990s more homeowners were looking for something to run their house during an outage."
Meyer found most stationary units were priced well beyond the scope of the average homeowner. In 2001, an electrician introduced him to a brand that was just what he was looking for, and he signed on as a servicing dealer.
Wiring a stationary generator into a house involves working with local and national codes, and can sometimes be outside the expertise of a power equipment dealer. For the first 2 years, Midwest Equipment partnered with electricians, letting them wire the set into the house and having his dealership handle the service side.
"Over the counter, we were making 18% on generators and we were giving our contractors a 10% break," says Meyer. "We had the units on display in our showroom, and when a customer bought one we would point them to one of our certified installers."
The arrangement worked for a while, "But then it seemed like they were always busy doing their own thing. We also came to realize that we were leaving money on the table."
Meyer hired a couple of technicians with a strong electrical background and then brought the installs in house.
"Customers responded to that well, as they were looking for a one-stop shop. For us, it was one more thing we could advertise."
The business peaked for Midwest Equipment in 2009, and then the poor economy took a bite. Sales are split 60/40 split with units going to people in town vs. the country.
Meyer agrees that there's always a renewed interest in back-up power sources following a major storm, but he says his dealership refrains from taking the ambulance-chaser approach.
"There's a way of assisting after a storm without looking bad," says Meyer. "It's how my sales guys present themselves when they go to a customer's house. They avoid pushing the negatives that can come as a result of losing power. Those are all valid, but for most homeowners a generator isn't a necessity. We have all lived without power at some point."
For Meyer, the busy season for generators is in the Spring and Fall, helping to fill in between the Winter and Summer selling seasons. Going into Winter, people want the assurance of keeping their furnace going. When it's raining in the Spring, they don't want to worry about power being cut off to the sump pump.
Being able to offer a maintenance schedule can also bring in extra dollars. "Standby generators need someone to stop in once a year to change the oil and filter and simulate a power failure to ensure it works," says Meyer. "For air-cooled generators, we charge a flat fee of $149 plus parts, which gets us out to a house once a year. We schedule those in October and November when we're slow in the shop."
Midwest Equipment usually advertises the generator sets along with zero-turn lawn mowers, but word of mouth can be the best sales approach. For most rural lifestylers, a stand-by generator isn't an impulse purchase.
"We offer free site visits to every person interested in a generator," says Masurek. "If we're going to bid the whole install, we've got to see what they need. Even people who have researched generators may not understand what has to happen to supply their homes with back-up power. A walk-through with the customer will confirm they have a heat pump, electric heaters, and other power-hungry devices."
Meyer says the biggest problem he sees with rural consumers and other property owners buying generators from a non-servicing dealer is they'll get the unit home and try to wire it in themselves. They'll soon realize it's not designed to perform the tasks they need. "We bring that expertise to the customer from the first conversation."
Generator manufacturers offer online programs that can help dealers size a generator set for a particular application, and most offer extensive training programs which are often part of the requirement for becoming a dealer (see sidebar).
Beyond that, the dealer must possess a certain comfort level when it comes to "Messing with the electricity in someone's house," says Meyer. "To make the program successful, dealers really should offer the 'full meal deal,' and take care all of it, from sales to service. If they're skittish about electrical codes, partner with a local electrical contractors to get the program going."