Home Center Merchant

BILL FISHMAN

Bill Fishman & Atfiliales

11650 lberia Place ary letter to Tom Peters describing the home center industry. Mike Mc('lelland. llardware Wholesalers. lnc., was one who wrote. With his permission, here is what he said: l)ear Mr. Peters:

Afler reading the malerials llill liishman sent you, we became concerned that more information is needed to provide you with a full understanding o[ what is happening in our hardware and home center industry. while it is true the larger "national chain" retailers grew dramatically in the early 1980s, in recent years the independent retailers have grown as a whole at a more rapid pace than many, if not most, chain operations. Several "major chains," such as Mr. llow, t{omecrafters, Bowater and others, are n t the same time, member-owned distributors and many independent distributors have grown significantly, simply because of the growth of "independent" retailers. Our company's growth for the year ending Juns .10. 1988. was l3(h. an increase of $lll million. lf we stay on course this year, we will end June 30, 1989. with a l4(I, increase, or an additional $l3l million in member wholesale purchases. Please keep in mind these are "wholesale" dollars, not at retail. Other distributors who service independent retailers are also expanding nicely.

I am not sharing this inlormation with you to tout lhe success of our company but to emphasize that independent retailers throughout the country are doing quite well and growing in market share and profitability. Ilnless you know this. you may send the wrong message to the attendees of your keynote presentation. many of whom are manufacturers and suppliers to distributors and independent retailers. To say to these experts in the industry that a few large chains are growing rapidly and independents are not would reduce your credibility in the eyes of those who truly know whal is happening. At the same time, it could cause many manulactUrers to develop programs that would result in them losing the most dynamic part of their cuslomer base. lndependent retailers today are not your tradilional "mom and pop" operations of the past but instead are the sons and daughters of mom and PoP, college educated individuals using sophisticated computerized inventory control systems and carrying out well planned marketing programs. These lorward thinking entrepreneurs concentrate their purchasing through one source, thus reducing their purchasing staff overhead costs to a small percentage of the national competitors' costs while at the same time focusing their time on selling, merchandising, promoting, training and cuslomer service.

Bill's article also says, "Retailers have taken over the distribution functions, buying direct." While true five or six years ago, this trend has actually been reversed, both by national chains and independent retailers. Even several large chains, like Payless Cashways, look to independent distribulors to supply more of their inventor,"- neecls. ( hlins rrnd independents irlike undersland the inrporlance of gross margin return on invcstntenl ((;MROI). total procurement cost, and ability to expand product seleclion without incrcasing rnvcntory dollar investment versus simple "incrcased margins." In fac1. Wal-Mart drop ships only 19([r of' its merchandise directly into its stores. thus flowing 8l([, through their clistribution centers.

In summarl-. the future of indepen- dent retailers in the hardware and home cente r industr_"- has nevcr been stronger. Todav programs are available to independent retailers that allow them to remain on the leading cdge ol our induslry. While I havc the greatcst respecl for Ilill Irishntan and agrce with nruch ofwhat hc says regarding the luture direction ol' our industrl espe- cialll tlP( coding, [:l)l transmission. etc., Ifeel opinions dil'l'er simply bccausc ol the nrakeup of the type of retailers with whom we respectivell,' work.

I look forward to hcaring your prcsentation at the National FIonte ( enter Show.

S incere Iy.

M ike McClelland l'hanks, N'like, fbr allowing ntc to run your views in this coumn. l:ditor's Notc: Mr. P(tcrs k(vnot('ctddrass tos (.\t( ll(nt. Ilt tlitl ,trlrlrt. .\ th( .luilut' (t/ indepcndents by saying he li'els thc.v hat'e cxcellcnt opportunitie.\. lttording to Mr. Pcters, indcpentlcttts' .!11c('.,J.r, .lust like tlrat ol L'httirrs, w'ill be predituted on ltott ntu('lt otl(ntion the! gir'( lo lt,vL,l0ping a r(pulalion 0/ suparior seryitc itr lltcir mu rkctplatc.

Exccutivc Vice Prcsidcnt Hardware Wholesalers. Inc.

Thol's How lt Goes!

"{l' you'll please retake your sezts, I'd like to.finish m)) statement about my intentions to retire!"