Home Center Merchant

BILL FISHMAN Bill Fishman & Affiliates

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ment organizations, home center retailing has come a long way in the past 20 years and is now entering a mature stage.

One industry survey classifies four major home center store formats (consumeroriented, consumer/contractororiented, home improvement speciality and warehouse home center) all having the potential to be highly profitable in the 80s.

The moderately sized (20,000 sq. ft.) consumer-oriented home center is classified as a full line merchandiser (avg. 25,000 SKUs ) with a margin of about 3090-3590, and targets the serious d-i-yer as its primary customer.

The typical consumer/contractor oriented home center is smaller (10,000 sq. ft.) than the consumer-oriented home center. offers a smaller merchandise selection (10,000 SKUs L spends less on advertising in proportion to sales, has a lower margin (200/o-25tlo) and a gleater dollar volume of sales per store. With a consumer/contractor mix, this format has excellent protection no matter which way the commercial building market goes. And although it has a smaller selection, the low margin makes the consumer/contractor-oriented home center attractive to d-i-yers.

The home improvement speciality store is the smallest of the four major types of home center stores in these surveys. It has the narrowest inventory (2,000-5,(n0 SKUs ), featuring only one or two product categories (Color Tile was illustrated as an example). With a high margin (4O90-5090) this format appeals to the d-i-yer doing a specific project, who feels he might need extra help or advice.

HOUSTON.

The warehouse home center format features the largest selling area (avg. 60,000 sq. ft.) and the largest dollar volume of sales per store. These outlets operate on low margins (about 25t/o) and carry full lines of home improvement merchandise. Their hard-hitting advertising is backed-up with a no-frills environment. Volume is the key to success for this format.

In light of these format comparisons, it

Lowe's aim is to increase their appeal to the d-i-y customers. They have treen remodeling their stores, buffering the chain against a drop-off in contractor business while the housing market was soft.

The Evans retail group indicates movement in the direction'of a nation-wide operation under several different store names. lt will continue to open new stores in the states in which it now operates and try to expand into other areas.

W.R. Grace, now one of the nation's largest home center operations, will be focusing on internal control and management development. Rapid growth through recent acquisitions now forces Grace to concentrate on a philosophy of management for its widespread holdings.

Hechinger's with its super store chain was highly successful in the 190s, is expected to stay with its large inventory format. Their 45,fiD SKUs do not include sporting goods, appliances, toys, automotive or other peripheral merchandise categories carried by some home centers.

Most industry reports conclude with an overall optimistic outlook for the'80 s, but add that competition will increase. Competition among home centers will grow sharper due, to lower population growth, market saturation and an upswing among contractor-oriented home centers who seek to level-off sales and profit fluctuations with the steadying influence of d-i-y business.

Competition from other store types like discount department stores (K-mart has over 1,0(X) stores with home improvement departments), and other mass merchandisers (Sean, Penney's, Wards) will also become greater. By their very nature, these stores seek high volume, promotional merchandise. Speciality chains (wallpaper and paint, floorcovering) are also on the rise.

One report concludes, "the success of any specific format or any individual firm will depend on how well the stores are positioned in the consumer and competitive markets and the degree to which companies employ advanced professional management techniques as the home center industry finally comes of age."