Warehouse, off-price retailing key concepts in '84

By Frank Denny Chairman Home Centers of America, Inc.

rIHE actions

Iof the Republican administration and the Federal Reserve Board took hold in 1983 producing a moderate overall economic recoverywhile bridling inflation.

Lumber and building material sales and profits outpaced the general recovery, with lower interest rates and real personal income growth generating both increased levels of new housing construction and greater disposable income for home improvement projects.

Warehouse home centers, of which we, Home Centers of America, are a part, will continue to proliferate throughout the country. The formula, which has gained widespread attention in the building materials retailing industrY, includes:

(1) a warehouse-type facility ranging from 65,000 to 100,000 sq. ft. in developed retail areas;

(2) a minimum of 50,000 households within an eight-mile radius of the location;

(3) merchandise displayed on warehouse racks which heretofore was not readily available in breadths and depths of selection at discount prices; and

(4) more assistance available to the d-i-y customer.

Many observers have pegged the total market share available to home improvement retail warehouses at

Story at a Glance

Warehouse home cenlers will spread.. .total market sharc pegged at 10-15%. .home improvement, d-i-y to floudsh sustained growth for '84.

l09o to l59o of the total market. The correctness of this assessment is yet to be seen. However, with the home improvement and repair market forecasted to grow from $56 million in 1983 to $124 million in 1990, it would appear that home improvement sales at lumber yards, hardware stores, home centers and retail warehouses will continue to be available to the hardworking, aggressive retailer who pursues this market vigorously. This growth in the total market, including the d-i-yer, will be achieved particularly in light of the widening gap in the rates of inflation in handyman labor costs versus d-i-y products.

Most industry observers are touting warehouse retailing as the panacea of the '80s. It is my opinion that this format will be replicated with previously untested lines of merchandise by a wide range of retailers. Off-price retailers will flourish as the value conscious consumer will seek out brand narne merchandise for less.

In 1984, I will closely monitor interest rates and money supply growth as these two indices provide insight to new home building and business formations. I am pleased with the moderate recovery in 1983 and look forward to sustained slow growth in 1984. I feel the boom and bust economic cycles of the'7Os andSOs will become a thing of the past provided that the conservative economic policies of the Reagan administration are continued.