The nuts and bolts of hardware wholesale programs

ATHOUGH the hardware busiFlness smnds out as one of the blue chip areas in retailing today, the hardware retailer of the '80s needs all the help he can get to juggle the ever widening responsibilities of his job - purchasing, pricing, accounting, sales forecasting, expense control, inventory management, employee relations, and merchandising. Operating a profitable store calls for a close relationship between wholesaler and retailer.

Each year a higher percentage of retailers is turnins to the distributor sponsored merchaidising program for help. Whether a retailer-owned company such as TrueValue and Ace or an affiliation of distributors such as Sentry, Trustworthy and Pro, the wholesaler distributor program is growing rapidly. The function of providing merchandise has expanded to a wide range of dealer services.

In addition to giving access to an inventory of name-brand as well as private label merchandise, the wholesaler distributors now offer a national identity complete with advertising. Full service programs provide bin tags, price tickets, microfiche catalog service, electronic ordering, computerized systems and documents. Store modernization, employee training, display materials, insurance and systems for detecting bad checks are among other pluses available.

The history of dealer owned wholesale organizations appears to have begun in 1924 when Ace Hardware Corp. was founded in the Chicago, Il., area by four hardware retailers in an effort to pool buying and promotional aCtivities. The company, multiplied to include some 4000 retailers today, is now located in Oak Brook, Il. Next oldest of those strong in the West is TrueValue. Incorporated as Cotter & Co. in Illinois, it was founded in 1948 by John Cotter with 25 members and headquarters in Chicago.

Other buying groups active in the West working with wholesalers and distributors, but not dealer-owned, include Trustworthy Hardware, founded in 1935 as a division of

Story at a Glance

Hardware retaaler of '80s needs strong support wholesale distributors, dealer-owned or atfiliate, provide costs savings, promotion, store management back-up system growing rapidly.

Liberty Distributors, DesPlaines, Il.; Sentry Hardware Corporation, Cleveland. Oh.: and ho Hardware Inc., Stamford, Ct., a twin of the Promart Home Centers.

mThe dealer owned wholesalers are committed to providing their owners with a wide range of merchandise and services at the lowest front end cost. Patronage dividends (profits) are returned to the individual owners on a basis of the volume of their purchases in the form of cash, refund certificates, and stock. If for any reason a dealer drops out of the company, all stock must be sold back to the company or hansferred to another party accepted by the company as a franchised dealer.

In addition to merchandising and dealer service programs, TrueValue has ownership of ttree paint factories producing under the Tru-Test label ind a powlr mower and tractor fac.tory, Lawn Chief. For these oPeratlons, dealers reportedly profit at all three levels, manufacturing, wholesale and retail.

Growth of the wholesaler affiliation program concePt has been remarkable. TrueValue, which claims to be the largest and the fastest growing, lists 5000 stores displaying-its logo in 50 states. Ace counts 4000 dealers and reports sales doubling in the past five years with the $7: billion mark passed in 1978.

Trustworthy is composed of 31 independent hardware wholesalers with 59 distribution centers serving more than 25,000 retailers, accbunting, according to their figures, for 16%o of the nation's wholesale hardware distribution. A Trustworthy wholesaler, American Wholesale Hardware, Long Beach, Ca., reports a 34Vo increase since 1968.

Sentry, which is considerably smaller. has 14 distributors, 20 warehouses, and 4500 dealen operating as Sentry stores. Pro,with 22 wholesalers,claims to be the world's #l voluntary-franchise chain. Figures reported for Southern California show 600 retail customers there.

Since retail dealers can affiliate with more than one wholesaler, there probably is some duplication in the ligures and statistics made public. Dealers also have the option of buying from wholesalers and distributors who are not part of the program.

Savings plus service are the competitive edges of the business with each wholesaler, dealer owned or independent, striving to give the retailers it represents the lowest merchandise costs, most efficient ordering including electronic systems, fastest delivery, effective promotions and advertising, both local and national, plus special services. Pricins. labels, busineis forms, uniforms, arid even door mats are some of the extras promoted. Store modernization and store planning including turnkey operations usually are available.

Annual ionventions and buying shows keep members informed. The independent wholesalers also offer special incentives to those affiliating with them. Cash discounts. cash rebates, cost plus shipments, and increased profitability through more efficient management are membership pluses promised.

Retailers are represented on the boards of the dealer-owned organizations. The independents seek dealer opinions by establishing dealer's councils and advisory boards. Recognition plaques, dealer of the year, and other honors are part of the system.

The dealer-owned wholesalers have fewer distribution centers than the independents. Ace maintains centers in San Francisco and Los Angeles, Ca., to serve the western states, Hawaii, Alaska, Guam and American Samoa. TrueValue has distribution centers in Los Angeles and Portland. Or.. for their western retailers.

Sentry is represented by Pacific Marine Schwabacher in Seattle, Wa.; Baker-Hamilton, San Francisco, Ca.; California Hardware, Los Angeles, Ca.; Mallco Distributors,

Phoenix, Az.; Zonk Hardware, Albuquerque, N.M., and Townley Intermountain Division, Denver, Co., to serve the West. Trustworthy has five distributors in their western zone, American Wholesale Hardware Qo., Long Beach, and ThompsonDiggs Co., Sacramento, in California; Hunt and Mottet Co., Tacoma, and Jensen-Byrd Co., Spokane, in Washington; and Salt Lake City Hardware in Utah.

Pro in the area west of the Rockies is represented by Budrow & Co., Santa Fe Springs, Ca.; Arizona Hardware, Phoenix, Az.; American Strevell, Utah; Morse Hardware, Bellingham, and Yakima Hardware, Yakima, in Washington.

Retailers appear convinced that the wholesale affiliation has something to offer. With most stores displaying the symbol of one or more, it appears that the advantages of identification in advertising, promotion, efficiency of operation, and cost savings are paying off.

COMPUTER & RETAILING

(Continued from page 8) handles the printing of bin labels and price labels. Purchasing, receiving, and accounting information also is provided by the computer.

For security and convenience the equipment is located in a small computer room at the rear of the accounting departrnent. Consistent temperature is maintained for the well beins of the equipment.

The computer, the Griffins feel, is definitely paying for itself. Payback for them is figured at one year. The indushy average for payback at this time is estimated to be three vears. Although they paid $50,000 caih for their installation, financing is available through the installing companies or banks. Lease equipment also is available. Life expectancy of the equipment with proper milntenance is said to be limitless, but technolosical advances usually make it obsoleie in five to seven years. The Griffins are seriously considerins the time when they wili convert to i system designed especially for the hardware industry.

They feel the biggest advantage of the system is the improved instock situation. Now there is less chance g{ belng out of stock, according to Bill Griffin. which results in -'increased profitability. " An unforeseen advantage has been the pinpointing of pilferage which is especially high in their area. With this information, steps have been taken to protect the merchandise. Although it is not part of the computer system, a closed circuit tv provides surveillance of some areas.

There have been few problems with the equipment. Maintenance is scheduled for convenient times so that there is little downtime. In case of a power failure or other malfunction. cash registers are operated manually with a written record of sales information kept. This is fed into the computer when it becomes operational.

A programmer affiliated with the installing company is kept on retainer. When a change is considered he is able to supply cost estimates so that the improved function can be weighed against the expense before action is taken. Updating the program when necessary keeps the computer functioning at top capability.

The 38 employees at the store received the switch to elechonics well, the Griffins report, with the expected hesitation on the part of the old timers. Most employees were reassured when they discovered, conhary to some concern, that the computer did not replace them, but enabled them to do a better job, often freeing them for customer service rather than tedious detail work. This is a strong factor in favor of computers, according to Bill Griffin. "We can do more business with the same staff. "

The Griffins recommend computerizing to other hardware dealers, especially now that there are firms specializing in computers for the retail hardware industry. They caution that the management should be aware that "you don't just plug in a system and put it to work. " It takes effort and the right attitude. "If you want to make it work, it will. " lnventories of softwood lumber at Western mills have dropped to record low levels, breaking the previous mark set in '73, reports Western Wood Products Assn., which blames significant mill closures and curtailments during the past year.

The Western lumber industry ran at only 77.50/o of capacity in Nov. (latest available fig.), ending 6 straight mos. of improving capacity reports; intercst rate flttctuations are blamed.. Pacific Northwest timber interests are fighting a move by environmentalists to immediately designate Mount St. Helens a National Monument.

Contrary t0 erroneous press reports, the Consumer Product Safety Commission did not ban urea-formaldehyde foam insulation, it only proposed a ban, citing health hazards connected with low level formaldehyde exposure. the lst U.S. lumber futures contract calling for Spruce-Pine-Fir (mostly Canadian) has been traded. .

Proposed L-T-L freight increases in Wa., Or., Id., Vy'y., Co., Ut., N.M. & Tx., have been suspended by the LC.C. a construction conversion to metric measure seems no closer following a recent "let's study-it-some-more" meeting of the American National Metric Council...

Single family starts slumped 6.40/o while rnultifamily units rose 9.10/0, their fifth advance in a row: overall. the starts were at exactly the same level as a year earlier. building permits for future construction czme in 9ok below the previous mo.

Preliminary figs. for all of 1980 show total housing starts at 1,291,000, the lowest yearly total since'75's 1,171,400... the '80 pace was 260/o behind '79 and 360/o less than '78's boomy 2,023,000. savings continued to outpace withdrawals at Southwestern s&ls in Dec. reversing the previous mo's outflow.

Palmer G. Lewis Co., Auburn, Wa., has completed its sale to Lanoga Corp., Seattle, of its five Superior Building Supply retail stores in Alaska for an undisclosed amount; PGL also completed its purchase from Lanoga of Galco, a wholesale distributor in Tacoma, Wa... . . Robbins Lumber,Sc/es is a new wholesale firm opened by "Robbie" Robbins, with a sales office in Arcadia, Ca., and distribution and remanufacturing in Fontana, Ca.,.

A domestic plywood wholesale dept. has been opened in Wilsonville, Or., by Oregon Lumber Export Co. . . Santiam Midwest Lumber Co. intends to open a regional distribution center in Tigard, Or... Monarch Mirror Door

,,Iom astounded," said one co., has begun:naking its own economist "i6*i"g tt " luiett mirrors at its Chatsworth, Ca. trousing Jtarr frgsl that showed facility' ' ' only a l% decline for Dec.; the seasonally adjusted annual pace Ames Taping Tool Systems was 1,548,000... it was the 1st Co.,Belmont, Ca., has opened a loss since May and far less than new service center in Fresno, the experts' predictions. . . Ca., . Pope & Talbot is now

The Merchant Magazine operating a modernized sawmill ($15 million worth) at its Port Gamble, Wa., complex. Southwest Forest Indus/ries plans startup of its new Eagar, Az., sawmill in Nov.; annual production capacity: 85 million bd. ft. ..

A new $l million retail facility is being built in Madera, Ca., by Boise Coscade for its Madera Lumber and Building Materials subsidiary, which will drop the old name and adopt the B-C handle when it opens officially in Sept.; on 5.3 acres, it will have 24,000 sq. ft. under roof. .

Fallbrook Lumber Co., Fallbrook, Ca., plans a Mar. 2, opening for its new 20,000 sq. ft. retail store at a new 6 acre site, which more than doubles the size of the old store. Butte Lumber Co., Chico, Ca., has added a retail dept. to its wholesale sales operation.

Weyerhaeuser has agreed to let Amoco Production Co. explore for oil and gas on about 2.7 million acres of Big W. mineral rights in Wa. and Or. . . Champion Building Products has changed its name to Champion International Corp., to coordinate with the parent corp.'s name.

It appears that the Carter Administration budget for '82, made before he left office, drops the planned National Forest timber sales to 11.6 billion bd. ft., another in a series of decreases in thot important wood source.. the City of Los Angeles has indicated that it will adopt the Uniform Building Code (UBC) which is expected to ease wood product requirements in that huge market.

Cement crunch in the 80s?. yes say some noting little real growth in supply in the next 5 years, coupled with an existing shortfall made up only by foreign imports. expect higher prices, reduced availability, experts warn.

All Coast brings hard \ffi. woods and soft woods from Canada, Washington, Oregon, ldaho and Northern CaliforniaVia water, rail, truck and trailer for distribution to you.

Our new complete remanufacturing and milling facility, distribution center and fleet of trucks enable us to provide dependable delivery service anywhere in the South West U.S.