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both labor and materials. It's STREI{GTH AND STABILITY available in one-eighth inch increments
Stimson Finger-Jointed Lumber is strong from 7' to 40',2" x 3" through 2" x 12"
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Stimson ffims ends to remove flaws such as knots, holes and splits. That provides tight, sffong, high-qualiry joints.
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Pat Farr Human Resources Director Jerry's Home Improvement Center Eugene, Or.
Afier working for his fathzr's farm supply business and serving in the Army, Farr joined Jerry's 17 years ago. He is a mcmber of the Homc Center Institute training council and the Western Building Material Association training advisory board. The 33-year-old company services about 65% consume ril 3 5Vo co ntractor s.
tI n the last five years we have seen a mushrooming of warehouse-type home improvement chains. With many of the larger markets already saturated, even smaller, already crowded markets now will be inundated by the insertion of two or more giant stores.
They will enter the market with lots of pre-opening hype and advertising about their great selection, unparalleled service and rock-bottom prices. The local press will jump on their bandwagon and herald their approach. Your customers will be drenched by their publicity, and they will believe what they hear: that soon there will be a new and better way to buy building materials that will change their shopping lives forever.
With this specter on the horizon, how can an independent, locally owned lumberyard or home center hope o say in business?
There are two possible scenarios for survival:
Study the chains years in advance to fully understand their r+lnt.. t6r$..ffiere.,lilms.llcah:.rtak6.gdvan" tage,,,,ol,,,b'Uying,,,pgwe1,,,,d[5!i[bution,;;,power,,and EophiStiietdr: hh6l0$[i.iithe....lieigeli;ilirmsi.;are ineteaSingf yi::pushi[g:::the. :ismallei,,,ti ffns,',uul,,,,,ln thrq::S6dtof S,,,a,omirn,aled::::b}{ : the,,,ihdividUaIied ploducts or services, the...'small...liim..,temains gng.o, i ,,,,, ,,,,j, ,,.,..,.,..!,Gaty,.lVlighti,::presldentt.::G; 4,,,Wright,,,,,,,,,..,.,, style and formula for success. Travel the nation visiting thefu stores, and get to lnow them better than they know themselves at the store level. Know their product mix, their pricing, their advertising strategies and their policies. Then look at yoru own market find the most logical place they will insert a store and beat them to iL Raise the capital, buy the property and build a giant box to compete with them head 0o head. Fill the store with merchandise at low prices, and prepare to spend huge sums on advertising. And do all of this two years before they enter your market. Realistic? I doubt it is for virtually all home-grown independents.
There is, however, an approach that can be - and has been - successful against the megastores. That approach is to sEengthen the market share you already possess, and to preclude market share shrink by giving your loyal customers no reason to shop elsewhere. How can this be achieved? Begin with preparation. Have a complete understanding of the major factors which will affect the market, well in advance of the chains coming in.
What are your stengths? What are your weanknesses?
Find out why customers are shopping at your store, as well as why they shop at your existing competitors. Do this by asking them. You can commission surveys, either telephone, mail or exit, or you can ask them yourself. Study customer comments that you have received in the punt and take every one seriously. Call the customers and have them elaborate on their comments. Each comment a customer has on your success or failure represents the opinion of a broad cross-section of your shoppers.
Know the future competition. Find out as soon as you can when they will be coming to your area. Study them. Visit their stores in other cities. Get on their mailing list for advertising. Spend as much time in their stores as feasible, and take extensive notes on their product mix, adjacencies and pricing.
Take your notes home and compare what they do with the way you are doing business.
After you have gained close knowledge of these factors, develop an action plan. By lnowing what your customers expect - and do not expect - from you, you can prepare to do tIe one thing which will best solidify their support and continued loyalty: exceed their expectations. continue to do what they expect, but strive to do it 1009o of the time.
, .,.'....lllltre lik- he,cornpe. iitionr :becaUser o$i!::ser. Vibe.'.i.$..u.nSUtpa*sed'; We do:,:.thi,h$S'1.;fOr,the eusto:me:trrrthat:::o:th efs cantti.:l::;:. ,.,iii',,.;.;..i, .,,1.;.;.;.;.l ;..'0 nt nos'.satei rnanA$di; fHnt ;l.u,Nt ber,:,:,rand rHerdwa,ig, $eettle;::War,r::; 1:,:,,,1,1,;,;,,;.,,,
Demand from your team members zero defect customer service in the areas that your customers have told you are important. While strengthening your existing position, remove barriers which prevent customer loy- alty. Fill your shelves and displays with merchandise - look like a full store, not one which is backing off. Make sure your aisles are clean and clear of clutter. Have price signs on every item you stock. Put a liberal return policy in place. Expand your hours of operation to more closely match your customers' needs. An4 most important, have enough knowledgeable help on your sales floor.
As you study the large chains, you will find a consistent theme: they all say they have the best service available. However, you can outdo their service. At the store level, many of the chains seem to lack the ability to motivate their employees to serve the customer at a consistently high level. At your local level, you can do this much more effectively. Aggressively train your people, not only in product *nowledge, but also on how to take care of your customers. This strategy alone will be the main reason your customers will remain loyal to you in the face of the barrage.
Next, look at your product mix and make sure that you stock everything your customers need to successfully complete their projects. The chains cannot match this. Then get rid of the SKUs likely to cause confusion in your customers' minds. Price your visible items near the chain's prices and use the needed accessories to help prevent margin erosion.
In sumrnary, the big chains will be coming, but you can survive by protecting your premium customer segments and providing them with everything they need, including expert advice, to successfully complete their project.
With chairman of thc board and chief exccutive officer Bernard Marcus, Blank co-founded Home Depot Inc. in 1978. It is now thc nation's hrgest home center retailer, with about $g.Z bittion in 1993 sales. Tlu company plans 645 new stores in the next four years and as flurny as 100 more Expo stores in the next Jive. In an intemiew with the Business Journal of Charlotte, N.C., he told tnw.
TL here are a lot of reasons why we're as successful as we are - the merchandise, pricing, all the things we do in * * the stores. But the reality * is that a very strong commitment to taking care of the customers at all costs is the key. qthe,fargg firms are a;threetl th,ele',S, no : QueSlion about,that; but there:are:a lot 6f ,indtCtri"
We support the feeling of taking care of the customers by making sure our associates feel they are not cogs in the wheel but are the entire wheel. It's easy to copy our facilities. But it's very hard 0o copy what goes on between the ean.
:,:,wheie they arent blowi4g'away
.,.:.thd small :,lirms. Thdrd is 'absolutely ho evidence:to sug- i,irg0St:::smellrrr letelEts:::a:le::::a .rdying breed:l' giants can't and focusing on their strong points, the independents will evolve to fill gaps the warehouses can't.
We start by hiring the right people and ::::: = David l(reqge, economist; paying them what they're worth. Their 'Dun&Brad5t*, ...' wages are 20Vo ta 25Vo above the industry average.
And we have over 30 formalized training programs. Some are in the s[ores, some are at the district level. and some are on the division level. For example, our assistantmanager training is done by the senior staff of the company - our c.e.o. works with them for a day, I take a day, the executive vice presidents take a day. ..
There are some things we've had to let go due to our growth in size, and there are some things we can afford to get other people to do for us. But training's so important, we continue to be involved.
We also have the notion of giving back to tle communities we serve.
We're developing new prototypes to compete as well as to grow. We never want to paint ounelves into a corner. We'd rather do expansion while we don't need the numbers, so we have new stores ready when we need them.
The Expo division has a strong commitrnent to decorator-quality business with wallcoverings and floors for the kitchen and bath. The base of customers is interior designers and builders.
Most people make the mistake that the rural markets would mean smaller stores. Not necessarily. The merchandise is different. It would be geared toward the famrer and rancher.
Not all rnarkets are right for the giants, and some are already troo full. Warehouses in larger markets will consolidate thrcugh attrition and buyouts. An excellent example is Builders Square, which has been impressive in everything except profit.
Right now, being small seems !o be the biggest downfall of many independents. They can't compete with the giants on price and can't offer as wide a selection.
Yet these indepe.ndents can take their small size and hrn it into a strength.
There is such a thing as too big. Mammoth hypermarkets such as Bigg's that do well in Europe have not taken off in many regions of the United States. If consumers are looking for a specific item, they don't want to get lost in aisle after aisle of warehouse.
By concentrating on what independents are good at, such as convenience for smaller projects, a fine-tuned product selection with a focus on quality, excellent senrice and good employee training, they can carve a niche where they can thrive. We're already seeing this in stores and lunberyards with power departments designed to fit their customers' identifi ed needs.
A similar evolution of retailers took place in the grocery industry when many of the current chains moved into the market. Medium-sized strores that ran smaller versions of the chains and corner grocers couldn't compete on selection or price. Now those types of stores are virtually extinct.
, lThe:,Wa)l,lo,,Compete, With,.the big boys is not to compgte with them at all;'
- Joel Steveni; marieting manager, Ace Hadware Corp;'
By looking at the survivors, though, we can see many promising possibilities for the hardware industry.
Smaller convenience stores thrived by making necessity items available right around the corner, 24 houn a day. More recently, specialty stores such as coffee shops and bakeries, like Starbucks Coffee and Mrs. Field's Cookies, have flourished. By having a broad selection in one category, these outlets have persuaded consumers to make a special stop for one item.
The key to their success isn't price or location. It's quality. Can you imagine someone sying, "Let's make a special stop at Starbucks. They've got a great selection of low priced, off spec coffees!" Specialty stores, such as plumbing and elecfical stores, and focused outlets, like the Ace Interiors stores, are already breaking ground in this market.
Sashco Sealants was founded by Les' father, Donald J. Burch, in 1936. lzs joined the company in the early 1970s and quickly took leadership of the adhesive and sealant manufacturer. Sashco is banking on the success of independent dealers, refusing to sell to the warehouse giants.
TL he independents will survive, even in the face of growing competition from the warehouse
We must keep in mind that every time we believe we've reached an end point with a new merchandising method (like warehouse retailing), something else comes along. For decades, Sears was stable and uncbanging, yet within the past few years, they have changed dramatically. They've dropped their catalogue business and have created Sears Hardware, outlets focused around their Craftsman Tools. We must ask, "What's beyond the warehouse concept and, in a time of rapid change, how soon will they become oumoded themselves?"
By taking innovative approaches, independent lumberyards and retailers can lead the market into horizons we have yet to imagine. Maybe mail order catalogues will take a chunk out of the hardware industry, as J. Crew and
Lands' End have done in clothing. Someone might become the Domino's of hardware, delivering all the supplies you need in 30 minutes or less.
Independens will also survive by not being so independent. HWI's Do-it Centers give independents the advantage of large company buying power, regional or national identity, marketing position, merchandising and advertising assistance. whether it's HWI, Servistar, Ace, Cotter or some other affiliation, the survivors will use coop programs more than ever.
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t Consumer spending is very important to the economy axd.:':the goVernment,r Canr:t,,affoid.::,toi...Ie.t 'it. declinei Tt e',,e*p.ect,s$f!',,
2 An aging po-pulation results in not only the problem of :decl inin g::.conSumer... Spgndin g::::bu,t:r rthe, Fioblem .of fewer, entr-, y'-level: wo,$!rs,,:,,Ther.e wilt,,.be,,,$reat pieSsui0 to,,solvehoth,of:,ttreseuobrcmswith,,f ration
3 tre ratio of single to narried housebolds continues to increase. Thus, there is a highet,level of new household formatibn r pei;,,cafita than has historiCally pfevailed: Thiscieatesmoredemfidtou.. *t."
,, : lze Resources is a consulting, training, recruiting and psychalogical testing firm dedicated to helping improve organizational productivity in the building supply industry.
On. orou.-ent that's afoot in the home center/lumberyard battlefield that will certainly pick up steam over
4 An increase in the number'of otOer p"opt. recAving Social,Security and a decr.easq::in,,th0i:ilumffi of,yoUngA people contr- t ting,,to,,Sociat Securitti: wiltr,.fesult,, in,,mea. sures,to,,!€aF mqs !,h the w ,force lo.n ,,,,, e likely solution is,,,eitCn'ding; the,re-tirg4g11t,,age,This wltl also:tEep pqofle,;spendin$ gerr1,.'.'..,..., '... ...'
5 Lifestyle changes and improving health are keeping ppople aitive lryr and inffeasing thdii,:snenmne more prevalent.
The medium-size chains such as Moore's, Roanoke, Va.; Grossman's, Braintlee, Ma., and Payless Cashways, Kansas City, Mo., will find that their smaller formats cannot successfully compete with the rapid expansion of the industry players who have invested in large-store formats averaging well over 100,000 square feet. These smaller chains must decide: Are we fish or fowl?
Forecasfi The mid-sized chains will begin fielding a larger contractor sales force as they shift their customer mix toward the professional. In markets where they cannot make this transition, stores will be shuttered.
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-' *f still :think smalldi'loceiions,,,a1e :picking]:Up:ineilai,n,'b;usinessi,,,,,f f ,:your eie 'ooi*..n..*g,'.Piojeot.i'iou,.pf cki..Up..:!teme ,at:,A Hor,n ,..'o- t..6r..an:...Ea0lgt.'.'..BUt.,.il .iou:.f6@.t.. a..'Scte*i,.iCI,. go,,to,'dieiil&{i .tiaffiare,.sldier'''......,.'....r....,...rr:,...................i.....................
Steve Johnson Executive Director Home Center Institute Indianapolis, In.
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The Home Depot has published that they plan to capture 25Vo of the U.S. home center market by the year 2000. Although they enjoy only an 84o market share today, the odds are good that they will be successful in achieving their market share goals. Home Depot is a master at innovation. They are always experimenting with new concepts. But even though they will continue to experiment with outside salespeople to service builders, I believe that they will achieve only marginal success servicing builders out of a big box store.
Forecasfi As the nation's big box retailers (especially Home Depot) jockey to dominate specific geographical markets, they will speed up expansion by cannibalizing each other. We can also expect to see Home Depot inroduce smaller format stores geared to serve smaller markets. I also predict that like Lowe's, Home Depot will soon realize that to successfully service builders, they must create large contractor-only yards.
Innovative independents will begin to market building materials in new and different ways. Several dealers in California and Ohio are already beginning to sell building contractors framing and trim packages on an installed basis.
Summary: Independents who are irmovative and willing to adjust the way they do business to accommodate local market conditions will continue to be strong players. However, many of the independents who are unwilling to make necessary changes in the way they go to market will find it increasingly diffrcult to compete.
The retailers in our industry who have the brightest future are those who have developed a strategic marketing advantage. Whether it's consumer or contractor trade, customers always buy from the retailer that they perceive is offering the greatest value. The company that knows its customer's needs the best will have the edge.
So ask yourself two questions: How clOse are we [o our customers? And, what is our company's strategic marketing advantage? Don't allow your competitors to beat you to the punch.
After three years as executive director of the M inne sota-Dal<otas Retail Hardware As sociation, Johnson joined the National Retail Hardware Association in 1987 as director of education/member services and executive director of the Homz Center Institute. Under his direction, NRHA and HCI have added or updated over 60 training proSrams.
\zan independent lumberyards and mid-size home center companies compete against large chains? The short answer is yes. Many are, and doing so successfully.
We at the Home Center Institute believe, as we have for many years, that the hardware/home improvement industry is big enough, diverse enough to offer opportunity for small and mid-size companies as well as large ones. We are realistic enough to admit that not every independent lumberyard will survive, nor will every mid-size home center. However, they are not endangered species.
Our research tells us that, although store unit counts are stabilizing, sales dollars are not. We estimate total industry sales (which include hardware stores as well as lumberyards and home centers) in 1994 will top 1993 by llVo; lumberyard sales are estimated to increase l2.4%o.
Further evidence of the ability of independent lumber retailers to compete comes from financial data provided by retailers who participated in HCI's 1994 cost of doing business study, which reports 1993 performance. These lumber retailers reported sales up 15.27o in 1993, compared to an increase for all stores of 9.8Vo.
Our projections for the next five years call for a compound annual growth rate of 8.27o for tle industry as a whole, an 8.8Vo rate for lumberyards.
Growth will not come easily for independent lumberyards and mid-size home center chains. A study released earlier this year by G. A. Wright Inc. and Dun & Bradstreet Information Services lays out the challenses.
: :,: :$Wi lhr:rthe Boe!n9,,,!6yof f $,,,and,. .Shabblr edohomt, people:rrheVe::,les5 di5,p eble, income. Coupled,,,with price cofipetition With Home Depgt and Home Base,'ilis not good news for ihe,:little guys. They aie,,driving 6verybdl,,bii,oke,,::ilt'- r - t the Ameh'can way.'
.....r.. iT6,il)f John5oh'. preside.h.t,. Northwest Lumbr, Seattte, Wa.
This study evaluated lumberyards on the basis of employment. The researchers found that lumber retailing was one of five retail sectors where large companies were gaining in employment market share at the expense of smaller companies.
In addition to pointing out the challenge, the study also suggested answers: specialization and service. And these are the roads successful independents are following.
Their strategy is to concentrate on
