By Luke Dunscombe T O DIFFERENTIATE THEIR STORES FROM THE BIG-BOX COMPETITION, MORE independent hardware retailers are going back to the basics. They are turning already strong plumbing and electrical departments into dominant categories. Their basic success strategies revolve around service and assortment. They make sure their plumbing and electrical aisles are staffed by knowledgeable employees, and they beef up their inventory levels with a deep selection of basic and hard-to-find items. The ultimate goal is to make sure customers leave not only with the products they need, but also with the confidence that they know how to tackle the project. To discover more insights into how to turn your plumbing and electrical departments into category leaders, read on to learn the success strategies of other independent retailers. Germantown Hardware While plumbing and electrical don’t drive the most sales of all the departments at Germantown Hardware in Germantown, Tenn., General Manager Justin Wagner says that doesn’t mean the store skimps on its selection or presentation. “We are smack in the middle of big-box central here and we are selling to the home repair and maintenance market,” he says. “That means our selection and presentation in plumbing and electrical has to be spot on. These are the categories that really define what a hardware store is for a lot of shoppers.” Even though his store is surrounded by big boxes, Wagner picked the areas where he wanted to have a dominant assortment. For example, in light bulbs, Germantown Hardware offers a broader assortment than even the big boxes. “We have everything you could want and that is important,” he says. “With help from our distributor we are able to offer a wide range of light bulbs and still be very competitive on pricing.” November 2006 SHINING THE 24 Learn How to Stand Out in These Core Categories Hardware Retailing on Plumbing and Electrical SPOTLIGHT Retailers who excel in plumbing, such as Germantown Hardware, say it’s important to carry a deep inventory of the basics in addition to hard-to-find items and to stay stocked up. Electrical Wholesale Outlet Complements Retail Business atron’s Do it Center in Bardstown, Ky., is more than just a hardware store. Connected to it is a full-service electrical wholesale store called The Electric Outlet. Owners Ron and Pat Birge get 13 percent of their total sales from plumbing, while the wholesale electrical business makes up 53 percent of sales. The Electric Outlet gets the majority of its business from city and county agencies, local factories and contractors, while the hardware store’s plumbing sales are an even mix of homeowner and professional sales. The Birges’ son-in-law, Steve Foster, runs the electrical wholesale side of the business, which tries to anticipate the needs of the local factories that are located around Bardstown. They November 2006 P 26 Hardware Retailing need a lot of fuses, light bulbs and wire, he says. “It’s convenient for them that we’re here,” he adds. “They don’t have to wait on something. We keep up with what they need, so we can have it on hand. If I get a call in the middle of the night, I can come in and get it for them so they’ll have it in the morning.” When the Birges bought the business eight years ago, the retail hardware store and the electrical wholesale supply outlet were operated as separate entities. After less than a year of maintaining two different systems, the owners combined them to make everything easier on themselves and their customers. “As soon as we could, we put everything on the same system,” Ron says. “That really saved us from doing double-duty on a lot of things. Before, it was two separate businesses. We had to have separate inventories, accounts payable and accounts receivable.” Combining the two businesses also turned Patron’s Do it Center and The Electric Outlet into more of a one-stop shop for customer needs. When the two were separate businesses, the door between them was locked. Now the door is open and the two businesses complement each other. “It’s easier for a customer,” Pat says. “If someone is buying something on the wholesale side and needs a tube of caulk, they can just come over and get it.” The Birges’ daughter, Krista Foster, who manages the hardware side of the business, says the store’s biggest assets are service and knowledge. “We like to say that you can come in with a problem and walk out with it solved,” she says. The employee in charge of plumbing, Vernon Watson, has been with the store for 23 years. He does much of his own plumbing work and even thought about becoming a plumber, but decided he’d rather sell it than repair it. “Vernon has a lot of knowledge about plumbing, and he is great about keeping on top of what people are asking for,” Pat says. “Most employees can serve a customer in plumbing,” Krista says. “But we all work together. We have the philosophy that if you can help the customer, then help them. But if you don’t, then be honest and get someone who can.” The electrical department at Cox Hardware and Lumber in Houston makes up 10 percent of the store’s total sales by targeting both homeowner and commercial customers. Because Germantown Hardware mainly services d-i-yers, Wagner also makes sure that, above all else, his presentations in the plumbing and electrical departments are clean, neat and easy to understand. “The departments have to be easy to navigate,” he says. “You can’t have product all jumbled up; everything has to have its place and remain that way.” To make sure his customers can find what they need, Wagner also looks for products with good, explanatory packaging. When the packaging isn’t so selfexplanatory, Wagner’s team puts signage on the bins or displays to ensure that customers know exactly what the product is and what it is used for. “You have to help them through the process, because a lot of times they might not know exactly what they are looking at,” he says. “Having good employees is part of this equation, but not every customer will engage an employee with their questions.” In the plumbing area, Wagner is making a concerted effort to move many of the items that he previously stocked in bulk to a new, carded selection that he feels is easier for his customers to shop. “We just don’t sell to a lot of plumbers or tradesmen who want to buy bulk out of bins,” he says. Northwoods True Value Home Center Northwoods True Value Home Center has stores on both sides of Lake Vermillion in Cook and Tower, Minn. The one in Cook has been open for 10 years, and the one in Tower opened this past May. The stores get a lot of vacationers looking to fix up cabins during the summer months. The Cook store has 3,000 square feet devoted to plumbing, while the Tower store has 1,600 square feet for plumbing. The electrical departments in both stores are about 1,700 square feet. To further enhance its already successful plumbing department the store converted space to be a showroom for plumbing and kitchen and bathroom products. Dan Julkowski, who owns the stores with wife Jodi, explains he had thought about expanding the department for years, but lumber became a bigger priority when a competitor started adding more lumber. The Cook store displays 24 feet of faucets so they can show what people want and need. “We’re a little different than some stores,” Julkowski says. “We don’t just stock the bestsellers. We carry a lot of the oddball things that others don’t carry. We really aim to have a wide range of products.” Vernon Watson, long-time employee at Patron’s Do it Best Home Center in Bardstown, Ky., helps a customer in the store’s plumbing department. FAR LEFT: Manager Steve Foster talks on the phone while two employees organize orders at The Electric Outlet, a full-service wholesale electrical supply business attached to Patron’s Do it Best Home Center in Bardstown, Ky. LEFT: November 2006 • Hardware Retailing 27 Plumbing Department Snapshot: Electrical Department Snapshot: Total Sales % Net Sales % Salesfloor % Inventory Sales per square foot Gross margin Sales to inventory ratio Total Sales % Net Sales % Salesfloor % Inventory Sales per square foot Gross margin Sales to inventory ratio $190,931 12.1% 11.4% 12.0% $211.94 44.9% 5.08 $148,929 8.9% 8.9% 9.8% $227.74 43.4% 4.77 Number of SKUs 2005 2006 Number of SKUs 2005 2006 Increase Decrease Remain the Same 37.3% 2.7% 60% Increase Decrease Remain the Same 40.0% 2.7% 57.3% 50% 9.5% 40.5% 59.5% 5.4% 35.1% November 2006 Source: NRHA 2006 Cost of Doing Business Study, composite numbers for hardware stores and home centers. 28 He explains that the key to their plumbing department has been providing a higher level of service. “People need three things: quantity, quality and service. One thing the big guys often miss out on is the service.” Northwoods doesn’t have a training program devoted to just plumbing or electrical product knowledge, but Julkowski says they make it clear to new employees that they need to listen and learn from more experienced employees. Julkowski will occasionally hire an experienced tradesman to help out in the department. For instance, the electrical department was run by a former electrician until he recently retired. “If we can find someone who’s already knowledgeable in an area, we’ll bring them in,” he says. “It’s easier to learn from someone else’s years of experience and mistakes than go through your own.” The stores carry some plumbing products that are meant to attract professionals, such as septic system items and urinals. “Many stores look at those items as too costly to carry, but we want to Hardware Retailing carry more quality items to bring those (professional) guys in,” Julkowski says. Consumer sales still drive the majority of the business, so Northwoods carries a wide range of faucets ranging from $20 up to $300 and also stocks almost any size in galvanized steel or copper piping someone might need. As Julkowski points out, “It’s become our reputation to have everything that you need. We want to keep customers local and be known as an anchor of the town.” He is planning to build more storage so he can keep water heaters, showers and toilets in inventory. “There’s nothing worse than having people walk out because you didn’t have what they need,” he says. Wagner Hardware Plumbing is the number one department for Wagner Hardware in Austin, Minn., accounting for 26 percent of the store’s total sales while its electrical department is not too far behind at 17 percent of sales. The 10,000-square-foot store devotes half its salesfloor to these core categories—2,800 square feet for plumbing supplies and 2,200 square feet for electrical products. Owner Matt Wagner points out that plumbing is a category that can be intimidating to some people, so it’s his job to encourage them and give them the confidence they need to complete the project. “Anybody can do a basic plumbing project; it doesn’t matter if you’re a man or a woman,” he says. What’s even better is that most plumbing products are blind items, according to Wagner. When it comes to electrical projects, customers are less worried about making mistakes and more concerned about getting hurt. Having knowledgeable employees available to answer customer questions has helped Wagner Hardware alleviate some of those fears. On weekends, Wagner keeps a senior employee in these areas so they are available to answer questions. “They don’t stock the shelves or anything else. They’re just there to answer questions and help customers. If one needs to go to the bathroom, another senior employee has to take his place until he gets back,” he says. In addition to having an informed staff, Wagner makes sure he maintains a deep inventory of basic and hard-to-find products for plumbing and electrical projects. Carrying a wide assortment is especially critical because 60 percent of his plumbing and electrical sales come from commercial accounts. As a result, he stocks heavier gauges of wire and lots of fuse boxes and shut-offs. “Some retailers carry enough for a job, but you’ve really got to have more than that,” according to Wagner. “Customers don’t want to piecemeal projects together running around to different places to get what they need. If you don’t have enough of what they need, they’re going to walk out.” Pipe fittings of all sizes and shapes fill the shelves at Cox Hardware and Lumber in Houston. To reinforce his store’s reputation as the problem-solving headquarters, Wagner has employees answer the phone with taglines such as “No matter what you got, we can take care of it.” Keeping up with local building codes can lead to more sales. “When the code changes, people are forced to upgrade and that generates a lot of new sales for us,” Wagner says. “People still have to maintain the older stuff they have, but if something is built new or being inspected they have to buy the new parts.” As for the future, Wagner hopes to expand plumbing to include bathroom accessories such as cabinets and related items. The store already carries about a dozen toilets and sells three or four toilets a day. “That takes up space and you need the room to do it,” he says. “One thing about those items is that the price is not typically as important as the color and style a customer is wanting for their bathroom. If you don’t have it, they’ll likely walk out.” Cox Hardware and Lumber For Cox Hardware and Lumber in Houston, both the plumbing and electrical departments are solid core product areas for the store. Plumbing represents about 11 percent of sales. “These two departments are core staples of our everyday business,” says Owner Virgil Cox. “They’re consistent revenue generators for us.” Having depth of inventory is important, especially in plumbing where some projects may require several parts. “In a market like this, everything is available in a 30-minute drive. Someone is not going to buy a few of an item from me and a few more from another store; he’s going to go someplace where he can buy all that he needs.” With a salesfloor of 20,000 square feet, the store’s plumbing and electrical departments are substantial at 4,000 square feet. “I’m a firm believer in having depth of product,” Cox says. “Some of the things have flat demand. Our strategy is to have enough items for the guy who’s going to have a large project. Having 400 of something sitting on a shelf really makes a statement. If a customer sees that you carry that much, he’s going to think that it’s a good place to buy it.” While he cannot anticipate the demand for every item, Cox operates under the philosophy that having a little too much inventory is better than running out. “It makes an impression on people. You don’t want to walk into a grocery store and buy the last four apples. The same is true for pipe fitting. People want to buy from full shelves.” Plumbing items can weigh a lot, especially having a deep supply of them, making specialized shelving necessary. “If you don’t have something that can support all the weight, you could come in one morning and it’s all over the floor,” he says. Cox uses reinforced fixtures that will hold 1,100 to 1,600 pounds per arm, compared to 300 to 500 pounds per arm on a normal shelf. Cox says the store gets a lot of commercial business, so he has been stocking products that many hardware retailers may not carry such as schedule 80 pipe for high pressure, which is sometimes needed for machines with a high-volume input. “That’s based on the market here,” he says. “People were asking for it, so we started carrying it.” Cox says his electrical department, which is 10 percent of the store’s total sales, is doing well despite some challenges lately. For instance, the high price of copper has affected sales of items such as copper wire. “People who want or need it will buy it. If a can of Coke is going for $8, a lot of people will start drinking tea. You can’t do that with building wire, but what you can do is not build,” he says. November 2006 • Hardware Retailing 29 Cox Hardware and Lumber’s plumbing department is headed up by a long-time employee, while the electrical department is under the direction of an employee who has a current electrician’s license, according to Cox. Experience in those fields has helped both the store and customers, as many questions often accompany projects for both electrical and plumbing. “People get nervous,” Cox says, “and having an employee who knows what they’re talking about really helps.” Wattier True Value and Laurel True Value Kim and Scott Wattier own and operate two hardware stores in Nebraska: Wattier True Value Hardware in Randolph and Laurel True Value Hardware in Laurel. While running two hardware stores is enough to keep most people busy, the Wattiers also operate a complementary service business on the side. Before the couple opened their first store, Scott Wattier had worked in the heating, air conditioning and plumbing Shopper Demographic Snapshot (Indexed to 100) TOILETS LIGHT BULBS FLASHLIGHTS 67 97 123 122 106 71 100 124 116 116 85 46 84 94 99 118 109 94 140 116 103 101 87 54 51 69 98 103 115 144 153 68 55 94 99 104 145 160 69 75 92 96 109 118 156 105 99 102 107 98 95 91 26 164 63 111 119 46 154 52 81 119 81 178 53 77 108 130 162 64 110 90 FAUCETS AGE 18-24 25-34 35-44 45-54 55-64 65+ INCOME under $15,000 $15,000 - 24,999 $25,000 - 34,999 $35,000 - 49,999 $50,000 - 74,999 $75,000 - 99,999 $100,000+ DWELLING TYPE November 2006 Apartment Condo/Town House Duplex/Triplex Mobile Home Single-Family Home 30 Source: Vista Information Services, a group within Activant Solutions Inc. * Compares the category to U.S. Census, with sales through chain home centers, independent hardware/home centers, lumberyards, mass merchandiser and specialty/other retailers. Hardware Retailing service industry. He used that experience to build a service business the Wattiers operate out of their store in Randolph. While there’s not a special area for customers, they can call into the store to arrange for service and the technicians go to the site. “It’s kind of like running three businesses sometimes,” Kim says. As for retail sales, the stores carry the basic products most do-it-yourself customers would need, along with some heating and air conditioning products at the Randolph store. Kim explains that some items the store carries because they are needed for the service business, and if the service business needs a product it is likely that consumers may need it as well. “People know that we do the work, so we have the product for it,” she says. Plumbing retail sales make up 10 percent of the store’s total sales, largely from homeowners. Kim points out that the stores do carry PEX (cross-linked highdensity polyethylene) products, which not all stores carry. The key to success in retail plumbing, according to the Wattiers, is to have all the different sizes and fittings, so when customers come in the store and need anything from a quarter inch to an inch and a half, they can get them. “You don’t want to send them someplace else for something you should’ve had. And the prices on these items aren’t often a concern. People want what they need and will pay for it,” she says. To keep their service levels high, the Wattiers have monthly night meetings for specific departments to keep everyone up to speed. “It’s important for all employees to be knowledgeable,” Kim says, adding that customers often have questions regarding plumbing and electrical projects. “We don’t have someone come in for sink repair everyday, but when there is we have to know what we’re talking about.”
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