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Aligning appliances with community

BY Brae Canlen

It’s been a hectic two years for Jean Hawkins, whose Maytag dealership has changed into a high-end appliance store in the middle of a record housing slump in Northern California. The process entailed two store-wide remodels and a major shift in vendors, plus competition from a strong independent. Some might say that Hawkins and her family have been through the wringer. But Valley Oak Home Appliance Center has survived by aligning itself with the community it serves.

Elk Grove, Calif., with a population of just over 136,000 people, is both a small town and a suburb. Located only 10 miles from the state capital of Sacramento, Elk Grove was considered one of the fastest growing cities in the United States until the housing market imploded. It still has a western feel, vestiges of its days as a stage coach stop and a way station for Gold Rush miners. A giant pumpkin contest and festival is still one of the premier events of the year.

Hawkins and her husband Lyndon operated a Maytag repair service in Elk Grove for several years before opening a Maytag store in 1990. Four years later they moved to a bigger space, built a retail showroom, and called it Valley Oak Maytag. They joined the Chamber of Commerce and stayed active in local service organizations and youth sports.

Fast forward to 2005, when a rival Maytag dealer from Stockton decided to open five more stores—including one in Elk Grove. Maytag, now owned by Whirlpool, helped design the state-of-the-art showroom, a 5,000-square-foot jewel with dozens of working appliances.

Having two Maytag dealers in one town caused confusion, not to mention competition, and Elk Grove Maytag started losing customers. The Hawkins did a major remodel of their store and retrained their service department to repair the Whirlpool models as well as the Maytags.

Housing starts in the Sacramento area starting dropping fast in 2006, along with home sales. Appliance sales also dipped. The rival Maytag dealer closed one of his stores in 2007 and the remaining five—including the Elk Grove store—in March 2008, according to the Sacramento Bee.

By then, Hawkins had decided to end her exclusive arrangement with Maytag/Whirlpool and differentiate the store with higher-end appliances. She joined Brand Source, an appliance and electronics buying co-op, which gave her access to Bosch and Fisher & Paykel. She added the upper-end offerings from Maytag and Whirlpool, names like Jenn-Air and KitchenAid. Wine chillers, trash compactors, and DCS grills were added to the mix.

Revamping the product offerings required another store remodel, and last fall, Valley Oak Home Appliance (as the store is now called) put in a showroom with three working kitchens. Professional chefs are coming in to give cooking classes and demonstrations.

Now it’s time to get the word out. Hawkins has begun an aggressive marketing campaign, with twice monthly newspaper inserts and weekly television commercials. At the center of the TV spots is the store mascot, a golden lab named Mr. Miles. “People come in looking for him,” noted Hawkins. (Nobody asks about the store’s cat, Mr. Maytag, who was left out of the commercials because he doesn’t like the publicity.)

Putting a dog on camera may seem small townish, but “that’s what this community wants,” Hawkins explained. When she talks about “relationship marketing,” it’s not the data mining operations that send targeted coupons to un-suspecting consumers. Hawkins and her family—her son runs the service department and her daughter-in-law serves as store manager—attend Rotary Club meetings and network with property managers. They build relationships face to face, and this has brought them through difficult times, she believes.

Hawkins also credits much of the company’s success to the service department, which employs six technicians and two installers. (All have been retrained, with help from the manufacturers, to work with the new brands.) Property managers and landlords rely heavily on Valley Oak’s service department to keep the appliances working in their rental units. And when a refrigerator or stove can’t be repaired, the technician issues a credit that can be used when purchasing a new appliance from the store.

This credit system also provides a foot in the door of residential customers. “The service customer, in time, becomes the new appliance customer,” explained Hawkins.

Valley Oak Appliance is developing relationships with remodelers who refer clients to the store, and vice versa. Kitchen makeovers are not what they used to be, Hawkins observed, but there are some flecks of gold in the current spate of foreclosures around Sacramento.

“It’s not uncommon for appliances to disappear from the house [during foreclosures],” she noted, “and the new owners have to replace them.” Stricter lending standards are also giving appliance sales an unexpected boost. “One couple just bought a range from us because the FHA wouldn’t approve their loan without one,” Hawkins recalled.

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Home Depot to close 15 stores

BY HBSDEALER Staff

Home Depot will close 15 underperforming stores, the company has announced, and remove 50 future openings from the new store pipeline. The closings will include layoffs of about 1,300 employees.

The closings, at locations in the Midwest and Northeast, will generate approximately $547 million in pre-tax charges in the company’s first quarter. The company will release first-quarter results on May 20.

The stores to be closed are as follows:

• Store no. 2015 in East Fort Wayne, Ind.

• Store no. 2032 in Marion, Ind.

• Store no. 2310 in Frankfort, Ky.

• Store no. 379 Opelousas, La.

• Store no. 2819 Cottage Grove, Minn.

• Store no. 6901 East Brunswick, N.J.

• Store no. 6904 Saddle Brook, N.J.

• Store no. 6171 Rome, N.Y.

• Store no. 3702 Bismarck, N.D.

• Store no. 3874 Findlay, Ohio

• Store no. 3865 Lima, Ohio

• Store no. 4552 Brattleboro, Vt.

• Store no. 4932 Beaver Dam, Wis.

• Store no. 4933 Fond du Lac, Wis.

• Store no. 4913 Milwaukee, Wis.

Home Depot said in a statement it still intends to build 55 new stores this fiscal year, including 36 new stores in the United States.

As for other stores in the works, the company said it has “determined that it will no longer pursue the opening of approximately 50 U.S. stores that have been in its new store pipeline, in some cases for more than 10 years. Accordingly, the company will record a charge of approximately $400 million related to capitalized development costs and ongoing obligations associated with those future store locations.”

“This is a continuation of our disciplined approach to capital allocation that we outlined last year,” said Frank Blake, Home Depot chairman and CEO, in a statement. “We will invest in our core retail business, in this case our existing stores, which drive our most profitable sales. Our capital efficiency model will also provide improved returns for our shareholders through dividends and share repurchase.”

Home Depot added that investments in existing retail stores will continue to include “maintenance, merchandising resets and other initiatives to improve all elements of the customer’s shopping experience.”

The company reiterated that its total capital spending for the current fiscal year is projected to be approximately $2.3 billion, down from $3.6 billion last year.

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Sherwin-Williams earnings fall in the first quarter

BY HBSDEALER Staff

Sherwin-Williams saw earnings fall in the first quarter of 2008, but the worldwide paint and coatings giant is still seeing strength in international sales.

Earnings fell 30.3 percent in the first quarter to $77.9 million from $111.8 million in the same period last year. Net sales grew just over 1 percent to $1.78 billion from $1.76 billion in the same period last year.

The stronger net sales were in large part due to strong Global Group sales, as was the case last quarter. Favorable currency rates and eight acquisitions since last year’s first quarter helped aid international sales, according to the paint company.

In the company’s retail Paint Stores Group, net sales were $1.031 billion in the quarter, 1.9 percent lower than in last year’s first quarter. Sales were weak due to “soft architectural paint sales and weak sales in non-paint categories partially offset by improved industrial maintenance product sales.”

Same-store sales decreased 6.5 percent compared with last year, and earnings decreased 31.9 percent. Earnings were weaker because of increased product and freight costs, the company noted.

The company’s Consumer Group, which includes paint products like Dutch Boy, saw sales decrease 4.8 percent in the quarter to $286.9 million. The sales decline was due primarily “to soft DIY demand at most of the segment’s retail customers.” Earnings in the Consumer Group were down 23.7 percent due to higher raw material costs, as well as a lower volume of movement at the company’s distribution centers.

The Global Group’s net sales increased 14.8 percent to $461.9 million due to market share gains, selling price increases, favorable currency translation and acquisitions. Earnings for the Global Group increased 21.7 percent to $7.7 million.

“Paint demand in the domestic new residential, residential repaint, DIY and commercial markets was weaker during the first quarter than we had anticipated at the start of the year,” said Christopher Connor, chairman and CEO of Sherwin-Williams. “We continue to be pleased with the strong sales improvements of the foreign business units in our Global Group and the continued growth they have been achieving in the architectural, industrial maintenance, OEM and automotive finishes product lines.”

Connor also noted that the Paint Stores Group opened 17 new stores in the first quarter and closed 23 “redundant stores.”

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