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Alittle cooperation, please

BY HBSDEALER Staff

There’s no industry more wrapped up in the co-op model than hardware retailing.

How did this come to be? The expanding, building nation of previous centuries had a hardware retailer on every main street with everything going for him, except buying power to compete with the national chains.

As Godfrey Lebhar (The founding Lebhar of Lebhar-Friedman, HCN’s publishing house) wrote: the small store’s best bet to grow is “to affiliate himself with some organization, such as a voluntary chain, or a cooperative enterprise of a similar type, which will give him the benefit of the expert guidance and help he must lack as long as he plays a lone hand.”

That was written in 1962. Some things change very slowly. But in recent days, co-op news has been breaking fast.

Case in point: Home Channel News’ cover story of our Sept. 10 issue: “Extreme Makeover: Co-op Edition, Ace management promotes for-profit structure.” The story was obsolete by the time it hit readers’ mailboxes.

The reason by now is well known, as we reported at homechannelnews.com: the discovery of a $154 million accounting error has put the brakes on Ace’s efforts to remake itself as a for-profit company and abandon its cooperative structure, at least for now. On page one, senior editor Brae Canlen addresses the accounting issue with Ace CEO Ray Griffith, who expressed confidence that “we’re going to take care of this issue.”

We haven’t heard the last of the Ace accounting story. But an accounting error is not going to replace hardware retailing’s bigger story: the efforts of the independent hardware stores across the country to thrive in our increasingly competitive marketplace.

Another executive with strong ideas on the topic of co-op positioning is Lyle Heidemann, CEO of True Value.

Earlier this summer at an annual meeting of the American Hardware Manufacturers Association, Heidemann suggested Ace was more and more resembling a standardized national format, as opposed to a collection of independent businesses. Heidemann, a former Sears executive who came out of retirement to take the True Value top job, described the middle ground between the two extremes as an area of opportunity for the traditional co-op.

“I would not have come out of retirement if I did not believe there was a viable place in American business for the independent hardware store,” Heidemann said. “Because I was doing OK retired.”

Of course, Do it Best might find some room for growth in that realm, too. ( See story, page 3 )

It’s important to note, as the co-ops fine tune their programs and reposition themselves in practice and in theory, the biggest competitors are not standing still. Home Depot’s Craig Menear made this clear in another cover story describing the company’s move to a more sophisticated merchandising philosophy. (See story, page 1)

It all adds up to one of the most exciting fall market seasons in memory.

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The return of a market

BY HBSDEALER Staff

San Diego Two relatively optimistic housing market forecasts factored heavily in an active day of seminars and award presentations at the ProDealer Conference held here last week.

In the conference’s kickoff presentation, Joshua Rosenbaum, director of the UBS Global Industrial Group, explained that only a matter of time stood between the current housing problems and a return to normalcy. “It really is a question of when, not if,” he said.

Of the six key macroeconomic factors — described as “pillars” — of the housing industry, five remain solid: GDP growth, interest rates, unemployment, inflation and non-residential construction spending. Housing starts, the sixth pillar, lags dramatically from 2006.

The question of “when” the return would come was addressed in detail at a later presentation on commodity pricing given by Paul Jannke, senior vp-wood and timber information for RISI. He pointed to research that predicts housing starts will remain weak until late 2008. Pointing to underlying demand created by population growth and household formation, Jannke described the overbuilding of 2003, 2004 and 2005 as a key cause of the dramatic decline in housing starts in 2007. The good news, said Jannke, is that 2009 should see starts jump back to the 1.7 million to 1.8 million level, following a 2008 housing start figure in excess of 1.5 million.

“With the weaknesses forecast in 2007 and 2008, we will have completely made up for the overbuilding” of the previous four years, he said.

If housing starts fall further to the 1 million level, as some expect, the silver lining would be a faster correction and a faster return to housing starts more in line with the underlying demand, he added.

The 11th ProDealer Conference held here at the Loews Coronado Bay Resort wasn’t all about forecasting and finance. A “Custom Builder Panel” on Thursday morning focused on the needs of custom builders and their expectations from pro dealers.

The best way to build a relationship with the custom builder is to do the research and bring solutions to the table, said David Payne, vp-Payne & Payne Builders. Sometimes, the solutions for builders address problems that they didn’t know they had, he said. “The smartest thing for a dealer is to find the time to talk to us to identify our faults, then provide solutions.”

And the panel agreed that when the relationship between the dealer and the builder loses the qualities of a partnership, the relationship is in jeopardy.

In addition, Basketball star Bill Walton, who rose to fame playing for the Boston Celtics and the Portland Trail Blazers, gave some advice on what to do “when the ball bounces the wrong way” during his Sept. 19 talk. He also reminisced about his days at Dixieline Lumber in San Diego, where the 15-year-old freckled redhead unloaded lumber as a part-time job.

Also at the conference, the annual ProDealer of the Year Awards Dinner recognized two companies that represent innovation and success in the LBM market — Kent, Ohio-based Carter Lumber and Fairfax, Calif-based Fairfax  Lumber & Hardware, the respective recipients of the ProDealer of the Year and Independent ProDealer of the Year awards.

The 11th Annual ProDealer Conference, sponsored by Home Channel News, kicked off with a City of Hope golf tournament. The first place team, winning with a score of 142, was Bruce Brushwood of Moulding & Millwork, Mark Donovan of Forest City Trading Group, Laura Dwyer of Dupont and Mike Fletcher of Moulding & Millwork.

The ProDealer Conference ran through Sept. 21.

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Toro names new member to board of directors

BY HBSDEALER Staff

Outdoor products company Toro has named Inge Thulin, vp-international operations for 3M, to its board of directors.

Thulin joined 3M in 1979 and served in various sales and marketing roles at its location in Stockholm, Sweden. He subsequently served as area vp for Europe, Asia and the Middle East and was named executive vp-international operations in 2003.

“As Toro’s revenue from non-U.S. markets continues to rise and we expand our manufacturing, design and distribution capabilities around the world, his perspectives will be invaluable in positioning the company for long-term growth and profitability,” said Michael Hoffman, chairman and CEO of Toro.

Thulin’s appointment brings the Toro board to 11 members.

Toro had sales of $1.8 billion in 2006 and is a leading provider of outdoor beautification products.

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