Delivery in 4 hours — Seriously
With locations in Baton Rouge and Denham Springs, La., Do it Best Corp. member Holmes Building Materials operates two home centers, both with about 10,000 sq. ft. of retail space, supplemented by full lumberyards out back and powered by a 22-truck fleet. One location is heavily commercial, the other is heavily retail-oriented, and both operate a store-within-a-store Holmes Windows Doors & More.
The company combines a folksy business slogan — “local people serving local people” — with a ruthlessly efficient distribution model described in one simple phrase: four-hour delivery.
Also aggressive is the company’s growth mind-set — it acquired Pelican State and Industrial Supply in 2010, and is still looking for opportunities.
CEO John Holmes, who in 1980 joined the company founded by his grandfather, shared some of the keys to success during the Do it Best May Market Extreme Retailing panel discussion.
Reacting to the economy
“In this economy, we continue to promote our retail business. Also, we have seen a drastic drop in the number of [builder] customers. Our market is relatively stable, but about 30% of the contractors have gone out of business. So it’s made it that much more important to build relationships with the strong ones. We have doubled our focus on simply building that personal relationship with every customer, especially on the professional side. If you’re not out seeing them, somebody else is.”
On launching installed sales
“People are renovating their homes because they can’t sell them, and they’re looking for a turnkey project. We brought our own staff on to handle installations. They’re on our payroll. They all wear our shirts and hats when they show up in our trucks. It has a real stabilizing effect on the customer. It makes them comfortable.
“But the key to [installed sales] is to have a good team leader. We have the team leader. Every morning starts off with that team leader managing the schedule. Once we get everybody out on the road, his focus moves to quality work done during the day. It really takes a dedicated person who has experience, who can look the customer in the face and say the job is finished. Personnel is everything.
“The program protects your margins because now you’re selling a project instead of an item. And it’s a value-added item. You’re not selling an item they can go buy at a big box. Primarily, it’s built around the windows and door business. Typically, we run about 30% to 35% gross margin on an installed sales package.”
On four-hour delivery
“From the customer’s order to the delivery of the product, our goal is four hours. There are exceptions. We do track them every day and shoot for 100% on time. And every afternoon I get an email that tells me how we’re doing. If the dispatchers are not working fast, they shouldn’t be working for us. We struggled a couple years back having too much overtime. We were operating the traditional hours from 6 a.m. to 3 p.m. Then we moved to a rotating staff and hired more people. We’ve gone back and evaluated our sales based on our workload.”
On merchandise mix
“This year, we’re building for the future, remodeling our main store. It’s been six years, and we intend to turn it upside down. We’re adding 5,000 more feet to our retail location and adding product categories such as appliances, home decor and cabinets.”
On inside support
“If we were starting over again, we would probably begin by taking a key inside person who is organized and detail-minded — maybe the guy who is not as good at retail sales — and move them to support an outside person. Then you would have an outside person tied into an inside person who is very detailed-oriented.
“Typically you can have about three outside salespeople per support staff. In the window and door biz, that’s a different person. Millwork is a little more complicated and specialized. But three to one is what we found works well generally.”
On customer connectivity
“We stay in front of our contractors with our outside sales staff, and I follow up behind them. We typically include an event as part of our marketing. One thing to keep in mind: If you lose one, if you built a good personal relationship, it’s possible to go out and get a new customer. But it takes a lot of work to make that transition.”
Extreme growth blueprints
Sometimes it’s the little things that make the biggest differences. Then again, sometimes it’s the big things.
The Fort Wayne, Ind.-based Do it Best Corp., fresh from its October Market in Indianapolis, is advancing a slate of initiatives both large and small. Projects range from reprinting its field staff’s business cards to building what it calls a digital World Class Commerce Center. And as CEO Bob Taylor sees it, they are all in service of one overarching goal: serving the members.
Let’s start with the big plans first.
The co-op’s World Class Commerce Center initiative marks an effort to bring various Do it Best Corp. digital ventures under the same roof, while enhancing its capabilities and keeping up with the times. Taylor described it as the pursuit of “a single best-in-class online merchandise and sales catalog for members and customers.”
It’s early in the transition, but Taylor has a clear grasp of the need, and a pretty good picture of the final product. Currently, the co-op has four websites: doitbest.com for e-commerce, mydoitbest.com for members, channellockproducts.com, and incomsupply.com for industrial commercial sales. All of them were developed at different times with different strategies and different platforms.
“They are all great if you know product,” Taylor said. “They have great functionality. But they’re not as good as they could be, and they don’t provide a world-class user experience.”
The move toward tablets, Androids and iPhones has the promise of improved interaction between buyer and seller at all levels, and Taylor hopes to stay in front of it. “We’re trying to give the customers of tomorrow the tools that function from a sales perspective, as well as a better ordering perspective,” he said. “That includes much richer content that will help our vendors move products through us, through our dealers and to their customers.”
The reboot began in May. And at the helm of the initiative is Commerce Center director Marty Bailey, an executive who has earned the reputation as a get-it-done project leader.
Expectations are high. How high? “When we’re done, we want you to say, ‘This is as good as what I’ve seen at Zappos, or Amazon or anywhere else,’ ” Taylor said.
Aiming high is a big part of the co-op’s second major initiative. This one’s called the Do it Best Advantage Program, or “Advantage” for short. The program identifies premier businesses in hardware, lumber and building materials and other non-traditional categories — both in the United States and overseas — and targets them with a completely new personalized sales and recruiting effort.
Its aim is to build strategic partnerships with premier independent business owners, Taylor said. As such, the co-op has assembled a specialized five-person team led by Advantage Program manager Gary Hoffmann to tell the Do it Best story. Part of that story is a new performance satisfaction guarantee for premier new members.
Related to the recruiting is a smaller change with big psychological impact. The company’s field staff is no longer called “retail development specialists.” The new term is “sales and business development specialists,” a change that has been made to business cards across the organization. The reason? To better reflect the diversity of businesses both existing and potential in the Do it Best family, Taylor said.
The change is more than mere semantics, Taylor said. “Understanding retail is still a key component of everything we do. But you have to remember that a lot of people are in contractor sales, industrial commercial sales or e-commerce. If you go in talking ‘retail’ they might think, ‘That’s not us.’ ”
The ongoing changes at Do it Best Corp., both large and small, are up against an economy and business conditions that Taylor believes are going to be slow to grow. He categorizes his housing start outlook as among the most conservative out there. In many cases, the consumers’ discretionary dollars are being pulled away from home improvement.
But the bottom line for many Do it Best members is the end-of-year rebate, and Taylor has a better outlook here. “For the eighth consecutive year, our total rebates to member-owners will exceed $100 million,” he said. “That’s up from last year’s rebate, and speaks to the advantage we provide our members.”
The art of the deal
There have been many memorable moments for Randall Jones and Greencastle, Ind.-based Headley Hardware, from reopening after a fire in 2000 to taking his entire Do it Best rebate check and investing it in an unproven electrical department in 2009.
But one of his proudest moments came during an ice storm in February, when the store distributed 1,134 bags of Do it Best ice melt in its parking lot in about 70 minutes. “We had 50 or 60 people in their cars waiting for the truck from Chicago because no one in five counties had any ice melt,” Jones told a group of Do it Best members during the co-op’s Extreme Retailing panel at its May Market. “There was no time for the men unloading the bags to look at customers’ receipts. And the crazy thing is, not one bag was taken without being paid for.”
The scenario was no surprise to Headley’s North American Salt distributor Mac Dunn, of Dunn Sales & Marketing, who said Headley Do it Best ranked second in the country as a single-store purchaser for ice melt — an impressive feat considering Greencastle’s modest population of about 10,000. “He has a destination shop,” Dunn said. “People in that town know that they can go there and get what they need.”
Headley Hardware’s business model defies easy description. From his 20,000-sq.-ft. operation — 13,000 sq. ft. of actual selling space — Jones emphasizes customer service and project expertise. But he also has a unique and ambitious approach to attracting commercial, government and contractor customers through a cost-plus discount program. Pricing is simple and attractive for these accounts — contractors receive a discount in a core department (such as paint), while commercial and government accounts tend to get an across-the-board discount.
Jones describes the model as a wholesaler to the contractors and a Grainger-type supplier to area production facilities. And on top of it all is an inclination to wheel and deal.
“What sets us apart is the amount of discounting we do,” said Jones, who entered the hardware business in 1987. “Before hardware, I was a flooring contractor myself, hanging around hardware stores looking for a deal. So, it was just natural for me to be able to wheel and deal. Nobody discounts like we do.”
Jones said the store maintains about 1,000 charge accounts in a town of about 10,000. A lot of them have discount arrangements. One that works particularly well are the senior discounts instituted about eight years ago.
The cost-plus model — which offers consistency and clarity, along with savings for commercial/contractor customers — might not be a model for everybody, but it’s worked for Headley.
In fiscal year 2011, for example, Headley was up 14% to a record $2.7 million in sales. The growth is continuing so far in fiscal 2012 — up 11% over the first five months of last year. “The recession for us was a $130,000 blip,” Jones said.
Fort Wayne, Ind.-based Do it Best Corp. CEO Bob Taylor has taken notice of Jones’ model and his success. “Randall Jones runs a good hardware store,” he said. “And he also gets great buy-in from his commercial customers with the cost-plus discount program, which he has leveraged so well.”
There are many facets to the cost-plus model, but it begins with explaining to the commercial customers the benefits of paying Headley’s cost of the merchandise, plus a certain percentage. “I tell them I will make 15% on everything I sell them.”
For a small town, Greencastle possesses a wealth of healthy corporate clients — from DePauw University to a mile-long Wal-Mart Distribution Center.
With price clarity, Headley plays a role similar to that of a purchasing agent for the commercial account. It’s important to partner with wholesalers for certain hard-to-find products, especially electrical products. And Jones said it’s crucial to show value to his commercial accounts and contractors by having the right product and the right time and the right place.
“We try to alleviate a lot of their worries about day-to-day stuff,” Jones said. “And when you’re accurate, you almost become an employee of theirs. The accuracy to me is the key. When a competitor makes a mistake, that is such a wonderful thing for you. If you can make zero mistakes and have the right price, you’ll win the day.”
Another key for the Do it Best member is to sacrifice large rebates in favor of low cost — which is possible through the co-op’s “vision” purchasing program.
The concept, if executed correctly, has tremendous potential. It takes discussions of discounting off the sales floor. It opens doors with big purchasers. But it might not be for every business. “The caveat is, you better have a hell of a lot of cash flow, because you’re going to get stretched,” Jones said. “And you gotta have an excellent bank.”
As Headley has grown, so has its accounts receivable. “It used to be painful carrying $100,000 in AR,” he said. “Now I’m used to carrying $250,000.”
Cost plus, as executed by Jones, runs on the principle of giving up margin for volume, and is made possible by strong cash flow.
On the retail side, Headley’s strategy starts with its people — employees are paid 25% higher than typical retail wages. “They are satisfied, and that shows on the sales floor,” he said.
Versatility also shows on the sales floor. “We cross-train like crazy,” he said. “Our cashiers can mix paint, sell basic plumbing and electrical, and figure out which bolt a customer needs. And our guys on the floor can run the POS, the managers can run the rental computer. Convenience is what drives our formula.”