A discourse on distribution
Ron Beal, president and CEO of Memphis, Tenn.-based Orgill, presented his views on hardware distribution during the President’s Council meeting in Las Vegas. Here are the highlights.
"I’ve been at this a long time. One of the things that always impressed me is how simple distribution is to conceptualize, but how complex and how difficult it can be to actually execute. … It’s pretty easy to understand why companies are not exactly standing in line to get in the business of distributing hardware products."
"For the most part the items that we deal with are not high value, especially when compared with basic building materials. Many are not easily conveyable — think extension ladders or wheel barrows. And far too many are relatively slow-moving. So put simply, we deal with a lot of stuff. But stuff that is necessary to complete any home improvement or home construction project anywhere."
"A big thing, and one we spend a lot of time on, is operational costs. It’s essential that we know operational costs — ours and those of our suppliers, as well as our customers. Hardware distribution is a transactional-based high-volume business, and cost is involved every time you touch a product."
"Price and efficiency are about the only ways to differentiate among [hardware distributors]. And price relates back directly to efficiency."
"We’re investing millions of dollars to make sure our systems and facilities and equipment remain modern and efficient. About 85% of Orgill’s warehouse capacity has been placed in service within the last 10 years. Just in the last three years, we’ve opened two new facilities and we’ve closed two that were obsolete."
The finer points
"Another thing we think is important, is we don’t dumb down. And what I mean by that is we don’t subsidize any customer or any product at the expense of another customer or product. We don’t do much bundling in our pricing because we prefer to give our customers as much flexibility as we can in picking the service mix that makes the most sense for their business."
"We’re also in the process this year of upgrading our delivery fleet, doing this to the latest high-performance diesel engine tractors that based on the tests that we run, we saw an 8% to 9% improvement in miles per gallon. Since our fleet is expected to travel some 26 million miles this year, that represents some really serious savings."
"In a five-year period ending in 2012, we lowered our SWD (shipping warehouse and delivery costs,) as a percentage of warehouse sales by over 20%. This is very meaningful, and we were able to pass these savings on to our customers."
"We know that we’re not sending rockets to the moon, but on most days it’s pretty much a full-time job."
Lowe’s television campaign flexes new muscles
There’s nothing unusual about Lowe’s advertising to sports fans. Just ask Nascar champion Jimmie Johnson.
But there’s something strikingly different about the latest Lowe’s television commercial that aired repeatedly during the height of the NCAA college basketball tournament. Here’s the difference boiled down to a single word: "testosterone."
No dancing families here. The commercial depicts men, some armed for demolition, taking their manliness to new levels during an outdoor home renovation project.
Lowe’s declined to elaborate on its strategy behind the spot. But the new emphasis on the male consumer is obvious.
It’s a universally accepted retail maxim that women drive purchase decisions, but there are some things that men buy more. A 2009 "Gender Roles in Home Improvement" report from the Home Improvement Research Institute (HIRI) identified nails/screws/anchors as the most masculine merchandise in home improvement, followed by lumber (See chart).
Pushed to find differences between the two giant home centers, retail analysts have often played the sex card — Lowe’s caters more to women, Home Depot more to men. But the reality is more complicated. For instance, if you want Martha Stewart, you go to the orange-colored home center.
The Lowe’s commercial further complicates the overall perception of home center masculinity by concluding: "Every weekend is your chance to take the field." You don’t have to be a man to appreciate the message. But it doesn’t hurt.
Phoenix rises again on home price index
It stands to reason: The pool of consumers willing to invest in home improvement projects dramatically swells when home prices are increasing. Under those conditions, not only does a new kitchen look nice, it promises a nice ROI.
That’s why the latest S&P/Case-Shiller Home Price Indices, released late March, was hailed by the industry as a positive sign. Not only did two widely watched indices of home prices climb to the highest marks since the burst of the housing bubble, but all 20 cities on the list posted year-over-year gains — eight of them in the double digits.
At the top of the list were markets that were among those hardest hit by the bust — Phoenix, San Francisco and Las Vegas.
Here are the 20 cities and how their January 2013 level increased over the January 2012 level: