Hardware stores seize the market opportunity
During the height of what some call the Great Recession, as the country was struggling to reverse the economic slide, Tom Hardman was looking for positive themes his hardware store could use to project an attitude that said: “We refuse to participate in the recession.”
“I wanted something to lift our employees’ and customers’ attitudes. One was to make them feel that individually they could make a difference,” said Hardman, co-owner of Hardman Supply Co., of Spencer, W. Va.
Hardman began promoting a “Made in the USA” campaign, framing the message this way: “By choosing to buy American, you are helping to put our friends, family and neighbors back to work. Let’s all buy American and bring those jobs back to the U.S.”
Other hardware retailers have taken similar paths, stocking more Made-in-USA products; in some cases they have created sections, or even entire stores, around Made-in-USA goods.
“As with many other industries, demand for products Made in the USA and a desire to support the domestic economy continues to grow,” said Mike Clark, chief merchandising officer of True Value Co. “As consumers continue to face an uneven economy, the new consumer value equation that emerged from the recession is now the new normal.”
Mike Petro, manager at The All American Store, with two locations in Ohio, said with many jobs outsourced, he wants customers to know that they’re helping keep people employed here in America by buying his products. “We believe an effective and simple solution to end our country’s decline is to buy what Americans produce,” he said. “When you purchase an item made or assembled in America, you are supporting a fellow American’s job.”
Sourcing and merchandising
While manufacturing products overseas may be cheaper, hardware store operators feel there are compelling reasons to buy and sell American products.
Hardman said he was pleasantly surprised to find so many domestic products in his company’s inventory. The Do it Best dealer searched the corporation’s catalog to find each product’s country of origin. He found that categories, such as building materials, paint, flooring and heating, had a high percentage of American production. Other departments had select categories that fell into this range.
Once the domestic products were chosen, Hardman adhered a “Made in the USA” label next to the bin label of that product. “In our circulars and on the radio, we identified qualifying products so our customers could ‘choose’ to buy Made in the USA,” he said. “At the Do it Best markets we search for products to add to our assortment.”
Two years ago, Petro issued a “call to arms” to the American retail industry, urging fellow dealers to make a commitment to Made in the USA. “No matter how small or large your store, you should dedicate at least 4 ft. of retail space to products made or assembled in America,” he said. “If everyone had at least a 4-ft. endcap of a Made-in-the-USA product in their stores, the repercussions would be substantial. Everyone can do it. It is time for the retail industry to step up to the plate and get this economy going. As retailers, we have tremendous influence on the buying habits of consumers.”
Petro even took some credit in Walmart’s new emphasis on U.S.-made goods. “A story title that linked Walmart and the All American Store was the headline in a article written by Motley Fool for the AOL business section just over one year ago. It was the No. 1 story on AOL’s front page for four straight days. We had so much traffic on our website it crashed our site for eight hours and generated well in excess of 50,000 visitors.”
Products that sell
Clark said basic plumbing and electrical sundries are benefiting where commercial users have a preference for U.S.-made products; and he noted that customer groups in certain farm and ranch categories appreciate American-made products, such as fencing and long-handled tools.
Petro said in his stores, virtually every product sells. Two of the better performers are Lodge Cast, which makes a line of iron skillets, and Tifco fasteners. “What fascinates our customer base is the amount of everyday products we inventory at our company,” he said. “What has surprised me is the number of companies that have contacted us to inventory their products, as well as the distance our customer base will travel to shop at our stores.”
In a 2013 study, Perception Research Services International found that 4-out-of-5 shoppers notice a “Made in the USA” label on packaging, and 76% of them said they would be more likely to buy a product because of the label. The Boston Consulting Group in a separate study found that 80% of consumers surveyed said they would be willing to pay more for Made-in-the-USA products than for those carrying a Made-in-China label.
This revelation does not surprise dealers. Petro said his customers would pay more for American-made as long as there was a difference of approximately 20% versus the Chinese-made.
True Value’s Clark said customers “in many cases” would pay a premium for American products. “While price remains an important consideration, the value of Made in USA is important to many consumers,” he said. “Of course, the media helps keep the Made-in-USA discussion top of mind for both our consumers and retailers. There is strong sentiment for keeping jobs in the USA.”
“It is time for the retail industry to step up to the plate and get this economy going.”
Mike Petro, manager, The All American Store
In their words: The US LBM story
The mailing address for US LBM Holdings is Green Bay, Wis. But don’t be fooled. The CEO lives in Ohio. The HR chief in Boston. The COO in New Jersey. And the marketing director is in Chicago.
The system of a permanent, floating headquarters is by design. “I don’t want to be handcuffed to a building,” says CEO L.T. Gibson. “One of the ways to avoid a big corporate culture is to avoid a big corporate office.”
The non-corporate corporation is one of the themes that emerged repeatedly as HCN spoke to several of the US LBM executives for their take on what makes US LBM Holdings the kind of company that can grow from a standing start to No. 14 on the HCN Pro Dealer Scoreboard in a mere four years.
US LBM executives showed a remarkable similarity in their description of the company culture. Three key ideas were repeated: local autonomy for the eight operating companies, clear lines of communication and the desire for continuous improvement. And on top of it all are the buying power and synergies that come with eight operating companies.
US LBM Holdings is growth-oriented in two ways: It continuously looks to make acquisitions, as it did in April with the acquisition of Shelly Enterprises. And it seeks to bring its resources to the local markets to help the operating companies achieve their individual growth strategies.
“Our companies have leading positions in their markets,” said CFO Rick Kolaczewski. “We expect them to grow faster than the competition.”
Here’s what else we heard that paints a picture of the 2013 Pro Dealer of the Year:
• “When I look at our business, I think part of what makes us work is the mix of the personalities. There are people with long histories in the business. Then Randy Aardema [EVP supply chain] and myself come from the vendor communities, and we see it with a different perspective. It makes for some good conversations.”
— Rick Kolaczewski, CFO (formerly with Fortune Brands)
• “I think if there’s a misperception, it would be that we buy a company, give them some money and leave them alone. Actually, our goal is to give them a lot of guidance. And we share best practices. And that’s the fun part — the part that leads to growth.”
— L.T. Gibson, CEO
• “If there’s a decision on credit underwriting, that’s handled right here by me and Greg [Belcher]. And we can make decisions very quickly. In my previous two companies, the underwriting took two or three days. And sometimes you don’t have two or three days. It’s the same with purchasing decisions. If I have a customer who needs a preferred supplier, I can act quickly. “
— Doug Jones, president, Edward Hines
• “We want our operating companies to be able to act like independents in the local market, reacting to market changes and customer preferences. And we don’t dictate any product lines or brands to our operating companies.”
— Jeff Umosella, COO and president, Universal Supply
THE “NEED TO KNOW” OF US LBM
►Its entire model is built on speed, providing lean efficiency to its subsidiaries and customers.
►It’s currently eight operating companies strong and is concentrated in the Midwest and Northeast.
►US LBM Holdings provides corporate oversight — IT, human resources and financial clout — to its divisions.
►It’s the 13th largest lumber and building materials distributor in the United States, and it’s only been around for four years.
►Its subsidiaries operate virtually independently, with their own management structures, brand identities and capacities to serve their local markets.
►There’s little in the way of a political hierarchy; indeed, the company motto is “together, we are building momentum.”
US LBM Holdings will accept the HCN 2013 Pro Dealer of the Year award at the Oct. 23-25 ProDealer Industry Summit in Nashville, Tenn.
Exceptionalism, as pertains to US LBM Holdings, begins with its growth. As one of the fastest-growing building materials distributors in the country, HCN’s 2013 Pro Dealer of the Year boasts year-over-year revenue growth of 15.7%, stands tall at 55 locations nationwide, and ranks 14th in sales on the HCN Pro Dealer Industry Scoreboard — all just four years after its inception.
There’s no secret, but there are principals. US LBM’s growth runs on the combined strength of eight autonomous companies, a focus on local knowledge and the ability to provide speed in the marketplace. And, most importantly, according to executives, it’s the people.
“We try to keep it very simple,” said CEO L.T. Gibson, describing his company’s structure. “There are synergies on the administrative side. And we have a local market focus. We think that local brands are very important. At the same time, we’re very disciplined as a group.”
Gibson, a former Stock Building Supply VP, oversees a culture that some might call the anti-corporate corporate culture. US LBM Holdings has 16 employees, while some 2,000 handle the day-to-day as employees of the various operating companies.
Karen Charielle, VP human resources at US LBM Holdings, added: “We have a wonderful team. We’re great partners together. Our success is driven by our employees, and showing that on the executive level drives [that ethic] down through the organization.”
The company has a healthy appetite for new acquisitions, associates and customers, said Charielle. And so far, the divergent identities of its individual yards seem to be a source of positive development.
“I don’t see it as a challenge — I see it as an opportunity,” she added. “Each company may have different customers and markets, but we all have the same philosophies and take part in a strategic plan we develop each year. We share best practices, and that creates synergy.”
The company has its sights set on paving the way for sustained progress in its company culture. Specifically, this means strengthening its human capital through a new in-house training and development program by the name of US LBM University. Charielle and her team will identify key successors and take them through the curriculum, taught by executives at the company. At the moment, they’re looking to partner with universities that stand out for their Lean, distribution, sales and leadership training.
“We’re passionate about our associates,” said Charielle. “If we’re giving them respect and guidance, that’ll return back to our customers.”
EIGHT AND GROWING
US LBM’s operating companies:
- Bellevue Builders Supply, Schenectady, N.Y.
- East Haven Builders Supply, East Haven, Conn.
- Edward Hines Lumber, Buffalo Grove, Ill.
- John H. Myers & Son, York, Pa.
- Lyman Lumber, Excelsior, Minn.
- Shelly’s Lumber, Telford, Pa.
- Universal Supply Co., Hammonton, N.J.
- Wisconsin Building Supply, Green Bay, Wis.