Live from Design & Construction Week
For the first time in the history of oriented strand board or any other product, the International Builders’ Show (IBS) and the Kitchen & Bath Industry Show (KBIS) were under one roof this year at the Las Vegas Convention Center. More than 70,000 attendees stormed the castle for what will hereto forth be known as Design & Construction Week, a perfectly sensible synergistic meeting of two highly anticipated industry events.
Between the hundreds of exhibits and an infinite show floor, there was plenty to write home about. Here is but a small sampling of the building products that caught our eye at HCN.
Master Lock dialSpeed
The padlock has gone electric. The right combination of up, down, left or right will turn the center light green and open the lock. It also allows for multiple codes — just don’t get it wet. (masterlock.com)
Moen Sip Beverage Faucet
Moen has crafted a solution for every homeowner who’s ever drank from the tap. The Sip faucet comes in various design profiles and can be outfitted with an optional filtration system. The one-handle, cold-only lever makes it easier than ever to quench one’s thirst. (moen.com)
AmeriSink Handcrafted Tempered Glass Sink
Bathroom-sinks-cum-functional-art-pieces were a chief creative exposition at KBIS. Here, a mesmerizing honeycomb pattern gives new meaning to the term “bee’s knees.” (amerisink.com)
Big Ass Fans
The Haiku ceiling fan (pictured) is the most efficient ceiling fan in the world, according to Energy Star. It’s also made from sustain-ably harvested Moso bamboo or durable matrix composite. We just think the name is fun to say. (bigassfans.com)
Best Sorpresa Range Hoods Collection
The Sorpresa Collection, from Broan-NuTone, took home the lion’s share of the visual interest pie via functional range hoods with a modern art twist. Pictured: Intrigue (bestsorpresa.com)
Kohler Deerfield Kitchen Sink
Burnt orange is certainly a refreshing twist on a kitchen sink, but with 20% greater volume than previous models, this enameled cast iron work of art combines form with function. (kohler.com)
Quikrete Concrete Etching Stain
Quikrete offered up an exciting prospect at IBS — doing more with less. Concrete Etching Stain can lend a marble-like appearance to plain concrete, adding a dimension of multi-toned shading. (quikrete.com)
Calculated Industries Construction Master Pro
With builder-specific buttons, such as “rise,” “run” and “slope,” the Construction Master Pro calculator has a loyal following on the job site. The classic is being updated across multiple platforms, including mobile phone apps. (calculated.com)
Jeld-Wen IWP Custom Wood Contemporary Center Pivot Door
This stately exterior door defies the need for hinges. Instead, a center pivot design provides a first impression with a contemporary feel. (jeld-wen.com)
Honeywell Wi-Fi Smart Thermostat with Voice Control
This thermostat spoke to us — quite literally. The voice-activated recognition feature gives hands-free control to the user, with a smart response program that learns his or her preferences over time. (honeywell.com)
Resysta Wood Alternative
With applications ranging from furniture to decking, Resysta combines rice husks, salt and mineral oil for an eco-friendly, low-maintenance hybrid material that stands up to weather and wear. (resysta.com)
Weyerhaeuser Flak Jacket Fire Protection
In other fire-resistance news, Flak Jacket is a patent-pending coating for TJI Joists that meets both single- and multi-family code. Don’t leave home without one. (woodbywy.com)
A Wall Street perspective
Baird analysts make it their business to know farm-and-ranch retailing inside and out. Not only do they keep close tabs on the publicly traded shares of Tractor Supply, they make the effort to understand the smaller players through its quarterly “Baird Farm and Ranch Supply Retailer Survey,” results of which are highlighted in this section.
Managing director Peter Benedict spoke to HCN.
HCN: What are the common traits of the best farm-and-ranch retailers?
Peter Benedict: From our perspective, it’s about striking the appropriate blend of consumables, soft goods and hard goods in the store, and really having a focused assortment. It really is about positioning yourself as the needs-based retailer for the customer who lives that rural farm-and-ranch lifestyle.
HCN: Tractor Supply had record sales in its latest quarter. The next day the stock dropped 5%. What happened?
Benedict: Their traffic was very strong — transaction count was up 5% year over year; that’s a very impressive number. But their average ticket was down 1.5%. Part of that was deflation set in — on animal feed, in one case. But the result was their comp-store sales grew 3.5%, and Wall Street expectations were somewhat higher than that.
Also, their initial earnings guidance for 2014 was below where Wall Street estimates were at the time of their report. While we think there is a healthy dose of conservatism in their outlook, that’s something that weighed on the stock.
And then the third point would be that the stock market in general and retailer consumer stocks in particular have been very weak so far this year.
HCN: We think there are about 5,000 farm-and-ranch stores in the United States. Is that low?
Benedict: I think it depends on your definition. Tractor Supply has about 1,280. By our count, the next 15 largest farm-and-ranch retailers probably have 650 or so. But certainly if you included the independent feed dealer networks out there, you would take the number probably to 10,000 or so.
HCN: How closely does the farm-and-ranch retail sector ride on the success of American agriculture?
Benedict: I think it’s fair to say, a good ag economy is preferable to a bad ag economy. But that being said, these farm- and-ranch retailers, I think, in particular Tractor Supply, are not really serving the professional farmer or grower. At Tractor Supply, fewer than 10% of their customers cite farming as their source of income. Also, look at where these stores are located. Tractor Supply has more stores in the Northeast than they do in the Midwest.
HCN: Tractor Supply took its time entering e-commerce. But now they seem to be out in front. How do you see it?
Benedict: They view online and e-commerce holistically. It’s both commerce and community. They certainly want to have a functional store online, but their website is also a kind of a social meeting point for their customers, and an online forum.
You can use the example of someone raising a certain type of horse in New Hampshire, and if they’re looking for advice, then someone from Arizona can easily chime in. That makes it a community center as well as a commercial site.
HCN: Is the farm-and-ranch sector better insulated from Amazon.com than most other retailers?
Benedict: It would be on the less exposed part of the spectrum, but I would not for a minute say it’s not exposed. There are items and pieces of businesses that could certainly go online.
Nobody is immune — there will be more e-commerce done in this space five years from now than there is today. I’m pretty confident about that. That’s why I think what’s critically important for farm-and-ranch retailers is to ensure that their mix of product in the store is really laser-focused on meeting the needs of the customer.
Farm & ranch steams ahead
It’s not just Tractor Supply that’s riding a wave of growth in the sector for hobby farmers and backyard ranchers.
This is not an article about Tractor Supply.
But let’s face it. You can’t write about the farm-and-ranch retail sector without referring to the Brentwood, Tenn.-based giant either as a competitor or as a role model.
“Tractor,” as competitors invariably refer to the 1,300-store chain, has very publicly mowed down obstacles to growth during the housing market downturn. The company points to its knowledge of its customer and its execution in support of that customer as two ingredients of its success. But Tractor Supply is not alone. Across rural America, and in some cases encroaching on metropolitan areas, the farm-and-ranch supply retail sector is on a roll.
Peter Benedict, managing director of Baird Research, says his company’s proprietary research shows a healthy environment for the rural retailer serving the hobby farmer, the backyard rancher and the horse-owning rural lifestyle.
“This is a good customer demographic to serve,” he told HCN. “These [customers] tend to have slightly above-average incomes combined with slightly below-average costs of living. They tend to be pretty fiscally conservative, so they didn’t get way out over their skis with a lot of debt and then had to retrench. It’s a resilient customer demographic. I would say that in general it’s good to be in farm and ranch.”
He added, with a nod toward Tractor Supply: “but certainly better for some than others.”
At the recent True Value Reunion, FRAP — farm, ranch, auto and pet — was one of the show highlights, as the co-op works to expand the segment. The business generated about $12 million in new wholesale sales for True Value, a 13% boost over 2012.
No matter how good the demographics are, a retailer in 2014 must execute, must stay ahead of the curve and must adapt continually to customer trends. Those concepts are embraced by high-performing farm-and-ranch companies in boardrooms well beyond Brentwood, Tenn.
Case in point: Marshall, Minn.-based Runnings. “The FR sector in general has done very well over the last five to 10 years,” said Dennis Jensen, director of marketing for the 30-store chain.
“We really consider ourselves pretty fortunate to make it through times when many retailers were negatively impacted by a soft economy.”
He said the company was insulated from the housing market downturn. Another secret to the sector: the products are necessities. “They need these things to run their life,” he said.
By the same token, Runnings, a member of the Do it Best co-op, is not waiting for customers to come to them.
“Our team has worked very hard over the last several years to evolve our brand,” Jennings told HCN. “To not only be known for farm merchandise but to be a retail destination known for clothing, for footwear, tools, pet, lawn and garden, toys and specifically the sporting goods category is one that is exploding for us. We offer hunting, fishing, archery supplies, and some stores under the Runnings brand carry guns, so we’ve really expanded our brand position so that it’s farm and home, and so much more.”
Even more dramatic is the footprint, both in terms of store size and geography. In Rapid City, S.D., a 34,000-sq.-ft. Runnings reopened in a converted Sam’s Club. It’s now 119,000 sq. ft. A similar story took place in New Ulm, Minn. And the company is planning a move East, where it purchased stores formerly owned by mass retailers.
Five Runnings are in the works to open in New York State and one in New Hampshire in the fall of 2014 and spring of 2015.
“We believe that because of the landscape out there in terms of the climate and type of customers, we feel we could be very competitive,” he said.
Another major initiative is e-commerce, which Jensen says will be up and running in September.
Tom Mahlke, CEO of St. Paul, Minn.-based Mid-States Distributing, a co-op, buying group and major farm-and-ranch player, said the entire channel — not just Tractor Supply — is experiencing “very good growth.”
Farm-and-ranch stores are getting larger. They’re adjusting to their customers’ needs. Technology is advancing efficiencies in the back room. And farm-and-ranch stores are going to places where they simply haven’t been before. Maybe not Midtown Manhattan, but in suburbs that one might not consider rural.
Founded in 1954, Mid-States has more recently seen members across the board step up performance in categories, such as tools, lawn and garden, and pet food and products. “They have continued to evolve the model,” he said.
“Our members continue to grow and thrive,” he said. “Ultimately, understanding your consumer better than the other guy is core to their success.”
Twenty years ago, Mid-States’ footprint was about 350 stores. It’s now about 750. That’s still a little more than half of the footprint of Tractor Supply, a retailer that Mahlke credits for “creating awareness and validity” for the farm-and-ranch supply channel. He added: “But when Tractor opens a store, that’s competition.”
Perhaps the biggest competitive advantage for the independent farm-and-ranch retailer, said Mahlke, is local knowledge that comes from being immersed in the community. “These independents are community-minded,” he said. “They understand their business. They understand and know their markets and consumers. They’re very formidable competitors.”
D&L Farm and Home
The growth of D&L Farm and Home supports the theory that farm and ranch is an increasingly sophisticated retail channel. The five-store retailer, based in Aubrey, Texas, is a case study for Epicor’s Mobile manager system.
“It is invaluable in moving inven tory between stores and keeping up with that,” said Lezlie MacElroy, treasurer of D&L Farm and Home. “It also helps our inventory ordering and control and making sure that maximizes our investment.”
Speaking from the Purina Expo, MacElroy said the store is equally invested in keeping up with social trends. “We’re seeing a couple different movements,” she said. “We see a lot more customers becoming a lot more interested in organic and holistic products. That’s a big interest.”
Another one is chicken ranching. “What has grown substantially for us in the last few years is in chickens. Selling chickens. People want to raise their own and get their own eggs.”
Perhaps at the farthest end of the spectrum from Tractor Supply, single-unit Burns Feed Store in Gresham, Ore., believes it’s “large enough to supply your needs and small enough to care.”
Rawley Burns, a Farm Mart store and a Horizon Distributing customer, says one of the biggest decisions for the store was to remodel. “We had a gravel parking lot. We had aisles too narrow, poor lighting and low ceilings. We bit the bullet and remodeled.”
Updating the product mix is just as important. Burns described his horse tac area (saddles and related products). “We went to a couple of really good high school riding teams and asked, ‘What do we need that we don’t stock that you’d be interested in?’ And all these girls said you need more color and animal prints and zebra prints.
“You need to listen to your customer,” he said. “You have to be willing to adjust and change.”