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On Rebates

BY HBSDEALER Staff

From Ace’s John Venhuizen

"Here is the context. Our goal this year corporately is to have a bottom line of about $100 million. It’s a good chunk of money. But when you sum up the collective P&Ls of our retailers just in the United States, it’s north of $500 million. Their investment is larger and that bottom line is larger. So on a regular basis, while it’s important for the corporation to make money, we very regularly make conscious decisions to leverage the corporate infrastructure and balance sheet, to deliver improved profits to the retail stores, even if it comes at our detriment. Because a 10% increase on a half a billion is a lot more money than a 10% increase on $100 million.

"So think of it this way: If we can drive our retailers’ net profit by 10% next year, that’s half of the bottom line of the whole corporation. We’ll do that every day. It’s kind of the trade-offs that we make because the customers are our owners.

"So in light of that: Is the patronage rebate important? Absolutely. But it has to be taken into consideration what their real return on investment is, which is the P&L on the stores.

"It’s gotta be looked at as a portion of the total. It’s not the end game in and of itself — no way. Our retailers do not build wealth merely because of the patronage rebate. They build wealth because of a successful store model, and the patronage rebate is a component of that."

From True Value’s Lyle Heidemann

"Our first focus is helping our retailers grow top-line sales and bottom-line profit.

"There has not been a corporation that has been able to figure out how to open up small boxes. Big-box companies have had a hard time thinking small box. Corporations have a hard time replicating that and getting a return on investment for their shareholders. And I wouldn’t have come [to this job] if I didn’t think there was a place in American business for the independent hardware store.

"I would say about the patronage dividend, if you look at the total dividend, total credits and discounts that we give them during the year’s period of time. For the total company, that averages about 9% of purchases. If you look at the pure patronage dividend, it’s 1.5%. Sometimes the patronage dividend check that our members get is a fraction of what they get week in and week out from us. It’s what we call the value of True Value, and that is sharing all the things they get from us during the course of a year, independent of getting a check finally in March.

"In the last two years we offered e-commerce, gift cards, credit cards — historically in the co-op model, those were all fee-based. But we believe they are so important in the marketplace today that we have no fees — that we’re offering them free to members. Our retailers have the personal connection to the consumer in their marketplace, and we believe we can help them be better retailers."

From Do it Best’s Bob Taylor

"At the end of the year every year we take all of our profits, and 90% of that goes back to our members in the form of their year-end rebate, and 10% comes back to our staff in the form of their year-end profit sharing. And that alignment between the two I think in our case is extremely important. Our staff knows that everything they do to drive rebates and be more operationally efficient will allow them to share in that success. So it helps us operate with fewer layers of supervision.

"At the end of the day, our prices still have to be competitive out there. You really have to drive a rebate through the efficiencies that you can gain. If you’re not paying interest and you have a low cost of operation and you’re directing all the dollars that might be used for advertising back to members, that’s what really helps to build a rebate.

"Is the rebate an important component? Absolutely."

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Readers Respond: EPA’s Lead: Renovation, Repair and Painting Rule

BY HBSDEALER Staff

Getting the lead out

The following letters were in response to an article about reform of the EPA's Lead: Renovation, Repair and Painting Rule.

Lead paint rule and the opt-out provision:

"Why the industry even bothers to humor the EPA is beyond me. Let the private property owner be responsible for his own 'pollution.' If he harms his neighbor, then he's responsible for the consequences whether financial or otherwise."

Charles Veazey, Boulia-Gorrell Lumber, Laconia, N.H.

"As a sales consultant working in the window installation business for an EPA-certified contractor, I average 850 appointments per year. I can assure you here in Connecticut, the opt-out rule would be exercised by 75% of my clients who do not have young children in the home. Therefore, I agree the opt-out rule would save valuable time for my installers and money for my customers. Bring it back!"

Name withheld

Got opinions? Email us at [email protected]

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Inside the Beltway

BY Ken Clark

The great H.L. Mencken wrote: "A good politician is quite as unthinkable as an honest burglar."

Is he right? I don’t know, but it seems as if Washington, D.C., is quite a mess these days, with a mounting deficit and acrimonious factions.

Still, one of the highlights on the HCN calendar is the National Lumber & Building Material Dealers Association (NLBMDA) Legislative Conference in Washington, D.C. This year’s event, in addition to several rounds of strategizing and lobbying, featured presentations from not one, but two politicians.

Speaking to the gathering of lumberyard owners, supplemented by suppliers and members of the Window and Door Manufacturers Association; Senator Angus King, an Independent of Maine; and Representative Bill Johnson, Republican of Ohio, took turns speaking.

How did it go? Ladies and gentlemen, if these two gentlemen couldn’t give a delightful speech that won over an audience, they wouldn’t have been elected in the first place.

Johnson introduced himself as a man born on a "two-wheel wagon rut mule farm." This seemed to go over well.

King introduced himself as a board member of Hancock Lumber. This went over even better.

Johnson quickly recognized the importance of the audience and his affection for employment: "Your industry is very important to many job-creating industries," he said.

King pointed out that Hancock Lumber was actually exporting product to China.

Johnson showed detailed knowledge of the hot-button EPA Lead: Renovation, Repair, and Painting Rule, calling for the reinstatement of the opt-out rule for homeowners when there are no children or pregnant women in the house. Then he kicked sand in the face of the EPA: "It’s the most out-of-control regulatory body in Washington."

King pointed out that non-defense discretional spending is at the lowest percentage of GDP in 50 years.

Johnson attacked Obamacare: "It’s going to die of its own weight," he said.

King said he didn’t vote for the Affordable Care Act, but he would have. "The idea of providing health care to millions of people who didn’t have it is a good one," he said. "It’s hard to argue with it." The room seemed to think hard about that one.

Johnson said, "Washington doesn’t get it right very often."

Regaining his footing in front of an overwhelmingly Republican audience, King finished with a tried-and-true Abraham Lincoln quote: "The dogmas of the quiet past are inadequate to the stormy present."

How can you not love these guys? Bigger question: how come things are such a mess in Washington.

[email protected]

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