“These are tough times. The general consensus is: we’ll make it through.” That’s how Orgill CEO Ron Beal describes the prevailing attitude among his 6,000 or so retail and pro dealer customers.
Memphis-based Orgill, No. 13 on the Home Channel News Top 150 Distributor Scoreboard, is bucking the macroeconomic trends with wholesale sales growth, recent investments in distribution facilities and overall high performance. And according to Beal, there are many stories of Orgill customers doing the same.
Orgill’s year-to-date sales through July were up 4 percent, compared to the same period last year—and the four month sending July were up 7 percent.
The company is taking dramatic steps to boost its distribution system. After recently opening a distribution center in Kilgore, Tex as, it is consolidating two older facilities into a state-of-the-art Midwestern “super center” in Sikeston, Mo., and shopping in the Pacific Northwest for a location for what will be its sixth modern facility.
Sales at Orgill give “some credence to the fact that we are maintaining, and possibly building our sales momentum as we go into the final months of 2008. “ Everything is not doom and gloom,” Beal explained to Home Channel News.
The economy does naturally bring additional pressure to Orgill merchandise executives to find trends and act on them. Beal described a couple examples. One is “impulse are a s” designed for pro customers who need job site cleanup tools, such as bags, brooms and shovels. Another is “punch list electrical” for the contractor.
Additionally, merchandise executives are studying the continuing battle of the brand s across the United States and 59 other countries, searching for the brands with local selling power. At the same time, the private label approach is constantly tweaked. The distributor added a line of its own Vulcan power tools.
One of Orgill’s sustainable competitive advantages, the company believes, is its commitment to training. Under the overarching program called Orgill Corporate University, the distributor goes about training in a variety of Channels—including specific programs for sales and logistics.
In the sales realm, training is dominated by the acronym COPS: Certified Orgill Professional Sales. That’s described by Jerry Cardwell, Orgill’s vp-corporate development, as “a pretty tough five days of training” that combines role playing and in-house and external professional trainers. More than a fourth of Orgill sales staff are CPOS certified.
A more advanced, and more exclusive, program is Master COPS. Cardwell describes graduates as a sort of sales force version of the green beret s. “We’ll put them up against anybody,” he said.
Macroeconomics to Home economics: Eight questions for Ron Beal
HCN: Do you think that the phrase “Bucking the trend” applies to Orgill as you head into the second half of the year?
Ron Beal: Well, I think it probably has. The second quarter for us was relatively strong. We ended the first half of the year with a sales increase, which I think is in and of itself kind of bucking the trend. And we’ve got some positive momentum going in the second half.
We’ve probably got a good chance of outperforming the general economy, understanding that we’re still in for a pretty tough period. I don’t think it’s over from a macroeconomic standpoint. So I think the chances are that we are going to buck that trend to some extent unless again we see a significant deterioration in the overall market conditions beyond what we’ve already seen. So, you’ve got that caveat in there.
HCN: And that is partly because hardware is your strength and that’s insulated from the weak economy?
Beal: That‘s probably part of it. I think the fact that our customer base is diversified, the fact that we deal with a lot of different types of retailers—home centers, pro and hardware. But we’re focused on the hardware-type hardlines products, and certainly those have not been as volatile as the pure building materials. I think another factor is we’ve had a lot of success in bringing new customers on board, and you know we’ve also been very active in bringing our customers some very, very aggressive merchandising and promotional programs.
HCN: You’ve also been active in expanding your distribution network. Is that another way of saying that you have confidence in the future?
HCN: How will those new DCs change your strategy?
Beal: Our new DCs are a part of our overall strategy to have an efficient, strategically located warehousing system and distribution system that will support our ability to serve our customers and sustain our growth. We are consolidating our two oldest facilities—Memphis and Vandalia Ill., with a new one in Sikeston, Mo. This will be especially significant because we’re replacing in Memphis a 54-year-old low-ceiling facility, which has served us well, with a new state-of-the-art distribution center. So we’ll get a lot of operational efficiencies. When [Sikeston] comes into service just about this time next year, over 90 percent of our distribution center space will have been put into service since 2002.
HCN: You’ve responded to the green trend with the “Green Friendly Products” program. What’s the next big product trend going to be?
Beal: I think energy savings. This may actually be considered a segment of the green movement, but I think it’s gaining importance, and maybe it deserves being classified by itself. The whole area of energy savings is going to continue to grow in importance.
HCN: What should Congress be doing in response to the housing market downturn?
Beal: Preserving the confidence in and the integrity of the financial market is a must. And from what I’m seeing, the plans to shore up Fannie Mae and Freddie Mac seem to be steps in the right direction, but certainly for the country and our industry, maintaining the integrity of the financial system is important.
HCN: A lot of people in this industry don’t like the idea of homeowner/bank/lender bailouts in general. Do you have any thoughts on that?
Beal: You know, I personally agree with that. But again, I think not doing everything that can be done to shore up the whole broad spectrum of our financial system in this country—I mean the ramifications of not doing that could be catastrophic.
HCN: Speaking of doing something, what improvement project is currently ongoing at the Ron Beal household?
Beal: Like a lot of people out there, I don’t have any major construction projects that I’m planning. Just normal maintenance like repainting and replacing downstairs carpet and those kinds of things. My guess is that I’m in the same category with millions and millions of other homeowners out there and that we’re all going to do what we need to do to take care of the investment that we’ve got in our homes. And that’s an area of opportunity, certainly, for our retail customers out there.
“You can’t be just an order taker in this business anymore,” said Steve East, Orgill vp-advertising. “We’re the home office for a lot of these independents. Most of the time, in tough times, training is cut. We haven’t done that. We know that a trained individual is a heck of a lot more powerful than an untrained employee.”
Programs are expanding, a s well. Orgill’s “Green Friendly Product s” program is an example of the distributor listening to customers, according to Beal. The company first created a definition of green, which was very similar to any of the existing definitions—recycled, non-toxic, energy efficient. The company identified 1,400 items that fit the bill, out of a total of some 65,000 items. (See story, page 27.)
“Again and again, we heard from our customers: ‘Tell us what items are green.’ ” Beal said. “And we did that.”
Sales mastery 101
When Robert Bass made a presentation to Ronald’s Servicentre, a hardware store in the Bahamas, it wasn’t just a sales call—it was a dissertation.
Bass is one of the first graduates of Orgill’s Master COPS program, the two-year training program that blends corporate training with traditional academic work involving retail theory and advanced sales development.
The training culminated with a real world project at Ronald’s, which ultimately bought into Bass’ recommendation. “Luckily, the timing was right for a facelift,” Bass said. “But selling them on the site expansion was something they weren’t expecting.”
The kind of success Bass has with Ronald’s Servicentre reflects Bass’ role as a consultant, as opposed to salesman.
“You can have buying partners and business partners,” Bass said. “In many cases, I’m a business partner with them—in their marketing, product selection, store renovation—any facet of their business they want.”
Based in Jacksonville Beach, Fla., Bass late last year was among the first to graduate from the Master COPS program. One of the key aspects of the Master COPS program for Bass was the Versatile Salesperson Training, helping sales reps match their presentation to the personality type of the customer. “This has helped me in the field immensely,” he said.
So has the Master COPS, a designation achieved by about 4 percent of Orgill reps.
“This program was more detailed, market specific to our industry and took longer than anything else I have experienced,” said Bass. “It’s a pretty intense program.”
As recently as the mid-eightes, most Orgill customers were concentrated within a two-hour driving radius of Memphis. Today, products are shipped to 60 countries. More than two-thirds of the 6,000 customers are pure hardware stores or home centers. The company also serves pro dealers and a smaller number of farm and agricultural retailers. The common thread is independence—some 87 percent of Orgill’s total sales are from independent retailers.
“What do independents want?” asked Beal. “They want low costs, stability and a hasslefree way to do business. We offer all of these things.”
“The guys operating in today’s super competitive marketplace are pretty good fighters by definition,” Beal said. “Successful independents have found away to make their stores unique in their market. There are hundreds of ways in which that’s happening. If you look closely, I’ll guarantee you’ll find the successful local merchants are doing something to make them unique in their market.”
To a large extent, Orgill’s story is the story of its customers. And that’s the way the executives in Memphis like it.
PRO Group makes key promotions
Denver-based PRO Group has promoted Brendan Sullivan to director of merchandising, a new position, according to the company.
Sullivan is a 21-year industry veteran who has served in various merchandising and business development positions for Servistar/Coast To Coast and True Value prior to joining PRO Group in 2005.
“Brendan Sullivan’s experience and work style makes him ideally suited to a merchandising director role,” said Steve Synnott, president and CEO of PRO Group, in a statement. “Brendan has worked as a buyer and merchandise manager, and since he joined our company three years ago he has taken a leading role in providing progressive ideas and programs on the merchandising side.”
In addition, PRO Group managing director for the PRO Hardware and GardenMaster divisions, Shari Kalbach, has been named managing director for the company’s Farm Mart division, which supplies independent farm supply retailers.
Kalbach joined PRO Group in 1997 and is responsible for all of the Group’s distributor relationships.
“Shari Kalbach has a proven track record as a highly effective executive working with PRO Group distributor members,” Synnott said. “Adding Farm Mart to Shari Kalbach’s scope of work is a natural progression of her role. She excels working closely with our distributor members.”
Design Within Reach narrows losses
Design Within Reach, the San Francisco-based specialty home decor retailer with around 70 locations nationwide, saw net losses of $159 million, narrower than the $575 million in losses recorded in the same period last year.
Net sales for the second quarter decreased 3.7 percent to $47.3 million, compared with $49.1 million recorded in the year-ago period.
Still, the retailer saw an improvement in gross margin, a measurement of earnings that takes production and service costs into consideration — gross margin improved to 46.4 percent in the second quarter, compared with 44.3 percent in the same period last year.
In-store sales were $32.6 million, up 2.2 percent from last year. Sales from phone and the dwr.com Web site decreased 17.5 percent to $10.4 million.
DWR also said it predicted that “in light of the challenging economic environment, the company believes revenue will be flat year over year.”