Wolseley plays show and sell
In Wolseley North America’s bid for growth, the company’s showroom strategy looms large. It’s here more than anywhere else in America, where the business model comes face to face with the kind of consumer that can lift a business through any economic climate—the upscale consumer.
More than that, Wolseley is banking on its ability to gain market share through its 426 continental showrooms—310 Ferguson, 90 Stock and 26 Wolseley Canada—by realizing synergies of Stock and Ferguson and focusing on training the 1,000 or so employees working in the showrooms.
This year, the company is opening three blended showrooms—in Salt Lake City; Richmond, Va.; and Austin. While the company had previously experimented with combination Stock and Ferguson showrooms (in Santa Barbara, Calif., for instance), the latest version—branded as “Home Selections Showroom”—marks a more sophisticated blending of businesses, said Stock president Joe Appelmann.
“Here’s the difference,” he explained. “In Santa Barbara, you have two businesses, one inside the other. When you go to our Salt Lake concept, it’s one management team across the two.”
The earlier version of the combination store emphasized Stock-supplied windows and doors. The new blended offerings bring “a lot more of the products that we install,” Appelmann said. “You’re going to see moldings, garage doors, siding, along with the window, plumbing, cabinets, appliances, lighting and door offerings. We’re very proud of it.” Four or five more new blended showrooms are on the drawing board, he said.
Sam Rose, North American showroom manager for Wolseley, is a big believer in the importance of customer experience. He describes the target audience of the showroom as the “attached consumer”—the homeowner who is working closely with a builder, designer, remodeler or plumber. In his office at head quarters in Newport News, Va., he enumerated the interconnected keys to showroom success.
“You certainly have to have merchandise that’s a wow,” he began. Then there is the importance of knowledgeable and enthusiastic people in the showrooms. The process of ordering and delivery and installation must be flawless. The fourth key is the development of great relationships with builders, remodelers and designers.
“All we have to do are those four things,” he quipped.
Though it’s a complex operation to manage, the showroom business model offers high rewards when done well. It naturally attracts high-end customers—Rose describes the target customer as the six-figure income female—and their potentially recession-proof spending patterns.
“We’re not experiencing a slowdown with the showroom piece of the business,” Rose said.
In addition to an attractive clientele, the nature of the business insulates showrooms from economic down cycles. Rose looks at this way: During a typical home purchase, the customer’s eye is carefully trained on costs. But remodeling a home brings a more lucrative focus. “When you think about remodeling,” he said. “You’re thinking about what the dream is, not ‘where am I going to cut corners so that my mortgage payment is where it needs to be.’”
Expanding on his optimistic theme, Rose said that even if the size of the market shrinks, there are opportunities to expand Wolseley’s business by capturing market share. “If you have 85 percent market share, you wake up and worry about the economy, because what else are you going to take? But when you’re in the single digits or low double digits, you have plenty of opportunity.”
For this reason, he says it’s the focus on the four keys to success that keep him up at night worrying, not the condition of the economy. “Even in a shrinking market, we can still grow our business significantly by making these investments in showrooms.”
Keeping an eye on new trends in product and merchandise are a big part of Rose’s job. And his approach leads him to some of the biggest names in luxury retail.
“You become successful by not necessarily comparing yourself to other wholesalers, but by understanding that the consumer coming to you is the same customer shopping at Saks Fifth Avenue or Nordstrom or Mercedes.”
When business brings Rose to New York City, he always makes a point to shop the legendary names of retail along Fifth Ave. Not to empty his wallet, but to fill his notebook with ideas that might translate into successful showroom retailing. In his 12 years of managing showrooms, he’s not only trained to look at how products are presented, but how the store personnel interact with the customer.
Asked for a product trend on display in the showrooms, Rose pointed to the home spa concept. “Our consumers are traveling the nations, visiting the five-star spas, and with the whole cocooning happening across the country, people are really trying to feather their nest at home—custom showering, whirlpool bath, steam and heated tiles. I can’t say it’s a new trend, but we’re locked into it more than before.”
Across the industry, pro dealer showrooms have evolved significantly in the past 10 years, and the big boxes continue to seek to boost their revenues with installation services. Rose sees competition with all of them, but of the home centers, he explained: “Where their market tops out, that’s where we’re really starting to play.”
Rose’s responsibility also extend to Canada, where research has shown that customers are interested in basically the same overall experience. Specific products may change—for instance, U.S. stores deal largely in Kohler, while Canada is a bigger market for American Standard.
“Showrooms have changed a ton in the last 15 years,” he said. “Years ago, people looked at them as a kind of free service to show some products. Now it’s a critical piece of the business.”
Stock president Appelmann pointed to the power of the showroom to improve the company’s remodeling mix and pull through high-end orders. They also naturally boost product diversity, moving beyond the structural frame of the home.
Having Ferguson’s experience doesn’t hurt, either. “Ferguson has done a great job over the last five or seven years building their showrooms,” he said. “So we didn’t have to start learning this business from scratch.”
Weyerhaeuser reports loss in fourth quarter
Federal Way, Wash.-based Weyerhaeuser reported a net fourth-quarter loss of $63 million, swinging from earnings of $507 million in the same period last year. Sales were $3.9 billion, down 23.1 percent from $4.8 billion last year.
For the year, the forest products company had net earnings of $790 million, up 74.4 percent from $453 million in 2006. Sales dropped, however, to $16.3 billion from $18.7 billion last year, a decline of 12.8 percent.
Steven Rogel, chairman and CEO of Weyerhaeuser, characterized 2007 as a “challenging year” and said the company has been implementing ongoing improvements to its packaging business, while implementing “growth strategies” in its timberlands business.
“The continuing erosion of the U.S. housing market created very unfavorable market conditions for our timberlands, wood products and real estate businesses,” Rogel said. “Despite difficult market conditions, which we expect to continue through 2008, Weyerhaeuser remains focused on managing through the downturn.”
The company’s real estate business took the largest hit, with earnings falling 52 percent. Orders were down 19 percent, and the company’s backlog of homes sold, but not closed, dropped 35 percent.
Weyerhaeuser is one of North America’s largest diversified wood products companies.
NAR weighs in on Freddie Mac, Fannie Mae reform
The National Association of Realtors has submitted a position to the U.S. Senate Committee on Banking, Housing and Urban Development, supporting increased loan limits in government-sponsored enterprises (GSEs) Freddie Mac and Fannie Mae.
Reform to the two main government-sponsored lending organizations has been a topic of debate in light of the damaged subprime mortgage market.
Proponents of raising loan limits say it is a needed stimulus for the housing market. Opponents say giving the lending organizations a route to the “jumbo” loan market could be dangerous without additional safeguards.
Currently, a cap of $417,000 exists on loans issued by the GSEs. The NAR and other proponents of the stimulus plan support raising the GSE lending limit to $625,000.
The NAR submitted testimony to the HUD committee saying, “Fannie and Freddie are our partners in the housing industry and are important to stabilizing and strengthening the housing market.”
The group said the package could help “as many as” 500,000 jumbo loan borrowers to refinance. Additionally, the NAR says a higher rate limit could allow a large number of borrowers to enter the home buying market.