Volume 46, Issue 2 - March 2007

Big Box Bulletin
Survival Strategies

Shelter recently had a conversation with Charlie Wickens, partner, co-owner and vice president of Lumber Inc., headquartered in Albuquerque, N.M. Wickens works out of the company’s Santa Fe, N.M., facility and has experienced a market invasion by numerous big-box retailers, including Lowe’s, Home Depot and Hope Lumber and Supply Co. His strategy for retaining market share is confident and simple—maintain course.

“When they come in, I really don’t worry about it,” he said. “If I did spend my time worrying, my business would go down.” 

His plan isn’t one of ignorance. He just has confidence in his business, a family-owned and oriented operation that focuses on providing a high level of knowledgeable service, something he thinks a big box simply cannot do.

“All the people that work here have either started out on the yard, driving, or something else, and I’ve moved them up; so they know just about every aspect there is to know about this business,” Wickens said. Then he added, “And they’ve even been out there and had experience in framing.” 

The story is different at the chains.

“You can go into a Home Depot, or Lowe’s, and [the] majority of those guys don’t know what the heck they’re selling,” Wickens said.

Inevitably, Wickens said there will be some impact when a big box moves into an area, but, in his case, there were no real consequences. “Well, it’s just like when Home Depot came in here about seven years ago,” Wickens said. “Their deal was, they were going to set up a contractor yard and it was the first one in the state. The philosophy in doing so was to knock guys like me out of here, essentially, and that backfired on them. I mean, did we lose some business in the way of ‘onesees’ and ‘twosees?’ Yeah. But did we lose any of our bigger clients? No. Because they know—we’re all about service.”

Wickens said a big-box retailer, by nature, doesn’t have the ability to know its customer and form a lasting business relationship. But he does.

“I’ve been here almost 24 years now, full-time, and I worked eight years part-time since I was a freshman in high school,” Wickens said. “So, we know this market.” 

Know When to Hold ’Em and When to Fold ’Em

In his article, “Local Retailers Get Tips on Surviving ‘Big Box’ Stores,” Joel Stottrup of the Princeton Union-Eagle reported advice he gathered from guest speaker Liz Templin at a local meeting in Princeton, Minn. Templin came from the University of Minnesota Extension Service to advise local business owners about how to survive a big-box invasion.

Stottrup said that Templin and her assistant Claudia Cody gave out tips for four hours. Their advice covered how to compete and how not to compete. Much of it falls in line with Wickens’ philosophy. Pertaining to product selection, she advised retailers to offer items big boxes don’t have. Wickens said a local orientation allows Lumber Inc. to carry products its big-box competitors don’t have access to. 

“Most of the rough-sawn beams here are a native species and they’re either cut by a local mill, or they’re out of Colorado,” Wickens said. “Their system doesn’t allow them to get that stuff, he explained then added, “And it’s just a better product.”

If a big box store offers something for less, it’s best if a local retailer doesn’t try to compete. Wickens agrees, but also feels his business has an advantage when it comes to delivery times.

“When they come into an area like this, they sell OSB, or some other product, below cost,” Wickens said. “And that’s fine. We tell people, when they ask us if we can match it, ‘No, I can’t match it. I’m not in that game.’ But you know what? After one house, inevitably, we’ll get the call—‘Can you deliver your OSB out here? We can’t afford to wait three days.’”

He thinks that timely delivery plays a larger role than a few percent here and there in product pricing. 

“Inevitably, what you find is, whatever money they save on the front with these big boxes, they end up paying somewhere on the back end,” Wickens said. “And they find that out.” 

Additionally, Wickens pointed out that big-box products aren’t always an “apples to apples” comparison. 

“When someone comes in to compare quotes, they will sometimes say, ‘Well this place or that place is quoting Andersen windows and you’re 20 percent higher,’” Wickens said. “So I say, ‘Okay, let’s look at their windows,’ and inevitably they're always quoting a much lower-grade window—something that Andersen, or one of the other window manufacturers, is building just for them at a lower cost, but also a lower grade. So, I can give them the same price with a lower-grade window, but in the end they don’t want that.”

Keep It in the Family

While some lumber dealers claim big box retailers serve as training grounds for future employees, Wickens said he doesn’t capitalize on that option. 

“You know, I haven’t hired a single one,” Wickens said. “Unless I needed someone to just handle walk in customers or punch in orders on the computer, I don’t need them. I’d rather bring in someone here, from the yard or wherever.”

Wickens knows his philosophy is Lumber Inc.’s strong point and one that a larger corporation simply can’t duplicate. 

“This is a family-owned and oriented business,” he said. “We try to treat those who have supported us right. If they’ve worked hard, then we bring them up and treat them well. That way you know you can trust the people who work for you and you know they’re going to work hard.”

Wickens views being the smaller, local guy as the more important position in which to be, and so far, he says his theory has proven true. “We’re service oriented and that’s how I combat the situation,” he stated simply then concluded, “We just focus on our strengths and go one step further.”

Nardelli Agrees to Leave Home Depot

Bob Nardelli is done. After various media outlets reported that he was criticized over his hefty pay and The Home Depot Inc.’s poor stock performance, the company’s chairperson, president and chief executive officer (CEO) stepped down on January 2, 2007.

The company’s vice chairperson of the board of directors and executive vice president Frank Blake succeeds Nardelli.

Under the separation agreement, Nardelli will receive a financial package of approximately $210 million, including amounts which have previously been earned or vested. It will include a cash severance payment of $20 million, the acceleration of unvested deferred stock awards valued at approximately $77 million and unvested options with an intrinsic value of approximately $7 million, the payment of earned bonuses and long-term incentive awards of approximately $9 million, the payment of account balances under the company’s 401(k) plan and other benefit programs currently valued at approximately $2 million, the payment of previously earned and vested deferred shares with an approximate value of $44 million, the payment of the present value of retirement benefits currently valued at approximately $32 million and the payment of $18 million for other entitlements under his contract which the company says will be paid over a four-year period and forfeited if he does not honor contractual obligations. 

Blake, his successor, joined the company in 2002 and has served as vice chairperson of the board and executive vice president. His responsibilities have included strategic business development, growth initiatives, real estate, store construction, credit services and its home services business. Prior to Home Depot, Blake served as deputy secretary for the U.S. Department of Energy (DOE), and prior to that, he served in a variety of executive roles for General Electric, including senior vice president, corporate business development. www.homedepot.com 

Do it Best Cooperative Named Outstanding Corporate Philanthropist

On November 15, hardware, lumber and building materials buying cooperative Do it Best Corp. of Fort Wayne, Ind., received the 2006 Outstanding Corporate Philanthropist Award from the Northeast Indiana Chapter of the Association of Fundraising Professionals (AFP). The AFP is a membership organization with chapters throughout the U.S. that provides advocacy, research, education and certification programs for fundraising professionals. It awards individuals and organizations that contribute their time, talent and resources towards charitable organizations with its annual awards program honors.

Do it Best was nominated for the Outstanding Corporate Philanthropist Award by the United Way of Allen County, Ind. The United Way acknowledged the corporation for “exhibiting a strong record of exceptional financial generosity, commitment to philanthropy and leadership in motivating others in the business community to become involved in philanthropic endeavors that benefit society.” The company was also recognized for its efforts on behalf of Habitat for Humanity, Big Brothers Big Sisters and other local organizations.

Bob Taylor, the company’s president and chief executive officer (CEO) accepted the award. “For more than 60 years, Do it Best Corp. has been dedicated to serving others as we would like to be served,” Taylor said. “We’re proud to say that this philosophy extends to our members, our employees, our customers and the communities we serve.” www.doitbestcorp.com 

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