Courting the “Pro” customer
American hardware and home centre retailers – both large and small – are aggressively going after industrial and commercial accounts now, a class of trade they once accepted as a minor part of their business and did not actively court.
According to research recently conducted by the American publication, Do It Yourself Retailing, retailers seeking to increase the trade business must do some things differently. Dealing with these accounts is substantially different than dealing with the average Do-It-Yourselfer.
Lowes, America’s second largest home centre chain, sets aside a separate area for commercial/industrial accounts and signs emphasise its call-in or fax-in service to save customers time by having products ready for pickup. Independent retailers can and do offer this same service. (See pic below also).
If Australian hardware and home centre retailers are like those in the US, local businesses and tradesmen have always come into their stores to get supplies from time to time. However they are usually seen as a convenience, viewing local retailers as a minor fill-in source, not a major supplier. Regular industrial or specialty distributors received the majority of this business, and local stores got just “dribs and drabs”.
But as giant chain home centres become more fierce competitors and spread into smaller cities throughout America, independent retailers realised they needed to find other customers to help make up the loss of some of their consumer business. One of the lessons they’ve learned is that they need to broaden some of their basic inventories and stock deeper inventories of certain key items.
They’ve also recognised that the typical store can be a very important one-stop source of supply for a wide variety of industrial/commercial accounts such as painting contractors, local manufacturers, other retailers, rental agents, building management firms, real estate agents (commercial and industrial especially), restaurants, hotels and motels etc.
They’ve also learned that they can relate their “convenience factor” into a strong sales point. When commercial/industrial accounts need product, time is money.
The ability to quickly get what is needed can keep a job running or enable a customer to complete a job on schedule. And a quick in-and-out shopping trip saves many dollars of employee time, rather than driving farther and waiting in a long line at an industrial supply house or giant home centre. With many tradesmen (in the US) earning $15 or more an hour, plus fringe benefits, time saved in local shopping can overcome a few cents difference in selling price – but this is a point which must be emphasised as one of the reasons why a local store can be a money-saving prime supplier. Those customer benefits must be promoted and exploited, not allowed to be taken for granted.
One US retailer with three locations periodically assigns an employee to survey industrial/commercial customers to find out how long it took them to get into and out of the store with their purchases. They also ask customers to write down any products not stocked in which they would be interested, so the stores can increase inventory assortments to meet specific customer needs.
This retailer also asks customers how long it typically takes them to shop at a nearby big-box retailer with whom it competes. This helps drive home the fact that the local store is saving accounts shopping time.
According to Do It Yourself Retailing’s research, commercial/industrial accounts find certain services most valuable. For example:
- A paper catalogue is most highly prized. Recognising this, many key wholesalers are now producing industrial/commercial catalogues which their retailer customers can have imprinted with their own store name and contact information. And some retailers, using computerised programs, are now generating their own in-house catalogues.
- They want to know about specials and savings so circulars and direct-mail pieces featuring industrial/commercial supplies are needed, especially seasonally. This material is also being provided by wholesalers. But with the advent of computer publishing programs, they can be generated internally or locally by many retailers.
- Periodic business letters to key accounts and prospects, telling of new products added to inventories, expansion of existing stocks to serve accounts better, etc. are also well received.
- Aggressive retailers can solicit direct mail materials from vendors to keep accounts alerted to products, pricing and labour-saving possibilities – mailing them by themselves or using as envelope stuffers.
- Phone calls and personal visits are helpful, but not essential. This fact is important because it means owner-operators of smaller retail stores do not have to be out making sales calls themselves if they set up routine mail, fax and catalogue contacts. An initial call on prospective accounts, explaining one’s strategy, expanded inventory and convenience factors might be enough.
- E-mail contacts and one’s own website, while helpful, are not at all essential.
Promotionally, the research shows there are some ideas that will motivate these customers. They like and respond to coupons providing savings on specific items. These can easily be created on one’s computer and faxed to a select customer list. E-mail specials also can be offered. Of course, one can also enclose with monthly statements brochures obtained from manufacturers to acquaint customers with products and product features.
While 65% of these customers or their employees will visit stores to get needed items, 20% will phone or FAX orders in, relying on a paper catalogue for item selection. Only 12% reported buying when and if a sales representative from the store calls, proving that it is not necessary to have an outside sales person to generate most of these types of sales.
If a retailer can offer a billing service which breaks invoices down by job, project or department, it can help generate business from major accounts which might be re-billing based on such elements. Among retailers surveyed who aggressively solicit this kind of business, the median monthly billing was $425 from each account.
The ease with which computers can generate simple promotional pieces now makes it possible for smaller retailers to be a far more effective promoter and source of merchandise for industrial and commercial accounts, but it does take some determination and dedication on the part of management to gear up to get more of this kind of business, instead of relying on a few odd pick-up sales.
Battle of appliances
Home centres are also winning the major appliance war. Home Depot, Lowes and, to a lesser degree, privately-owned Menards, are doing something other retail organisations have been unable to do so far – chip away at Sears’ commanding market-share lead in major appliances. (See February 2003 issue). For decades, Sears has dominated the major appliance business in the US, owning nearly 50% of the market at one time and more recently a still-commanding 41.4% market share. The market is estimated at $21 billion.
More recently, however, its share dropped to 38.5%, even though Circuit City, a major retail appliance and electronics chain, dropped out of the appliance battle entirely. Instead, both Lowes and Home Depot each gained more than two market share points – Lowes to 13.7% and Home Depot to 6.4%. Lowes has been the number two appliance retailer for years, whereas Depot is very new to the fray. In addition to the home centres, Best Buy, a large publicly owned chain, and scores of local chains and independents still sell majors.
And the future holds even more peril for Sears because Depot and Lowes’ aggressive growth plans will put their appliance assortments in front of even more consumers this year. Depot plans to open 200 more stores this year, Lowes another 80, and Menards operates approximately 180 stores in the Midwest. Together, the three chains will be operating nearly 3,000 stores offering appliances, compared to Sears’ 870 department stores, plus its small-town catalogue units which can show only a few sample products.
But it isn’t only location, location, location troubling Sears’ appliance sales. The home centre chains are offering broader assortments, faster and cheaper delivery and have the ability to offer lower prices because they are occupying less expensive real estate.
Sears’ stores are in expensive mall locations, while the three home centre chains occupy less costly outlying suburban locations, which actually also put them closer to home-owning consumers.
Bob Vereen, Hardware Journal’s US correspondent