1 Store, 2 Stores, 3 Stores—More!

Multi-store ownership is a growing, readily identifiable trend in many of the world’s retail sectors. Will single-store hardware operators soon be “out-numbered”?

On the face of it, most hardware operators would be delighted to have additional outlets. Their own mini-empire of eponymous, publicly recognisable retail icons, all carrying the collective weight of their owner’s ambitions. “Bob’s Hardware Stores”…most of us, surely, would be envious of Bob.

The merits of multi-store ownership are particularly salient in the 21st century now that computerisation has simplified accounting, product ordering, invoicing, inventory management and payroll matters—all of which used to pose headaches of duplication on a store-by-store basis.

By contrast, many of today’s business software packages are sold on the strength of their ability to handle multi-store applications. The software designers, in other words, are anticipating that their retail customers will require a fistful of stores…even if the retailers themselves don’t realise it yet!

The Benefits
Efficiencies are clear to see:

First, there is the buying power that comes from making larger, more regular orders in bulk, leading to higher margins at the point of sale. Second, the centralisation of the abovementioned business procedures can cut overheads significantly and streamline the administrative costs associated with running a conglomerate.

Third, increased cash flow can provide the wherewithal for expenditure on necessary utilities like warehouses and vehicle fleets, generating a platform for exponential expansion over time.

According to a recent article in the American magazine Professional Retailer (1), representatives from major companies like Kubota Tractor, North American Case IH Agricultural Business, and John Deere have observed a marked change in the make-up of their members’ dealerships, with many operators expanding to multi-store operations.

These business directions have relevance to the hardware industry, particularly in relation to stores with a trade orientation. Mike Broeker from Kubota Tractor is reported as saying that 10% of his company’s dealers have multiple outlets. “The trend is increasing and we’re embracing it with guarded optimism,” says Broeker. “It’s important that the dealer can handle the growth and manage it.”

Jim Irwin from North American Case estimates that a third of his dealers are involved in multi-store activity in one form or another. “The trend is increasing at an accelerated pace, to the point where we’ll have 50% multiple ownership in 3–5 years.”

So far, so good. But what are the pitfalls?

The Pitfalls
Obviously, there is a potential for service-oriented outlets to alienate customers through diminished personal service, relocation of strategic personnel to a headquarters, and a greater dependence on middle management to make vital decisions. Many customers might also lament the loss of heritage-laden, regionally specific store operations.

It remains to be seen where the ideal balance lies. As consumers become increasingly tolerant of mass-produced products, it may be that they are similarly willing to embrace “mass-produced” retail environments. If hardware retailers can harness adequate on-floor expertise to satisfy customers in a multi-store format, then competitive pricing and administrative efficiencies should only reinforce the success of their overall business. And, no doubt, there will be plenty of “Bobs” on hand who are willing to take a chance and add another outlet to their stable.

1 “Economy of Scale: Multi-store Operations”, by Bill Johnston, Vol. 1, Number 2, Winter 2003

By John Power