The Hard Word

This month’s Hard Word columnist is Tim Starkey, Group Manager of HBT…AHJTimStarkeyJan05

It seems to me that many hardware retailers don’t think very clearly about the group they belong to. I have been involved in nurturing Hardware & Building Traders from its start-up more than seven years ago, to a current membership nudging 150 stores, so it’s probably fair to say that I’m a bit biased on the subject of hardware groups.

However, if you’ll indulge me that one misdemeanour, you would also appreciate that I’ve talked to many business owners and managers over these last few years and I do think that I have something of an insight into the way a lot of people approach their businesses. I should also point out that I do not come from the hardware industry, but have a broader background in management across a variety of industries.

Inertia is often the problem. If you’ve been part of one or other promotional group for a while it creates a bit of a comfort zone that can feel difficult to leave. The problem is that every group has a different business model, and the owner needs to decide whether that model fits their own business and objectives. And I think they should also review it now and then to see if anything has changed. No group (and I include HBT in this) has a model which will suit every business and I see many businesses that are members of promotional or buying groups which at first blush don’t seem to make sense.

The classic example is the store located in a regional centre or town. It has a good position, is known by everyone, provides good service and probably has a good trade business. You just have to ask – why would this business want to spend money putting someone else’s name on the storefront and distributing catalogues selling (low profit) lines that don’t relate to how it actually makes money?

Sure, when this store signed up for the group they probably felt they needed the group to achieve competitive buying prices. But the advent of groups such as ours mostly negate that argument today. The costs of belonging to a group can be significant – yet you have to ask – do you actually want the sales which those catalogues may bring in? It seems as if management doesn’t always analyse these issues logically.

There are many hidden costs associated with supporting catalogue sales including redundant stock, servicing backorders, lower margins on sale items and staff time. The bottom line for all business is its profitability. We don’t suit everybody either, but there are a bunch of stores out there that could be more profitable without someone else’s banner and marketing. The real issue is the need for owners to analyse rather than assume. They also have to decide to manage too. We see a lot of stores where management has been abdicated to staff who may make decisions based on their own convenience or preferences, rather than on profitability.

If you have something to say about the hardware industry, drop Lesley an email at:lesley@nullglenv.com.au.