NFIB

Thinking Outside the (Big) Box
07/ 26/ 2005
by Bridget McCrea

What would you do if some of your best, long-standing customers were suddenly courted by a 90,000-square-foot behemoth boasting a wider selection and cheaper prices?

That reality hit some of the nation's independent construction distributors in 2004 when Home Depot acquired Costa Mesa, Calif.,-based White Cap Construction Supply, a specialty hardware, tools and materials distributor that targets contractors. The acquisition placed Home Depot — known mostly for catering to do-it-yourselfers and homeowners — squarely into the territory of smaller distributors who stand on service and expertise rather than just the lowest price.

Ron Radonovich of Denver-based Fasteners, a 25-employee firm that specializes in fasteners and industrial tooling, says his tool and consumable business (such as screws, nuts and bolts) has been adversely affected by the big boxes' growing presence. Yet smaller firms still have a few tricks up their sleeves, he says.

"We can be more nimble, while the big boxes have a lot of overhead to deal with," says Radonovich. "We don’t have to cover ten layers of management to make a profit."

Radonovich says his firm also helps customers get in and out in a hurry. "Our goal is to take care of them immediately and get them back on the road," says Radonovich. "At a big box, they could be No. 22 in line, waiting to buy some nails."

Frances McGuckin, author of Business for Beginners, From Research and Business Plans to Money, Marketing and the Law, says independent distributors' propensity to carry "full lines" (instead of handpicking specific products from certain manufacturers), also helps keep contractors coming back.

"At the typical big box you'll find 50,000 SKUs (compared to 8,000 to 12,000 that a smaller distributor carries), but not enough selection within those individual lines," says McGuckin. "Smaller players may not be able to stock the same level of inventory as a Home Depot, but they can specialize and cater to the contractor who can't wait two weeks for delivery."

Wayne Garrett, president of Grand Island, Neb.,-based Centaur Enterprises, a 20-employee distributor of tools, fasteners and related products, says Home Depot entered his market three years ago and has yet to make a dent in his firm's business. "We felt some effects when it first opened, but after two months we forgot that they were even there," says Garrett.

Garrett credits his business' knack for hanging onto its employees, training them well and doing what it takes to make the customer happy, even if it means making after-hour deliveries. "Price and quality are important," says Garrett, "but at the end of the day what people want is great service."

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