We all know that this industry has been suffering half a decade from the double whammy of its proximity to the subprime fiasco, compounded by the shock waves generated by the worst recession since the Great Depression. Every other month, leading housing economic indicators seem to change course, leaving contradictory trends. All this only serves to muddy views of this industry’s economic well being.
As if that is not enough, the pundits who pronounced the current recession technically over some time ago are increasingly spouting the term ‘double-dip’ when reviewing our economic progress through the ravages of the recession. This only serves to add to the alarm sounded from the many sectors of society which doubt that the recession has come close to an end.
While almost all market segments of this industry have indicated consistently decreasing and troubling sales figures through the past five years, none has been nearly as hard hit as the pro dealer. The pro dealer’s reliance on building construction led them to glowing positives in yearly financials throughout the housing boom of the 90’s and the first half of this decade. Of course, this phenomenon was spurred in large part by that era’s great prosperity and its mentality of encouraging consumer spending to the point of embracing great personal debt.
At the same time banks and financial institutions were driving unprecedented profits, in large part through the creation and sales of complex, new ‘securities’, which essentially bundled batches of mortgages, many of which had been issued at sub-prime rates. Many of these mortgages had been virtually given to customers with little to no down payment or real backing. Money for housing flowed so freely that some pro dealers began offering luxury kitchen and bath appointments including a line of products from high-end manufacturer Viking.
As subprime financing began to take root, consumers began to assume there was no end in sight to the ease of acquiring houses for a quick turnover and profit, while moving up the ladder of acquiring increasingly opulent and normally unaffordable homes. The concept even was coined with the brand, ‘flipping’. This became so popular that a television show was created to capture the excitement.
This led to a culture which was almost seeking to burst and eventually did. Now many of those homes which were not necessarily built to flip but were a creation that economic energy, sit foreclosed or never even inhabited. Others await a completion which may never happen. Currently, in addition to the wave of foreclosures we have experienced, there are also far too many homes awaiting their first occupants who may never arrive.
All this briefly explains the plight of pro dealers as they await the resumption of an energetic building market, which until lately seemed a promise to be fulfilled just after the next coming fiscal quarter.
Now a prominent pro dealer has taken a new tact as it attempts to free itself from the shackles of constraint by the questionable future of new housing construction. 84 Lumber recently announced that it is testing a consumer-oriented prototype at its corporate headquarters in Eighty Four, Pa. If tests prove successful, the company plans to roll out the new format to rural markets it deems as underserved by these market’s big boxes.
Through this process the company expects to transform about seventy of its lumberyards into retail-style stores that will feature several aisles of DIY essentials including painting supplies and plumbing fixtures. 84 is also looking into the viability of offering current popular favorites such as outdoor grills, sheds and even backyard gyms. Kitchen and bath design centers are likely to be spruced up as well. As the company’s traditional locations are not designed to invite average DIY consumers, these stores will be remodeled to include brighter lighting and a more open floor plan.
I have written in the past how flexible dealers in our industry are when it comes to including new products and services in their arsenals to attract new customers and add to the total of the average checkout. 84’s newest test is a fairly radical solution to the industry’s current challenges, offered by a typically traditional and accomplished player.
Several year’s ago I visited a local 84 location. The location manager and his associates were eager to discuss their operation in great and proud detail. They were particularly clear on their positive interactions with customers, most of whom were local contractors. When I asked who their competitors were, an interesting discussion ensued. As I noted that the relatively nearby Home Depot hadn’t been mentioned, I detected a long pause in the response.
They didn’t view Home Depot as a true competitor. In fact, they noted that a small part of their customer base was made up of accomplished Do It Yourselfers, who preferred tapping into 84’s project knowledge to visiting Home Depot. Now it seems at least some 84 locations are setting their sights on Home Depot customers.
In-depth profiles of Ace Hardware, Home Depot, Lowe’s and 4,500 leading home center and hardware chains can be found in Chain Store Guide’s Database of Home Centers & Hardware Chains.
Arthur Rosenberg, Senior Editor
Arthur has worked at Chain Store Guide for 20 years. He received a B.A. degree from City College of New York and attained a master’s degree in electronic communications from Brooklyn College. Please contact him if you have questions or comments.
