DRI Industries taps a productive market by selling a hardware store in a mailbox.
DRI Industries taps a productive market by selling a hardware store in a mailbox.
In 1975, Paul Harmon, a direct-mail copywriter, struck on the idea of packaging hundreds of nuts, bolts, screws, and other fasteners in compartmentalized boxes and selling them through the mail. This unlikely way of selling fasteners grew out of the frustration he experienced while rebuilding his mother's '66 Chevy late at night when hardware stores were closed. "I'd miss a nut or a screw and I couldn't go any further," he recalls.
Harmon, then 32 years old and president of Direct Response Inc., a Minnesota marketing services company catering to insurance companies, did some old-fashioned shoe-leather market research. He visited area hardware stores to get an idea of the kinds of nuts, bolts, rivets, pins, and screws that people frequently used. Then he collected more than 2,000 fasteners from a dozen manufacturers and organized them according to type and size in a 12" x 5 1/2" x 9", 25-drawer box. He called his hardware supply kit the Nut & Bolt Shop.
"In 1975, if you'd asked a direct-marketing expert if a product as unglamorous as nuts and bolts would be a good item to sell by mail, he would have said, 'Are you kidding?" says Maxwell Sroge, president of Maxwell Sroge Publishing Inc., a Colorado Springs consulting and publishing company that reports on the mail-order industry. But Harmon, an advertising major at the University of Minnesota and a former copywriter for Fingerhut Corp., a leading mail-order merchandiser, knew the sales value of convenience. The Nut & Bolt Shop eliminated the nuisance of sifting through old cans and baby-food jars, in search of the right nut, or of driving back and forth to the hardware store.
In 1978, Harmon created DRI Indusries Inc., a solely owned Bloomington, Minn., company spun off from Direct Response Inc. Last year, DRI ranked #349 on the 1982 INC. 500, a list of the fastest-growing private companies. The 200-employee company had more than quintupled its sales in five years, from net sale of $7 million in 1977 to more than $38 million in 1981, and in calendar year 1982, DRI reported sales of $50 million. Using direct mail predominantly, with a sprinkling of advertising in newspaper and magazines, the company has sold more than 2 1/2 million Nut & Bolt Shops, and now carries a line of more than 60 other workshops with names like the Thumb Screw Sbop, the Cap Nut Shop, and the Wood Bung & Button Shop. The company's most expensive item, the $399.95 Dream Shop, has been rumored to make grown men weep for joy over its 13,500 pieces of hardware -- just about every type and style of fastener, organized and labeled in more than 70 cabinets, cases, and bins, complete with look-up charts. Buying those parts at a retail store would cost more than $1,000, claims Harmon, whose low prices result from volume purchasing and direct sales. And if anybody -- including the Federal Trade Commission -- says "Prove it," he will produce meticulous files of retail prices to substantiate his claim.
When Harmon first tested the Nut & Bolt Shop in 1975, he rented a list from a mail-order tool distributor with the names of people who had a track record of buying tools through the mail. He tested various prices -- $19.95, $24.95, $29.95, and $39.95 -- on different groups on that list. The responses indicated that, at $29.95, he could sell enough units to eke out a profit once he had subtracted his wholesale and promotional costs. (Today the Nut & Bolt shop sells for $19.95. While that price represents a loss, says Harmon, it is worth the customer names it generates for future sales.)
Satisfied by the test results, Harmon sent the first mailing to 25,000 names drawn from a dozen different lists, rented from tool and hardware companies and magazines written for tinkerers, handymen, and home owners -- DRI's target audience. A four-page letter introduced the product and spelled out its benefits, using plenty of bold letters, asterisks, and hand-written messages in the margins to emphasize the product's selling points: qualty, price, and convenience.
From its first mailing, DRI received 1,200 orders -- "an excellent response from a cold marketplace," claims Harmon. "The Nut & Bolt Shop's success told us people wanted hardware on hand for convenience," he adds. However, he admits that his reaction to the customers' enthusiasm was damped when it came time for him and two employees to fill the first batch of orders. "Fasteners arrived at different time and in different forms -- kegs, pounds, piece counts -- from more than a dozen manufacturers and distributors," remembers Harmon. "Hand-collating each piece, we began to ask ourselves if it was all worthwhile."
Despite the unruly order processing 1,200 boxes were shipped, each containing 2,101 pieces of 51 different types of fasteners. Although the type and number of items were arrived at somewhat haphazardly, admits Harmon, competitors that followed have offered the same number of pieces. "They assumed we knew what we were doing, which is funny. There wasn't any magic," says Harmon. Today, instead of doing its own packaging, the company hires a supplier to gather the hardware from other manufacturers and assemble the workshops. The complete workshops are then shipped to customers from either DRI's Bloomington plant or from one of three shippers in Nevada, Maryland, and Alabama.
DRI processes its own orders as well as those that come from credit-card companies that stuff their billing statements with DRI's ads. Since 1975, when Harmon first persuaded Shell Oil Co. to stuff 1.5 million credit customer bills with an ad for its Nut & Bolt Shop, DRI has continued to expand its customer base using credit-card companies. From an initial 1,200 names, DRI's list now tops 2 million. The computerized list can be grouped for special mailings by how recently or how often purchases are made, product category, or dollar amount.
The first rule to stimulate repeat sales from its list is to tell customers the truth, Harmon says. He scrutinizes advertising copy to ensure that no one has made a promise the company can't meet. To convince people that the hardware is of high quality despite the discount price, DRI also sends samples. If a customer is dissatisfied after ordering a product, DRI promises a full refund. Delivery time -- a key to keeping customers happy -- runs from five days to two weeks. "We learned our lesson on the importance of fulfilling promptly," says Harmon. "In the first quarter of 1978, the company was seriously back-ordered. Today those people still won't order from us."
In 1981, DRI Industries introduced its first mail-order catalog -- 88 pages of faseners available in complete sets or individually in bulk, tools to install and remove the hardware, and a selection of cabinets bins and trays in which to organize the assorted pieces. Each nut and bolt is shown in actual size to make the customer's selection easier. "The catalog -- a $150,000 investment -- is not overwhelmingly profitable," says Harmon. But he adds that it gives a customer a place to turn to rather than wait for the next mailing. "It reinforces the image that we have everything." Although future catalogs will include more merchandise, the company wants to avoid "straying too far from the niche we have carved out," says Walter Waxman, DRI's vice-president of marketing. "If we added pots and pans we'd only create confusion."
But DRI has diversified in other ways. In 1981, the company formed a sister company, International Tool Sales Inc., to sell products proven to be mail-order winners directly to retail stores and wholesalers. "We wanted the two companies to have separate identities," says Waxman. "Certain retailers resist buying from mail-order companies." By far the hottest product has been a portable, two-wheel hand truck, which converts into a four-wheel dolly, called the Four-Wheel Wonder. The practical, labor-saving device originally sold for about $40. Now priced at half that, it has sold briskly since last spring, according to major merchandisers, including Montgomery Ward & Co. and K mart.
"We took a product that existed in the industrial marketplace and redesigned it to make it more affordable for homeowners," says Stephen Zastera DRI's senior vice-president and general manager. Zastera scaled down a traditional industrial dolly, added some practical features, then lined up two manufacturers in Korea and Taiwan to produce the device.
The task of finding suppliers to manuacture products at the right price is easier now than it was five years ago when DRI first started to develop its sources overseas. Bruce Brekke, DRI's vice-president of purchasing, culled trade magazines for listings of vendors in certain product categories and spoke to foreign consulates in Chicago. Next, he traveled to the Far East to find manufacturers. "Today, they seek us out," notes Brekke, who deals directly with factories or through an agent rather than through a trading company.
Not all the company's product ideas have received the enthusiastic response the Four-Wheel Wonder did. "What I thought were some of the greatest ideas have generated the worst response," admits Harmon. One was a $29.95 auto parts "shop," which DRI spent $60,000 promoting to about 60,000 names. The shop consisted of a set of auto parts, such as fan belts, hoses, and fuses, stored in a box that fit neatly in a car trunk, with different shops for different car models.
"It was perfect from a promotional standpoint," says Harmon. "You can rent hundreds of lists of car owners, and you can pinpoint each owner's type of car then send the person a personalized printout of what will be included in the kit." It seemed ideal, but when Harmon received the test responses, they were barely measurable. "I still have 4,000 vacuum hoses in inventory as a reminder of my folly," says Harmon. "Every once in a while when you think you're pretty good, the public gives you a good kick in the teeth and straightens you out."
Tough as such news may be to swallow, Harmon emphasizes that direct feedback from consumers is one of the benefits of direct marketing. "In this business you don't need to send out questionnaires or use focus groups to test an idea," he says. "You put together a package and ask people if they'll buy it. If there's no check, they don't want it."