But no matter how closely independents shave prices, they compete against the superstores' unbeatable selection. Small stores offer no more than 15,000 items, while Home Depot carries more than five times that number. In response, clever independents build up a specific strength like garden supplies, rental operations, or woodworking tools.
Bill Griffin, owner of Griffin Ace Hardware, in Santa Ana, Calif., says his plumbing department offers more hard-to-find fittings than a nearby Home Depot does. He expanded that section because local homeowners were asking for it, and he has modernized his merchandising, implemented a mandatory 40-hour training program for new employees, and extended his hours.
Independent stores like Griffin's still offer the advantages of convenience and personal service. "Our stores are at least 100,000 square feet, so we can't put them on every corner," admits Lonnie Fogel, a spokesperson for Home Depot.
Plumbing
Average size of plumbing business: 20 employees.
Average gross sales: $2.3 million in 1991.
Status of mom-and-pops: Sinking the giants.
Plumbing, as well as heating and contracting, remains a highly fragmented "son-and-pop" industry without large national operators. Market leader Roto-Rooter, based in Cincinnati, estimates that its share of the market is "in the low single digits," according to Robert Boettger, vice-president of marketing.
Larry Harmon of De Mar Plumbing, in Clovis, Calif., likes it that way. His company has grown from $200,000 in 1985 to $3.2 million in 1993 by solving customers' problems beyond their clogged drains.
That meant polling his customers to learn that their two biggest complaints were not knowing when help would arrive and receiving bills unrelated to job estimates. He resolved those issues by introducing guaranteed one-day service and a flat-rate pricing system that covers more than 85% of De Mar's jobs. He has added a one-year guarantee on all work and requires that his employees be thoroughly trained in such areas as customer satisfaction. He insists that they wear uniforms and that they follow service calls up with customer surveys.
"If we could raise the capital to expand, we would start franchising," says Harmon. "I think the nation is ready for a national franchised plumbing company -- as long as it is of high quality."
Office Supplies
Percentage of office supplies shipped from manufacturers --
To the mass market (Wal-Mart, Kmart, and so on): 11.4% in 1992; 5.9% in 1986.
To the superstores: 11.2% in 1992; 0.3% in 1986.
To small or midsize dealers: 8.8% in 1992; 19.9% in 1986. Number of independent dealers: 6,000 in 1992; 13,300 in 1986.
Status of mom-and-pops: Folded.
Industries that sell commodity products -- which are as diverse as drugstores and lumber retailing -- have been quick to fall to superstores, notes Dun & Bradstreet's David Kresge.
And nowhere is the phenomenon starker than in office supplies. Chains like Staples, Office Depot, and OfficeMax have grown in just seven years to erase small dealers. Now the big players are consolidating their lead by rolling out private-label brands.
Many experts see the next five years' growth coming from superstores. A recent report by Patrick McCormack, senior vice-president at Dean Witter Reynolds, projects that office superstores will continue to proliferate -- doubling from 775 outlets today to 1,600 in 1997.
"Long-term, we think there's not going to be anybody left but 20 big players," says Peter Costello, spokesperson for the Business Products Industry Association, in Alexandria, Va. "You are not going to be in this business without a strategic alliance." Like the voluntary chains that have sprung up in the hardware industry, the remaining independents are tapping into collective-purchasing groups that allow them to slash prices.
The leaders of those groups advise independents to mimic the look and feel of big stores rather than highlight the independents' personal nature. With customers now accustomed to buying almost exclusively on price, independents need to create the perception that they are competitive, according to Larry Ehmen, co-owner of Fishers Office Plus, in Quincy, Ill. "You have got to change the box you sell out of and make your place look like a discount place."
With the support of Independent Stationers, a 220-member purchasing group that wants its members to bear the Office Plus name much as hardware wholesalers use the Ace and True Value names, Ehmen and his partner, Randy Krutmeier, recently upgraded their retail operation. They moved from a 1,600-square-foot store into 2,500 square feet of retail space and replaced the old-fashioned freestanding display gondolas with shelves of merchandise.
"We even painted the ceiling white to make it look less fancy," Ehmen notes. "Now people come into our store and say, 'Finally, an office discount store.' Well, our prices were the same at the old store. Mom-and-pop stores used to be fancy -- carpets and so forth. Now they look like Kmart or Office Depot -- well-lit, with merchandise stacked real high."
-- Tom Ehrenfeld
