New Stores a Bonanza for Home Handyman : Hardware Marts Expand but Independents Move to Meet the Competition

SAN DIEGO —  Southern California’s do-it-yourselfers need not travel far in search of hammers and nails.

In a six-block cluster along Fletcher Parkway in El Cajon, the repair and remodel crowd is being wooed by Westy’s, Handyman, Home Depot, Home Club, Sears & Roebuck and the Hazard Center building and lumber supply company.

Fullerton’s Orangethorpe Avenue is home to the likes of Home Club, Home Depot, Builders Emporium, Buena Park Lumber and National Lumber.

Stretches of hardware heaven are growing up around the country, but the Southland “is where the action is (because) Southern California is the world’s largest user of wood products,” said William Cowling III, president of Dixieline, a five-store lumber and hardware chain in San Diego.

$59 Billion in Sales

Regional chains, hardy independents and major retailers are chasing the $59-billion annual do-it-yourself market that will mushroom to more than $100 billion by 1990, according to statistics gathered by the Indianapolis-based National Retail Hardware Assn.

But intense price competition is taking a toll.

“There’s a blood bath going on in El Cajon,” observed Cowling, whose nearest Dixieline outlet safely sits more than a mile away from the cluster of hardware and wood products outlets along Fletcher Parkway. “And what’s happening in Fullerton is World War III.”

The casualties:

In September, San Diego-based Handyman’s board of directors voted to liquidate the company, which went public just a year ago after spinning off from Edison Brothers, a St. Louis-based retailing company.

Liquidation of Handyman’s 53-store chain’s assets figures to generate a handy gain for shareholders, officials said. Since the announcement, Handyman’s stock has risen by more than 14 points.

Last year, Boise Cascade sold most of its Southwestern retail stores, including a lumber yard and mill, a wholesale distribution facility and seven retail building-materials stores in San Diego. A local management team acquired the San Diego operations in a leveraged buy-out.

Weyerhauser last year sold its San Diego operations, including five Dixieline retail outlets, a wholesale distribution center and a manufacturing facility, to Providence-based Nortek.

W.R. Grace, which late last year sold more than 100 of its West Coast retail outlets to Santa Monica-based Wickes Co., the owner of Builders Emporium, also is negotiating the sale of its Midwest and Eastern home stores.

“My God, there are so many (ownership) changes going on,” Cowling observed. “That alone should serve as a smoke signal that there’s going to be a shakeout.”

Change has been the name of the game in the once-staid lumber yard and hardware store industries during the 1960s, when savvy retailers created “home center stores” that for the first time combined lumber and hardware sales under one roof.

In 1979, Atlanta-based Home Depot further rocked the retailing scene when it introduced two “warehouse home centers” that offered handy men and women a massive selection of aggressively advertised and competitively priced lumber, hardware and home furnishings.

Warehouse stores are just that--massive hardware and lumber supply stores with upwards of 100,000 square feet of floor space, crowded with merchandise and stacked to the rafters.

The warehouses contrast with both neighborhood hardware stores that might occupy 5,000 square feet, and the larger but more traditional home center retail stores that are bigger than a hardware but smaller than most warehouses.

Because warehouses each require as many as 125,000 households to support them, only about 70 U.S. markets may be large enough to attract and hold the major competitors, according to Ellen Hackney, who edits “Do-It-Yourself” magazine for the National Retail Hardware Assn.

In the race to open new stores, warehouse operators already are waging war in Southern California and in cities such as Atlanta, New Orleans, Detroit, Cleveland, Chicago and Virginia Beach.

‘Maturing Very Rapidly’

Consequently, more than half of the 400 warehouses that the nation’s do-it-yourself population will be able to support already have been built, according to the National Retail Hardware Assn.

“Our segment is maturing very rapidly and we’re now in a consolidation phrase,” observed Jud Walford, chief operating officer of Builders Square, K mart’s two-year-old chain of home center stores.

Those that survive the consolidation will cash in on a national wave of self-sufficiency that continues to bolster the ranks of consumers with the confidence to tackle the repairs and renovations that once were best left to plumbers, carpenters and masons.

The percentage of the nation’s homeowners who feel competent to do their own remodeling and repair work has nearly doubled since 1970, according to the National Retail Hardware Assn.

Now, 75% of homeowners are doing it themselves and retailers believe they can “drive that figure up a little bit more . . . before they bump up against the people who say there’s no way they’ll ever do anything for themselves,” Hackney said.

And to the delight of retailers, do-it-yourselfers are willing to spend money in order to save money.

In 1970, the “typical” household was spending just $252 a year at hardware, lumber and home center stores. By 1985, annual spending had risen to $670 and by 1990 do-it-yourselfers will spend more than $1,000 a year, according to the National Retail Hardware Assn.

Heavyweights Attracted

That spiraling spending pattern has attracted some retailing heavyweights that, faced with “sales that are stagnating and profits that are falling . . . see the home improvement market as a hot market,” Hackney said.

K mart has been generating most of the recent heat since spending a reported $90 million in 1984 for San Antonio-based Home Centers of America’s nine stores. K mart’s Builders Square subsidiary expects to have 82 retail home warehouse stores open by the end of November and officials hope that the chain could grow to 150 stores by 1990.

In addition to courting do-it-yourselfers, Builders Square expects to generate as much as 40% of its business from “the professional repair and remodel guys,” who traditionally have depended upon lumber and hardware outlets, according to the chief operating officer and co-founder of Home Centers of America, Jud Walford.

Builders Square’s warehouse stores stock more than 3,000 professional items, including heavy duty power tools, paint in five-gallon containers, and name brand hardware that appeals almost exclusively to professionals, Walford said.

K mart Entry

But despite K mart’s aim to fashion a stronghold in Southern California, Builders Square has opened just three California locations, in Oxnard, Rosemead and Riverside, and has definite plans to add just three new stores, in Buena Park, Fountain Park and Bakersfield.

When Builders Square--or any other new warehouse--comes to town, it attempts to muster immediate consumer awareness through an intense advertising campaign that focuses on low prices, a wide product selection and a high level of in-store service.

Despite their gains, however, the major chains operate just 13% of retail hardware and lumber outlets and control just 30% of lumber and hardware sales, according to the National Retail Hardware Assn.

The heavy reliance on price-cutting schemes likely won’t continue because “underpricing--which is one of the big problems in Southern California--leads to a price war,” Hackney said. “And no one can continue to sell at cost forever.”

Stiff Competition

Warehouses also face stiff competition from small regional chains and individual hardware stores that are responding to competition by adopting more efficient retailing practices.

“It’s a case of the elephants doing lots of fighting and the ants scurrying to safety until the fight’s over,” Hackney said. “The warehouses will shake each other out.”

“There’s plenty of room for everybody,” Walford acknowledged. “The warehouse has been the big talk over the last couple of years but you still see the independents.”

“When the warehouses first started coming in we threw up our hands and were very concerned about the (competition),” acknowledged John Cameron, communications director for Ace Hardware, a national wholesale distributor. “But we now know that we can compete very effectively. Once you get inside and check out the prices, you’ll find that we’re very competitive.”

Despite the warehouses’ “initial excitement . . . we always see that prices and service (begin to) suffer when they try to get their costs in line,” observed Allen Quimby, president of Western Lumber Co., the Boise Cascade spinoff in San Diego that operates seven Westy’s retail outlets.

“Customers come back to us when they see what we have and they don’t have, which is service and knowledge,” Quimby said.

“If you can put that new kitchen sink plan together in your head, then fine, go to the warehouse,” Cowling said. “But if you need help, our people will take the time to help you put that together.”

Sales to Contractors

Chains such as Western and Dixieline, however, are careful not to emphasize do-it-yourself sales at the expense of revenues generated by professional contractors. Both Western and Dixieline extend credit to contractors and maintain special contractor service desks. Dixieline employs 22 salesmen who travel to construction sites in radio-equipped cars, “so contractors don’t even have to go into a store if they don’t want to,” Cowling said.

Cowling, who has plans to add a handful of retail outlets in San Diego, also is considering expansion elsewhere. Dixieline has considered acquisitions of home centers and lumberyards in Los Angeles, Austin and Hawaii.

In addition to emphasizing high levels of in-store service, independent hardwares and regional chains are bolstering their buying power and advertising by joining hardware wholesale companies.

Consumers might not recognize Chicago-based Cotter & Co. but thanks to a $44 million annual advertising campaign featuring the likes of Pat Summerall and Paul Harvey, do-it-yourselfers do recognize Cotter’s True Value product line.

Last year, Cotter shipped just under $2 billion in merchandise to its more than 7,000 members. Oakbrook, Ill.-based Ace Hardware Corp., the nation’s second largest hardware wholesaler, shipped just over $1 billion in merchandise to its 4,800 hardware stores and home centers.

Interestingly, Sears Roebuck & Co., one of the nation’s largest retailers of hardware, power tools and home improvement products, also is running counter to the bigger-is-better theory.

Sears’ Entry

Sears hopes to have 45 of its 4,000-square-foot “Sears Paint and Hardware” stores open by year’s end. The stores, which will carry Sears’ popular Craftsman tool and Weatherbeater paint lines, also will carry items designed to attract “the guy who’s doing a weekend project and needs a specific item right away so he can get back to the job,” according to a Sears spokesman.

For do-it-yourselfers with time to spare, however, it pays to shop around because prices and selection have never been better.

The Home Club warehouse in El Cajon recently offered more than a dozen styles of hammers, including ball peen, dry wall, shingle (hammer or ax), rigger axes, wood rip-claw hammers, “soft” hammers and framing hammers.

Finding the lowest prices is difficult, however, because competitors offer such a wide variety of brands.

Measuring tapes: Home Depot recently offered a 25-foot Stanley Powerlock measuring tape for $7.93. Although Home Club (a membership club that tacks a 5% surcharge onto non-members’ bills) didn’t offer the 25-foot tape, it did offer a 30-foot Stanley tape measure for just 44 cents more.

Handyman offered the 25-foot Powerlock for $12.99 and Westy’s, the smallest of the stores sampled, offered the 25-foot tape for $11.49 and the 30-foot model for $18.49.

Light bulbs: Home Depot offered four 60-watt standard General Electric bulbs for $2.79. Home Club was selling four 60-watt Westinghouse light bulbs for $1.58. Handyman’s four-packs of 60-watt Westinghouse “soft white” bulbs were marked down from $6.99 to $3.99, and Westy’s offered four 60-watt GE light bulbs for $3.49.

WD-40: Home Club was selling the 12-ounce can for $1.48, while Home Depot wanted $1.38 for a 9-ounce can. Handyman offered a 9-ounce can for 98 cents.

The small independents can be competitive on some surprising merchandise.

During a recent visit to Chicago, Hackney talked to the owner of a small family-owned hardware north of Chicago that had undercut mighty K mart on power tool prices.

“On the seven tools he offered, he beat Builders Square on five of them and tied on one,” Hackney said. “He was higher on just one of the tools.”