Progressive Distributor - Battling the big boxes

Battling the Big Boxes

With showroom and counter sales booming, this Northeastern Indiana specialty tools and industrial distributor demonstrates how to blend retail and traditional distribution practices into profitable sales.

by Richard Vurva

"You need some help there, bud?"

If a pimply faced kid in an orange vest mumbles those words when you enter a big box retail store, it makes you want to teach him a lesson about respecting his elders. Coming from a friend or co-worker, however, it's not only an appropriate greeting, but also welcome. It suggests you're in the company of peers. You're more than an unwanted intrusion in a busy sales clerk's day.

It's also an example of the casual give and take that occurs between customers and salespeople at Mill Supplies, an industrial and construction distributor in Fort Wayne, Ind. Customers know the people behind the showroom counter are knowledgeable and experienced. In fact, some have spent more time pounding nails and drilling holes on jobsites than they have selling tools and supplies.

Counter salesman Steve Wyss, for example, was in the construction business for 10 years before he came to work for Mill Supplies. He has seen and done it all, so contractors trust his advice when they ask for help solving an on-the-job problem.

In a recent visit to the store, Loren Himes, a field superintendent with Serres Masonry of Fort Wayne, spent several minutes talking to Wyss about how to set up a safety harness training program and thumbing through brochures about safety harness regulations.

"He's very helpful," Himes says. "He wasn't trying to sell me a thing. He was just trying to help me."

By allowing salespeople to spend a few extra minutes talking with customers, Mill Supplies owner Jim Beckstein's hope is that customers like Himes will remember the helpful free advice he got and return to make a purchase at a later date.

"There are a lot of different ways that our customers can buy products, from catalogs to CD-ROMs and now electronic commerce," Beckstein says. "But none of those alternatives can answer questions or solve problems."

The tactic appears to be working. An average of 30 to 40 new customers stop by each month. Visibility has dramatically increased thanks to billboard advertisements, signage placed at sporting events in the local coliseum, and radio and TV advertising. The company is an active participant in the local building contractors association and helps put on the annual Building Contractors Association Trade Show, further increasing name recognition in the community.

"Sales are skyrocketing at the front counter," he says. About 30 percent of the company's $20 million annual sales from its Fort Wayne and Indianapolis branches come from walk-in contractor business.

To build or not to build
Counter sales began taking off in spring 1999 when Mill Supplies expanded its existing showroom in Fort Wayne by 5,500 square feet. Why spend the money on a major expansion that more than doubled the showroom floor? It was either that or build additional
warehouse space.

"We literally were tripping over ourselves back there," says warehouse manager Mike Eber. "We had to either add on to the warehouse or add on to the showroom."

Fire code restrictions limited building higher shelf space in the warehouse, since it would have meant installing a new sprinkler system. Expanding the showroom seemed the only logical solution.

In hindsight, it was the best move the company could make. Adding warehouse space raises costs and it can be difficult to justify a return on investment. Add showroom space, however, and you increase inventory visibility, which boosts add-on sales.

The concept is simple. Contractors shop the showroom the same way most people shop in their local grocery or department store.

"I've yet to go into a store to buy one thing and come out with just one thing," Beckstein says.

A contractor comes in to buy a Milwaukee Electric power drill and leaves with the drill, a grinding wheel and two new carbide bits.

"We have a lot of comments from people who come in and think we've taken on a lot of new lines. But, we didn't," says Janet Beckstein, Jim's wife and the company's chief executive officer. "It was always in the back. They just weren't aware we had it."

Moving inventory into the showroom puts it where it can do the most good: customers can see it. The next step will increase visibility once again.

"We're not quite done with our showroom," she says. "My idea is to have every row marked like the grocery store. If we have an impatient buyer, he can look down and see exactly what's in that aisle."

A new credit card integration package also speeds customer service. Instead of swiping a customer's credit card, punching in the purchase price and waiting while a modem dials out for authorization, the counter clerk swipes the card right into the computer terminal. Within seconds, the clerk receives authorization and the transaction is completed.

Customers who call orders in ahead of time can go directly to an express pickup counter to pick up orders. They don't have to wait behind the shopper talking to the counter clerk at the front of the store.

"It's one more way we try to get the customer in and out of the door faster," she says.

The best of two worlds
With two Lowe's stores, one Menards and a Home Depot in town, finding a way to set yourself apart from the other guy is smart business. So, Mill Supplies blends the best of the tricks used in the retail trade with traditional distribution practices.

For example, all items in the showroom are bar coded. The aisles are wide and well lit. Attractive product displays draw the customer's attention to new products. But closer examination reveals subtle differences that set the showroom apart from a retail establishment that caters primarily to do-it-yourselfers, not professional tradespeople.

You'll find only top-line products designed for professional tool users. You won't find superfluous merchandise like furnace filters, kitchen faucets and carpet swatches.

Then there are the barstools at the checkout counter. Some distributors think Beckstein was foolish to put stools in the store.

"Put merchandise under those counters instead," they tell him. "You don't want people sitting there getting comfortable."

Beckstein remained resolute. He says many customers who come into the store know what they want and where it is, but still want to sit at the counter and be waited on. Sure, it raises his cost of sales, but it's a way to differentiate himself from the competition.

Another way he sets himself apart is by providing tool repair service. The company is an authorized service center for several major tool brands, including Bosch, Milwaukee Electric, Ridgid, Stihl, DeWalt and Metabo. Beckstein also negotiated to become the official tool repair facility for some of the local big box retailers, capitalizing on a weakness of the competition.

To attract small contractor customers, Mill Supplies offers fast turnaround on tool repairs, often making repairs while the contractor waits. When repairs are more complicated, they charge a nominal breakdown fee. If the tool is beyond repair, they waive the breakdown fee if the customer buys a replacement tool from Mill Supplies.

To capture business from the remodeler or contractor who stays on the job late, the store opens at 6:30 every morning and stays open until 7 two nights a week.

Something else you won't find at a big box store is what Beckstein affectionately calls the "toy room." Salespeople can take customers into the 15-foot by 20-foot room adjacent to the showroom and encourage them to pull the trigger on a Bosch rotary hammer and compare it to a Milwaukee tool before buying. The room is filled with workbenches, blocks of concrete, wood and steel, so customers can actually try out a tool and compare it to a competing brand.

"Vendors love it," Eber says. "They believe that if someone tries their tool, they'll want to buy it. We keep a lot of our rental tools in there so customers can try them. If we don't have one in rental, we'll pull one off the shelf. They usually buy it once they try it."

Scanning for gold
In order to make the new showroom work, the company needed to upgrade its inventory processes. So, when it expanded the store, it also installed a new PathGuide Technologies inventory tracking system that works in conjunction with its Prophet 21 package.

Eber says installing a new radio frequency bar code inventory control system saves untold hours of manual labor costs. "We don't have people moving stuff around to keep things in order," he says. "Before, we had to keep things together in the warehouse. It had to make sense visually so you could see where everything was. Now, we put inventory wherever we want and the system keeps track of it for us."

It has resulted in much tighter inventory control, since cycle counting is performed on a daily basis.

"A couple of us work on cycle counting every day," Eber says. "We'll get through the entire inventory at least three times a year. Before, we did A items three times a year, B items twice and C items once a year, if we were lucky."

The system makes it possible to do batch picking, which speeds the picking process. Here's how the concept works: When filling orders, pickers can take five or six orders at a time, scan them in and maintain more than one bin on a shopping cart. The hand-held scanner directs them to take two drill bits from one shelf, two grinding wheels from another and put them in the appropriate bin. Pickers can fill several orders at one time, and the system tells them the best path to walk for optimum efficiency. There's no more backtracking down the same aisle several times.

The receiving process works the same way. Before, after receiving an item, warehouse workers had to immediately put it away and match it to the paperwork. Now, it's received into a "putaway" cart and stays on that cart until someone has time to put it on a shelf. In the meantime, if a customer needs the item, the system knows it's still on the putaway cart, so no one wastes time wandering the warehouse in search of the product. The old system could only recognize the primary location for an item. It wouldn't recognize anything else.

Beckstein says he's willing to invest in new technology if it helps improve customer service.

"The runner in a pickup truck for a company costs at least $50 an hour," he says. "If he can get a step ladder faster at the electrical house and he doesn't have to stand in line there but he does here, I've lost that business. But if he associates us with speed and time, is that investment a good one? Yes, it is."