Behind every good expansion …

Home Channel News, Nov 22, 1999

One hundred-fifty Great Indoors. Two hundred Expo Design Centers. Five hundred more Ronas.

Did someone say market saturation? The industry is going through another of its occasional spasms of expansion that find retailers mapping out growth strategies that either ignore existing market conditions or disregard them as irrelevant.

What's driving the plans of these companies -- to say nothing of Home Depot and Lowe's, which will put up another 250 warehouse home centers in 1999, and 300 more in 2000; or Sherwin-Williams, which wants to open another 50 paint stores next year -- is the unshakeable conviction that customers are thirsting for their brand of retailing, and that the current competition is living on borrowed time.

At this point, columnists usually start waving red flags to signal impending problems ahead, or shake their heads in dismay over the plight of independent and regional dealers -- aka the salt of the earth -- that are being run over by predatory mega chains.

But that argument seems insupportable. For one thing, the independent dealers that have weathered the consolidation wars are doing fine. Our staff has been researching stories about Ace Hardware, whose operations will be the subject of a full-issue study in NHCN's Dec. 13 edition. While Ace projects only a 2.3 percent gain in wholesale sales, to $3.19 billion, in 1999, many of its dealer-members nationwide are warding off chain competition successfully; some are even expanding.

The depiction of big-chain growth as anti-competitive has turned out to be specious, at least the way it's played out so far in the retail home improvement arena. While consolidation has eroded in-store customer service, it has had a positive impact on product assortment or pricing. Virtually all of the industry's innovations over the past decade -- particularly in store design and visual merchandising -- have emerged from what large companies tried first.

More companies with aggressive expansion plans have developed stores with products, in-store design and service tailored specifically to attract women whose importance, for the most part, has been neglected by less attentive dealers.

"We believe the female homeowner is severely underserved," said Jim Inglis, the former Home Depot executive who is starting a new retail venture called Dekor. He told associate editor Monica Toriello that home improvement retailers today "are still very heavily oriented towards the male. We want to remove the intimidation in the shopping experience for female customers, and I think by doing that we can even expand the market."

Obviously, Sears and Rona, the Canadian-based buying group, have drawn the same conclusion. Rona's latest version of its Renovateur Regional unit includes a huge section where paint and home decor products are displayed in an attractive, wood-paneled showroom setting that is jarringly at odds with the cantilever racking that dominates the rest of the store. And as associate editor Brae Canlen reports on page 1, Sears' Great Indoors may be the most female-centric new store concept to bubble up from the home improvement cauldron in decades.

It remains to be seen whether the market can absorb the number of stores these and other retail giants plan to open. But growth is revitalizing several of the industry's largest players, and customers are likely to benefit from that.

John Caulfield