Diversified services offer seeds for future growth opportunities

Home Channel News, March 19, 2001

PRO GROUP OFFERS A BROAD AND

growing variety of programs and services for its distributors and their retailer customers. Below are brief descriptions of three -- space planning, the FAST promotion program and Pro Financial. As with all of Pro's offerings, affiliated companies are free to choose whether to participate.

SPACE PLANNING

Using Pegman and Intercept software, Pro has developed sets of planograms for six core departments -- plumbing, electricals, hardware, tools, lawn and garden and paint -- and two store prototypes -- a basic 3,500-square-foot store and a larger 6,500- to 15,000-square-foot version with expanded niche departments. To build the more than 400 planograms involved, Pro captured some 32,000 video images and 4,000 shape drawings. All told, 20,000 items are accounted for, complete with product measurements and UPO information. Included is an endcap program that ties into Pro's monthly circular advertising.

Traditionally, Pro has marketed its space management services by offering the software to its distributors and dealers as a means for them to maximize retail shelf space and better merchandise products. Four distributors-members -- Wallace Hardware, Moore-Handley, Long-Lewis Hardware and Handy Hardware Wholesale -- currently have Pro's planogram software in house, according to Randy Burns, Pro's manager of retail space systems.

But in January, Pro launched a new division, Space Management Services, and began offering Burns and his expertise to manufacturers and other companies outside the Pro network as a sort of prepackaged, space management consulting service for retailers.

"Retailers have begun to expect and demand space management of their suppliers," Burns said. "Instead of having to purchase the software and learn how to us it, we do it for them."

Should the service prove successful, it could be spun off as yet another of Pro's growing stable of limited liability corporations.

"Our thinking is to go to small- and medium-sized manufacturers who don't have the justification for their own full-time [space management staffs], and do it on a fee basis at a fraction of the cost," said Richard Paige, Pro's president and CEO.

FAST

Focused Aggressive Sales Techniques, or FAST, is a promotional program that grew out of a member's suggestion that Pro use its collective buying power to negotiate deeply discounted prices from manufacturers of select, well-known brands and products at key times of the year. In exchange, retailers participating in the FAST program agree to participate in six promotions a year and give those products preferred merchandising positions, such as endcaps, in their stores.

"It's basically a guaranteed better placement for a better price," Burns said. "We feel it's unique in two-step distribution."

Limited to six manufacturers per 60-day promotional period to maintain the value of the program, FAST is available to members across Pro's array of store programs. Dealers can choose the extent that they want to participate in any given cycle based upon the types of products they carry.

Pro began putting the program in place a year ago, and it was rolled out in January. To date, more than 200 stores have signed up, and by the end of the year Pro hopes to have at least 36 vendors involved. Among the vendors participating in the first FAST promotional cycle were Master Lock, Boss Glove and Swan, the maker of lawn and garden products.

Among the benefits for vendors is the opportunity to introduce new products, according to Don Robison, managing director of Pro's Garden Master and Farm Mart programs.

"For example these may not be products customers necessarily go to the feed store for, but it becomes an impulse item," Robison said.

PRO GROUP FINANCIAL

Launched four years ago in partnership with DeutscheBank, Pro Group Financial is designed to improve cash flow for companies all along the supply chain. Under the program, DeutscheBank serves as a payment go-between, paying participating manufacturers for products close to when they ship, but not billing the distributor for 90 days.

"In effect, it allows manufacturers to give extended terms to the distributor but still get their money up front," Robison explained. "The retailer gets better terms because the distributor gets better terms, and the manufacturer gets a guaranteed payment."

Though the program is "still in its baby stages," according to Robison, about 25 Pro distributors are participating.