Stellar Retailers

Home Channel News, April 17, 2000

Reshape an Ever-Changing Home Improvement Industry

do-it-yourself wasn't even in vogue until the 1950s, and even then it was often regarded as more of a hobby than a necessity by most observers.

However, a few pioneering retailers can be credited with creating, nurturing and transforming home improvement into one of the Largest and fastest-growing retail segments in America.

In the early 1900s America was a rural nation, with hardware stores and lumberyards serving the need for farming and building products and tools. Indeed, a handful of retailers today can trace their roots to before the turn of the century. However, most of them began as quite different enterprises that evolved into hardware and building materials outlets over time.

N.A. Mans & Sons, for instance, began as a coal business in 1900 that eventually was transformed into the Trenton, N.J.-based, nine-unit lumberyard chain it is today. Ohio-based Stambaugh Hardware, which today consists of 15 convenience-oriented stores, started in 1846 as Youngstown Hardware, selling carpentry tools, gun barrels, buggy parts and hay forks.

Then, as now, any market served by a fragmented group of unconnected retail outlets was ripe for a larger retailer who could bring economies of scale and larger buying power to bear on the marketplace. Sears, Roebuck & Co., formed in 1886 by railroad agent-turned-watch salesman Richard Sears and his repairman, Alvah Roebuck, used its well-known catalog, the growing railroad system, the post office and its volume buying capabilities to serve as an alternative to over-priced rural stores.

By the early 1900s Sears was selling windows, doors, moldings and other building products along with its selection of wedding gowns, baby buggies, watches and musical instruments. Through 1940--when the program was disbanded--Sears sold 100,000 complete house packages via mail order.

An industry emerges: Hechinger, Payless Cashways, Grossman's, Rickel, Scotty's, Orchard Supply, Wickes and Menard give shape to a new retail concept

Home improvement came of age as an industry in the four decades following the end of World War II. Between 1945 and 1980 the random collection of small, ramshackle hardware stores and backwater tine yards slowly gave way to regional and then national chains of consumer-oriented home centers.

The hotbed for this new retail concept was California. Builders Emporium (BE) opened its first lumberyard in 1947 and eventually grew to 106 units in the early 1990s. Handyman, which in the early 1980s had 88 stores, opened its first unit in San Diego in 1962. National Lumber, which grew to 21 stores and whose high-profile and witty advertising stood out in the industry, opened in 1961. San Jose-based Orchard Supply Hardware, which could trace its roots back to 1931, became one of the industry's most profitable hardware store dealers before Sears purchased it in 1997.

All over America retailers began to assert their regional dominance: Ernst Home & Nursery (which was founded in 1896) in the Pacific Northwest; Rickel, Channel and Pergament in the Northeast; Grossman's and Somerville Lumber in New England; Hechinger and Lowe's in the Middle-Atlantic and Southeastern regions; Central Hardware, Wickes Lumber, Menards and Payless Cashways in the Midwest; and, in the 1970s, Handy City and Handy Dan in the South.

These chains developed what was to become the typical home center prototype: stores with 25,000 to 35,000 square feet of selling space, 20,000 SKUs and big parking lots. Their hard lines selections were broader and deeper than the typical hardware store, plus they carried lumber and building materials (some inside the store, some in drive-through outdoor yards).

While these companies were extremely successful at dominating their regional markets, many began to look for new sources of capital in order to expand. Several sought cash from larger corporations. Some, like Scotty's, Handy Andy in Chicago and Mr. Goodbuys in Philadelphia, found partners from outside the United States. Others linked up with U.S. corporations: Edison Brothers, which owned Florsheim Shoes, bought Handyman; BE and Wickes Lumber merged into a larger Wickes Cos. with other non-home center holdings; Grossman's became part of Evans Products.

The chemicals company W.R. Grace went on an acquisition rampage in the 1970s, scooping up Angels and Orchard in the West, Handy City, Handy Dan and Cashway in the South and Channel in the East. By the early 1980d Grace's home center division was the industry's largest operator.

In the 1980s shakeup and consolidation followed the conglomeration of the 1970s. Some corporations decided to invest elsewhere, such as when Edison Brothers forced Handyman into liquidation in 1986 in order to capitalize on California's real estate boom. Lone Star, another conglomerate consisting of Lindsley Home Care in Florida and Warners in Minnesota, cashed in its home center chips at 10 to 12 times earnings.

Other factors played a role in the demise of many of these regional chains. Debt related to expansion and under-performance kept many of these chains from upgrading their operations to compete against a new, transformational retail concept that debuted in the late '70s and took the industry by storm in the '80s.