Today, when Lamperts prices out lumber for a $300,000 home, a similar thing happens.
“We should be $1,000 more because of our expertise, our delivery and our service–things you don’t get from Menards–but half the time, we’re $1,000 less because of the way John prices,” Fesler says. “It’s a very deceiving way to price.”
It’s an approach long used in other industries. Grocers, for example, rely on loss leaders like cheap milk or inexpensive eggs to lure customers into the store, where they then load their carts with more profitable items.
With the construction industry in the doldrums, pro dealers have had to broaden their client mix to survive, putting more emphasis on retail consumers and price-sensitive pro customers. The most successful dealers have capitalized on their keen understanding of their local markets.
“There’s no magic answer to how you compete with Menards,” says Fesler. “It’s different in every location. You have to find those things that will make your local operation viable.”
For All American Do it Center in Tomah, Wis., that has meant diversifying into rentals of equipment like Bobcats and excavators and doing installed sales. “Like it or not, we’re a 30,000-square-foot convenience store,” says operator Brian Buswell.
All American follows Menards’ prices, he says, but it doesn’t try to beat them. “No one will believe us if we’re cheaper, so we try to oblige them and price ours 2% to 3% higher,” he says. “In some cases–blown fiberglass and treated lumber, for example–we call Menards and we actually raise our prices.” Then, he says, we “run a tight ship and have people who can really sell. Menards doesn’t have that.”
Be Special
Do it Best’s Ondricek advises independents to compete by “knowing the local code and the products you should carry. There’s a lot of product–plumbing and electrical–that’s unique to the local market, and a national player doesn’t have that.” Menards tells customers to drive to the local municipality to find out what they need. Pro dealers can save customers that trip.
Bob Peabody of the Lumber Mart in Grand Forks, Minn., says his company once tried to compete on the wafer board Menards used as a loss leader. “If the cost was $6.95 a sheet, they’d go with an ad at $4.95, and the Lumber Mart met that price. “But it was a foolish decision,” he says. And fortunately, one that only lasted for a couple of months.
Now, Peabody says, “We focus on how we’re different. We deliver it. We put it in the room where you need it. We have the expertise to make sure you have the right product in the right place. “Those $4.95 customers weren’t good customers. They’d be the first ones to bring in a broken handle on a hammer they used as a crowbar and they’d want you to replace it at no cost to them. They took a lot of time and energy.”
You can see the difference between Menards and a pro dealer in the parking lot, Fesler says. In the early morning, Lamperts parking lots will be filled with pickup trucks that average two years in age. Menards will be full of 10-year-old trucks.
“Those are new guys just starting out who don’t value their time as much,” Fesler says. “They’re willing to pick up the product themselves and spend two hours looking for what they need and sort through bins to find enough straight 2x4s.”
“Good contractors–the ones who will be here tomorrow–are just trying to figure out how to get it done fast,” Peabody adds. “So if they want it today, you better figure out how to get it there. Price is not nearly as important as service to these people.” He says Menards understands “the only way to get that good contractor is through service. But they still can’t provide the knowledge and service we can.”
Successful dealers say their business rests on a three-legged stool of quality products, knowledgeable employees, and service customized to the local market. “We tend to carry a slightly better grade of construction materials,” says Ondricek of Do it Best’s members. “And we’re quicker than the big boxes at picking up new products. The knowledge and expertise of our sales people–and the ease of using our products because we deliver–that’s also what we sell.”
Then again, as an autocratic, private company, Menards tends to be more nimble than its national peers in adjusting to market conditions. Home Depot might add a standard, consistent 100 feet of a product, then wait a year to see how it performs. “Menard won’t wait,” Fesler says. “If it works, he’ll put in 200 feet in two months.”
A good example of customized service can be found in Oxford, Ohio, where Gillman Home Centers began selling mattresses to the steady stream of college students at the local university, Miami of Ohio. “There wasn’t another store selling mattresses within 20 miles,” says Charlie Gillman. “In this economy,” he says, “you have to look and see what people aren’t doing.”
Customizing operations in each of its six locals, Gillman has a Radio Shack inside one store. Others rent tools. Some sell appliances. In a location where the store manager had a passion for pets, Gillman says, the company began providing pets and supplies; it has now gone through several semi-trailer loads of horse feed.
As Ron Dorn likes to say, “this isn’t rocket science. We just have to say, ‘What do we do well?’ and stick to it. If you try to be the cheapest and provide quality and service at the same time, you’ll fail.”
Dorn hopes Menards’ talk about service at its new Ohio store is a sign that company is falling into the trap of trying to be all things to all buyers. If that’s the case, he says, “that’s good news for independents.”
