Home Depot (HD) and Lowe's (LOW) are to independent hardware stores what McDonald's (MCD) and Burger King (BKC) are to independent restaurants: daunting competition (see BusinessWeek.com, 6/29/06, "Independent Restaurants, Lose the Chains"). However, independents are leveraging their reputation for quality service and convenience and taking a number of other steps to compete with and differentiate themselves from their giant-sized counterparts.
"Home Depot and Lowe's are constantly trying to find ways to improve their service, but when it comes down to it they can't compete with the locally owned independent merchant who knows his market and knows his customers by name and knows how to help them with their projects," says Scott Wright, spokesman for the North American Retail Hardware Assn., a nonprofit formed in 1900 to support independents.
Indeed, some of the most frequent complaints about big boxes stem from their often inadequate treatment of customers (see BusinessWeek.com, 6/19/06, "Home Depot: Last Among Shoppers "). And because emphasis is placed on selection and bulk inventory, finding specific products in the sprawling stores without help can be frustrating. So can taking on a home-improvement task that becomes unwieldy, and not knowing where to turn for expert advice.
"Oftentimes people go to a big-box store [and stock up] and attempt to do a project, but then come to us later on and say: 'I thought I could do this, but could you give me a little more help?'" says Mike Frattallone, co-owner of Frattallone's ACE Hardware, an independent with 13 locations in St. Paul, Minn., and surrounding areas. The business has grown around its nice-guy image and reputation for service since Mike's father Larry started it in 1975, weathering the arrivals of Menards, Home Depot, and Lowe's.
"PICK YOUR NICHE." While most people assume that the big boxes are cheaper because of their ability to warehouse on a massive scale, independent hardware store owners point out that the price gap is exaggerated in advertising and by word-of-mouth. "These big-box stores come into town, and they're [really] cheap for a while. Then they start inching up their prices," says Jim Hayes, owner of Hayes Pro Hardware in Middletown, Ind. They also focus comparison shoppers' attention on a handful of low price points on popular commodity items, he adds.
To combat big-box low prices, many independent hardware stores around the country join retail cooperatives, such as ACE and True Value. Membership in a co-op gives the small retailer access to warehousing and identification with a nationally advertised brand.
Home Depot and Lowe's carry a wide variety of product categories, so some independents are finding that it's more effective to focus on a single niche to compete. Dunn's Hardware of Lyndhurst, Ohio, specializes in repairs of all kinds.
"You have to pick your niche, whatever that is, and then you have to hammer [it] home to people," recommends owner Patrick Smith. "We know our customers go to Home Depot for kitchen and bath, but when they actually want something fixed they come to us."
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