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In the black: Member flexibility, online technology, customer service, polished programs push profits

BOB TAYLOR, president and CEO, Do it Best ...
SHOW PAINTS The Valspar paint lines, including Laura Ashley, are...

In mid-September, Do it Best released financials for the fiscal year ended June 30, reporting that sales had fallen about 7 percent to $2.81 billion—below the $3 billion mark the Fort Wayne, Ind.-based co-op had so proudly achieved in 2006. So why was president and CEO Bob Taylor smiling?

Probably because—given the weak housing market and deflated lumber and panel pricing—Do it Best had come out of the fiscal year smelling pretty good. The co-op turned in record profitability, up close to 3.5 percent; hard-lines sales were up 4.5 percent; and Do it Best had managed to keep operating overhead at 2 percent, the lowest in the industry.

“I can’t do a lot about the pricing of product out there in the marketplace: You had deflation in panel prices last year close to 60 percent at some points during the year, and lumber pricing was down in excess of 25 percent,” Taylor said. “But to go through that and still end up where we did with the profitability that we did and continue to drive growth and hold our own in unit volume, I’m real proud of what our team and our members were able to accomplish.”

Customized to fit

Taylor believes Do it Best’s success lies in its core principle: Each retailer is unique and shouldn’t be forced to use products or programs that don’t apply to his particular store or customer base. The needs of a lumberyard in southern Illinois are different than the needs of a small hardware store in upstate New York, so Do it Best offers a menu of options that members can choose from—or not.

“We have a hard time believing that some one-size-fits-all or cookie cutter approach is really the answer,” Taylor said. “It’s a competitive marketplace, and I think our members need to stand out and use everything at their disposal. That’s your ace in the hole. That’s something that differentiates you from a Starbucks or a big box. You are the local guy.”

The co-op’s laissez-faire attitude is appreciated by members like Ed Tisdale, owner of Family Hardware in Cape Coral, Fla., a Do it Best member since 1991. He likes the fact that his customers know his 10,000-square-foot store as Family Hardware, not necessarily for the Do it Best Express branding it adopted in the 1990s.

“Nothing is mandatory about being a member of Do it Best except paying your bills,” Tisdale said. “I don’t think any particular dealer’s affiliation or brand amounts to a hill of beans for most people. As long as we provide the depth and breadth of merchandise and great customer service, that’s what the local people care about.”

Jeff Prupis, owner of Pomona Paint & Hardware in Pomona, N.Y., also swears by the autonomy Do it Best gives its members. After all, he said, who knows the needs of local customers better than the owner himself, who experiences the same issues on a daily basis? “I use the same air conditioner filters that they do. The same guy who fixed my roof probably fixed theirs,” Prupis said. “Do it Best owners understand the micro-economy.”

Taylor also touts the fact that in a faltering economy, Do it Best was able to give back a record $126.2 million rebate to its member-owners, representing a 3.5 percent increase over 2006. For Tisdale, that’s a 13 percent rebate, and for Prupis, the number comes in at 14-plus percent and represents a “huge second profit for the store.”

It’s all about making the stores more competitive and profitable at retail, and new vp-merchandising Steve Markley believes Do it Best is achieving a healthy balance of nationally recognized brands and globally sourced products, the latter of which have increased by 25 percent to 30 percent in the last year and now number more than 4,000 skus.

“We’ll buy a product through an existing vendor overseas. If there’s not that opportunity, we’ll source it directly from overseas,” he said. “We don’t have a strategy to get away from national brands, but we want to supplement those brands with private label products. In many categories, the brand may be important to us in the industry but is not that important to the consumer.”

Priming paint

The co-op is also emphasizing paint at the October dealer market in Indianapolis. There will be a paint exhibit area that puts special emphasis on departments and programs (branded and private label), including an expanded 36 feet of color racks for a striking in-store presentation and half-hour manufacturer demonstrations designed to show retailers how to instruct their own customers in weekend projects.

The branded program features Valspar—both the premium Medallion label and the Integrity brand exclusive to Do it Best members—as well as the Laura Ashley designer line and a private label program by Sherwin-Williams. “The idea is to let members distinguish themselves in a marketplace. Do it Best brands can be consistent in tying into Do it Center, Do it Best and member-branded stores,” said Dick Wise, merchandise manager for paint and sundries. “Whatever market you’re in, we have a program to address that—from basic to high-end. We can put together a program that addresses their consumer.”

It comes back to Taylor’s point about diversifying the business and giving consumers more reasons to shop your store rather than the competition. Whether it be expanding into home decor, installed sales, rental and/or industrial/commercial sales, Taylor said each store has opportunities to broaden the base of their business, protect themselves and continue to drive additional volume for their operations.

“When times are good, you kind of manage your growth. When times are bad you have to work a little harder at creating growth,” he said. “We certainly have to do that and help our members expand their businesses.”

He pointed to the success of programs like RetailPLUS and RetailSTART, which offer financial incentives to start up or expand, but says he doesn’t expect overall numbers to grow too much. Do it Best will continue to experience some attrition, but the new members coming in tend to be stronger, more aggressive and driving more volume, according to Taylor.

“If I look at the number of stops per round that our trucks make, we’ve gone from about 14 or 15 stops 10 years ago to now just around 10 or less,” he said. “So it’s more volume per member, which makes for a more efficient operation.”

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