How does a stubbornly independent building supply house carve out a decent share of a market dominated by omnipresent, almost omnipotent, big box hardware retailers?
By emphasizing customer service.
By painstakingly educating every rookie staffer. And by giving away hot buttered popcorn. Lots and lots of popcorn.
“You wouldn’t believe the amount of popcorn we go through – more than $100,000 a year,” grinned Jim Thorogood, co-owner of Calgary-based Totem Building Supplies, the largest independent building supplier west of Kenora.
|Larry MacDougal photo, Business Edge|
|Totem president Jim Thorogood, right, and his son Ryan, a general manager, take on the giants.|
Totem recently opened its 14th retail store. Not too shabby for one of the little guys on the block.
Now entering its 34th year, Totem’s retail and wholesale operations will move about $200 million worth of lumber, paint, plumbing and electrical supplies and do-it-yourself garage, deck and shed packages in 2004. And the week after Thorogood (who runs the family-owned company in partnership with his son, Ryan) received an achievement award from the Western Retail Lumberman’s Association seemed a good time to catch up on three decades of steady growth.
The Thorogoods don’t mind sharing an occasional trade secret. But they wisely avoid antagonizing powerful internationals such as Home Depot and Rona, which steamrolled into Alberta during the early 1990s. Jim and Ryan are content to live and let live, generally keeping a low profile.
“It’s the surface whale that gets harpooned,” is a corporate byword around the Totem head office.
“We have to offer something the big box stores don’t have,” explained Jim, who learned the game at the elbow of his own father, Cliff.
“We can’t beat them on selection. We can probably match them on price. The only thing we really have to offer is service and a highly-trained staff,” he said.
That’s why every newcomer who joins Totem’s Alberta-wide staff of almost 1,000 spends two weeks at a company training centre before hitting the sales floor. When the indoctrination is complete, the rookies can handle everything from cutting a mitre to mixing a can of latex.
Totem’s enlightened service approach evolved naturally while the Thorogoods were casting about for a strategic response to the dreaded arrival of the big-box giants.
“That took a couple years to get used to,” admitted Jim, who added that one of the major challenges was combating a negative perception – subsequently proven wrong – that independents could no longer compete.
“The customers thought that. Maybe the employees thought that. The banker thought that. It was really a very trying time,” Thorogood grimaced.
But instead of crawling into a hole, the Totem team stiffened its resolve. And though the learning curve was steep, the Thorogoods adjusted and prospered, while other independent outfits crumbled under the competitive pressure.
“As it turned out, we benefited. We became better merchandisers.”
In initial response to the invasion, Totem spent $2 million modernizing store exteriors, replacing familiar but old-fashioned cedar siding which had outlived its usefulness.
“My accountant said, ‘You must be losing your mind,’ ” chuckled Jim.
Store interiors were cleaned up as well, while managers beefed up inventories in an effort to match the big-box monsters’ fully-laden shelves.
Meanwhile, the company streamlined its product line while placing renewed emphasis on existing strengths, such as “package selling” of do-it-yourself deck, garage and shed kits.
“Our guys can customize these packages in five minutes, something the competition doesn’t have the ability to do,” said the junior partner.
Another key strategy was to investigate wholesale sales to professional contractors. Today, Totem’s wholesale component nicely complements the retail side, representing about 30 per cent of total volume.
Overall, the re-tooling job took three or four years.
All the while, Totem’s management group – a remarkably cohesive and loyal team – was working overtime to create new, customer-friendly sales models, while formulating plans for the staff training centres.
“We were almost glad when they (the big boxes) finally opened. We wanted to get it over with,” said the senior Thorogood.
Surprisingly, Totem was able to maintain sales momentum for the first few years, though the onset of fierce competition meant paring down its profit margins.
By the third or fourth year, however, profit margins were returning to normal and sales volumes were picking up nicely. The Thorogoods have never looked back – not that they’re getting cocky.
“If we get too aggressive, they (big-box competitors) have the ability to do us harm. We don’t want to get them angry,” said Jim, who tries to maintain an atmosphere of relatively peaceful co-existence.
Apparently, there’s room for everyone.
Hey, Big Guys. Want some popcorn?