HARDWARE WARS.

THE BIG-BOX CHAINS NEARLY PUT BEVERLY HILLS-BASED PIONEER & LUCERNE OUT OF BUSINESS, BUT THEN A NEW MANAGER FOUND WAYS TO COMPETE WITH THE GIANTS

BACK in the early '90s, Jeffrey Tilem wanted little to do with the hardware store that was started in part by his grandfather and had been in his family for 65 years. He was content in his real estate career.

But by 1993, Pioneer & Lucerne Hardware was in serious trouble. The Beverly Hills landmark and so-called "hardware store to the stars" was getting hammered by the recession. And big-box hardware stores like Home Depot were undercutting its prices.

While fighting those battles, the operators of Pioneer & Lucerne had run up a huge debt and the store was put in receivership. The family tradition was on the verge of folding.

That's when Jeffrey's father -- Joe Tilem, a Beverly Hills attorney -- asked his son to try to turn the store around. For six months, Jeffrey assisted the store manager, learning every part of the business. Then, he took over in late 1993.

"I saw the store was not set up properly. It looked more like a 1970s operation, with cash registers -- not a computer in sight -- and very high prices," Tilem said. "It was a dinosaur that was fading fast."

So Tilem set out to lower prices, computerize and reduce the overhead by bringing payroll and other operations in-house. Shortly afterward, he introduced a handyman service, which has five employees going to customers' homes to make repairs.

He also launched an Internet service, with a catalogue of 80,000 available items and information on where to find merchandise that isn't stocked. Meanwhile, he remodeled the store to better display merchandise not typically found in hardware stores like china, toys and greeting cards.

"We had a great customer base built up over all the years," he said. "But I realized that to differentiate ourselves and keep those customers, we had to have lower prices and really personalized service."

(Tilem didn't want to name any of his current celebrity customers. Barbra Streisand is reportedly among them, but she now sends an assistant to do her shopping.)

Longtime customer Joan Nicholas said she likes the atmosphere and service at Pioneer & Lucerne. "I hate the big-box stores; sometimes the service is nice, but it can be a debilitating experience to spend a half-day walking around those huge stores," she said. "I come from a small town and like the feeling of community stores. I find what I need there, and, if they don't have it, they'll order it for me or tell me where I can get it."

Much of the clientele was inherited from Pioneer Hardware, which was established in Beverly Hills in 1926 and for many years was located on Beverly Drive. Through the years, it counted Jimmy Stewart, Frank Sinatra and Dean Martin among its customers.

Three thousand miles away in New York, Jeffrey Tilem's grandfather, Martin, started Lucerne Hardware in 1925. According to family legend, stars sometimes came there through the years (including, ironically, a very young Streisand).

In 1983, the family moved Lucerne Hardware to Beverly Hills, a few blocks away from Pioneer. Six years later, Lucerne bought out Pioneer and the combined store opened up in its present location on city-owned property on Crescent Drive.

At the time, the city cut the newly merged store a break because it was in a zone designated as a community business corridor. Beverly Hills had established the area and reduced rents to ensure that small neighborhood stores were not wiped out by the influx of pricey boutiques that were coming to dominate the central shopping district.

In recent weeks, however, the rent has increased 15 percent -- a big hit for Tilem.

"We can't pass the cost on to our customers," he said. "If we tried that, many would go to Home Depot and our other competitors. It means we're going to have to become even more efficient and keep growing the business."

One area being pushed these days is the handyman service. In a story that Tilem loves to tell, he says two of his first handymen were especially popular with women customers.

"Their names were Pablo and Marcello, but we called them G and Q. They were both big, muscular men, one of whom was actually a model," he said. "Shortly after we hired them, we found that a number of our women customers were calling up and asking that they perform all sorts of chores around their homes. I periodically checked up on them to make sure nothing else was going on."

The two handymen have since opened their own business in Orange County.

Pioneer & Lucerne Hardware

Year Founded: 1926

Core Business: Hardware and houseware products

Employees in 1994: 10

Employees in 1999: 15

Revenues in 1998: $980,000

Revenues in 1999: $1.1 million (projected)

Goal: To grow the business while keeping the family tradition alive

Driving Force: Well-heeled clientele that likes the personal touch and community feel of a small-town hardware/general store