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Hardware Wholesalers Inc.

Don Wolf, president of Hardware Wholesalers Inc., started with the company in 1947 as an order filler in the warehouse. He has, in a manner of speaking, grown with the company-and the company has grown as dramatically as his career.

Hardware Wholesalers got its start in 1944 when Arnold H. Gerberding, owner of a hardware store in Fort Wayne, developed the idea of a hardware and building materials cooperative. Cooperatives themselves were not new. They had begun to appear in the 1930s when large department store chains such as Sears, Roebuck & Co. and Montgomery Ward were hurting small independents. Hardware Wholesalers, however, was the first to combine hardware and lumber retailers. The company was incorporated in 1945 with 75 members and was housed in a two-car garage in downtown Fort Wayne. Within a year, the company had to rent three other warehouses to handle its inventory. Then, in 1948, it moved the entire operation to the current corporate headquarters on Fort Wayne's east side. At that time, HWI had 13 employees.

Now, HWI has 865 employees at seven distribution centers: Fort Wayne; Cape Girardeau, Mo.; Dixon, Ill.; Medina, Ohio; Waco, Texas; Columbia, S.C.; and Woodburn, Ore. The seven locations give HWI almost 3 million square feet of distribution space. In addition, there are now 3,000 members who gave their company $1.1 billion in sales in the last fiscal year.

In the interim, Wolf worked, as he says, "about every job in the company" before becoming CEO in 1967. While guiding HWI through years of consistent growth, Wolf also has proven to be a valuable asset to the community. He has served as national president of Big Brothers/Big Sisters of America and was a founder of its Fort Wayne affiliate.

Wolf, in addition, has been deeply involved with the Study Connection, a program that HWI's executive vice president, former schoolteacher Mike McClelland, helped initiate. The Study Connection, which after just one year has been wildly successful, matches at-risk students with community volunteers for one-on-one tutoring.

Wolf and McClelland are simply doing what they believe any good corporate executive should do: Give something back to the community. After all, Wolf attributes some of HWI's success to its location. "Being located in Indiana," he says, "has helped us keep our cost of operations quite low-which means more profits for our stores." Indeed, HWI's overhead ratio is the lowest in the industry. In each of the past two years, every employee has accounted for more than $1 million in sales.

Thus even though HWI is probably only the third-largest hardware cooperative in terms of dollar sales, Wolf says, if you compare services, programs and systems, it's probably number one. And it is services, programs and systems that distinguish one cooperative from another.

Like the members of competitors True Value, ServiStar and Ace, HWI members make an initial common stock investment and then purchase their inventory from the cooperative. At the end of the year, profits are returned to members in the form of reductions in the purchase price of goods. In most every other respect the member remains a fully independent retailer.

Differences, then, are manifested in the specific programs and services offered by a particular cooperative. In that regard, HWI is markedly different. While Ace and True Value,for example, have national advertising campaigns and have sought national name recognition, HWI has deliberately sought to avoid such an image. "We give our dealers all kinds of advertising help," Wolf says, "but it's all to submit his name in the marketplace." One good reason for putting the retailer's name before the public rather than HWI's is that the independents are gaining market share over the large chains. The reason for that, Wolf suggests, is that "the consumer has a better image of the locally owned, locally controlled merchant than he does a chain."

Hardware Wholesaler's Do-it center program also sets the company apart from its competitors. Originating in the late 1970s when independents were having difficulty competing with the chains, the Watt Group, a leading design company from Toronto, developed the program. The Watt Group concluded that the weakness of the independents was due in part to their tendency to blend with their surroundings. In response, the company created an aggressive store design intended to capture the eye, placing the independent store in the forefront of the buying public's vision.

The concept worked. The typical retailer that has joined the Do-it center program, Wolf says, has increased his business by 30 percent the first year on average, 15 percent the second and 10 percent the third. Originally, the design for Do-it centers was limited to a red background. Now a retailer can choose from red, green or blue, as well as a variety of architectural schemes. Even with the Do-it center program, HWI eschews a national identity. The program is simply a way to increase the visibility of the independent.

To assist independents further, HWI also has developed a New Resident Mailing Program to introduce new residents to their local independent HWI member. The idea is simple and effective, but not widely used by other companies. Each new resident in a participant's market receives a welcoming letter that includes a coupon offering free merchandise or a discount.

It is, of course, computerization that has made the New Resident Mailing Program possible. That is also the case with HWI's Data Phone System. The system provides a direct link between the retailer and HWI's computer. Thus, McClelland explains, if someone comes in and says he wants to buy a prospector's hammer that the retailer doesn't happen to carry in stock, the retailer can say, "Well, let me check my warehouse."

By hitting a six-digit number in the computer, he can find out that the warehouse that services his area has 18 of them. He can turn to the customer and say, "I have that in my warehouseI'll have it for you Thursday." If it should happen that the warehouse is out, the store clerk can check one of the other warehouses and have it shipped by United Parcel Service. I don't think anyone else has a system like that," says McClelland.

Hardware Wholesalers also is breaking new ground with a training program through which stores receive a video each month that covers such topics as customer relations, merchandising and product information. The 30-minute videotapes are produced in HWI's own studio in Fort Wayne.

These programs and others were designed, Wolf says, to help independents become stronger in the marketplace, to give consumers an option. That's HWI's corporate philosophy. "That is our code of ethics," says Wolf. "You treat everybody like you like to be treated: suppliers, members, and each other."

That is one reason why HWI has had an employee profit-sharing plan since 1953- but not the only reason. "We cannot be successful in a competitive business," McClelland says, "unless all of our people are working together for the same common goal. We go very far in making sure that everyone plays a part in that." In recent years, according to Wolf, profit sharing has exceeded 25 percent of total wages.

Hardware Wholesalers, however, has gone beyond the norm with profit sharing. The company now has an IRS-approved plan that retailers can adopt for their own employees without experiencing a paperwork nightmare-HWI has already done all the work.

Whether it's HWI's location, services, innovations, employee relations or the proper mix of each, the company is doing something right. Member purchases have more than doubled in the past seven years, from about $500 million in 1983 to 1.1 billion last year. Member rebates also have increased each year, from $25 million in 1983 to more than $50 million this past fiscal year. And all the while, overhead as a percentage of sales has dropped.

While the figures for some other cooperatives may not be quite as impressive, most are certainly not hurting. All of them appear to be benefitting from the poor performance of the large chains in recent years, presumably because many customers prefer to shop at locally owned hardware stores.

The outlook remains good for independents and HWI. That, despite only 5 percent growth for HWI between May and August of this year, which Wolf freely admits is about 3 percent below expectations. But, he maintains, the hardware and building materials business is not as cyclical as many other businesses.

"Our business never goes wildly high or drops dramatically low," he says. Any slight decrease today is usually offset by an increase tomorrow. By the same token, when housing starts are down, remodeling goes up. These guys can't lose.
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Title Annotation:Regional Report
Author:Faulkner, David
Publication:Indiana Business Magazine
Article Type:company profile
Date:Dec 1, 1990
Previous Article:Focus - Fort Wayne: toward 2000 & beyond.
Next Article:Decatur.

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