Specialty retailers still find ways to live and thrive in a big-box world

But consolidation continues to take a toll on independents

NATIONAL REPORT -- Independent dealers selling products for home decorating seem to be getting scarcer by the day.

The news earlier this month that PPG Industries, the giant paint and glass manufacturer, is negotiating to acquire the 35 paint and home decor stores operated by New Dean & Barry (see page 4) became public only days after Benjamin Moore, the New Jersey-based paint supplier, added to its growing stable of specialty retail outlets by agreeing to acquire Virginia Paint's 10 stores.

Virginia Paint, which has operated in that state for 47 years, generated $12 million in sales in 1999. Robert Maddux, Virginia Paint's president, will stay on as its general manager under Benjamin Moore, which typically has been the paint supplier's modus operandi in running the dealers it buys.

The decisions by the owners of Virginia Paint and New Dean & Barry to sell their retail outlets, though, spoke to the precariousness of local and regional specialty dealers in a market dominated by warehouse-sized home centers, discounters and even expanding national specialty chains.

The recent bankruptcy filings by Trend-Lines -- which is disposing of its Post Tool stores to focus on its 120 Woodworkers Warehouse outlets that sell hand and power tools -- and Stambaugh Hardware provide the latest example of the challenges that dealers with specific, narrow product mixes face doing business in a competitive climate that's regulated by consumers and pros who continue to gravitate toward larger outlets offering broader assortments of merchandise.

"It's kind of a generational thing," observed Gordon Brown, the owner of Brown's Paint in Savoy, Ill., who confirmed comments he made to the (Champaign-Urbana, Ill.) News Gazette, a local newspaper, that he and his wife closed their 50-year-old store in August after concluding that younger customers, by and large, prefer big-box shopping.

"I'm 52, and people in the 45-to-60 range were raised thinking of those [independent] stores as places to shop. But for people 23 to 35, it doesn't even occur to them to shop in these smaller outlets," said Brown, who now runs Brown Dental Lab, a business he's owned for a decade. "It's the proliferation of these big stores and the fact that they are close to where people live. Plus, customers can go to them and buy paint, a dishwasher, just about anything they need."

The listing of the industry's largest 50 specialty dealers of paint, flooring and home decor products, as compiled by NHCN (see page 18) shows that the aggregate sales for these companies last year rose 9.9 percent to $11.4 billion, as the number of stores increased by 2.5 percent to 7,183 units and total selling space grew 3.6 percent to 40.8 million square feet, which works out to slightly under 6,000 square feet per store, on average, and just under $1.6 million per store in sales.

(In its July 17 issue, NHCN ranked the 50 largest lawn and garden specialists, whose sales in 1999 increased 5.1 percent to $1.6 billion from 675 outlets. Garden centers are in the same boat as other specialty dealers, whose stores have been losing ground for several years to home centers and discounters, according to the tracking of consumer purchases conducted annually by the National Gardening Association.)

More than lust surviving

All that being said, specialty dealers have not gone the way of the dodo yet. In this following special section, NHCN profiles the business strategies of nine retailers whose stores are dedicated to the sale of home decor and outdoor living products.

Four of these companies -- Home Valu, Worldwide Floor Coverings, Siperstein's Paint and Armstrong Garden Centers -- are regional players coexisting nicely with big-box competitors through innovation, attention to customer service and an astute understanding of their roles in a changing, fickle marketplace.

Carpet Co-Op, another profile subject, is a huge buying group with a far-reaching network of independent dealers selling floor-covering products and services. The New Hampshire-based organization has big growth plans for each of its subsidiaries (on Oct. 4, it acquired a majority stake in a floor installation organization called FloorExpo), as well as an expansion of its market reach through the Internet.

It is also instructive that two other large home improvement retailers -- Sears and HomeBase -- are seeking to transform themselves through the development of specialty outlets. NHCN is providing our readers with a first look at HomeBase's new Bed Bath & Beyond-like House2Home concept, which it installed into five stores and is likely to expand to many of its remaining warehouse home centers. Sears' newest ventures -- its Great Indoors home decor format, which will be expanded to 150 stores over the next several years; and its stand-alone floor stores, which now number 25 outlets and target customers outside of major metro areas -- seem to be in line with the new corporate direction being set forth by Sears chairman, Alan Lacy, who has said he wants to re-emphasize the "hard side" of the retailer's business.