Standard Plumbing Supply finds strength in diversification

BY MARY JO MARTIN
Editorial director

Standard Plumbing Supply Company was founded in 1952 in Ogden, Utah, by Dale Lee Reese. Reese, who had a Master’s degree in Retail Merchandising from New York University, believed that it was time for a new approach in a plumbing wholesaling. He felt that plumbing contractors knew the plumbing parts better than their wholesalers, and that he could save contractors time by allowing them direct access to the material in the warehouse. Upon starting up Standard Plumbing Supply, Reese opened his warehouse and pipe yard to contractors -- becoming one of the innovators of self-service wholesaling in our industry.

The company later became involved in the manufacturing of plastic pipe, pipe nipples and the trucking business.

In 1992, Reese turned over the ownership of Standard Plumbing Supply Company and its related companies to his sons, Richard, David and Dennis. Richard Reese became the sole owner of Standard Plumbing’s 13 stores in northern Utah and southern Idaho. David and Dennis Reese became the sole owners of the manufacturing and trucking companies which they later sold in 2006 to other concerns. Richard Reese continues to serve as president of all of the operations of the Standard Plumbing Supply Company, with assistance from vice presidents Dave Freeman and Blair Tucker. Freeman handles the plumbing operations, while Tucker is in charge of air operations. Both are long-term veterans of the plumbing and air wholesaling industry.

Richard Reese recently shared insight into this diversified, highly successful company with editorial director Mary Jo Martin.

MJM: Please share with our readers a snapshot of the company’s operations?
Reese: Standard Plumbing Supply has 70 store locations in eight western states. Its corporate office, distribution center and store operations in Sandy, Utah, comprise 310,000 square feet in six buildings on 15 acres. Standard has 390 employees. We are primarily in the residential plumbing and air supply businesses. Traditional sales through wholesaling activities comprise 70% of our business. Consumer or cash sales account for 30%. The company owns all of the real estate the branches are located on, except four locations. Since 2001, we have acquired and remodeled or built over 60 buildings for Standard store locations.

Other operations of Standard Plumbing include: Standard Air Supply, a heating and air conditioning distributor with the RUUD line of equipment; Standard Hydronic Supply, a hydronic supply store; Standard Commercial Sales, a contractor-only supply store; BuyPlumbing.Net, an internet distributor with 50 different websites; Showroom Supply, a supplier to other distributors and kitchen and bath dealers; Standard Logistics, a long-haul trucking company; Radiant Manufacturing, a company that designs and assembles hydronic systems and controls; and ReeseSource Leasing, an equipment financing company.

MJM: Do you buy through centralized purchasing or does each branch have some purchasing autonomy?
Reese: The material for all Standard operations is centrally purchased by two buyers. Managers and salespeople have broad autonomy in the types and amounts of inventory carried within their individual location and budget.

MJM: Is there a central distribution center or warehouses at each branch? How do you handle inventory transfers and getting material to branches or jobsites over such a large geographical area?
Reese: Each Standard store and showroom has an on-site warehouse inventory that is replenished at least weekly from our Stock Support Distribution Center, which handles 93% of our merchandise. It is a hybrid operation of several distribution methods -- quick response, cross docking, zero inventory pull through, traditional stocking and pulling, and inventory push out.

Our private label lines (Standard Plumber Friendly) and a few other high-volume, low-SKU commodities are stocked in Stock Support for pulling and shipping to the branch locations. Most store inventory SKUs have zero inventory on hand at the Stock Support center. Store demand for these items is automatically accumulated and placed with the vendor on one purchase order. When delivered to Stock Support, the merchandise simply passes through the warehouse on its way to the various Standard Stores.

A multi-million-dollar, high-speed conveyor sorting system with 75 automatic diverting lanes moves incoming material through the receiving and sorting process to each branch. This system creates a palletized assortment of product for loading onto Standard Logistics’ trucks for delivery to the branches. Standard Logistics then finds an outside paying return load for the trip back to the distribution center.

MJM: Who are your primary customers?
Reese: Plumbing and heating contractors, distributors and end consumers.

MJM: How are your sales divided?
Reese: We currently realize about 90% of our sales in plumbing and 10% in heating. We are most heavily involved in residential construction, which accounts for 90% of our projects; the remaining 10% are commercial jobs.

MJM: Describe your showroom operations and how important the decorative market is to your business?
Reese: Our showrooms are key to the success of our plumbing stores. In many stores, showroom sales account for more than half of sales. Our showrooms range in size from 2,000 to 14,000 square feet. We designed and layed out the showroom floor plans on our own, and even built our own displays in our display shop.

MJM: How is it different to sell/market decorative products than your other categories?
Reese: Showrooms are retail concerns and require an entirely different mindset to operate. Customers in the showroom require much more time and patience. Showroom designers must be very knowledgeable about all the products they sell, and they must have excellent customer service skills. We regularly conduct product information and sales skills training. We have an on-staff training specialist who travels to each of our locations to do in-depth on-site instruction.

Our showroom primarily services our designer and homeowner customers. Showroom designers can spend hours with a client and then they enter quotes and are the liaison between the client and the plumber until the job is complete. In the showroom, we must sell at a higher margin to cover all of these services. Often, our outside sales force and plumbing contractor forget that all of these services we offer in the showroom come at a price. Many plumbing contractors often down-sell product faster than our showroom designers can up-sell it. Many plumbers and contractors expect a share of the margin that cannot be supported in a day and age when the consumer can buy through the internet or at a home center.

MJM: With decorative product evolving and changing so quickly, how do you keep your showrooms current?
Reese: Our showrooms are in a constant state of change. With 50 showrooms, we have differing sizes and we centrally determine what will be displayed in a showroom of that size. With our desire to keep the product in stock for same-day shipping, we must have a uniformity of selection in our showrooms.

We display product families together in suites and vignettes, the way it would appear in the bath. The matching toilet and pedestal are together in the display. We often display something for attention -- knowing that the consumer will not usually buy it, but just talk about it with their friends.

MJM: Who are your primary decorative lines?
Reese: Toto, American Standard, Blanco, Oceania, Maax, Aquatic, St. Thomas, Porcher, Grohe, Hansgrohe, Showhouse, Danze, Brizzo, Moen, Delta, Price Pfister, Native Trails, Fairmont Designs, Elkay and Franke. We also work with smaller niche players that design unique products, such as Sonoma Cast, Sonoma Forge, Hastings and Sonia.

MJM: Is there a significant amount of residential construction going on in your territory?
Reese: Residential new construction has slowed in all of our areas, but our showroom traffic continues to build.

MJM: Do you sell any appliances or extras, like cabinet/door hardware, etc., in the showroom?
Reese: We sell plumbing fixtures only. We used to be in the lighting business until 1995, but it was too entrepreneurial -- too much like selling high-end furniture -- and we could not duplicate success from store to store so we got out of it.

MJM: How have your customers’ expectations changed over the years, and how has Standard Plumbing adapted to those changing needs/wants?
Reese: Our customers have always wanted product at some extreme discount from list. Now that the fixture manufacturers have exploded their SKUs in their lines, our plumber customers still want the same across-the-line discount -- regardless of the movement of the items within the line. Our vendors need to differentiate pricing discounts within the line or eliminate a list altogether. We price all of our items with a competitive net price on the floor and with no reference to list to help combat the line discount problem.

The other ways we have changed is by increasing our inventory of faucets and fixtures. With $5 million of centralized, dedicated showroom inventory, we are able to ship today -- and that has value to the customer.

Customers are very savvy now. With the internet and home improvement shows, our salespeople are required to have even more product knowledge and design skills.

MJM: With so many sources of competition in the marketplace, how does Standard Plumbing differentiate itself?
Reese: In keeping with our founder’s basic ingenuity, we are not just distributors, we are merchandisers. Our stores are organized and neat. We offer our customers on-line purchasing, invoicing with a complete history, on-line payments and on-demand customer-specific catalogs.

Having control of our real estate allows us to be in the most convenient locations for our customers and allows us to have facilities that represent us in a professional manner. A consumer selecting fixtures will not go to a wholesale part of town and shop in a place that is dirty. Our showrooms are an integral part of our business and we understand that the plumber is forced to buy fixtures from the showroom where the consumer wants to buy them. Our retail focus is directly related to promoting our traditional wholesale business with the plumber.

Our private label lines provide us with competitive advantages in quality and price in the market. Our distribution center makes the importing of product possible and allows our branches to have a wholesale purchase quantity price without overstocking and with frequent replenishment opportunities. Our Showroom Supply operation stocks nearly the entire broad product assortment in our showrooms for same-day shipping.

MJM: Do you have any special events/activities that you sponsor that help to build customer loyalty and relationships?
Reese: Standard sponsors a product show each year. We hold the product show at our Sandy Campus. Last year, we had 2,000 attendees and more than 150 vendor/rep booths. We bus and fly customers in from outlying areas and take up three local hotels. Customers and vendors are treated to a wonderful roast beef, turkey and ham meal for them to enjoy. Dave Freeman is a wonderful promoter and our people really get behind him to make it a success. Our vendors and manufacture’s reps are keys to the success of the show.

MJM: Can you describe the leadership philosophy at Standard Plumbing, such as accessibility to customers and employees, and hands-on activity by the owners?
Reese: Our philosophy is to work hard, change and then keep working till it works.

We are not afraid of change and will do whatever it takes to succeed. Our computer system works for us because we have specifically examined each process and have modified it to cut labor and be more efficient.

Standard’s focus is to cut all of the cost out of the transaction that the customer will not pay for. Everything we do is about creating real value for the consumer. We embrace change and progress.

MJM: Is Standard Plumbing a member of any industry buying groups? If so, how has such an affiliation benefited your business?
Reese: Standard is a member of Affiliated Distributors.

MJM: Are you comfortable sharing percentages of growth you’ve achieved in recent years?
Reese: Since 1992, Standard has achieved a cumulative average 27% yearly growth for each year through 2006.

MJM: What are your growth projections/plans for the near future?
Reese: With the downturn in the housing economy and coming off back-to-back years of extreme growth, we need to catch our breath. We have two new stores opening this summer Roy, Utah, and Nampa, Idaho, and two leased locations moving into owned facilities this fall. We are evaluating each store and have one or two that do not strategically fit, and we will most likely close them.

After catching our breath, we will get on to opening four to six stores in 2008.