HD Expo... What happened?

What does it mean for the industry?

 

BY PETER and ANDY SCHOR

Showroom specialists

 

In our family, we talk about who is the “heir to the throne” in the industry after I retire some day. I would like to introduce my “Guest Columnist” for this month, my son Andy Schor. Years ago, when he was 12 and when most kids wanted to play in the summer, Andy wanted to go to work with me to learn the showroom industry. I am one proud dad! Andy, you get the stage to address what happened to The Home Depot Expo Design Centers and how the readers can capitalize on it:

 

During the past 20 years of my career, specializing in the showroom and decorative sector of the kitchen and bath industry, I have had the privilege of seeing things from several different perspectives. My experience has included the following:

 

• Working in my family’s decorative showroom business in Newport Beach, Calif.
• Being one of the original opening staff of the first Home Depot Expo in Southern California
• Holding management positions with three nationally recognized decorative faucet companies
• Being showroom director of 10 high-end decorative plumbing, kitchen and appliance showrooms for Apex Supply,

 

Atlanta, Ga., one of the top 20 wholesalers in the nation at that time. Apex Supply was purchased by The Home Depot.

As you can see, I have experience in many phases of the industry. I have witnessed and made many deals between major manufacturers and wholesalers, being a party of both sides. I understand the infrastructure and relationships from the manufacturer to the distributor (wholesale and retail) through selling to the contactor or end user. Having these various perspectives, I hope to bring you some insight as to what happened with The Expo Design Center, and what it means for the industry.

 

When the first Home Depot Expo opened in 1991, it was like the opening of a Hollywood premier, but not just any Hollywood premier — it was more like a Martin Scorsese film. The subject matter was highly controversial, with only a few actors (manufacturers) wanting a role in the movie. The original script (business plan/model) was well planned. The idea of taking a Home Depot model of such large scale and offering a destination for people to shop, where they could find almost everything they needed to build a better quality home, with upscale products not necessarily found in a regular  Home Depot, was genius.

 

The plot (the plan) to take business from the boutiques, specialty shops and wholesalers that were selling specialized products with higher profits and higher dollar ticket items made all the sense in the world. This would capitalize on the Home Depot’s cash flow, buying power and strong brand reputation and increase their market share in an area where they had basic experience. In some people’s minds, this movie was going to be like Star Wars, with all of the technology and special effects being brought out into the open. It ended up, however, more like Titanic (not that Titanic wasn’t successful when it was afloat, but I hope you get the idea).

 

What did the Expo do for the market?

 

As many of you who have showrooms or sell higher-end decorative products, know, Expo was your best friend and your worst enemy. On one hand, probably Expo’s biggest contribution to the U.S. market was expanding awareness to the general population about products that they had no idea existed. We all need to remember and understand the reality that 10 to 15 years ago, brands such as Jado, Grohe, Blanco, Robern, Hansgrohe and many others had less than 1% recognition by the U.S. population. Today, these same brands account for quite a large percentage of the business. So who is benefitting from that exposure now?

 

Certainly, there were many other factors involved in the development of these lines, with very hard work from the manufacturers, reps, advertisers and the huge impact of hgtv, but ask yourself this: If the Expo and other similar companies had not given the general public access to these products — to touch, view, shop for and purchase them, would they be where they are today?

 

What else did they do? How about training and expanding the talent base of our industry? I am sure that a large percentage of you who have showrooms, and who had an Expo near you, have somebody on your staff who worked for them. The training they received was usually pretty good for employees who were able to attend Product Knowledge classes without putting in overtime.

 

Because of Expo’s business model, their associates needed to be fast tracked through product knowledge trainings, and they had to have these trainings frequently, so that their salespeople could be productive on the floor. But once a salesperson felt as if he or she had the product knowledge they needed, the good ones came to realize that there were better opportunities out there for them to earn more income, as well as to have more stable hours (no night or weekend shifts) and a pretty good benefits plan. Their employee stock purchase programs and stock option opportunities had not really been that valuable since the mid- to late-90s. That knowledge not only may have helped you build your showroom staff but it also exposed more people to our industry.

 

What were some of the causes?

 

Certainly, the people at the top of The Home Depot are much smarter than I am, and Lord knows that I have made many errors in my career and my life, but sometimes even the smartest people who are a part of a large corporation such as The Home Depot (reference the saying “Bleeding Orange”) can’t see the forest for the trees. When the first Expo opened, the store drew people from hundreds of miles away. I can remember working with people from Arizona or Santa Barbara, who came not only to see the Expo but also to purchase there. Can you imagine at the time, a store with everything from carpet, tile, doors, windows, decorative hardware, home décor, picture framing, countertops, decorative plumbing, kitchen cabinets and appliances all under one roof. The ultimate one-stop shop! Customers justified the travel with the simple argument that they would have to drive and spend countless hours visiting multiple stores, taking about the same amount of time as to drive to one location hundreds of miles away. The Expo became the ultimate destination showroom.

Over time, and as the Expos grew, I think that this lesson was lost. The Home Depot was wildly successful, with their regular stores overlapping territories, cannibalizing their own store sales. They took a similar path with Expo. In my humble opinion, this may have been the biggest nail in their coffin, as Expo should never have been a convenience-based business model; they should have maintained their destination model. Although things were looking pretty good during the period from 1995 through 2005, there was just not enough “luxury” business out there for people to “drop by Expo this weekend and pick up a Viking range or a Persian rug.”

 

Another major issue was “installed sales,” which may have also been their Achilles heel. In many ways, this competed with building remodeling trades rather than servicing them. Adding to the complexity was the uncertainty of remodeling projects, of not knowing what might be found behind the walls; giving The Home Depot “satisfaction guarantee” certainly spelled trouble.

 

Other questions that come to mind are: What level of expectation did the average person who upgraded to Expo/Luxury items have, vs. the expectations of regular hd customer, and could these expectations be satisfied? What is the quality of the person doing the work? Could they not make it on their own with their own business? If not, why not?

 

There are plenty of other issues such as trade pricing/discounting, delivery and whether or not they took full advantage with their showrooms by having such a huge in-stock selection, all of which I would answer with,  “Hindsight is 20/20.”

 

What can we learn from this and how will it impact your business?

 

There will be both good and bad lessons from this; how you take action and how you see the ways it will impact your business will determine how much you can capitalize on the information. Consider what impact the Expos liquidating their inventories will have on your market. It is my understanding that the Expos will be liquidating most of their inventories. If that is the case, if they are going to run sales that are open to the public with “liquidated” prices, you need to be prepared for a dwindling share of the market getting taken up by the shoppers looking for a deal. Maybe it is time to call a friendly competitor outside your market and work together to possibly negotiate a deal to purchase some of the Expos saleable inventories to preserve the price and the market and to improve your profit margins.

 

How can I capitalize on the  Expo Design Centers closing?

 

In today’s economy, this is obviously the “billion dollar question!” Not to be too pessimistic, but it’s not as though we are all cash rich and have money to spend on additional advertising, promotions and expansion of our businesses. So, you ask, What should I or can I do? There are no easy answers, but consider some of these suggestions:

 

• Look at what Ferguson is doing with their “destination showrooms.” They are not only expanding their showroom presence but are making more of a one-stop shopping destination. Think about either partnering strongly with a tile, hardware, flooring, lighting, appliance or other specialty type company and subleasing part of your showroom to them, or swap square footage with them to get more exposure or, even better, expand on your own. Evaluate your ability to offer the bath and plumbing products that today’s consumers expect in your showroom.
• Make sure that you stay involved with your local trade groups and continue to network.
• Look for new brands or products that your competitors don’t have access to. Right now, you need to really become better “sales” people. The days of simply “order taking” are over and won’t be back for some time. Sell products that have a competitive advantage over the competition. Sell customers on a product, have them make it a closed spec and list your company as the source. You will find that you will often be rewarded.
• Consider making more secondary market calls. When was the last time you went to the local professional trade group chapter meeting (asid, iida, nkba, aia, nari, nahb, phcc etc.) to keep them informed about what you do and to present yourself as a viable source to service them for projects. How about taking a company table top for $75 to $150 at a monthly meeting? It works!
• Check out my dad’s article in The Wholesaler magazine, (www.thewholesaler.com), Archives, September 2007, on “Target marketing consumers of resale homes in the high-end market.”

 

I know it is “slim pickin’s” in these tough times, but people in the very high end are more apt to still spend money on their bathrooms.

 

Andrew Schor has more than 23 years of experience in the decorative plumbing, hardware and appliance business. Growing up with the industry in his dna, he is the third generation of Schors in the industry. From his grandfather, who owned a plumbing wholesale business in New York City, to his father, Peter, a noted showroom expert, educator and industry consultant, Andrew has continued with tradition in his family’s industry. Andrew is well respected and has a diverse career working on the manufacturing side and the sales/distribution side of the industry. He has worked for notable companies such as Apex Supply/The Home Depot Supply in Atlanta as director of showrooms and builder sales, responsible for 11 showrooms; Sepco/Watermark as national sales manager; Cifial as director of sales; and Huntington Brass as vice president-sales and marketing. Andrew currently resides in the suburbs of Atlanta.