The endgame for countless failed hardware and building-supply stores begins with three words. The Home Depot, an Atlanta-based retailer, expanded from four stores with $22 million in annual sales in 1980 to claim title to more than 1,700 stores and $64 billion in sales last year. In January in Rockland, the big-box building-supply company opened its 10th store in Maine.
But eight months later, with interest rates beginning to tick up and next year’s housing starts expected to slow only slightly from record highs, building suppliers along the coast say the big retailer’s impact has thus far been negligible. They remain wary, waiting for year-end accounting to provide a clearer picture. Looking further into the future, Austin Goodyear, president and chief executive of the 10-store EBS Building Supplies chain, says most independents remain convinced that plenty of opportunity exists beyond the big retailer’s reach.
A relentless coastal real estate market helped boost EBS sales from near $37 million five years ago to $62 million today – in spite of the Home Depot that settled in its Ellsworth back yard in 2001. Now the company is in the midst of spending more than $2 million to expand and spruce up its stores, and is looking down the road to additional locations.
Goodyear said EBS has even managed to harvest some profit directly from its competitor’s supersized success.
“We saw Depot and Lowe’s coming in the early 1980s,” the Brooklin resident said. “Matter of fact, we bought a few shares in both of them for our retirement plan. It turned out to be the best investment [our plan] ever made – marketwise, better than GE.”
Goodyear is a former electronics industry executive who built Litton Industries’ Industrial Systems and Equipment Group to $700 million in annual sales. He is directly related to the Charles Goodyear who patented the vulcanization process to cure rubber and for whom the Goodyear Tire Co. was named. The inventor had died destitute, however, in 1860, and the family was not heir to a fortune or any other benefits from the patent.
Goodyear left Litton and bought Ellsworth Falls Lumber Co. Inc., the parent of EBS, in 1970 from three families who had built the home center around a local sawmill. The company built a Cherryfield store in 1972, bought and modified a Bucksport farmhouse in 1974 and then expanded by buying stores in Blue Hill and Machias. The company opened its 10th store in Rockland in 1994 and now employs 300 people.
After the Ellsworth Home Depot opened in 2001, Goodyear said EBS sales took a solid hit, then recovered. Some market share could be displaced in Rockland, he said, but the 55 percent of EBS sales that come from building contractors constitutes solid opportunity for growth. In order to realize that growth, he said, independent operators must get out of the commodities mindset and stop shaving their margins to compete on price.
“A very high percentage of the houses being built around here are being built by people who certainly aren’t going to fool around with 2 or 3 percentage points on material prices for their house,” he said. “We are trying to let them know how efficient and accommodating we are to the contractor, and that a contractor, backed by an outfit like us, has got a big advantage for the owner.”
The Midcoast’s second-largest building supplier, Belfast-based Viking Lumber, also has managed to vault ahead while much of the United States was in a slump. Viking’s sales grew from near $25 million five years ago to $44 million last year.
“I would guess we’d bump $50 million [in revenue] this year,” said President David Flanagan.
Viking, founded in Belfast by Flanagan’s father in 1945, expanded to Hancock last year. Flanagan bought from Dudley Gray the building-materials business Gray’s grandfather had started in 1927.
The Viking payroll includes 136 people working in what Flanagan likes to call “four-and-a-half stores.” The stores are spread between Warren and Hancock, the “half” being the small yard Viking rescued on Vinalhaven in 1992 after proprietor Lawrence “Sour” Orcutt died.
Flanagan said about 70 percent of Viking’s business comes from contractors, and that the formula for pricing has little to do with competitors.
“We don’t pay any attention to that,” the 50-year-old Flanagan said. “We pretty much base our pricing structure on what it costs us, what the overhead is and what is a fair profit.”
Goodyear and Flanagan agree overhead has been hit hard in recent years by technology costs. Computer-managed inventory has led to more efficient operations, but costs $50,000 to $100,000 a year for Viking, and averages $340,000 a year for EBS. Those kind of costs, combined with rising prices for materials, safety measures and insurance, demand a new approach to modeling costs.
“The price structure among the local businesses is just not 21st century,” he said.
Out in Bass Harbor, Less McEachern, at McEachern & Hutchins Inc. isn’t so worried about the 21st century. He employs 15 people at his Bass Harbor yard, the Trustworthy Home Center in Bar Harbor and at McEachern & Hutchins Hardware in Southwest Harbor.
“We’re the smallest there is around,” the 53-year-old McEachern said.
McEachern bought the Southwest and Bass Harbor businesses from his father in 1980. A decade ago, he bought back the Bar Harbor store his father had sold years earlier. McEachern said virtually all his sales come from contractors and sales have swung up and down a bit over the past several years, but have generally improved. Price pressure has eased up, he says, as more time-stressed contractors choose to pay a premium to yards willing to deliver job-site services.
McEachern’s free delivery motto, “one piece to a truckload,” tells the tale.
“They can maybe make a few demands here that they can’t make with a larger yard,” he said. “That’s more important right now than the bottom line price.”
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