A tale of two home chains Hechinger's mistake may have been to aim to be like Home Depot

It lost upscale feel, customers

In retrospect, though, no one really knows where it went wrong

June 22, 1997|By Jay Hancock | Jay Hancock,SUN STAFF

When longtime Marylanders visit the hardware store, that's not how they describe it.

"Everybody says, 'Run out to Hechinger's,' " said shopper Rick Polomsky, who encountered the phrase when he moved to Catonsville from Chicago last year. " 'I've got to go to Hechinger's.' Everybody says Hechinger's."

Lately, the term has slipped from truth to idiom. "Going to Hechinger's" often means "going to Home Depot" or "going to Lowe's."

As competitors have stolen its clientele, the retail chain that defined home improvement in the Baltimore-Washington region is honored more in parlance than pocketbook.

Last week supplied the most pointed evidence yet. The Landover-based Hechinger Co. revealed that it may try to solve its problems by selling itself to another company -- for a $3-a-share price that once would have seemed ridiculous.

How a brand name that penetrated the local language came to this yields a lesson for both businesses and sociologists.

Hechinger is a prime example of the precariousness of 1990s retailing, analysts said last week. It illustrates how even the strongest redoubt can crumble before powerful mega-chains and inscrutable consumers.

The wrench in Hechinger's gearbox also demonstrates the growing economic split between the American well-off and everybody else -- and the peril to merchants who try to straddle both worlds.

Hechinger was once "the premier home center in the industry," said Kenneth M. Gassman, a retail analyst for Davenport & Co. in Richmond, Va. "In the '50s, '60s, '70s, everybody else came to their stores to see how to do it."

Founded in 1911 by Sidney Hechinger, grandfather of present Chairman and Chief Executive John Hechinger Jr., the chain had 128 stores in 24 states by 1989, earning almost $50 million that year. It had become prosperous and loved as an upscale hardware store, "the world's most unusual lumber yard," with cordon-bleu service and a big assortment of tools, housewares, fasteners, plumbing parts and paint.

Out of the South

But deep in the South, a company called Home Depot had coined a different method of hardware merchandising.

Home Depot's stores were even bigger than Hechinger's 60,000-square-foot, football-field-plus venues -- half again as big, first, then twice as big. Home Depot was generating sales to support such behemoths by catering to contractors, not just do-it-yourselfers, and shutting down smaller hardware stores across the South in the process.

Hechinger executives weren't asleep at the wheel. They saw Home Depot, saw it early, knew they had to act and did. They just made the wrong moves.

In business, catastrophes often can be blamed on one or two major missteps, obvious in retrospect. IBM let Microsoft get ownership of the software for IBM's personal computer. Food Lion fumbled the public relations ball in its tainted food scandal. Maryland National Bank made big loans to shaky developers.

"There are some situations where you can point to a major tactical error," said Donald T. Spindel, who follows Hechinger for the St. Louis investment house A. G. Edwards. "That's not the case here. I don't think it comes down to whether Hechinger did any one thing incorrect."

Hechinger executives declined to comment in detail last week, citing the confidential buyout talks.

What did they do wrong? "The short answer is: everything," said Jack D. Seibald, a retail analyst for Blackford Securities. "They've had a screwy management that has not kept its eye on the ball."

But even to Wall Street experts, many of whom were recommending its stock a few years ago, Hechinger appeared to be doing the right things, correctly.

A stalking horse

Unfamiliar with "big-box," Home Depot-style merchandising, Hechinger sought a chain that was. In the late 1980s it bought Home Quarters Warehouse, a Virginia Beach, Va.-based Home Depot clone that Hechinger left as a freestanding operation.

For the next few years, Hechinger Co. was actually two companies: a chain of traditional Hechinger stores in Virginia, Maryland and Pennsylvania; and a growing division of "HQ" warehouse outlets farther south and in the Midwest.

The formula appeared to work, for a while. HQ would be the company's growth vehicle, pushing into the North and Midwest in advance of Home Depot, supplying its shareholders the hope of ever-rising profits.

Hechinger outlets would hold the home ground, secure in 80 years of shopper loyalty, claiming in prime locations what they lacked in size. And when they could, Hechinger stores bowed to Home Depot, too, getting bigger, more like warehouses, with better assortments, lower prices, more features designed to appeal to contractors.

In the long run, it didn't work. Home Depot steadily marched into Hechinger towns and made them its own. The pattern became familiar: State-of-the-art HQ and Hechinger stores would open, pack in the shoppers and book $30 million apiece in annual sales. Then Home Depot would arrive, as it did in the Baltimore region in 1991, and swipe much of it away.

Jumbled stock

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