June 26, 1997|By Liz Bowie | Liz Bowie,SUN STAFF
Ray Desor works behind a Plexiglas shield and copes with all the problems that drugs and poverty have brought to Sandtown-Winchester, but over the past six years the lumberyard owner has come to the realization that his location isn't so bad after all.
It's a long way from Home Depot.
Since June 20, 1991, the day Home Depot opened its first Baltimore-area store in Glen Burnie, the do-it-yourself chain has been reshaping the industry in the region. After several years of same-store sales declines, Maryland-based Hechinger is up for sale. Some Mom and Pop stores have gone out of business, while others were forced to find a niche business that attracts sales Home Depot doesn't want.
When Desor bought Mace-Fremont Building Materials Inc. in 1980, it was an 80-year-old business that had burned down during a blizzard.
"The price got cheap enough so I could afford it," he said.
He built it back up and was making a profit when Home Depot arrived in the metropolitan area.
Almost immediately, his sales dropped by 30 percent, he said. He fought back by going into specialty sands used in sandblasting and plastic products and then picked up more business as Sandtown Habitat for Humanity began rehabilitating houses in the neighborhood.
His margins, today, he says, are better than they were before the chain entered the market.
Much of his business comes from neighborhood people who don't want to drive to the Home Depot in Catonsville or the Hechinger near Security Square Mall, he said as he sat in his store one day this week. As if on cue, a customer walked in looking for a glue for an aquarium. "I got some adhesive that I got from Hechinger, but I am a long way from Hechinger," he said.
For Craig and Eric Silverstein, the story has been different. Competition from Home Depot killed their business, they said. When Home Depot opened its store four miles from Pulaski Lumber and Supply co. Inc., the impact was dramatic.
"When Depot moved in with predatory pricing to take business away from Hechinger's and other independents, it took our cash," said Craig Silverstein. "Our cash sales went down 60 to 70 percent. Then they started with the small contractors. We lost 40 to 50 percent of that. The only thing we had left was industrial."
But what hurt most was the loss of the business from home owners who paid cash, he said, because the brothers lost operating capital and it became increasingly difficult to handle a payroll for 18 people.
The store stayed open all day Saturday and part of Sundays, but couldn't climb back. In 1995, the Silversteins closed the doors of the store their father had opened in 1950.
"Home Depot came into the market wanting to put everyone out of business," said Barry Meninger, vice president of Stebbins Anderson, a hardware store in Towson.
Several lumberyard owners said that, because of Home Depot's size -- it operates 500 stores with $19 billion in sales -- it can buy and sell lumber much more cheaply.
Home Depot sells lumber and Sheetrock at prices below what an independent lumberyard pays for them.
"I can go out and buy several tractor-trailer loads of Sheetrock and it will cost me $4.45 per sheet," said Steve Ackman, vice president at Crown Lumber & Supply Co. Inc. on Central Avenue in East Baltimore. But Home Depot sells it for $3.89.
The result has been a shakeout in the industry. It is not unusual for a small hardware store to lose half its market share when Home Depot enters the market, if the store hasn't done anything to combat the giant, said David Sonnen, manager of retail people development for Ace Hardware Corp. in Chicago. After it has stolen customers and driven out competition, Home Depot raises its prices, he said.
Home Depot denies that it follows that practice.
"Perhaps a retailer can't compete with us on our prices, but they can compete in other ways," said Katrina Blauvelt, a Home Depot spokeswoman who said the company is not out to put the competition out of business. "The key is for the Mom and Pops to find their niche."
In fact, local store owners say, they have compensated in many ways. They have tried to gain back business by offering superior service, specializing in a particular item and joining a cooperative, such as Ace Hardware, True Value or ServiceStar.
"I won't battle Home Depot anymore," Ackman said. Instead, he said, he offers much better service. If customers come in to buy something, for $5 or $5,000, he has them out of the store within 20 minutes. At Home Depot it could take hours for a small contractor to wander the aisles picking up a myriad of items for a renovation project, but Ackman will collect all the merchandise and load it into the pickup truck quickly.
"I will deliver it at a certain time on Saturday," he said. "I will pick up what you don't use. If a board is warped, I will replace it."
Despite those tactics, Crown Lumber & Supply, which has made millworking a specialty, has lost almost all of its customers from outside the Beltway.
