I recently had the great pleasure of spending a day consulting with one of the owners of Australia's largest wholesale plumbing distributor. The purpose of the meeting was for me to tell these folks how showrooms should be run. I got a big and very pleasant surprise. They already know how! I learned as much or more as they did.
Reece Plumbing Centres, a division of Reece Australia Ltd., is a publicly owned but family-controlled wholesale distributor of plumbing supplies, mechanical, and gas and irrigation products. Harold Joseph Reece, who took to the road selling hardware to families building a new life after World War I, started the company in 1919. The Wilson family assumed control of the business in 1969. In 1978 they took steps towards growing a national chain. In 1990 they were operating 49 branches and today have more than 180 stores.
I spent the day with Peter Wilson, executive director and marketing manager, and Adrian Palumbo, trade marketing manager. Peter's dad, Alan, is managing director. Although the company is publicly owned, all five directors have the last name of Wilson.
Year 2000 sales were $594 million - up a healthy 27% over 1999 - and 2001 is tracking just as nicely. Operating profits were up 41% in 2000 over 1999 and they weren't all that shabby to begin with!
The part that interested me, and that I was retained to discuss, was the company's showroom business. It has more than 150 showrooms throughout the country and in 1999 opened ReeceDesign, a showroom for architects, interior designers and their customers.
The average showroom size is about 1,000 sq. ft., with some in the 2,000- to 3,000-sq.-ft. range. Most are operated with one showroom consultant. Monthly sales and margins are on a par with American wholesalers, but programs have been put in place that are growing both areas.
Peter and Adrian were pretty tired boys by the time we met in Los Angeles. They had been crisscrossing America and Canada, visiting with wholesaler distributors and manufacturers. They were also touring as many showrooms as they could schedule.
I asked them if they had learned much on their tour. Their response was "a number of small ideas." The feeling was that American and Canadian wholesalers are running behind what is happening in Australia.
Therein lies the problem that I continually talk about: As a general statement of personal opinion, I don't believe U.S. distributors operate very good showrooms. They treat them as "that other side of the business," the tag-along necessary evil to keep their vendors happy. They don't know the retail (showroom) business and they're not interested in learning.
Here's how important learning retail is to the folks at Reece: After two weeks of studying the wholesaler showroom business in the United States, Peter Wilson was going to stay and spend a full week doing market research on the best retailers in America: Nordstrom, Neiman Marcus and the like. He wants to know what the best retailers in America do to make themselves customer friendly. Then he's going to take this home to Australia and incorporate it into his company's showroom operations.
Reece's core business is the plumbing contractor. The wholesaler has worked very hard to build strong relationships with these folks. But it also markets to and works very hard to sell the consumer. It sells Mr. and Mrs. Homeowner through its showrooms and over the counter. In fact, Reece has upgraded its counter environment to be very consumer friendly: tile on the floor, good lighting, nicely merchandised displays, well-dressed counter salespeople. I asked what price the consumer pays at the counter. Adrian replied, "List price, of course." So obviously the company has different pricing levels for different customers.
The wholesaler has launched a major marketing blitz to underscore its commitment to the trade. Reece has posters, counter stands, bumper stickers, newspaper ads and billboards that say "Don't risk it, use a licensed plumber" and "Reece. Supporting the plumber for over 80 years."
So yes, Reece walks both sides of the street - and very successfully. And this has occurred in the last 10 years. Gutsy? You bet! It was the first wholesaler to cross over the line - but it knew the tremendous plus-revenues that could be reaped by going after the consumer business too.
Reece has pioneered the development of showrooms in Australia. The company knew that selling the consumer (and keeping the plumber happy) was a key to success. It recognized that the wholesale and retail businesses are very different. It has taken the time, energy and money to learn both.
The company has an in-house training director who teaches not only product knowledge to its showroom consultants and counter salespeople, but also selling skills. What a novel idea - teaching salespeople how to sell! (See my last four articles in Supply House Times.)
In case you wondered, there is a big-box chain in Australia called Bunnings. It's very similar to our Home Depot and Lowe's. And yes, it buys direct from the plumbing manufacturers and has marketed the perception that it sells "cheap."
The Reece showrooms are open on Saturdays (only about 40% of the U.S. distributors are) and they have a nice diversity of products. The showroom style trend is much more contemporary (European) than in the United States, where traditional remains the style of choice.
White fixtures are it! Reece doesn't even offer colors. Wow, would the U.S. distributors love that! Evidently the reason for this is the number of people in Australia and the cost of showing, selling, inventorying and manufacturing colors.
Now heed this, American wholesalers: Reece treats all 150 showrooms as profit centers. It knows every month whether or not it is making money in its showrooms. What a unique concept!
Reece also has some private label products made for it, which it markets throughout its system. The wholesaler is trying to break the mold with new and different products, which will allow it to inch up its margin. The company is teaching its salespeople how to sell for margin!
I believe Reece could diversify its products even more than it has - including vanities, mirrors, door and cabinet hardware, tile - to create more of a "one-stop shopping" concept. But with all the market research and marketing talent it has, I suspect it will continue to be on the cutting edge of plumbing showrooms in Australia.
Attention American wholesalers: You've spent a lot of money building out your showrooms, in many cases very nicely. You've spent the money to hire showroom salespeople. Now please take the next step, like our Australian friends have, and treat your showrooms as profit centers.
To the owners and managers: Learn what running a successful retail business entails, open up your doors to the homeowners (they're the ones making the buying decisions), diversify your products so your margins increase, and do what's necessary to train your salespeople. There's a huge opportunity just waiting for you. Take advantage of it! If you don't, someone else will!
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