Starting up Summit
Let's hasten to add, however, that Perotti didn't think the idea of a start-up was funny or absurd.
"Actually, this was in my five-year plan 10 years ago," says Perotti, who oversees a group of companies, including several contracting firms. "As a contractor, I always kept such a large inventory that I thought opening a supply house was a good idea. I just never had anyone who I could trust to run it.
"When Steve walked in, it was magic."
Gifford even had picked out a site that would be familiar to Philadelphia's contractors. It was the former headquarters of Fisher Brothers, one of the oldest plumbing supply houses in the city.
Like the Fisher Brothers name, the site had been abandoned in late 1996. But Gifford was convinced that the location was a good one. After all, he had worked there himself before departing for sunnier climes in 1994.
"This location always did well despite what was happening in other branches," Gifford recalls.
Having an idea and finding a location were just the beginning. Before Summit Plumbing & Heating Supply could be born last August, Gifford and Perotti had work to do. They had to gut and renovate the building. They had to assemble a top-flight team of talent and find lines to attract customers. And they had to develop a marketing plan.
"We know starting up a company is difficult," says Gifford, Summit Supply's chief operating officer. "Our service is how we'll stay in business. Taking care of the customer is where it's at today. We'll go just about anywhere our customers want to lead us."
Philadelphia's storyBy the reckoning of Steve Gifford and Summit's Executive Vice President John Taylor, no new plumbing wholesaler had started up inside Philadelphia in the last 25 years. Further, they calculate that 13 supply houses have gone out of business or been acquired since 1992.
Among those departing the scene was Fisher Brothers, which had operated under its original ownership from 1907 to 1992. New Jersey-based Ridgewood Corp. acquired the company in 1992 and ran it through the end of 1996.
When the Perotti Group bought the empty Fisher Brothers building about a year later, Perotti, Gifford and Taylor decided to do a complete makeover.
"We cleaned everything out and started from scratch," Gifford says. "With an empty shell it was easier to make changes."
Workers painted and reorganized the warehouse, giving it a brighter, more open look. They also installed a new HVAC system.
The counter area also was freshened up and expanded with new self-service shelves and displays. Although the location previously had a showroom, it too was upgraded.
Philly's stakeThe city of Philadelphia and state of Pennsylvania were interested enough in the startup to help finance the project. Gifford, Taylor and Perotti submitted their business plan and other information to the Philadelphia Industrial Development Corp., which acted as Summit's sponsor to the Pennsylvania Industrial Development Authority.
The state is assisting Summit Supply by financing a portion of the cost to renovate the building, says Brian Morris, Summit's controller. The city offers tax abatement, which means that property taxes are frozen at their current level and the property is not reassessed for five years.
"The whole initiative is to bring job creation to the city," Morris says. "We have to create 35 jobs over the next three years."
Summit Supply now has 15 employees. One of the few upsides of other supply houses shutting down is the availability of qualified people who know the market, Gifford says. He and Taylor both had worked for Fisher Brothers, as had Kathy Howells in inside sales. Other key people with market experience include Philip De Angelis, HVAC product manager; Joe Gable, warehouse manager; and Jim McAviney, counter foreman.
"So much of this business is driven by building relationships with customers that you just can't throw a new guy out there and expect results," Gifford says. "Our people probably average a little over 15 years in the industry. That has really helped us gain acceptance from our customers."
Efforts by the state and city to stimulate the local economy apparently are paying off. The Philadelphia area is experiencing a building boom now, both with new construction and renovations. The territory served by Summit Supply actually encompasses a 1O0-mile radius of the city into Pennsylvania, New Jersey and northern Delaware.
"This is the strongest the housing market has been in years," Gifford says. "There's no space inside the city itself, but quite a bit of building is going on in the outlying areas.
"Inside the city, the residential jobs are mostly remodeling work. In the old row homes, people are tearing out the old bathrooms that were built in the mid to late' 50s. They're finally getting rid of their harvest gold and avocado fixtures."
On the commercial side, which is Taylor's area of expertise, the economy is being driven by civic and institutional projects. Schools, the airport, federal and city buildings, a nearby Air Force base and a new sports arena all are creating work. As in other metropolitan areas, prison jobs are particularly strong, Taylor says.
With all the activity, Summit Supply faces stiff competition from established wholesalers such as Weinstein Supply and mass retailers such as The Home Depot. What the Philadelphia market has not experienced yet are the giant wholesalers such as Ferguson Enterprises and Hughes Supply. Ferguson has come close with its location in King of Prussia, Pa., and its recent acquisition of L&H Supply in New Jersey, but has not yet penetrated Philadelphia.
The nature of the Philadelphia market makes Gifford and Taylor reluctant to characterize their start-up as part of any trend that might occur elsewhere.
"Our start-up is specific to our market," Gifford says. "I wouldn't know anything about opening a business in Richmond, Va., or Charlotte, N.C. Unless you know the people and the market, starting a new business would be suicide.
"We just felt Philadelphia needed another supply house. We thought we could bring something new to the table."
Market servicesServices and features offered by Summit Supply may be new to the Philadelphia market, new to the old Fisher Brothers location or just plain new.
When the showroom was upgraded, the concept was to appeal to contractors doing high-end kitchen-and-bath remodeling jobs as well as to custom home builders. Besides plumbing products, the showroom features lighting fixtures, again with the same custom builder in mind.
"We're a showroom for plumbers and builders," Gifford says. "Homeowners can walk in as well, but our price structure will protect the contractor. We offer installations but we use contractors to do them."
Nearby but with a separate entrance is the remodeled sales counter. The most striking feature of the renovation is the self-service area. Contractor customers can help themselves to products on shelves and in bins. Ten vendors rent and maintain their own shelf space exclusively for their products.
"Although self-service is becoming fairly common down South and in other parts of the country, this location never had it before," Gifford says. "We felt it was a feature customers wanted to have, and we've experienced little or no shrinkage."
The area also contains three booths equipped with phones for contractors who need to call a customer or a builder. Separate from the booths is a phone-equipped office for reps.
"We're trying to be more manufacturer- and rep-friendly," says Taylor, who was a rep himself after leaving Fisher Brothers. "We get excellent service from our reps, and we want to return the favor."
Adjoining the counter area are an expanded kitchen and training room where, almost daily, breakfast or lunch is served and seminars are conducted. Summit enlists vendors to co-sponsor the cost of soup or sandwiches for a two-week period and tries to tie in a workshop with every meal.
"We're big on training," Morris says. "The more educated contractors are, the better customers they'll be."
Summit Supply tries to fill even more basic customer needs by providing a recycling bin and trash compactor in its parking lot. Contractors can haul debris from a jobsite there rather than to a landfill.
"A contractor has to pay a fortune to take that stuff to a landfill," Gifford says. "We can provide a useful service at no charge, and it keeps contractors coming back here to drop off their scrap."
Another innovative service - coolers and free ice - keeps contractors coming back to Summit. Contractors can pick up the coolers, which have Summit Supply's name and logo emblazoned on them, and refill them with ice from the wholesaler's 800 pound ice maker whenever they come in to pick up materials. Summit does not charge customers for the coolers, unless they lose them. Summit's delivery trucks carry other coolers and dispense ice or cold sodas at jobsites.
In emergencies, contractors can reach Summit employees who are equipped with cell phones and on call until 10 p.m. The wholesaler also offers a 24-hour commercial water heater replacement service for emergencies at locations where hot water is critical.
Contractor connectionWith one of its founders a contractor, Summit Supply should have special insights into the needs of its contractor customers. Perotti's contracting roots go back to H.A. Perotti, a plumbing company founded by his father in 1946 in Bristol, Pa. Today, the Perotti Group comprises a number of plumbing, HVAC, mechanical and kitchen/ bath remodeling contractors.
Although Perotti always has believed in maintaining a large inventory, the idea behind Summit Supply was not to create a captive supply house for his contracting companies. In fact, those firms today are just as likely to buy from other wholesalers as they are from Summit, Perotti says.
Perotti's experience in managing inventory did get him interested in the supply house business. Automating his contractor's warehouse convinced him, though, that wholesaling is entirely different from contracting.
"Summit Supply is a 100% separate business," Morris says. "In fact, we tried to use the same software to manage our inventory here and it didn't work. We went to a system that was much more appropriate for wholesalers to meet our customers' needs."
So, while Richard Perotti is indeed a contractor, he says that many of the ideas for innovative services that he has brought to Summit Supply have nothing to do with his background in the trades.
"I'm a marketer," Perotti says. "I like coming up with ideas that will help us serve our customers."
Customer relationsSo far, Summit Supply has relied on direct mail, an open house and word of mouth to bring in customers.
When it opened last summer, the wholesaler sent out 3,800 fliers to prospective customers. On Oct. 30, Summit Supply hosted an open house for contractors. The event featured a trade show with 47 booths in the warehouse, a catered luncheon and dinner and a visit by Philadelphia Mayor Edward Rendell.
"With the market as good as it is, we're asking customers to try us," Gifford says. "It's been a very smooth transition for contractors to add us to their list of suppliers. No one has dropped other suppliers to use us exclusively but they have added us as another supplier."
Taylor adds, "It's been gratifying to see the number of customers who have tracked us down."
As he has seen customers' acceptance of the supply house grow, Taylor says that much of the apprehension of starting up a new company has faded.
"It's a little scary at first not knowing if it's going to fly, and there's always a challenge," Taylor says. "We're the ones carrying the ball now, and we don't have an owner to go to.
"But this is a blast. It's a lot of work but we're having a lot of fun too."