An Interview With YOW's New Boss
A series of management changes has taken place at Your “other” Warehouse since its acquisition by Home Depot in 2001. The latest was the promotion in January 2009 to YOW general manager of Mike Hogenmiller, who joined Home Depot in June 1999 as a buyer for bath products and subsequently moved up the ladder to merchandising management positions. Prior to taking over YOW, he was serving as senior director and divisional merchandise manager of the former Home Depot Expo, and New Concept Development stores.
Hogenmiller has vast plumbing product experience acquired throughout his tenure at Home Depot and even before, when he spent 10 years as a buyer for the Builders Square home center chain, where his responsibilities included plumbing. I interviewed Hogenmiller in early September as follows.
Supply House Times: You have a lot of experience with plumbing and bath products. What are some of the most notable product trends you’ve observed in recent years?
HOGENMILLER: For a long time I made it a point to visit the Kitchen and Bath Show to find new and innovative products, but it was a real challenge until in the last few years the industry evolved into high-efficiency products in a meaningful way. The market began to change when technology finally became a factor. Now a primary focus is conservation, Water Sense Products, touch control and other technologies of a similar nature.
About the same time, consumer demand heated up for vanities and other furniture-style products for the bath. A large percentage of products started to appear in the market with improved and innovative style as well as furniture-quality attributes. These are the most significant changes I’ve seen in the market over the last eight to 10 years.
Q:Have you noticed any difference between consumer and professional trade product preferences?
HOGENMILLER: Consumers tend to be more focused on individuality. They spend a lot more time understanding attributes such as the finishes available, along with the breadth and width of products they can buy. The professional focuses on quality and reducing callbacks and overall time on the job - especially in a market like we are currently experiencing where there are far fewer jobs available and callbacks tend to reduce profits.
Q: Prior to becoming YOW’s general manager, you spent time as a merchandising manager for the Expo stores. Plumbing wholesalers once viewed Expo as a big threat to their showroom operations, but it didn’t work out for Home Depot. What is your assessment of what went wrong?
HOGENMILLER: Expo was very productive in the premium/luxury business and really strong in the services side of managing very large-ticket remodeling projects that crossed over into kitchen and bath, drapery, carpets, color coordination, etc. It was a different business model to support than the core Home Depot businesses. Interior designers were involved, and we usually dealt with general contractors rather than subcontractors.
There was nothing really wrong with the business. It’s just that the economy changed and because of the ticket value surrounding luxury premium products, customers slowed their spending, as was the case in many high-ticket areas of the economy. The impact was much greater than on Depot’s commodities/maintenance side of the business. Commodities are more about maintenance and people are still doing maintenance, but the big remodel jobs basically disappeared.
As a company we made a decision that it would take some time before the economy came back to support Expo’s style of business. As an organization and board, the company decided to focus on our core business and remove the distraction. This doesn’t mean that down the road we may not take another look at luxury premium products again. But from a timing standpoint, it just didn’t make any sense to continue running 34 stores in a sector of the economy where there wouldn’t be a lot of consumer interest for some time.
HOGENMILLER:I’ve been involved with YOW since the late 1990s. I know the past management very well and understand the culture they brought to the original business. When I came on board early this year, I was pleased to see a number of associates still around who were here 10 years ago. Although there’s been a lot of change in leadership, the core business itself was still very much intact.
What wasn’t there was a defined strategic direction of where we should be headed, not only for the future but because of the existing economic situation we’re dealing with. There were some hungry people here who were asking management for direction on what to focus on. For the first six months we did a lot of soul searching, asking ourselves what was the long-term purpose of the company, what do we need to return to the enterprise as a Home Depot subsidiary, and what obligations do we have to our customer base on the master distributor side.
Our master distributor customer base is still very attached to Your “other” Warehouse. The first thing we tackled was to talk to our top suppliers and important customers, and ask them to tell us what was lacking in servicing them. We received fairly consistent answers from both groups; they were having a hard time understanding where we were headed and definitely we were not in step with the suppliers.
A fairly clear picture emerged from both groups that we needed to rebuild our sales team to something customers expected, and our merchandising team to what our suppliers were looking for. My job is to develop teams that serve those interests and give both groups assurance that they are strategically going to grow.
This is a very humble company. I’m not going to tell you that we’re the best in the world today. But we have a lot of people focused to make sure we’re doing what we can to deliver the customer service we were known for and will be known for again.
Q:What do you say to plumbing distributors who hold Home Depot’s ownership against YOW?
HOGENMILLER: What the distribution community needs to understand is that we’re a very ethical organization with a high level of integrity and don’t share internally competitive information between our trade and retail segments. They’re two very separately managed pieces of the overall business. The only leverage really created is from a supply chain perspective. We’re able to buy at a better price because of our association with Home Depot and that enables us to provide a higher level of service at lower cost than we could without that affiliation.
We have very little discussion with our trade customers about Home Depot. We have a few people associated with the Depot side to make sure our supply chain is functioning properly to service their business, but their merchants have responsibility for that business and the merchants at YOW are responsible for servicing our trade customers. We are rededicated to having associates in place to service YOW customers the way they expect. You’ll find as we go on that our customers will start to vocalize that we are living up to this strategy.
Q: I wrote an article in 2007 about YOW trying to “return to its roots,” and a big deal was made by the managers at the time of separating YOW as a distinct b-to-b entity apart from the retailing business. What’s become of that?
HOGENMILLER: I think it’s more in effect now than then. We do business with more than 4,000 b-to-b customers. It crosses over into a large part of the industry, including a large volume of business with wholesalers who use us for fillers, as well as e-commerce customers, traditional showrooms, and with retailers besides Home Depot. This is YOW’s core business.
One thing different than in 2007 is that we have a much larger number of associates focused on our trade business. They have a specific list of customers they’re accountable to, and they participate in strategic growth meetings to help our customers grow their business.
We have produced more new jobs in the last 12 months than in the previous 24, and have redirected a large part of our sales force internally to the trade customer. Also, we’re still in a hiring mode and have open positions to fill in the next six to 12 months. We will strategically build the team to support the customer base as the economy gains traction again.
Everything revolves around our associates. They determine whether we are providing great service or subpar service. We have instituted an escalation process, so if a customer calls in with a problem a customer service rep can’t handle, supervisory associates get contacted immediately to get a resolution promptly to the satisfaction of that customer. My cell number is available to every CSR in our building. I’ve been on vacation on a Saturday afternoon with a phone in one hand talking to a CSR and another phone in the other talking to a supervisor in another division to make sure we get the right resolution to please that customer.
Our advantage is we understand the metrics of our business, and understand what the customer wants. We are a viable company that is returning shareholder value to the total enterprise, and the leadership provides valuable support across all the channels we do business with.
Q: What are the most difficult business issues you deal with on a day-to-day basis in running YOW?
HOGENMILLER: It’s finding ways to leverage the cost of the business and get it back to customers so they can thrive, and enable YOW to thrive as well. The cost of the business is something we spend lot of time dealing with, and we have to spend more time on it than in the past.
I look at today’s economy as a drought. Lake levels drop significantly, and when that occurs all the nasty stuff in the lake appears on the surface, things like rusty old cars and so on. In this type of economic drought, all the things that were down there that facilitate cost in running the business rise to become very visible. When the lake level drops, that’s the time to clean everything up, so when the lake level rises again, we are in a position to grow at a much more rapid pace.
We’ve spent a lot of time reducing expenses in the business and reinvesting it in customers. That will be the defining difference between YOW and other companies in this industry.
Anyone would be kidding if they told you credit isn’t an issue in the marketplace today. So we spend a lot of time with our customer base to make sure our receivables aren’t an issue. Last year we spent a lot more time on this challenge than ever before, this year not nearly as much, which is good news. It has been a challenge for everyone that underwrites credit in an environment like today’s.
Q:How has YOW been weathering the so-called Great Recession?
HOGENMILLER: It depends on which piece of the business. The areas related to maintenance are up; businesses focused on traditional construction or remodeling, very much a challenge. Anyone who tells you business is up in that sector, I’d love to know their secret! That pie is significantly smaller now and presents a challenge for all of us. I don’t believe we will see recovery in this sector until well into 2010.
Q:Independent plumbing wholesalers are of course the lifeblood of YOW and other master distributors. What’s your assessment of the future for independent plumbing wholesalers?
HOGENMILLER: Is the independent sector healthy over the long term? I think they are. Our customer base consists of a large number of independents, and we have a number of suppliers who structure their business around those types of businesses. As long as they focus on their customers and run a good business, they will be around as long as they want to be.
I firmly believe, as with YOW, that when this recession turns the corner, we will find a lot of businesses in this industry running much better than they have in the past. The opportunities to increase the business will return quickly because the industry as a whole will be running much leaner, more efficient operations.