Dick Youngblood: Selling hardware the old-fashioned way works

ARLINGTON, MINN.

When Dick Thomes went to work for his father and two uncles at Thomes Bros. Hardware & Appliances in 1974, there were three other hardware stores in Arlington, all of them catering in one way or another to the local farm trade.

One store hawked livestock feeders, another milking equipment. Thomes Bros. peddled International Harvester combines and tractors along with its plumbing supplies, sporting goods and nuts and bolts.

Today, the other three stores are long gone, as are the Thomes Bros. farm implements and most of the farmers who bought them.

Yet the 120-year-old business, which Dick Thomes bought in 1990, has survived to become the oldest family-owned hardware store in the Upper Midwest.

Considering that the store's revenue, which reached $610,000 in 2007, hasn't grown significantly in the past 15 years, the question is: How in the name of 10-penny nails has Thomes endured in the face of competition that includes Home Depot, Lowe's, Menard's, Target and Wal-Mart stores, all located within 30 miles of his doorstep on Arlington's W. Main Street?

One explanation came from Mac Hardin, executive director of the Minnesota-Dakotas Retail Hardware Association: "His reputation and record for service to his community and customers are outstanding," he wrote in a commendation letter.

His success has not gone unnoticed: In June he was elected president of the North American Retail Hardware Association, an organization of 16,000 independently owned hardware stores nationwide.

Thomes' endurance seems to have had less to do with missing follicles than with a strategy that plays off the competition with big-box retailers and Arlington's transition from a farm town 50 miles southwest of Minneapolis to a bedroom community for workers in Chaska, Shakopee and other western Twin Cities suburbs.

Part of the strategy involves a product mix built on the understanding that "because our customers are working in the bigger cities, they'll buy their power tools at Lowe's or Menard's. So we'll stock the drills, saw blades and grinding wheels for those tools," Thomes said.

Similarly, he carries no light fixtures "because we can't match the selection at Home Depot," Thomes said. "But we do stock the switches, boxes and wires to hook those fixtures up." And there are fewer toilets in his inventory, while he stocks a wide selection of "the wax rings, supply pipes and ball cocks you need to install or repair the toilet."

Here comes the key: "We'll not only sell you the parts, but we'll make sure you understand just how to install those parts," he said. "When you come to Thomes Brothers, we take the time to help you solve your problem."

"We get an average of about 105 customers a day, and we rely on a large number of them coming back tomorrow, or next week," Thomes said. "We can't afford not to serve them well."

Service, but at a price

In exchange for that service, however, his customers can expect to pay more for this back-to-basics array of plumbing and electrical supplies, lawn and garden products and nuts and bolts. The pricing strategy is crucial for offsetting the lack of revenue growth.

"When I started, a 33 percent margin on these smaller items was the standard," he said. "Today you won't stay in business at a 40 percent margin; it has to be closer to 50 percent."

"But our customers understand that," Thomes said. "When they walk into a big-box store, they expect lower prices and less help; when they come to us, they expect higher prices and a lot of help." Not to mention a willingness to sell, say, an individual drill bit instead of a set, or a few bolts or screws instead of an entire box.

Thomes Bros. does remain price-competitive with the big-box stores on its large inventory of home appliances, on which the margins are closer to 25 or 30 percent and delivery and installation are free. Lower overhead helps keep these sales in the profit column.

Service isn't the only weapon in Thomes' arsenal: As the town shifted to bedroom-community status, with more and more residents working out of town, "it made sense to be open seven days a week instead of six," he said.

He also has expanded his inventory by 25 percent, which means shelving and wall hangings that once were at eye level now reach for the ceiling.

And what a ceiling it is: The 5,000-square-foot store encompasses the original 1,750 square feet of space Thomes' great-grandfather started with in 1888, complete with the original, intricately embossed tin ceiling overlooking a varnished hardwood floor.

The place has the look of permanence about it.