Case Study- Hal’s woodworking
Hal Donovan started an ordinary hardware store, named Hal’s Hardware in Sandusky, Ohio, in 1988. He had been working during his summer vacations from college for a long-established hardware store and decided he liked the business. Hal’s Hardware developed an excellent reputation as a friendly neighborhood store. The store managers are all active in the community and the store regularly sponsors youth sports teams and supports local charities. When hired, salespeople go through a comprehensive training program that includes skill training in the areas of the store in which they will work (plumbing, electrical, power tools, flooring, garden, and so on), and they are trained in customer service skills. As a result of this focus on service, Hal’s Hardware became a community gathering place.
Hal offers classes and workshops for the homeowner and hobbyist three evenings each month and regularly schedules seminars for professional customers on weekday mornings. Many of these workshops and seminars are underwritten and taught by manufacturers to promote their products, but an increasing number are being created by Hal’s Hardware staff members.
In recent years, Hal has become concerned that the business is no longer growing. The store is facing increasing competition from hardware chains such as Home Depot and Lowe’s. These national chains have opened many new stores, and they are larger, carry more items, and offer lower prices on some items. The competition is fierce; for example, Hal’s Hardware closed its lumber department because of this competition. The national chains buy lumber in such large quantities that they can offer far lower prices. Hal matched his larger competitors’ prices, but found he was unable to earn a profit on lumber sales and that department consumed a large amount of floor space in the store.
Hal was worried that this sort of problem could develop in other departments, so he began looking for ways to add value to the customer experience, especially in ways that the national chains were not willing or able to do. For example, Hal has found that many people want to try out a new power tool in person before they spend hundreds of dollars on a purchase. Thus, Hal’s Hardware created a tool demonstration area staffed with salespeople who are experts in power tool operation. For each major type of power tool (drills, power saws, joiners, grinding tools, and so on), Hal created a small booklet of hints for using that type of tool. Hal’s salespeople give these booklets to customers as free handouts. They also sell Hal’s own low-cost instructional DVDs.
Hal’s Hardware currently has a Web site that includes general information about the company, directions to the store, and hours of operation. Hal is thinking about expanding the Web site to include online shopping. He is hoping that customers might find the Web site to be a useful way to order items, see whether items are in stock at the store, and comparison shop among different brands of a particular item. Hal also hopes that the Web site might reach customers who are not located near the store, but he realizes that some of his products do not have ideal shipping profiles.
Hal has been talking with Sarah Johnson, his most senior store manager, about his idea for adding online sales to the Web site. Sarah has been with the company for 20 years and has organized a number of the classes held on Saturday afternoons in the tool demonstration area. After hearing Hal’s ideas, she expressed some concerns. Sarah explained that going online with their entire product line might not make any sense because the competition for common tools is likely to be just as fierce online as it is in the store now. She has noticed that there seems to be a solid core of customers who are interested in serious woodworking and who show up for a lot of the classes. These customers buy some of the best, and most expensive, tools that the store sells. Many times, she finds that she has to specially order tools for these customers when they are working on a specific project.
Sarah suggests to Hal that they might want to take the business in a different direction online and sell only the high-end specialty tools to dedicated woodworkers and cabinetmakers. These items yield much higher margins than the regular tools and the salespeople who Hal has hired are eager to develop videos and instruction sheets that would appeal to this more skilled and specialized audience. Sarah suggests that they call the new online business Hal’s Woodworking to distinguish it from the general hardware store business. She suggested that Hal take a look at Web sites such as Highland Woodworking and Woodworker’s Supply to get a better idea of the online store she has in mind.
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