Carving a Niche : Lumber Firm Solves a Knotty Problem

When big building supply chains opened within a few miles of his lumber store, Ray Johnston got nervous. But after seeking feedback from customers and hiring focus groups, he retooled Hardwood Center in Santa Ana to concentrate on custom milling work and personal touches. Johnston was interviewed by Karen Kaplan.

I opened this store in 1976 and business always grew steadily. Then in 1987, a Builders Emporium store opened a couple of miles away. Home Depot and HomeBase came in a few years later. We were frightened because they have thousands and thousands of items and they are very price-competitive.

We worried that we’d lose our contractor base. If a contractor needs eight things and he can get all eight of them in one store, then you’d think he’d be tempted to do all his shopping there. We thought homeowners might be tempted to go there too.

After the home centers came to town, our business went down 40%. We went from 17 employees to about nine in 1990. Since the recession started in 1989, it’s hard to tell how much of that was our competition and how much of that was the economy.

We talked to contractors who came into our store and asked them what they liked about us. They said our store was faster to get into and out of and that we had depth in our product lines. After they visited the other stores for a while, they started to see their limitations.

We talked to our customers in bona fide focus groups. We asked them what they liked about our store and what they thought we could capitalize on in our advertising. Based on what our customers said, we decided to focus more on special-order materials and milling work.

We advertised in newspapers and through direct mail and emphasized the personal and informal nature of our store. Our customers deal with the same salespeople over and over again, and we’ll take large orders over the phone without requiring a large deposit. We quoted prices over the phone to help people comparison-shop because we wanted them to come to us.

It didn’t cost us a lot of money to change our focus. When the business started coming back, we kept our staff small to save money. Now we have a leaner, more focused organization.

Now that we’re doing more custom work, there are more details and paperwork. We’re also doing more deliveries. It’s a more demanding business, but we’ve gotten good at it.

In 1994, I began to see that we were going to survive. The realization comes at the end of the year when I can see that we haven’t lost money. I’m still concerned about the home centers, but the fear and panic have gone away. Now we also have the satisfaction of knowing we survived in a very competitive atmosphere.

On the threat from large home centers . . .

“We were frightened because they have thousands and thousands of items and they are very price-competitive. We worried that we’d lose our contractor base.�

On the impact of the focus groups . . .

“Based on what our customers said, we decided to focus more on special-order materials and milling work.�

On recognizing that the business is safe . . .

“The realization comes at the end of the year when I can see that we haven’t lost money. I’m still concerned about the home centers, but the fear and panic has gone away.�

AT A GLANCE

Company: Hardwood Center

Owners: Ray Johnston and Todd Skinner

Nature of business: Lumber and custom milling store

Location: Santa Ana

Year founded: 1976

Number of employees: Eight

Annual sales: $1.7 million