Lock on the Market : Kwikset, Which Pioneered Low-Priced Door Lock, Is Flying High

In countless American homes from the flat sprawl of the San Fernando Valley to the urban core of Baltimore, the key that fits the front door features a familiar stylized cutout that is the trademark of an Orange County company that has nimbly survived the booms and busts of the housing industry and the ravages of foreign competition.

In 46 years, Kwikset, which created the inexpensive three-piece tubular door lock to meet the demands of the post-World War II residential housing boom, has faltered only once. It was forced to make its first major layoffs--10% of its 2,000-member work force in Anaheim, Texas and Oklahoma--last year when the sluggish economy cut into sales.

But it has since recalled those workers and is preparing to increase its payroll by an additional 200 employees in the coming months as it expands its parts factory and assembly plant.

The company, a highly profitable subsidiary of the $5-billion Black & Decker Corp. consumer goods empire since 1989, has countered the decline of new home construction in the last three years with a renewed emphasis on the remodeling and home repair market, which accounts for about 70% of all U.S. residential lock sales.

The marketing shift, which brought Kwikset products into such unfamiliar arenas as Sears and Target stores, so far has worked well and sales have picked up, said Steven Price, marketing vice president.

One chore Kwikset tackled was to capture the hearts and minds of the unhandy--a generation of new homeowners with little or no exposure to maintenance skills because they grew up in career-dominated families where mom and dad jobbed out such tasks to a handyman.

The answer, as Kwikset sees it, is to use that most familiar of household appliance teams--the television and videocassette player--to instruct customers.

Thus was born the “project pack,” a series of matched lock sets and deadlocks. All are packaged with an instructional video on their installation; several come with a Black & Decker cordless screwdriver, and one includes a complete set of the proper drill bits and hole saws to install the locks in a new door.

While the company has benefited from its marriage with Black & Decker, Kwikset’s continued success in the face of foreign competition and recession goes back to decisions made in the late 1970s, said Price, a Black & Decker marketing executive who joined Kwikset after its 1989 acquisition.

When imports from Korea and Taiwan began hitting the U.S. market in the late ‘70s, Kwikset decided to compete directly on price, Price said. “The company bellied up to the bar and almost overnight dropped its prices 25% to be more competitive.”

Other U.S. lock makers did not drop their prices and saw their shares of the residential lock market erode while those of Kwikset and its foreign competitors grew.

“We are the only U.S. company still (manufacturing domestically) in the opening price point segment,” Price said.

The decision to slash prices cut deeply into Kwikset’s profits for a few years, Price said, “but the company started right away to change its manufacturing, to modernize and use more automation,” to cut production costs as demand increased.

It also changed the way it marketed its products to retailers, Price said. Kwikset began charging retailers for advertising and for point-of-sale displays that it had paid for in the past. Kwikset also speeded its delivery of orders.

“We had been a company that drove our segment of the market and we changed to a company that simply competed in that market with other players,” Price said.

Industry analyst David S. Leibowitz of American Securities Corp., New York said Kwikset “is a company that should not be overlooked. It has a consumer franchise, an important brand name and a line with some depth.”

Kwikset has been able to drive demand for its products partly with a bold new operational philosophy--more typical of a Japanese conglomerate than a U.S. manufacturer--that places increasing its market share ahead of immediate profit in the panoply of corporate goals.

To that end, Kwikset has stuck to its old pricing while introducing upgraded products that often are costlier to manufacture than their predecessor models. One example is Kwikset’s introduction this year of a line of solid cast-brass decorator door handle sets to replace the brass-plated, stamped zinc models that were much less expensive to produce. Kwikset decided to protect its market share, however, by slashing its profit margin and selling the brass sets at the same prices as the old zinc sets--beginning at $139.

At Kwikset, the aim is to maintain the company’s dominance of the low-cost market, where it now captures about 55% of annual sales, while boosting its share of the fast-growing mid-range market, where it has about half the 40% market share commanded by San Francisco-based Schlage Lock Co.

Overall, Kwikset has about 36% of the total, or $200 million, of the $550-million annual residential door lock market in the United States.

Kwikset also wants to secure a position in the upper price range, now dominated by Baldwin Co. in Redding, Pa., Schlage and a handful of European firms. But Price said Kwikset does not foresee itself as a major player in the high-end market.

“That is really an artisan’s market and we are a mass producer, and that’s what we will stay,” he said.