Profiting From Loss of Chain : Retailing: Closure of Irvine-based Builders Emporium should boost big centers, mom-and-pop stores and, for now, shoppers.

By DAVID W. MYERS and GREG JOHNSON

Aug. 26, 1993 12 AM PT

TIMES STAFF WRITERS

Large home improvement centers should benefit most from Builders Emporium’s decision to close all of its retail outlets, but “mom-and-pop” hardware stores that offer more personalized service should also get a boost, analysts said Wednesday.

Consumers planning to fix up their houses should also benefit--at least over the next few months--as the Irvine-based chain slashes prices as part of its massive “going-out-of-business” sale and competitors join the fray by launching big sales of their own.

“The big winners out of all this are the ‘big guys,’ like Home Depot and HomeBase,” said Terry McEvoy, an analyst who covers home-improvement stores for Janney Montgomery Scott Inc. in New York. “It won’t hurt small operators, because their customers are pretty loyal and their stores tend to be more convenient.”

Bill Griffin, who began selling hardware from Griffin Ace Hardware on West 1st Street in Santa Ana when he was 12 years old, doesn’t expect business to change dramatically after the closure of the five Builders Emporium locations that ring his family-owned store.

“Oh, we’ll see a short-term drop in business because they’ll do a closing sale,” said Griffin, 52. “But in the long term, we’ll get some customers who were shopping Builders Emporium because it was convenient.”

Most do-it-yourselfers will probably have to wait until next year to find out whether fast-growing companies such as Home Depot and HomeBase, which is headquartered in Fullerton, will keep their prices down after the last Builders Emporium is closed, or will let prices drift upward because one of their key competitors will be gone.

“As for shoppers--well, only time will tell whether they win or lose when Builders shuts its doors,” McEvoy said. “My guess is that there won’t be much change from where they are today. Nobody wants to get into a long price war, like the airlines do.”

Griffin said independent hardware stores are not going to disappear simply because the “big boxes” are consolidating. Griffin, whose father, Harold, opened the original Griffin Hardware store on Harbor Boulevard in Santa Ana in 1953, expanded to a second store in Del Mar late last year. He said he was confident enough in the independent store’s future to encourage daughters Shannon and Kelly to join the family business.

Ironically, Builders Emporium pioneered the concept of today’s massive home-improvement centers more than 20 years ago, when it opened dozens of stores ranging from about 25,000 square feet to 50,000 square feet--typically 10 or even 20 times the size of small hardware retailers. The company prospered by offering the same personalized service that customers could find at a tiny store with the cut-rate prices that only a big operator could provide.

But even bigger stores, such as Home Depot, began to appear in the 1980s to offer even deeper discounts. Builders soon found itself stuck in an industry that was rapidly changing: Too big to offer the convenience of a corner hardware store, yet too small to effectively compete with the newer centers that were often three times its size.

National Lumber & Supply Inc., another Southland home-improvement giant whose stores were about the same size as Builders’, filed bankruptcy and liquidated in 1990. The closing of Builders Emporium leaves the industry split into two clearly defined segments: Traditional retailers with smaller stores under 20,000 square feet and huge “warehouse” stores typically with 100,000 feet or more.

“There’s really no ‘in between’ anymore,” said Neal Kaplan, an analyst with Scott & Stringfellow Investment Corp. in Richmond, Va.

Chains such as Builders Emporium were “simply too big to be small and too small to be big. . . . There just wasn’t room for them anymore,” said Griffin, who is president of the National Retail Hardware Assn., which represents 17,000 of the nation’s 30,000 independent chains.

Analysts Kaplan and McEvoy say Home Depot, HomeBase and other warehouse stores that are considering expanding in California will likely divvy up the lion’s share of Builders’ $500 million in annual sales because their low prices and huge selection will attract Builders’ former customers.

But smaller hardware stores should continue to prosper, in part because they’re convenient for people who do odd jobs around the house.

Average sales at independent hardware stores rose to slightly more than $1 million during 1992, up from $567,212 in 1983, said association spokeswoman Ellen Hackney. But unlike the warehouse stores, where sales are driven by major purchases, the average hardware store customer spends an average of $11.78 per visit.

The independents generally are tiny by retail standards; the association’s stores average just 9,000 square feet of sales space and an additional 3,000 feet of warehouse and service space.

Independents often can compete with larger competitors on price, Griffin said, because they’ve banded together to create cooperative wholesale companies, such as Ace and True Value. Profit generated by the wholesale operations is returned to the retail hardware stores.

Hardware Rankings

Builder’s Emporium ranked 15th in 1992 annual domestic sales among the warehouse home centers. Top 10 home improvement chains ranked by 1992 sales (in millions of dollars): Home Depot: $7,148 Lowe’s Cos.: $3,846 Payless Cashways: $2,496 Builder’s Square: $2,419 Hechinger: $1,869 HomeBase: $1,571 Menard Inc.: $1,400 Eighty-Four Lumber: $898 Grossman’s: $833 Southerland Lumber: $825

Sources: Executive Media Corp.; Building Supply Home Centers Magazine

Researched by ADAM S. BAUMAN / Los Angeles Times

Slated for Closure

Orange County will lose 12 stores in 10 cities when Builders Emporium closes for good. The locations:

* Anaheim: 3420 W. Lincoln Ave.

* Costa Mesa: 289 E. 17th St.

* Fountain Valley: 17200 Brookhurst St.

* Garden Grove: 12662 Chapman Ave.; 9920 Westminster Ave.

* Lake Forest: 24392 Rockfield

* Mission Viejo: 27690 Santa Margarita Parkway

* Orange: 1538 E. Chapman Ave.; 1343 E. Katella Ave.

* San Juan Capistrano: 32051 Camino Capistrano