'A Different Mousetrap' : Orchard to Open Stores Amid Fierce Competition


Despite the presence of home improvement rivals such as Home Depot and HomeBase--and a competitive field fierce enough to force Builders Emporium out of business--San Jose-based Orchard Supply Hardware is opening a string of stores in Southern California.

Orchard, which operates 45 stores in other parts of the state, will open three stores Saturday in South Pasadena, Hollywood and West Los Angeles. It opened three others late last month in Pasadena, Van Nuys and Burbank. The company plans to open an additional five to 10 stores--most of them in the Los Angeles area--next year.

Orchard's executives believe that the Southland's do-it-yourself market--the nation's largest--is big enough for their outlets because, while the warehouse stores promote low prices, Orchard emphasizes service. And while Home Depot and HomeBase offer lumber and other construction materials, Orchard carries a broader variety of "fix-it" items, housewares and garden goods.

"There's been a shakeout in this industry," Orchard President Maynard Jenkins said. "People who operate traditional hardware stores are losing sales to warehouse stores. But we're flourishing because we're a different mousetrap."

Industry analysts agree that Orchard has a separate appeal.

"If you want to build a deck, you would want to go to a Home Depot," said Bo Cheadle, an analyst at Montgomery Securities in San Francisco. "If you just need to repair a leaky faucet, you would want to go to Orchard, because with the higher level of service, you get in and out quickly and save time."

Indeed, the three Orchard stores that opened April 30, which did not charge sales tax during the first two days of business, have drawn large numbers of Southlanders. The company plans to offer the same promotion at its three store openings this weekend.

"The response in Southern California has been overwhelming and far above expectations," Cheadle said.

Burbank resident Kim Hutchinson has already shopped at the Burbank store four times and recently checked out of the store with a basket full of plants.

"I like the way the store is laid out because it's easy to find items," Hutchinson said, referring to the supermarket-style lanes at the store. "Also, the employees are very helpful."

Another Burbank resident, Kyle Johnson, said the Orchard service is almost too much of a good thing.

"The employees won't leave me alone," Johnson said as he shopped for screws at the Burbank store.

Orchard executives say they have more roaming customer service workers than do warehouse stores. Employees are trained to approach customers and offer assistance. The company said it also tries to hire people with more experience in household repair.

However, the home improvement giants are also touting their service. Irvine-based HomeBase has been hiring more salespeople who are experienced and knowledgeable in home improvement retailing, spokeswoman Carol Elfstrom said. She said the company also recently retrained its employees to be more attentive to customer needs.

Elfstrom said HomeBase will compete with Orchard for some customers, but she noted that HomeBase also caters to building contractors by offering construction materials not available at Orchard. Of the 81 HomeBase stores in 10 states, 31 are in Southern California.

Executives at Atlanta-based Home Depot, the nation's largest home improvement chain, said their company also offers high-quality service. The company has 41 Southland stores and a total of 279 stores in 24 states.

"We're known for low prices, but we also excel at customer service," spokesman Jerry Shields said. "We hire good people and we pay them well."

Orchard may compete more directly with some independent neighborhood hardware stores and nurseries.

However, some well-established independents such as Koontz Hardware in West Hollywood, say they are not concerned. An assistant manager at Koontz noted that Orchard has moved into sites previously occupied by Builders Emporium and that there were actually more competing stores before Builders Emporium announced in August, 1993, that it would close all 82 of its California outlets.

Ironically, Orchard was prohibited from opening stores in Southern California in the 1980s because it was owned by Wickes, the same company that controlled Builders Emporium. Wickes did not want Orchard to add to Builders Emporium's competition woes.

Orchard, which became an independent company as a result of a management buyout in 1989, became a public company in April, 1993, by listing its stock on Nasdaq. It was founded as a modest cooperative for prune farmers in the Santa Clara Valley in 1931.

Orchard began to operate as a retailer in the San Jose area in the 1950s. The company later expanded throughout the San Francisco Bay area.

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