Home Depot Shuts Out the Locals

Sam Brenner saw the carnage first-hand.

Before Atlanta-based Home Depot even opened its doors in his Alhambra neighborhood five years ago, a lumberyard down the street closed in anticipation. A second shut down two years after Home Depot opened. As for Brenner, he packed up his business, S.B. Lumber, and ran to the northeast San Fernando Valley, then a “depot-free zone,” where he planned to sell lumber away from the firing range of big-box carnivores.

Cut to today. There’s a Home Depot in San Fernando. Another in North Hollywood. A third in Panorama City. Brenner’s fighting for breath and casting about for cover.

“They’re basically choking us,” he said. “You try to survive, but everybody’s closing their doors.”

These should be the glory days for neighborhood lumber businesses, what with the economy booming and many people renovating homes or building new ones. That it’s actually a dark time for some lumberyards speaks volumes about the havoc Home Depot--the nation’s largest home-improvement retailer, with $30.2 billion in sales in fiscal 1998--can wreak when it sets its mind to dominating a market like the San Fernando Valley.

The latest casualty is Hull Bros. Lumber Co., the Canoga Park yard that closed its doors this fall after 77 years. On Jan. 3, another Valley stalwart, Terry Lumber, will be acquired by Carolina Holdings Inc., a major commercial lumber company based in North Carolina. (Owner Terry Mullin said the sale stems from the recent death of his son, Tom, former president of the business.)

But old phone books are littered with the names of shuttered lumberyards, including that of Valley bulwark Builder’s Emporium, a local chain that went belly up six years ago. One reason, say business owners and retail experts, is the almost-unbeatable competition of big-box stores, which explode into a neighborhood with a larger array of goods and cheaper prices than local merchants can offer.

This can mean good news for consumers, who can land better deals while wrapping up an entire shopping trip in one gigantic store. But it also results in lesser variety, because as large as a 140,000-square-foot Home Depot is, its lumber department cannot replicate the selection of a dozen smaller stores. And renowned as Home Depot is customer service, analysts say it may never give the attention a local retailer gives a longtime client and friend.

“We sort of run down the street to Home Depot and forget about the little neighborhood lumberyard,” said Jack Kyser, chief economist of the Los Angeles County Economic Development Corp. “Then we look around one day and say, ‘Oh gee, I really miss it.’ ”

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Of course, Home Depot is not the only big-box retailer out there. Irvine-based Home Base operates stores in Canoga Park and North Hollywood. The chain, however, is struggling to regain equilibrium after sales fell for two years in a row. Some analysts and other merchants say Home Base does not pose the kind of threat to smaller stores that Home Depot does.

“Usually, when you have a category killer like Home Depot, you give up service,” said Richard Giss, a partner with Deloitte & Touche and a member of its retail services group. “They are still a low-service operation, but they have people there who can really answer your questions. That is the key to their success.”

Apparently set on blanketing the market, Home Depot runs nine stores in the Valley and surrounding cities like Santa Clarita and Glendale. David Hamilton, who spent 10 years managing Home Depot stores in the Valley, said the company focuses on listening and responding to customer needs as well providing good value.

“We want to be in stock, at a good price. If you’ve got any needs, whether it’s to learn how to build a deck, what you will need to build a deck, or what other accessory items do you need, that’s where our focus tends to be,” said Hamilton, now Home Depot’s national products manager, based in Orange.

It’s a formula that’s sent the Valley’s remaining lumberyards scrambling for new strategies. The first step some take is to concede the nonprofessionals, the do-it-yourselfer crowd, to Home Depot.

“Homeowners look at price, price, price,” said Mike Tuchman, owner of Roadside Lumber in Agoura.

Roadside, instead, caters to the commercial and industrial trade, stocking items that contractors need and providing the kind of credit, service and delivery schedules that Home Depot--so far--does not offer in the Los Angeles market.

In North Hollywood, M&M; Hardwood stays afloat by focusing on high-end products suitable for cabinets and interior decorating projects.

Nearby, Anawalt Lumber and Materials, at 11000 Burbank Blvd., tries to use the size of its 2,800-square-foot store to its advantage. In the big stores, said owner Jim Anawalt, “You can’t buy one thing where it doesn’t take an hour. Here, they can just get their stuff and go.”

The business--one of five Anawalt stores in the Los Angeles area, each of which is owned by different members of the family--also counts on highly personalized service to keep its core customer base of homeowners returning.

“We’ll go to people’s houses and help them out [with projects],” he said. “We deliver the same day.”

But what works today may not be so effective a few years from now. A couple of developments on the horizon could put an even tighter squeeze on the Valley’s retail lumber industry.

For one thing, Home Depot is testing a new initiative to bring in more professional business. Analysts who track the company say the push has been highly effective in Chicago, where Home Depot offered extended credit, improved delivery and other specialized services such businesses as contractors and plumbers. The program has not reached Southern California yet, but analysts predict it may do so in the next few years.

Then there’s the arrival of Lowe’s, the country’s second-largest home-improvement retailer. The North Carolina-based chain hopes to open its first Valley-area store in Burbank late next year, with other locations to follow.

“When a business is competing with Home Depot, it’s been a struggle, and that’s putting it mildly,” said Douglas A. Gordon, an analyst with San Francisco-based Banc of America Securities. “When competing with both [Home Depot and Lowe’s], it’s deadly.”

So what’s a guy like Brenner, of S.B. Lumber, to do?

He started by zeroing in on the small contractors who have so far been under-serviced by Home Depot. That’s helped, but business is still half of what it once was, he said. So Brenner is checking out side businesses such as pest control.

“You try other avenues,” he said. Otherwise, “you can’t make a living.”