GARY C. KNAPP
Posted on 01/22/2006 8:07:55 AM PST by csvset
VIRGINIA BEACH — Last year, power tools powerhouse Stihl Inc. helped a small local merchant open a new store in Chesapeake.
Stihl designed and built the showroom for Land & Coates, one of its lawn equipment dealers, absorbing a large chunk of the expense, said Barden Winstead, the retailer’s general manager. Land & Coates, a family business with three other Hampton Roads stores, saved at least a third of the cost to start up the new location.
“Stihl invested in our new store out there. They’re almost a partner,” Winstead said. “Everything they do, it’s obvious that they care about us.”
Stihl’s devotion to its independent dealers is the core of a marketing strategy that stands in contrast to the rest of the retail realm’s emphasis on high volume and rapid growth. It’s so proud of rejecting the mass market that last spring it launched an advertising campaign in newspapers including USA Today, The Wall Street Journal and The Virginian-Pilot.
“Why is the world’s number one selling brand of chain saw not sold at Lowe’s or The Home Depot?” the ads ask. “What makes this handheld blower too powerful to be sold at Lowe’s or The Home Depot?”
In finer print, Stihl boasts of its dedication to 8,000 independent dealers nationwide. “You see, we won’t sell you a leaf blower in a box, not even a big one.”
The reasoning behind this approach is simple and conventional: service.
“These big boxes are not able to give service,” Hans Peter Stihl, chairman of the supervisory board of Andreas Stihl AG & Co. in Waiblingen, Germany, said during a visit last fall to its U.S. headquarters in Virginia Beach.
The eldest son of the company’s founder, whose name appears on every product, was succinct and steadfast: “No service, no sale.”
And sales have hardly suffered, the company said.
Privately held Stihl releases no sales figures but cites record sales and profits for 14 straight years, with annual sales growth averaging 10 percent over the past decade. In 2005, sales climbed 18.4 percent, due in part to demand for chain saws after a busy hurricane season.
While overall shipments of gas-powered, handheld products are expected to decline in 2006, Stihl keeps growing. It recently announced an expansion of the Virginia Beach plant on Viking Drive to build more of its signature orange saws, hedge trimmers, brush cutters and leaf blowers. This year, the company expects to produce about 3 million tools.
Stihl officials acknowledged they give up the potential for bigger sales volume by eschewing the big chains. But the company gains in assuring the purity of its brand, said Fred J. Whyte, president of Stihl Inc.
“The risk you run in the big box is that you’re getting someone who happens to be working in power equipment that particular day,” he said recently.
At the Land & Coates store in Virginia Beach last week, salesman Matt Barnes met a customer looking at Stihl chain saws. The customer first asked about prices, but as Barnes explained the differences in the saws, the man grew interested in the safety features and horsepower and appropriateness for his plan to clear a fallen tree and cut through several acres of property.
Stihl dealers will assemble each tool sold, fill it with fuel, show the buyer how to start and use it, and direct him to the necessary safety gear. When the product needs a new part or a repair, the same dealer will take care of it.
A Stihl handheld tool runs on a gasoline-powered engine, similar to an automobile. It needs regular maintenance but can last for several years.
Most major retail chains farm out their repair operations to third parties, Whyte said. And that’s no good for Stihl. The company won’t allow Internet sales either because they cannot guarantee proper service.
Mass marketers have built their business on limited service and low prices. Put a Stihl product on the shelf of The Home Depot or Lowe’s, and its price tag would stand out as one of the highest – typically from about $50 to more than $100 more than other chain saws, trimmers and blowers.
Unless a salesperson can explain the steeper cost, shoppers would see no difference between several chain saws with the same length blade, horsepower and weight. They wouldn’t know that the Stihl product has an automatic gear-driven oiler that works when the chain turns, a unique chain break, a higher-grade chain that lasts longer than softer metals, or a chrome-impregnated cylinder that wears more slowly and transfers heat better than an all-aluminum cylinder.
“If you can actually show the person what they’re paying for,” a consumer often will buy the more expensive product, said Eric Bolling, manager of the equipment shop Aldridge & Chambers, a Stihl dealer in Virginia Beach.
If a shopper looks only at prices and chooses the wrong saw to clear-cut his farm on the Eastern Shore, for example, the tool might break more quickly. That leaves the customer frustrated and dissatisfied with that brand.
Bolling said such purchase mistakes change consumers’ perception. After John Deere tractors began selling at The Home Depot in 2003, customers have come to Aldridge & Chambers with conked-out mowers built to handle less than 2 acres that they tried to use to cut 4 acres.
“They’re like, Home Depot sold me this. Why isn’t it doing the job?” Bolling said. “So what that does is give John Deere a bad service record.”
But that hasn’t stopped many manufacturers from moving into the mass market. John Deere will hit Lowe’s this spring. The Home Depot plans to start selling Cub Cadet and Toro lawn tractors in February. Echo Inc., a Stihl competitor that once sold exclusively through independent stores, has a place on The Home Depot shelves along with former specialty brands McCulloch and Homelite.
Representatives from The Home Depot Inc. and Lowe’s Cos. Inc. visit Virginia Beach periodically to try to woo Stihl. Whyte said he politely reiterates the service-first philosophy, and the chains stress their volume, consumer exposure and advertising muscle.
“They cannot even entice me by giving a huge order,” Hans Peter Stihl said, cracking a smile.
Officials from The Home Depot declined to comment. “We don’t discuss our relationships with our current vendors, and we don’t discuss other manufacturers’ business strategies,” said Jen King, a spokeswoman for the company, based in Atlanta.
Lowe’s representatives didn’t address Stihl specifically but conveyed a desire to attract top-line manufacturers. “It’s our goal to have a wide range of power tools at every price point,” said Chris Ahearn, a spokeswoman at Lowe’s headquarters in Mooresville, N.C. “We’re always looking for opportunities to enhance that.”
Manufacturers face heavy pressure to reach the masses. Publicly traded companies must promise significant quarterly sales growth to satisfy investors and shareholders.
“They chase numbers and they chase volume,” Whyte said.
A privately held European company such as Stihl takes a longer-term view, planning two years in advance, Whyte said. It answers to the vision of its founding family, which started the company 80 years ago .
“You have to decide what your identity is going to be in the marketplace,” Whyte said. “And if you’re just going to chase pure volume, ultimately that comes with a price. You ultimately erode the quality of your product.”
Whyte offers a common scenario: A manufacturer starts out making an item with the best materials, well-researched designs and homegrown labor. Once a big retail chain decides to carry the product, the manufacturer has to buy more equipment and add employees to meet demand.
Then the retailer begins to carry less expensive competing products and tells the manufacturer to lower its prices. After investing so much, the manufacturer cannot afford to lose that business. So, it must cut expenses – trim the quality of its materials or seek cheaper labor – to make the big retailer happy.
Few manufacturers have championed the specialty market the way Stihl has. At Domes, an independent purveyor of home video and audio equipment in Chesapeake, salesman Jock Hughes could name only two companies – Runco International and B&K Components Ltd. – that don’t have products in big chains such as Best Buy and Circuit City. Other electronics makers, including Sony, Onkyo and LG, have separate lines, one to sell in specialty stores and one for the big chains.
Lillie Gilbert, owner of Wild River Outfitters in Virginia Beach, counted Patagonia Inc. as one of the few lines of recreational gear that consumers cannot find at Dick’s Sporting Goods or Sports Authority. If it had to produce enough for those chains, Patagonia would have a hard time using all Portuguese cotton and making fleece with recycled products as it does now, Gilbert said.
“I think the integrity of the brand is more important to some people,” she said.
Stihl owns no stores, so it makes a point of taking care of its dealers. It has encouraged and helped retailers modernize and spruce up their dirty, garage-like image.
Its “concept store” is a clean, bright display that centers on a pitched wooden frame under the orange Stihl sign, with each tool hanging under a photo that shows it in use. Stihl teams set up the displays at little cost to the merchant. After Stihl did that for Aldridge & Chambers, sales of the competing Echo line dropped 75 percent in a year, Bolling said.
The company will go as far as constructing a whole showroom, as it did for Land & Coates. “A little independent dealer like us trying to do this would be hard,” said Winstead, whose father bought the company’s first lawn equipment store in Norfolk 25 years ago.
The retailer wanted to expand to fast-growing Chesapeake but was cautious about the investment until Stihl pushed for it and helped find a site.
Land & Coates returned the favor by pledging to carry Stihl’s handheld equipment exclusively. Other Land & Coates stores offer the competing Shindaiwa brand, made by a Japanese company that also stays out of the mass market.
For Land & Coates, selling only Stihl products has posed no disadvantage. The retailer’s Stihl sales rose 19 percent last year – even better than in 2003, when Hurricane Isabel hit Hampton Roads – outpacing sales growth across all product lines, Winstead said.
Unlike mom-and-pop hardware stores that panic when The Home Depot comes to town, or independent book sellers that cringe when a Barnes & Noble opens nearby, Stihl dealers said they have little reason to fear the big boxes. Seven years ago, Speed’s Power Equipment moved closer to The Home Depot in Salt Lake City, said Jordan Ford, the store’s manager, who participated in a Stihl dealer meeting here last fall.
At The Home Depot, Echo products sometimes sell at higher prices than Stihl tools, Ford said. And the stores’ proximity allows consumers to easily make a cost comparison. “They feel they’re going to get a better deal at Home Depot, and sometimes they’re not,” he said.
The Home Depot and Lowe’s typically attract a different shopper. But Stihl dealers said they often gain those customers after they buy tools that the chains cannot repair or that aren’t worth fixing.
Hans Peter Stihl said he believes those customers will eventually come to his brand and never go back. “And we can’t wait.”
Reach Carolyn Shapiro at (757) 446-2270 or carolyn.shapiro@pilotonline.com.
GARY C. KNAPP
Perhaps we will be returning to the days of yesteryear.
Hi-O- Silver ... away!
I know I go out of my way to patronize small stores like this. We patronize a small "Lawn and Power" shop that is within 3 miles of both a Lowes and a Home Depot, and have for years.
I talked to the proprietor of the small shop one day, and when it came up he said having those two 'big boxes' open up was the best thing that ever happened to him.
He sells brands they won't touch, and stands behind his products with factory trained service right in his store. Now, even though my lawnmower is a Craftsmen, the nice man at the local Lawn and Power shop gets all of the service work on it every year.
L
this is why i will always favor a private company over a public corporation. the structure of a public corp. opens it up to wrong influences and graft.
Today's business schools teach "winning the ties," which is to say, invest no more than you have to in your product and make it no better than your competitor's. Stihl and a few other companies are doing well by ignoring this concept.
The companies that are willing to cut their quality to build products for the price that their customers like Home Depot or Wal-Mart or Loews are willing to pay will soon find their reputation decreasing to the same level.
That it is European isn't a factor. Most Asian firms - even public ones - also take a longer view.
Short term thinking is seemingly an American invention and disease. It is destroying our economic foundations and economy.
It's ironic that the Leftists' Leftist, Senator Howard Metzenbaum, raked Bork over the coals over retail price maintenance. Judge Bork pointed out that some customers purchase on other factors besides price and was excoriated for it. Now the Leftists hate Wal-Mart.
Cool! Good post.
A friend of mine who recently moved to a bigger, wooded parcel asked me just yesterday about chain saws and I told him immediately that Stihl was THE ONLY way to go. I have two Stihls and they have been going strong for over 20 years. My "Wood Boss" must have the equivalent of 300,000 miles on it. My brother owns a tree business and he has three Stihls - - he wouldn't own anything else.
Plus, Stihl makes a heck of a product...they really don't need the box stores. Heck, I've got two Stihl saws and a Stihl weed trimmer.
Stihl's approach however is very German. In Germany, products are sold through smalled stores or department stores. If you buy a washing machine, for example, the employee selling the machine probably has been working at the store for many, many years and knows all about the product. Big Box doesn't play there.
Of course, one pays for this level of service!
Interestingly, another German power tool company, Hilti, which always had a reputation for being the highest quality construction tools (powder actuated nail guns, etc.) just recently decided to sell through Home Depot. A friend of mine is a long-time Hilti salesman and when I heard about this I called him up and we both laughed in disbelief. (Actually, he cried in disbelief.) Hilti is now poised to go right down the tubes.
Not that the concept itself is taught at business schools (it is learned quickly enough), but "planned obsolesence" is a blight upon humanity.
I have worked in Germany. You can't even buy a donut after noon Saturday.
My local guy is imo about as close to being a thief as one can get...and has no real competition...
I would just as soon drive into Menards or Fleet Farm and buy my saws and then take a drive when some of it needs repairs
to a shop certified to repair and service it...
Six of one...half a dozen of the other...
imo
I do the same. The Land & Coates store has helped me with my chainsaw, (not a Stihl), over the years. Besides sales, the big box stores have nothing to offer.
Over twenty years ago I purchase a Ryobi weed trimmer. About six month later I took the failed product into a shop for repairs. The owner pointed me to a pile of junked trimmers, most of which were brown Ryobi's, and told me to toss it in with them. Seems they are not worth fixing.
I learned my lesson.
I own a Stihl 029 saw with a 14 inch bar. Bought it years ago when we lived in Minnesota and cut a lot of firewood. Continue down here in Missou. I like the Stihl's no-tool-needed chain tightener.
Lancey, I was in the market for a saw last fall, and sprung around $350 for a Stihl 'Farm Boss'. One of the best purchases I ever made!
I have used quite a few different chainsaws, but nothing like the Farm Boss. It starts, runs, and cuts like a hoss, no hassles. I can bury the bit in a big trunk and it keeps on cutting.
In the past, it always seemed like I spent half the time adjusting and tinkering to keep the saw working. Not anymore, this is a great piece of equipment
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