The Market Analysis looks at potential customers and potential business. Hisarlik Hardware explored the market segments, their needs, and did a marketing analysis.
The need for this venture was looked at first. Does downtown need a hardware store? The answer was a resounding yes.
Once the need was established, Hisarlik needed to analyze the make up of its customers, who and how many. Who is the potential customer? How many potential customers are there?
Once it was determined that there was a need and who the customer is, the next step was to figure out how to make them Hisarlik Hardware customers. How to get the potential customer in the store?
There are six major market segments:
Each market segment is unique and requires different marketing to attract them.
Downtown residents have already expressed the need for a local hardware store, as is documented in the April 2003 issue of Wilusa Magazine. Residents recognize the need and will be supportive of a retailer answering their concerns. The data that has been supplied to Hisarlik Hardware (by Yorikle, a market research firm used by Building Blocks ) shows there is a population of nearly 53,000 people and more than 20,000 households within two miles of the proposed location. The analysis provided by Yorikle states the area could support a 19,000 sq. ft. store. We are proposing a 9,500 sq. ft. store. In other words, there is enough business in this area to support a store twice the proposed size. The report has also found there is more than $2.5 million of potential sales revenue, based on the number of households alone (not including any of the other segments). The potential is expected to grow to more than $3.0 million by 2007.
Hisarlik Hardware believes the key to the need analysis is that all of the research and potential was measured by households, and households only. The households only make up one segment of the potential business the store expects to generate.
When Hector Priamson initially looked at the hardware business, one of the most important factors was the fact this industry seems to be immune to significant fluctuations in the economy. Based on information from the US Department of Commerce, the home improvement retailing industry has consistently grown at a rate of 7% for the past decade and similar growth is expected for the foreseeable future.
In the 1990's the growth in the industry was attributable to strong home sales, economic prosperity, and significant amounts of home renovation. Since 2000, growth has stayed at the same levels even though some of these factors have changed. Growth since the year 2000 was attributable to low interest rates and refinancing. According to the Federal Reserve Board, 35% of all refinancing goes to home improvement.
What does the future hold? 93% of all Americans plan to stay in their current homes and 78% of homeowners plan to undertake home improvement projects in the next year. How much will they spend? 69% of homeowners plan to spend as much or more in the coming year than they did last year. Home improvement budgets have grown 31% since the year 2000.
Hisarlik Hardware is being encouraged by Building Blocks to enter the equipment and party rental business upon opening the store. Based on conversations with other members, the rental component has been an overwhelming success adding to cash flow of the business as well as increasing traffic to the store. Reports of success unanimously talk about the fact that "renters" need tools and accessories to go with the rental equipment adding to the overall profitability of the store.
In the downtown market, the make-up of the rental inventory will vary a bit from what a suburban store might have. Hisarlik Hardware will work with the Building Blocks Rental people to determine the inventory. Hisarlik will rely on the knowledge and expertise of Building Blocks.
An investmentm is required upon opening for the initial purchase of the equipment to rent. Building Blocks has the necessary training and computer support to make this a very logical addition to the traditional hardware store.
The "Big Boxes", such as Lowe's, Menard's, and Home Depot have had a significant effect on the Home Improvement industry. According to the National Retail Hardware Association, based in Wilusa, the Big Boxes have expanded the market, increasing consumer participation in home improvement. However, the National Retail Hardware Association feels that the Big Boxes are nearing a saturation point, and in the future, they cannot open many more stores without it affecting and threatening other current Big Box locations.
"This competition has not kept independent hardware stores, home centers, and lumberyards from prospering. These stores are much more professionally operated than they were just a decade ago, and most posted strong profits last year."
---NRHA, 2004 Market Measure
Independent Hardware stores need to focus on their strengths.
Service. 88% of consumers have a favorable opinion of small business vs. 61% for big business (the lowest since 1993).
Convenience. Consumers want to get everything they need in one trip to the store. The Independent hardware stores are able to do this, because they work with their customers.
"There are four ways to compete
But price is only one of them."
---M. Chandler, a retail industry consultant
There is no immediate local competition. The nearest hardware store is 1.8 miles away on South Hasan Dag Avenue. The store is a small, 4,000 sq. ft., and isn't current in its products or presentation.
Because of the lack of product and poor shopping presentation, residents do not consider this an option for hardware. The next closest hardware store is 2.7 miles away. There are several stores that are 3 to 4 miles from the proposed site. Studies say customers do not want to travel more than 3-7 minutes to a location. While these stores could serve the need, their location does not make them a viable option to downtown residents because of distance and neighborhoods.
The "Big Box" stores such as Lowe's, Home Depot, and Menard's are built to serve suburban Wilusa. The closest Lowe's is 12.5 miles and 17 minutes west of Hisarlik Hardware's proposed location. The nearest Home Depot is 10.5 miles or 16 minutes west of Hisarlik. Menard's is 9.3 miles and 14 minutes east of the location. There are no stores that are convenient to the downtown market. To get to any of these, customers must plan on spending 30-40 minutes of driving roundtrip at a minimum before even walking into the store. Hisarlik Hardware will be a 2-3 mile drive or 5-10 minutes maximum travel to the store. This convenience will be a major selling point for the business.
From discussions between Hisarlik Hardware and the parent company of Building Blocks, regarding the possibility of a "Big Box" store opening in the downtown area, it seems unlikely due to the size of the potential market, cost, and lack of real estate, to build such a structure in Arazawa Township.
An analysis of competitors in the equipment and party rental field is similar to that of the hardware industry. There is one competitor that is southeast of downtown, 1.5 miles from the proposed location. The company, Best Rentals, Inc., handles equipment and party rentals.
Tent rental has one competitor that is downtown. An factor in tent rental may be the clean new equipment and, once again, great service available from Hisarlik. American Tent and Awning is located 1.8 miles from the proposed location. One advantage for Hisarlik in tent/party rental is that a customer can cover more bases with the variety of equipment and supplies from a rental and hardware store versus a company that focuses solely on tent rental.
The closest tool rental company is 2.3 miles from the proposed location. Hisarlik Hardware feels that significant progress can be made into the tool rental business because of convenience. Hisarlik expects to be a fantastic solution for contractors working downtown who need equipment for the day or for the project. Residents downtown have smaller homes and condominiums, consequently they do not have room to own bulky or large quantities of equipment. This is expected to be a benefit for the rental business.