For some metal distributors, small orders can be big business.
Metals distribution is a fairly diverse business model, with a variety of products, shapes, services and even delivery models available to the average metal service center. But whether it’s a massive flat-rolled steel service center or a small mom and pop red metal bar supplier, neither business is much known for its opportunities for in-house browsing.
That’s not so with that entirely different model of metal supply businesses, the cut-to-size retail shop.
While most of the service center space eschews the retail side of metal distribution, some companies offer small-quantity sales. They range from a multinational franchise player that only deals in retail to some traditional service centers that offer it in addition to their larger quantity industrial customer base.
In many ways, Metal Supermarkets stands alone in the metals distribution sector. Founded in 1985 in Mississauga, Ontario, by the late William Mair, the company is the only multi-outlet store that exclusively deals in small-quantity sales. Mair had been a senior executive with Alcan Aluminum when he launched the company.
“He always recognized there was nobody focused on the small-quantity, cut-to-size aspect of the business. He started it up and did well,” says Stephen Schober, president and CEO of Metal Supermarkets.
Over time, the company expanded. But not in the same way its service center counterparts typically did, through strategic acquisitions and greenfield expansions. Rather, the company borrowed from companies such as McDonald’s and Ace Hardware to grow its footprint.
“He got some investors and it became the classic start-up, classic franchise model,” Schober says.
That remains the model today. There are more than 100 Metal Supermarkets operating across Canada, the United States and the United Kingdom, with multiple franchises opening yearly. In the last few months, new stores in South Las Vegas and South Phoenix were added to the growing roster.
Alro Steel followed a much different path to a similar place. The $3 billion company was founded in 1948 by brothers Al and Robert Glick as a traditional metals distribution operation in Jackson, Mich. In the 1970s, the company made its first expansion, then built on that to create one of the largest service center companies in North America.
In 1997, Al Glick saw the same hole in the market Mair previously recognized, the need for a small retail store for those customers who aren’t looking to buy truckloads of material (well, maybe a Ford F-150 truckload). They opened the first Alro Metals Outlet near their headquarters facility in Jackson.
“Taking care of small customers is Alro’s DNA, so it was kind of getting back to our roots,” says John Santarelli, corporate manager for Metals Outlets for Alro. There are now 24 Alro Metals Outlets, all east of the Mississippi River.
In the case of Houston’s Triple-S Steel, those roots are why the company offers retail outlets in a handful of its facilities. The company, founded by Bruce Stein in 1960, followed the lead of Dixie Iron & Metal Co., the business run by his father, Johnny Stein.
“We started in retail before we were big,” says Sam Stein, product manager for Triple-S and the fourth generation of Steins in the metals business. “That’s kind of our story.”
Triple-S currently operates retail stores in its flagship Houston and San Antonio facilities in Texas, plus others in Grand Junction, Colo.; Farmington, N.M.; Knoxville, Tenn.; Macon, Ga.; and Salt Lake City, Utah.
All but one had retail operations when Triple-S acquired them. Salt Lake City’s Intsel was the exception, where the introduction of a retail side there was a more opportunistic than strategic part of the deal.
“The building across the street from our Intsel facility in SLC was up for lease and had a really good layout that fit our retail model. And we had a manager there who had a talented eye for the retail business and he shepherded that.”
With Metal Supermarkets, the franchisees typically don’t come from the metals business. Rather they are more likely to have a retail background. Schober concedes it can be difficult to adjust from the service center mindset.
“Sometimes we have someone from the metals industry and they can’t get over what we call, ‘elephant hunting.’ We’re not trying to get 10 to 15 to 50,000-pound orders. We’re a niche player. We’re not trying to be in the same battleground as the major service centers. We’re not equipped to do that,” he says.
Their model is pretty standard. The franchises carry more than 8,000 pieces of metal, cut-to-size. There may be some variations by geography once a franchisee has learned the market, but they tend to be minimal.
There are also some occasional differences in equipment between the stores, with some running waterjets while others use small plasma tables.
Unlike Alro and Triple-S and others who have a service center side of the business, Metal Supermarkets franchises don’t have an existing supply of material to tap. Instead, Schober advises his franchises to build relationships with local service centers in the markets where they serve. There can be some reluctance from distributors, but that seems to be waning.
“As we grow (we now have 85 stores in the U.S. and 26 in Canada) we’re getting more interest from multi-location service centers recognizing we’re a legitimate customer. I think we’ll develop more preferred relationships, but for the most part we seek to have the franchises build and develop in their local areas,” Schober says.
One thing all of these companies have to do to grow is engage in marketing which is much less of a concern for the service center side of the business. If a new full-line service center opens in a city, most, if not all, of the potential customer base will be aware of that development in fairly short order. But retail stores are targeting consumers who may not know such an option even exists.
“We spend a little more time and effort on that, doing different things. We might do radio ads or print ads locally, plus some Facebook ads around the city. It’s a little different than trying to get a customer on the full-sized metal side,” says Brian Glick, vice president of business development and marketing for Alro.
Metal Supermarkets uses a shared approach. The corporate team is responsible for the website, provides the phone system and ERP, but turns over local marketing to the stores.
“There’s a lot of digital advertising, trying to create awareness. Some markets, they’re aware and for other markets it’s a whole new thing. It depends where you’re starting,” Schober says.
Retail customers differ in other ways. An experienced job shop operator likely knows the exact specifications of every piece of metal he uses, a knowledge base built over time and through expertise. But many customers in a retail facility have no such instinctual knowledge, which makes the opportunity to explore the products so valuable.
“The real niche is for people to be able to come in and browse. They may not know exactly what they need. They can touch it, feel it and get taken care of very quickly. It’s very convenient,” Santarelli says.
The customers that shop all of these businesses cover a wide array of metal users. They range from the smallest of fabricators or job shops that simply don’t buy in typical service center quantities to hard-core hobbyists to occasional do-it-yourselfers. Often, for companies such as Alro or Triple-S, a regular buyer of large quantities could make a beeline to the retail space for an immediate purchase. “That convenience becomes very important,” Santarelli says.
While Triple-S would never rule out offering more retail options at its existing or future facilities, it’s not necessarily part of their growth strategy. That contrasts sharply with Metal Supermarkets, which is in the middle of a major expansion effort targeting a host of U.S. cities.
Moving into a new market for the company doesn’t happen without considerable thought and study. The corporate team will use Census data to see if enough companies that Metal Supermarkets sells to are in a given area, information that must also satisfy the potential franchise operator.
Once agreed upon, each franchisee is given a protected area from which they can operate – they won’t be competing with another Metal Supermarket down the block.
“The last thing we want is for the franchise to fail. We see this as a partnership. It’s a long-term commitment,” Schober
At Triple-S, the material isn’t limited to cut pieces or even its heavy supply of ornamental iron. They also sell hardware, power tools, welding machines, hard hats, etc. “My grandfather calls it a fabricator’s toy store,” Sam Stein says.
Though companies such as Alro and Triple-S operate retail and wholesale businesses, there is limited overlap between the two models. “We have some people who work both sides of the business, but for the most part they operate fairly independently,” Sam Stein says.
Alro also has some movement, or cross-pollination as Santarelli calls it. Most of its hires and promotions are made from within, so individuals can and have moved from the service center side of the business to the outlet side and vice versa.
That doesn’t mean there aren’t things to be learned or benefits to be had from this kind of dual businesses. For starters, the retail side benefits from the purchasing power of the larger service center, as well as having a place from which to source material.
But there’s value that can move the other way as well. Stein notes that the customer-facing nature of the retail outlet puts a premium on service, delivering the message that each customer should be made to feel like a priority. “We want our walk-in customers to feel as important as any other customers.”
“There are definitely things to be learned by both sides of the business. But the industry is the industry, whether you’re talking about small customers or large customers,” Santarelli says.[Caption:]
Metal Supermarkets specializes in small orders, cut to size. (Photo courtesy Metal Supermarkets)