situation

Market Decision Analysis 602, Fall 2019 Final Case

Van Good Hardware Store is a family owned business located in Bolton MA. The store has been in operation for 50 years and occupies a 20,000-square foot company owned building just outside the center of town.

The current owners are Bill and Emily Becker. Their two children, Anne and Tom, are also active in the daily operations.

o Anne is the head of operations

o Tom focuses on marketing, B2B sales, and distribution

Bill and Emily, hoping to semi-retire, would like to have the children take over the primary

management roles within 5-years.

Recently, a major paint company approached the store. The paint company is seeking new

distribution channels for their exterior paint product line

o A gallon of paint retails at $40 and provides a gross margin of 45% o To become a certified supplier, Van Good would have to;

Invest $20,000 in franchise fee

Pay 5% cooperative fee on each sale for advertising and signage

o Paint company estimates the following sales based on their recent market study

Year 1: $70K

Year 2: $120K

Year 3: $170K

After a family meeting, the children are only interested in continuing to operate the business if they can either expand the focus of the store and/or open an additional store before their parent semi-retire.

o Bill and Emily have asked for a month to think about the children's wishes and have asked for a marketing analysis study before making their final decision within 3 weeks.

Background

The Van Good Hardware Store is the only hardware store located in Bolton MA. One other store closed 7 years ago due to the opening of several Lowe's and Home Depot stores in the surrounding area.

o Sales were $4M in 2018 with a gross profit margin of 28.7% ($1148K). The store employs 15 non-family members.

o Projected growth over next 3 years with current portfolio

5% 2019

8% 2020

7% 2021

o Revenue sources: Service and storage 25% (50% gross margin), Tool sales 25% (20%

gross margin), Yard related items 30% (20% gross margin), Rental Equipment 10% (30%

gross margin), Other 10% (22% gross margin) Store Current Primary Focus

o Leading brand name yard, garden, home, and professional tools such as; STIHL, Husqvarna, AEG, DeWalt, ECHO, Makita, Mechanix Gloves, Fiskars Machete, etc.

o Service and Winter Storage for all sold equipment to include electric and gas-powered mowers (sit down and push)

o Day and long-term rental equipment

o Vegetable garden related supplies Reputation

o Store has won the award for the best regional hardware store for the past 10 years by Boston Globe.

o Highest better business ranking

o Recent customer satisfaction ranking in a primary market research study was 4.8 (out of

5) by consumers and 4.7 by professional/B2B clients

o Most employees have been with the store for over 10 years and include manufacturer

certified mechanics and industry associations.

Children's long-term interests and opportunity thoughts

o

o

Expand the number of stores in a 20- mile geographic area. With the expansion, the next generation (their children) can manage and operate in future years

o Expand foot print of current store to 40,000 square feet

o Evaluate the paint franchise option that was recently presented

Expand into lighting, kitchen, and bathroom fixtures

Home appliances to include refrigerators, stoves, sinks, tubs, etc.

Case Requirement

As the marketing analyst for the company, you are asked to develop a market analysis report

for Bill and Emily's review