LETTERS FROM THE GLOBAL PROVINCE
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GP23Jul03: How to Beat Walmart, Home Depot, and Other Powerhouses; Heard It on the Grapevine
The Answer Is Leonard Lee. Leonard Lee is an agnostic, but oddly enough, he wants to turn us into believers. He hopes we’ll become passionate about Ottawa’s Lee Valley (www.leevalley.com), a supplier of woodworking tools, garden equipment, etc, which he founded. And now that he’s moved on to his third career as a maker of medical instruments, he’d also welcome some admiration for Canica Design Inc. (www.canica.com), his new enterprise.
Oddly enough, we’re already converts, and we’ve not tried his products or services. He’s persuasive. And we’ve clearly been waiting for something better to come along. Home Depot, Walmart, and the like don’t stock the items we need, charge too much for their plants these days, offer seeders for rent that have slits in the body, and sell soaker hoses that break down all too easily. For 2 months, we’ve not been able to get our very fine Felco #2 shears repaired, because the dealer cannot get the spare part needed. Desperate, we believe in Leonard even before trying his wares. On the rebound, we’re after salvation, having walked through the valley of despair. Like many who have had trouble with their supplier, their government, or their church, we are ready to make a leap of faith, hungry for something that works.
By Recommendation. That set us to listening to the grapevine. We came on Lee Valley because one of our Global Province readers said, “Here’s a company you just have to put on Best of Class.” To prove the point, he cited a story about a gift he wanted to take to his sister in Florida two Christmases ago. He was after a micro-plane wood rasp, a very handy shredding tool for the kitchen, which was out of stock at his local Lee Valley. Even though he was leaving on Friday, the store folks promised delivery on time. “Thursday morning a courier delivered the tool to my door. There was no delivery charge. This is typical of the commitment to customer satisfaction that Lee Valley always exhibits.”
Getting Started. Leonard Lee started Lee Valley at age 39, partially to escape a government job he had come to detest, and secondly, as a woodworking enthusiast, because he could tell the world needed some better tools. Today its Veritas unit manufactures about 1/3 of its tool offerings, which makes the whole enterprise more of a tool maker than a conventional retailer. It does about 1/2 its sales in eleven Canadian stores. The other half is mail order, with half of that volume coming from its 300,000 U.S. customers. It has now swollen to about 700 employees, and, as we remember, it records something north of $100 million in sales.
The Product Is First. You’ll remember we talked about the world of Unbranding in our Global Province letter of July 9. That’s where you take dollars out your hype budget and put them into product quality. Lee Valley spends less than one-tenth of one percent of sales on advertising, but lays out a whole lot of money, time, and energy getting the product right. It designs and produces a lot of its products. And its design and manufacturing knowledge makes it a very picky buyer, indeed, of the other products that make it into the stores and catalogs. It spends its dough on the product and the customer experience. As Lee said to me, you (i.e we) are distinguished by “the products that don’t make it into the catalog.”
The Customer Experience. We can only half tell the story of what Lee Valley does for its customers. Let’s discuss some of the things it does that turns customers into proselytizers for the company:
As Lee said to me, “With our customers, we’d like to create a state of awe, though we never want to shock them.” That’s a better way of expressing an idea about quality used in business 20 years ago: “We don’t want to satisfy customers: We want to delight them.”
Helping Out. In our Annual Report on Annual Reports 2003, we have implied that 21st century corporations have to do more than create shareholder value. They must and will broadly create value for the society of which they are a part. (By the way, we’ll be announcing the highlights of this report to the press this week, and it will be posted on the website by July 31).
Lee Valley does this in several ways, but let’s cite a simple one. If you recruit a new customer for the company, it will donate $5.00 to the Nature Conservancy or United Way. It has recently geographically segmented its catalog customers so that they can see the local Nature Conservancy projects in their catalogs that they will be helping if they’re good recruiters. Lee, incidentally, is a Board member for the Nature Conservancy of Canada, so this program has become a handy way for him to put his money where his mouth is.
It’s About Product. We’ve said that Lee Valley answers the question: How do you beat Walmart, Home Depot, and the other Behemoths who offer average merchandise that wears out, at medium, but not sharply discounted prices, based on squeezing their suppliers too hard? The answer: Offer a great product, don’t waste bucks on frivolous marketing, and back the product to the hilt. Then the grapevine will bring customers to your door.
A Loose Screw. Now we’re waiting to see if Lee Valley is all it’s cracked up to be, having sung its praises based on copious hearsay. We’ll find out if the free, small screw Mr. Lee offered us for our errant Felco #2 does arrive. We’ll be watching the mailbox, because the acid test of any business is how well it does the small things. A few minor things done well at the beginning win customers for life.
The opposite tack will gain you some devout enemies. Years back we called a credit card unit of one of the world’s largest banks. Phoney charges, maybe to the tune of $10.00, had appeared on a couple of our bills. By the way, the bank’s consumer activities are immensely profitable. When we talked to a manager, he recoiled, told us not to bother him with such small matters, and advised us to call the disreputable merchants who were palming off these charges. As a result, we have cut every business relationship with that bank, and we go out of our way to advise some of its major customers about its arrogance. Ethical lapses by this bank regularly appear in the news.
We don’t think the people in Lee Valley will ever kiss off business so cavalierly. That’s how you beat the big guys: don’t be like them.
Copyright 2004 GlobalProvince.com