Several factors have helped shield the company from an economic storm, but the biggest factor is that the company, which is privately held, is debt free,
There are only two routes to go for a wholesale distributing company like House-Hasson Hardware, and neither one involves sitting still.
“One is to grow and get bigger. The other is to face extinction,” House-Hasson President Don Hasson said.
Hasson has decided to avoid extinction.
Since its founding in 1906 by Sam House and C.S. Hasson, the Knoxville company has grown through sales expansion and acquisitions to the point where it is now a $200 million-a-year operation serving 12 states. Despite the recession, House-Hasson is in the midst of another growth phase, with plans for a $1 million expansion at its plant in Forks of the River Industrial Park in East Knox County.
The growth includes adding a 50,000-square-foot storage level to its 350,000-square-foot warehouse in Forks of the River, plus six new truck bays and a 50,000-square-foot parking area to accommodate 60 tractor-trailers it is adding to its distribution fleet. Then, there is the additional work force.
“We have hired a net total of 100 people,” Hasson said.
In October, House-Hasson acquired the distribution company Moore-Handley Inc. of Pelham, Ala., through a bankruptcy auction. House-Hasson added the 25-person sales staff of that company to its own sales staff of 50 and also hired 10 truck drivers in Pelham for an operation it had established there to distribute private-label merchandise.
House-Hasson also operates a warehouse facility in Prichard, W. Va., and has hired 30 more employees there, plus 35 for its Forks of the River operation. The 60 extra trailers at the Knox County facility come from the Moore-Handley acquisition, Hasson said.
The purchase of Moore-Handley for $14.5 million, according to news reports, was a matter of seizing an opportunity, Hasson said. It was another chance to grow. The trend for the last 30 years or more for the wholesale hardware sector has been toward consolidation, leaving fewer – and larger – companies.
“When I was born, there were probably about 500 wholesale hardware companies in the country. Today, there are about 25,” he said.
House-Hasson has been a part of the trend as it has grown through buyouts. It’s first major acquisition was Paris Dunlap Hardware in 1988, followed by Sheffield Hardware in 1997, Persinger Supply in 2007, then Moore-Handley.
As it grew, House-Hasson has gone through four major expansions of its East Knoxville headquarters since 1980. The latest is occurring not only during a time of economic recession, but one in which the housing industry – the segment of the economy that House-Hasson’s business is most closely tied to – has been hit especially hard.
Several factors have helped shield the company from an economic storm, but the biggest factor is that the company, which is privately held, is debt free, Hasson said. It was that way when he joined the family business in 1975. At some point early on, a decision was made to retain earnings and invest them in the business rather than distribute them. Hasson said he has tried to continue that practice since becoming president in 1985.
“Our philosophy has been to retain earnings for the 35 years I have been here, so by doing that over a long period of time you can develop enough retained earnings to buy up some other companies. That has kind of been our strategy,” he said.
This approach helped get the company through the recession and take advantage of opportunities resulting from the recession, such as the Moore-Handley purchase. Still, House-Hasson was not immune to the economic downturn and cash flow in 2009 was about 35 percent less than 2008, Hasson said. Although the credit freeze did not directly affect the company, it hurt House-Hasson customers who sell to the speculative house-building market, according to Hasson. Most House-Hasson customers are smaller, independent hardware stores competing against “big box” chains like Lowe’s home improvement stores and The Home Depot. House-Hasson takes steps to help the independents compete, Hasson said.
An advantage of the larger chains is the ability to buy in bulk at discount. House-Hasson can do this as well through its membership in Distribution America, an organization of distribution companies that pool their buying power to get low prices. House-Hasson also helps customer stores merchandise, market and advertise their products.
“Most of our customers have only four or five employees and they look to us as partners on things like that,” Hasson said.
House-Hasson installs point of sale systems in customers’ stores so they can track sales, orders, price changes and other merchandise information. Most customers can’t afford an advertising staff, so House-Hasson uses its own to develop newspaper circulars and ads in which customers may go online and customize them for their own stores and locations.
House-Hasson has in-house staff that designs four-foot sections of store space, each with different assortments of merchandise. It has more than 1,100 different designs and a marketing staff that performs surveys for particular stores and recommends what combinations of products would sell best there.
“We have gone through and suggested the best-selling items to put in each of those four-foot sections,” Hasson said. “We can build a store that is more right for the market than if we just said ‘here is a catalog; order some stuff.”‘
Pricing strategy also is critical, Hasson said. The big box stores rely on determining a “price leader,” which is an item that can be discounted to draw traffic into the store. House-Hasson has a retail pricing staff that does the same thing for its customers. It uses a system of nine different price codes that gauge price sensitivity – the degree to which a change in the price of an item will affect its sales – to help stores establish a price leader, Hasson explained.
Changing with the times
House-Hasson has changed dramatically since its founding in the same year the Wright brothers received a patent for their flying machine. According to a company history, C.S. Hasson, Sam House and 12 other employees of the C.M. McClung Co. hardware wholesaler left that company to form their own and operated out of a six-story building on Western Avenue. In the early days, orders were received and shipped by rail and business was driven by traveling salesmen whose territories ranged from the towns around Knoxville to isolated communities served by general stores. In 1926, Sam House retired and C.S. Hasson moved from a sales territory he handled back to Knoxville to become president of House-Hasson Hardware.
The company faced major challenges dealing with the Great Depression and then competition from catalog and mail-order companies, but the close relationship it had built with customers through its sales force appeared to keep sales intact. In the 1950s, under its president J.W. “Jack” Hasson, the company entered a period of growth, expanding its sales force into Virginia, Kentucky and North Carolina and adding another warehouse. By 1954, the company had a sales staff of 35 and was doing business in seven states.
House-Hasson Hardware got a major boost in 1970-1971 when C.M. McClung and Co. was liquidated and House-Hasson acquired many of that company’s employees, lines of merchandise and business. House-Hasson’s sales were immediately boosted more than 30 percent. In April 1979, the company broke ground at the Forks of the River site it now occupies. It now employs about 400 people and serves 12 states with a fleet of 40 trucks and 80 trailers.
Behind that growth has been a strategy of cautious money management, growth through acquisitions and increasing emphasis on the success of stores that make up the customer base.
“Most people just think of a distribution company as brown boxes going in one door and out another,” Hasson said. “We do that, but we do a lot more.”