National Hardware Show exhibitors expressed cautious optimism about the health of the U.S. economy.
The slowdown many have experienced since mid-2000 was a natural adjustment after the falsely inflated bubble of the dot-com frenzy. Now, they say, the country can rediscover tangible measures of economic health.
``Things aren't really bad. They're down, yes, but from 2002 on, we expect the economy will grow at a forecastable rate,'' said Jay Johnson, marketing director with housewares molder Iris USA Inc. of Pleasant Prairie, Wis.
The firm plans to open a 250,000-square-foot manufacturing plant in Mesquite, Texas, this fall, Johnson said at the show, held Aug. 11-13 in Chicago.
``We're having a pretty good year. 2001 was not a great year, so it was expected that we would recover in 2002 and get back on track with growth, and we've done that,'' he said.
Iris makes some products under the Martha Stewart Living line through Kmart Corp., but officials said they are not concerned about potential fallout from the federal probe into Stewart's sale of ImClone Systems Inc. stock.
``The business engine behind our Martha Stewart line is Kmart,'' Johnson said. ``Our bigger concern is the state of Kmart.'' So far, the Troy, Mich.-based mass merchant has been paying its bills steadily and ordering consistently every week, officials said.
Diversification is the name of the game for a lot of other manufacturers in the wake of the troubled retail scene.
Kmart's Chapter 11 reorganization already hit Chicago-based StyleMaster Inc., which relied heavily on that one customer. Ames Department Stores Inc. will close 327 stores during the next nine weeks. The Rocky Hill, Conn.-based chain filed for bankruptcy protection last year.
Cinco Plastics Inc. has put its proprietary line of Christmas tree stands into major mass-merchandise stores for quite awhile. The housewares company has worked with Home Depot Inc. and Wal-Mart Stores Inc. for nine years and with both Lowes Co. and Target Corp. for the past four years, said Cinco President Ramon Fiveash.
But the Houston firm also knows the perils of working with big-box stores, Fiveash said.
``You have to have a broad base of customers, or it will kill you to lose one of them,'' he said. ``You're living dangerously by working with only a few companies.''
Many retailers change buyers frequently, and new purchasing agents can bring their own suppliers to the table, he said.
``You're always subject to being dropped,'' Fiveash said. ``But on the other hand, if you have the account, the volumes are great.''
Cinco, a producer of tree stands made of polypropylene and other copolymers, also is careful with pricing, he said. Many large retailers will ask for price rebates and other cost allowances after a contract is signed, according to several exhibitors at the show. Those allowances can cut the price as much as 10 percent for a product within the first year it is sold to a mass retailer.
``It's tough to pass on price increases,'' Fiveash said. ``That's why you always must have new channels and new products in the pipeline.''
The company is working closely with garden centers and selling more products to the overseas market, Fiveash said. Among mass retailers, Wal-Mart commands such a presence that its sales alone could make or break the upcoming holiday retail season, researchers say.
``This year for Christmas, Wal-Mart will be the chain that decides if it's positive or negative,'' said C. Britt Beemer of America's Research Group in Charleston, S.C.
``If that chain was up 8 percent and everyone else was down, Wal-Mart alone could actually create a positive 2 percent in sales for the season overall.''
For the past four years, Ultralast Vinyl Arbors of Sarnia, Ontario, has debated the merits of moving to garden centers instead of the traditional mass-merchandise stores, said corporate sales manager Guy Riopelle. The firm makes a variety of outdoor plastic items, including PVC trellises.
About 15 percent of Ultralast's product is sold in mass-merchandise stores, including Kmart, Riopelle said. But while Kmart seems to be back to some stability now, Ultralast is cautious.
``We don't want to put all our product in one store or with one company,'' he said. ``It is better to spread it around so we don't get burned.''
Ultralast is putting more of its higher-end products into lawn and garden centers, where the profit margins are greater and the offerings more sophisticated.
``It's a growth market,'' Riopelle said. ``During the downturn, more people choose to stay at home. We do well when the economy is down.''
Beemer echoed that sentiment, citing an America's Research poll showing that 18 percent fewer people traveled on Memorial Day this year than in 2001, but 28 percent more grilled.
``People are still spending the money,'' Beemer said, ``but they are spending cash that they normally would have set aside for vacations. They're just spending it in ways they've never spent before. You see people who are building outdoor kitchens now. That's just an extension of entertaining outside.''
Beemer's study this year found that 8 percent of its 5,000 participants plan to build swimming pools, compared with a 2 percent average over the history of the 23-year-old poll.
``What we're really seeing is a redefinition of the home,'' he said.
Akro-Mils Inc., a maker of storage bins and outdoor products, has had a fairly flat sales year, but one that is better than 2001, said product manager Linda Carter of the Akron, Ohio-based firm. And with recent financial problems plaguing Kmart and other retailers, the economy may take some time to rise considerably, she said.
``We have some concerns about Kmart,'' she said. ``But hopefully, the company will stay on the right track.''
Dallas-based Today's Plastics, a longtime toy maker, is branching into the lawn and garden line. The company is attempting to sell more of its products to mass- merchandise stores, said President Tom Romig.
Those products include outdoor barbecue tables and serving trays that are blow or rotational molded. The company started its lawn and garden line, called Backyard Gear, three years ago.
The market for lawn and garden products is expanding faster than the company first anticipated, Romig said. And while working with mass merchandisers has its challenges, a key is finding the right products and prices for that market, he said.
``The lower-end products sell well in the large retail stores, in general. We can price for different markets,'' he said.
Rose Plastic USA, a California, Pa., injection and blow molder of retail product packaging, did put a plant expansion on hold due to the uncertain economic climate.
``We expanded in equipment, but not in footprint,'' said President Ken Donahue.
``Our intention is that we're going to expand. We're just waiting for the economy to show sustained life.''