Latest / Small Business Success with Fexingo: Local Companies, Main Street Stories, and Community Commerce / How a Local Hardware Store Beat Home Depot with a Promise to Fix Anything
Transcript
- Lucas: If you walk into a Home Depot or Lowe's on a Saturday morning, you will see a parking lot full of trucks and a store full of people who need to fix something. But you will not see anyone who can actually do the fixing for them. Luna: Right — the big box model is built on you doing the work yourself. They sell you the parts and the tools, but they don't install them. Lucas: Exactly. And that gap — the gap between selling a part and actually solving the problem — is what a 97-year-old hardware store in Providence, Rhode Island has turned into its competitive moat. I'm talking about Sherman Hardware. Luna: I've heard of it. They have this sign in the window — 'We Fix Anything' — and they actually mean it. Lucas: They do. And 'anything' is not a slogan. It's an operational commitment. Sherman will diagnose and attempt to repair any broken item you bring through the door — a lawnmower engine, a toaster, a bicycle chain, a vintage lamp, a child's toy. They do the diagnostic for free, and they only charge if you approve the repair. Luna: Free diagnostic — that's a pretty aggressive customer acquisition play. What does that cost them? Lucas: I ran the numbers with the current owner, a guy named Anthony Sherman — great-grandson of the founder. He told me the average diagnostic takes a technician about 15 minutes. Their fully loaded labor cost, including benefits and payroll tax, is roughly $48 an hour. So each free diagnostic costs them about $12 in labor. Luna: Twelve bucks to get someone in the door. That's cheap compared to what a lot of e-commerce companies spend on customer acquisition. Lucas: It's extremely cheap. And here's the thing — about 40 percent of their new customers come in through that repair counter. Someone walks in with a broken blender, they get a free diagnosis, they approve a $60 repair, and while they wait, they buy some light bulbs, a new hammer, a bag of birdseed. The average basket for a repair customer — including the repair fee plus any retail purchases — is just over $200. Luna: So the $12 diagnostic pays for itself on the first visit. And if they come back for another repair, it's essentially free to acquire them again. Lucas: Exactly. And the retention numbers are pretty wild. Anthony told me that customers who have used the repair counter at least once visit the store three times more often than customers who haven't. And their lifetime value is roughly two and a half times higher. The repair counter is basically a loyalty program disguised as a service desk. Luna: So why can't Home Depot or Lowe's just copy this? They have the real estate, the foot traffic, the capital. Lucas: They could try, but it would be structurally very difficult. The big box labor model is optimized for low-wage shelf-stocking and cashiering. Their average hourly wage for a floor associate is around $16. A skilled small-engine repair technician costs $25 to $30 an hour plus benefits. The big boxes would have to create an entirely new job classification, a new training pipeline, and a new compensation tier — and then somehow make that work in a store that's designed for self-service. Luna: It's not just the wage — it's the culture. The people who work at Sherman Hardware have been fixing things for decades. That knowledge is not something you can hire for at scale. Lucas: Right. And Sherman's model actually leverages the fact that they're small. They log every single repair they do — what came in, what was wrong, what part was needed — in a binder that goes back to the 1940s. When a customer brings in a 1987 Weed Eater, the technician can flip to the tab for that model and see the last time it was repaired, what part failed, and what they charged. Luna: That's basically a proprietary database. And it's only valuable because they've been doing it for decades. You can't buy that. Lucas: You can't. And this is where the data becomes a real competitive advantage in inventory management. Because Sherman logs every repair, they know which parts fail most often. So they stock those parts — the specific carburetor gasket for a 1995 Honda lawnmower, the exact heating element for a 2003 Cuisinart. Their inventory turns over faster on those niche SKUs than Home Depot's does on any one of them. Luna: So the repair counter is actually a demand signal. It tells them exactly what to order. Lucas: Precisely. And it goes both ways. When a customer comes in looking for a part, and the part is in stock, they remember. That builds trust. Sherman has a 97 percent same-day fulfillment rate on parts for items they've repaired in the past. That's almost unheard of in the hardware business. Luna: Okay, but let's talk about the economics on the repair itself. They're charging $60 to fix a blender that costs $80 new. The customer could just buy a new blender. Why do they choose to repair? Lucas: Anthony says there are three main motivations. First, sentiment — that blender was a wedding gift, or it matches the kitchen, or it has a specific feature you can't get anymore. Second, convenience — you can drop it off at 8 a.m. and pick it up at 5 p.m. Ordering a new one online takes two days. Third, and this is the most interesting one, it's a values decision. A lot of customers, especially younger ones, are actively trying to reduce waste. They feel better repairing something than throwing it away. Luna: So the repair business is riding a cultural tailwind. That's a pretty good position to be in. Lucas: It is. And the numbers back it up. Sherman's repair revenue has grown at a compound annual growth rate of about 8 percent over the last five years, while their retail sales have been flat. Repairs now account for roughly 35 percent of total revenue, up from 22 percent a decade ago. Luna: So the repair side is subsidizing the retail side in a way. It's bringing people in, building loyalty, and generating its own profit. Lucas: Exactly. And the margins on repair labor are actually quite good — around 65 percent gross margin, compared to about 35 percent on retail hardware. The parts they sell for repairs have a margin of about 40 percent. So the repair business is not just a marketing expense — it's a profit center. Luna: But surely there are limits. They can't fix everything, right? There must be items that are just not economical to repair. Lucas: Of course. Anthony has a rule of thumb — if the repair cost exceeds 70 percent of the replacement cost, they'll tell you honestly that it's probably not worth it. But they'll still offer to do it if you want. And that honesty builds credibility. People trust that when Sherman says 'we can fix this,' they mean it. Luna: That's the opposite of a car dealership. They're actively talking people out of spending money. Lucas: It's the long game. And the long game is working. Sherman has been in business for 97 years. The average Home Depot store has been open about 20. There's something to be said for a strategy that survives multiple generations of retail disruption. Luna: Speaking of surviving — you know, this episode is a perfect example of why we love doing this show. We get to dig into a story like Sherman Hardware and find a real insight that you can actually use. If today gave you something useful, the way we keep this show ad-free is through listener support at buy me a coffee dot com slash fexingo. It's a small way to keep these conversations going. Lucas: Yeah, and it genuinely makes a difference. Every contribution helps us spend more time on stories like this. Luna: Alright. Back to Sherman — what's the biggest threat they face now? Because it can't all be smooth sailing. Lucas: The biggest threat is labor supply. Finding young people who want to learn how to repair small engines and appliances is getting harder. Anthony told me he's started a formal apprenticeship program with a local vocational school. They take two to three apprentices a year, and it takes about 18 months to get them fully productive. But the pipeline is thin. Luna: So the competitive moat is also a vulnerability. If they can't replace their aging technicians, the model breaks. Lucas: Right. And that's really the meta lesson here. Sherman's advantage — deep, specialized human knowledge — is exactly what's hardest to replicate and hardest to scale. But it's also what's hardest to sustain. The question for any small business with an expertise-based moat is: can you train the next generation before the current one retires? Luna: That's a question that applies to a lot more than just hardware stores. It's the central challenge of the knowledge economy. Lucas: It is. And Sherman is at least trying to solve it. Most small businesses don't even think about it until it's too late. Anthony started the apprenticeship program five years ago, and he says it's the single best investment he's made. Luna: So it's not just about fixing blenders. It's about fixing the business itself. Lucas: Exactly. And that, I think, is the real story. A hardware store that figured out how to be indispensable by doing something the big guys won't — and now has to figure out how to keep doing it for another 97 years.