L&M Supply: "Dirty Price Cutters"

Not beinBy Jean Coleg a girly-girl type of girl, I’ve always enjoyed a trip to L&M Supply more so than a shopping spree at any department store. I like looking at tools and hardware and electrical supplies and sporting goods, even if I haven’t a clue what they’re for. That type of stuff just seems to hold so much…promise.

It’s a place where you’re likely to run into people on zealous home improvement missions or planning outdoor adventures. You do a double-take when you see your neighbor hovering over a paint-spraying contraption, and learn that he’s an expert ceiling texture guy. Or you see a co-worker inspecting poultry feed and learn that she raises chickens and sells farm fresh eggs. This is valuable information you wouldn’t glean by running into these people at, say, the grocery store (oh, gee, she eats) or the bank (oh, gee, he deposits).

So, for me, a trip to L&M is more than just another errand on the list. It’s an opportunity to learn things about other people and to learn how to do something myself that I didn’t know how to do before. It makes me feel vaguely superior to be in L&M on a Sunday (it’s always a Sunday), looking for screws or a paint scraper for an important project.

But unlike most of the local businesses I patronize, I had never met the owners of L&M. The company has seven stores and its headquarters are in Grand Rapids, so it’s not surprising that I wouldn’t know the owners. I was intrigued by what little I did know – the business is 51 years old, multi-generational, co-family-owned, and expanding in a difficult economy. It was time to learn more.

A request for an interview went through the Virginia store manager (Toni Fena) to company headquarters. After a few emails were exchanged, and a few phone calls made, I was on my way to Grand Rapids to meet with co-owner Terry Matteson and other members of the L&M team. Our phone conversation had left me feeling that this man had a lot to say, and was careful whom he said it to – but I had charmed him by my obsessive interest in the details of Chick Days (an annual L&M event, and more on this in a later issue), so I was in.

 L&M corporate headquarters are located at the rear of their former Grand Rapids store (now their central distribution center) on Hwy. 169. Their newest and grandest store, completed in 2009, is a 97,000 sq. ft. flagship on Pokegama Avenue.

While waiting in the reception area for Terry, I noticed a framed message on the wall: “To Suppliers and Representatives: We assume that you are offering our buyer your best program. We hope that neither of us are evJames Luthen, left, and Del Matteson in 1959 at their first store in Grand Rapids. Submitted photoer embarrassed by our learning of a better program being offered our competitors. Thank You.” It is a clear message from the people whose motto for half a century has been, “Quality at a Discount.”

On a coffee table were neatly aligned copies of magazines: “Guns and Ammo,” “Motor Trend,” “Popular Mechanics,” “Field & Stream,” “Handgunner,” “Ruffed Grouse,” “Whitetales,” and “Minnesota Business.” Large portraits of the company co-founders, Del Matteson and Jim Luthen, gaze upon the comings and goings of visitors and employees. Approximately 30 people work at L&M headquarters, which oversees seven stores and 450 employees.

When Terry arrived and we settled ourselves in a conference room, the first thing I did was extend my condolences. L&M co-founder, Del Matteson, who had passed away just three months earlier, was his father.

Terry said that Del was more than just his dad. They were business partners and friends. With three sisters and no brothers, Terry said that his dad became the brother he didn’t have. “We fished and hunted together,” Terry said. “He taught me all his business principles. He was a true entrepreneur. In the dictionary under ‘entrepreneur’ his name should be there. He was a huge people person.”

Del Matteson’s business philosophy was simple: Treat people like you’d want to be treated, and have a little fun while you’re at it. “My dad was always happy, he loved people. He knew everything about a person five minutes after meeting them.” Terry asked Del once how he did that and his dad said, “All you have to do is be concerned and interested in them.”

“I loved working for him,” said Terry. “The last two years [before he died] he’d still come in. Once, he needed to sit down, and we found him sitting in a fish house [in the sporting goods department]. He said, ‘You put this ice house in the wrong spot! I haven’t had a single bite!’” And then Terry shook his head, as though still amazed at this memory of his father - health failing, and humor intact.

Del Matteson sold minnows strained from the Prairie River between Grand Rapids and Calumet when he was 7 years old - the first inkling of what was in store for this man. This was followed by farm work, truck driving, graduation from Greenway High School, service during WWII in Germany, marriage, Itasca Junior College, the University of Minnesota, then back to the Lawrence Lake area, where his long career as an entrepreneur began in earnest.

First it was the purchase of the Country Bar and Grocery Store (now Petrich’s Store), from Barney Jennings. Del had to borrow $600 from his parents to make this deal happen. He and his wife Lila cleaned up and operated the business for a couple years and sold it for a $15,000 profit. His next business venture was the purchase of an on and off sale liquor store in Lengby, MN, which he operated from 1952-1956. 

By now he and Lila had three children and they decided to move to Grand Rapids. Del stopped at the real estate office of James Luthen on a Friday while house-shopping, and by the next Monday Del was working for Luthen. This arrangement lasted three years and formed a solid relationship between Del and Jim – and the foundation of what would become L&M Fleet Supply, the first retail discount supplier in northern Minnesota.

One day Del and Jim stopped at a new farm store in Brainerd. The place was “wild with customers,” as Del said later, and so they scouted it out and learned of an affiliation with a cooperative buying group called Mid-States Distributing Company in St. Paul. They contacted Mid- States and put together a plan for a new

 business. Del would be the operator and Jim the silent partner. In 1959 they opened up the first L&M Supply store in Grand Rapids. It started out as a 24’ x 60’ wooden building with three rooms. Del’s first desk was a 4’ x 8’ sheet of plywood and he sat on a step stool.

In those days, it was a challenge to find merchandise you could buy directly from the manufacturers, Terry said. L&M Supply was the first discount organization put together in northern Minnesota, way ahead of Wal-Marts, K-Marts and all the other discount stores, according to Terry. And, he admitted, some people didn’t like the idea. In those early days, their old company pickup was spray painted with the words, “Dirty Price Cutters.” Terry said Del’s and Jim’s first reaction was to remove it, but then they decided to let it go. “They decided it was the best advertising they could get,” said Terry, and the story has become L&M legend.

Their relationship with Mid-States continues to this day. The buying group membership has grown from 15 stores in 1959 to 600 stores in 2010. In 1994, L&M joined another buying group, Sports, Inc. out of Lewiston, MT, with a membership of over 300 stores which buys sporting goods and clothing. And in 1996 they joined a third buying group, True Value. True Value is one of the largest hardware buying chains in the world.

These memberships have allowed L&M to purchase quality products and provide them at a discount to their customers, said Terry. And customer response has been good. The last 10 years have seen consistent growth, including a new 63,000 sq. ft. store in Detroit Lakes in 2004; the 2005 remodel and move to the new 70,000 sq. ft. Hibbing store location; the 2006 7,000 sq. ft. expansion of the corporate office; the 2008 expansion of the Virginia store which added 37,000 sq. ft., and the current remodel at the same location; and the 2009 remodel and move of the Grand Rapids store to its new 97,000 sq. ft. location on Pokegama Avenue. During a recession, no less.

I asked Terry about that. Their plans for the new Grand Rapids facility were underway before the economic crash, and there was no turning back, he said. I asked him, What if you had had a crystal ball? “We still would have done it,” he said. “In the short term, it’s been hard. But long term, it was the right thing to do.”

Succession planning was important to partners Del and Jim. Terry said his father wanted a commitment from him in 1974 - would he be a business partner or not? Terry said there was a time, in high school, when he didn’t know for sure what he wanted to do. He attended St. Cloud State University and studied sales and business, and worked a few other places. In the end, he knew he wanted to follow in his father’s footsteps, and he offi cially came on board that year.

Luthen kept things in the family, too, when his son-inlaw, Don Ley, came on board in 1976. Don and Terry have worked together as partners for 34 years. They claim “no problems” in all those years. Don, an engineer, has focused on more of the detailed and technical aspects of the business, while Terry has dealt more with people and purchasing, though they say that they can both function in each other’s zones and do so frequently.

The newest, and third generation of owners are now in place, and it remains in the family. Terry’s sons, Del and Shawn (ages 31 and 30, respectively), and Don’s son-in-law, Erik Andersen, 32, are all co-owners. They all joined the company between 2001-2003, making their commitments as young men.

“There’s nothing I’d rather be doing,” said Shawn. “I never seriously considered doing anything else. I grew up visiting Dad at work; everything was tied to L&M. I saw it was successful, and I knew it took a lot of hard work. You can’t get bored here,” he said. “We’re always surprised [with what the day brings].”

While all three now work out of corporate headquarters with administrative duties in finance, operations, purchasing, and IT, all three started “on the floor” and worked in most departments to get a complete understanding of how the business operates. “We wouldn’t ever ask anything of our employees that we wouldn’t do ourselves,” said Shawn, remembering some less-than-fun responsibilities he has had over the years, one of them being “counting pig ears.”

There’s a sense of reverence -- as opposed to hubris -- in these young men for the generations that preceded them. “We learn and work together as a team,” said Erik. “We always welcome input from the floor managers, we want them to talk to us. We know we don’t have all the answers.” He emphasizes their adherence to Del Matteson, Sr.’s motto of treating others as you want to be treated. “We have an obligation, not only to Terry and Don, but to all the employees, to stick to the core values of the company.”

They talk about the importance of their employees. In the 1960s, Del Sr. established a pension plan for his employees whereby they could contribute up to 10 percent of their wages, and he would match it dollar for dollar. This program still exists for L&M employees, and is part of each employee’s benefits package. “We want to provide our employees with the benefits they need in order to have a good life,” said Erik.

They promote from within to a large degree, and make those decisions based on performance. “It’s not how long [you’ve worked here], but how you do,” said Shawn.

Some time ago, they implemented “positive production reports” for employees. When a customer testimonial came in, praising the work of an employee, it would be written up and included in their personnel file. “That was a good idea we got from a company in Iowa,” said Terry. “Just when you think you know everything, you find out you don’t know anything.”

They say their success depends on adhering to the basics. “Slow and controlled growth, never over-extend ourselves, never forsake what we have,” said Erik.

They both get great satisfaction out of getting things done and being able to respond quickly to the demands of the northern

Minnesota market. “We’re just like our customers,” said Shawn. “We live and play in northern Minnesota. Just like all our buddies, we’re out there and we feel we definitely know what’s gonna sell.”

I asked them about being perceived as an evil big box discounter. They differentiate themselves from the Wal-Marts and Targets by pointing out that they are able to react much more quickly to the unique demands of northern Minnesota’s market, and don’t offer a strictly national set of products. “And we are an independent store, locally owned,” Erik said.

They say they do learn things from studying the big box stores. “We’ve learned that people still value price. That people value a wide product mix,” said Erik. Other things they’ve learned, which are reflected in the changes in their stores the past few years, include more emphasis on merchandising (better presentation of their products) and making the shopping experience easier for the customer (less self-service and more customer service). “When a husband and a wife come into one of our stores now, it’s much nicer for the wife,” they said.

Also, product training for employees has been implemented across all seven store locations, adding up to a more positive customer experience.

I asked Terry and Don what the greatest challenge and the greatest reward has been for them during their time at L&M’s helm. It wasn’t an easy question for them to answer.

They agreed on a few things. Their greatest challenge: Maintaining complete customer satisfaction. Their greatest reward: Providing careers for their staff, being recognized as a good place to shop, and providing quality at a discount.

“It’s never been about money. It’s not money driving it at all,” said Terry. “We just wanted some stores to be proud of, and employees who enjoyed it. It’s worked out for a lot of people.” He mused for while, and added, “I believe the majority of people think of [L&M] as a positive retail company. We must be doing something right, when a customer says, ‘I want to go back there.’ Without those customers, we have nothing.”

It’s a different company now than in the old days. The scrappy start-up with plywood desks and step stool seats is a thing of the past. I asked Terry if he missed those days. “When we first started, financial things were tough, getting products was tough,” he said. “We used to spend a lot of time on those things. It was more hands-on. Now we spend a lot of time on different issues.”

Those issues are more complicated and the result of growth and the technology used to manage the growth. “The technology helps you run better, but upkeep and maintenance is expensive and time-consuming.” With 1,700 suppliers, 100,000 products and 450 employees, it’s a different ball game now.

He didn’t say it, but I’d venture to guess that among the greatest rewards for Terry was the relationship he had with his dad. Father, partner, friend and “brother.” He speaks with reverence of Del, or, “Pops,” who believed in treating everyone fairly – customers and employees alike – and having fun while doing it.