With the manufacturing sector and industrial generation static or ebbing, scrap metal dealers are looking to retail customers to help boost the flow of material into their yards.
Retail clients can take many forms, including small scrap metal collectors, plumbers, HVAC companies and even homeowners. This diverse group of potential customers could help supplement the supply stream for many metal recyclers.
Kevin Gershowitz, president of Gershow Recycling, a Long Island, New York-based scrap metal recycler, says that while he seeks to provide good service at a fair market price to both his retail and industrial customers, there are distinctions in serving these two specific sectors.
“Retail customers are face-to-face transactions where the customer has transported their scrap metal to the facility,” he says. “Our goal is to retain them by providing a clean, safe and competitively priced environment.”
However, many recyclers say, reaching retail customers and gaining their repeat business are challenges.
Retail scrap buying requires a different approach—one that does not come naturally to some scrap dealers. It can involve reconfiguring their yards to make them more accessible, reaching these customers through advertising and promotions and overcoming preconceived notions that exist about scrap yards.
Joel Fogel, director of nonferrous metals for Cohen, a Middletown, Ohio-based scrap metal company with about 20 locations in southern Ohio and Kentucky, says his company has made a significant commitment to develop and grow its retail business, whether by cultivating a network of smaller dealers it does business with regularly or by attracting “soccer moms” every few months.
Fogel says retail buying is a key part of Cohen’s success. “It is very important to us,” he says. “As tough as it is on the industrial side, the retail side holds much bigger spreads.”
Servicing commercial and industrial accounts includes trucking material and spotting containers, which result in costs for Cohen that cut into the company’s profitability, Fogel says.
He estimates that 30 percent to 40 percent of Cohen’s business is retail, which means the company may end up handling material from several hundred customers every day in addition to servicing its industrial and commercial accounts.
Scrap yard design
The first step in establishing a successful retail business is recognizing that servicing retail customers is very different from servicing industrial accounts. When courting retail business, recyclers often design (or redesign) their facilities with paved surfaces, pouring concrete or laying asphalt. Scrap metal also tends to be stored in containers rather than on the ground, and retail customers often are separated from scrap processors’ industrial operations. These steps can help to prevent flat tires and other damage to customers’ vehicles.
Gershowitz says yard design can help to attract retail customers. “Retail traffic flow improvement is a very important part of our conversation,” he adds.
Michael Mervis, a director at Mervis Industries, a Danville, Illinois-based recycling company with multiple locations throughout the Midwest, says his company has opened recycling centers that specifically target retail traffic, investing time and money to nurture this part of its business. “The goal is to get the customers in a clean, comfortable environment,” he adds.
While Mervis Industries depends on industrial accounts for much of its business, Mervis says the company recognizes the importance of retail customers. “These potential customers are hugely important to us,” he says. “With our business, you work extra hard to earn the trust of guys who are making their living fairly. We want to cycle them through our facility quickly.”
For Mervis, serving retail clients also means establishing smaller facilities. “We like to work with small, regional yards,” he says.
Metro Group Inc., a scrap processing firm based in Utah, has created separate facilities for its retail customers. Mark Bond, president of Metro Group, says that of the eight facilities his company operates, several are dedicated to serving retail clients.
Metro, like many metals recycling companies, still gets most of its metal from industrial customers, though Mark Bond estimates that perhaps 15 percent to 20 percent of the company’s material comes from retail customers.
Companies also need to consider the type of equipment to be used at their retail sites, with most saying the machines often are scaled back from what they use at their industrial yards. One thing every scrap dealer says is essential is having some form of scale for weighing the material.
“You need to have some basic equipment: a can sorter and can crusher, maybe a Bobcat (skid-steer loader) and perhaps an electromagnetic crane,” says Mark Bond. “We do some limited preparation, but most typically we get aluminum cans and some postconsumer scrap.”
Because a good portion of the materials being delivered to retail operations are aluminum cans, Fogel recommends a can-buying system. He also recommends a platform scale.
Chris Bond, Metro Group vice president, says that while the company has a mix of industrial and retail sites, he is most upbeat about Metro’s retail recycling operation in a high-visibility area on a major intersection of Salt Lake City. “The new facility building is new,” Chris Bond says. “All of the site is paved. All the material is containerized. It is near a shopping center, which makes drop-offs so much more convenient, as well.”
While the facility was designed to be less intimidating to customers, he says it also is under scrutiny by the city because of the long-standing perception of the scrap recycling industry. “In setting up a retail facility, it is tough to find an ideal location,’’ Chris Bond says.
Price and payment
Offering a clean, safe environment to drop off material may sound like a deal clincher, but all the scrap dealers contacted for this article say that retail customers are more concerned about receiving a fair price. Low scale prices also can lead to reduced retail traffic at yards.
“Retailers follow the general markets,” Mervis says. “If the prices drop, there is less incentive to collect scrap. People are less willing to travel greater distances when the prices are low.”
Fogel says the customers Cohen deals with are smart. “You would be surprised how educated our customers are,” he says. “The customers will know which way the market is trending.”
Retail clients also can require payment more quickly than industrial clients. “The smaller guys, they often have to have the payment immediately,” Mervis says.
Small companies, such as plumbing firms and other generators of scrap, may be familiar with the network of recyclers in their area. However, reaching the residential sector in a cost-effective manner can present challenges.
Mervis Industries uses a variety of advertising options, such as radio and billboards, as well as promoting the company’s services via social media. However, Mervis says, “I am not sure anyone has found the right mix” of advertising to effectively reach potential customers.
Fogel says Cohen has developed partnerships with the Cincinnati Reds MLB team and the Cincinnati Zoo that have helped create recognition within the community. “We also look to link up with other groups. And, we are always looking to give back to the community,” Fogel says.
The company also has a newsletter to keep its suppliers up to date.
Billboards also appear to be popular with many scrap dealers, particularly when they are near the yard.
Gershowitz says billboards help to develop brand recognition.
However, Gershow Recycling also has explored other avenues for advertising. “We have advertised in print and on television. Both were used successfully to help launch new facilities over the past several years,” he says.
Gershowitz also stresses that word-of-mouth marketing is a great tool “to echo the importance of recycling for the environment and draw attention to the incentive of being paid to do so.”
Getting the word out about the services Metro Group offers runs the gamut. Depending on the market, radio advertising can be a good choice, they say. When considering radio spots, Chris Bond says classic rock, talk radio, country music and Hispanic-language stations are ideal venues.
All the dealers contacted for this story agree that it is best to be visible in the community, either by sponsoring a sports team or by partnering with an environmental group or school, essentially anything that puts the company in a positive light.
At the end of the day, the biggest challenge with retail customers is ensuring repeat business. Ensuring your company’s name stays in front of them through advertising and community engagement can help.
Gershowitz says, “We encourage all homeowners who do clean outs to bring their scrap metal down to our facility, no matter what type of scrap it is or how much you have of it. If you are going to clean out your garage, you might as well get paid for it.”