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This was originally published at http://sanantonio.bizjournals.com/sanantonio/othercities/sacramento/stories/2006/12/18/story6.html and is reproduced here without permission under the Fair Use Doctrine of the copyright act. © American City Business Journals Inc.

Kelly Johnson
Staff Writer
December 15, 2006

A franchised chain of membership clubs for home-related goods -- with a membership fee that some say can reach $8,000 -- is setting up shop in Rocklin and later plans to expand to Elk Grove.

DirectBuy Inc., an Indiana-based chain of 112 stores in 33 states plus 21 in Canada, is scheduled to open in mid-January in the former Antique Plaza space along Rocklin's Granite Drive.

Michael Bertagna, who is opening the 30,000-square-foot store with his wife, Andrea, and other family members, anticipates the store will exceed annual sales of $10 million. It will have 20 to 30 employees.

The Bertagnas also expect to open an Elk Grove store next year. They haven't selected a site.

The family partnership opened its first store in November 2005 in Pleasanton after being DirectBuy members. They previously bought, sold and remodeled properties and before that owned and operated a golf course, utility company and hotel in Austin, Texas.

The Pleasanton store has annual sales of more than $10 million, and this year was named the chain's store of the year based on performance. That store does about 50 kitchen remodels a month, Bertagna said.

He chose Rocklin for its good access and safe community. He and his wife relocated from the Bay Area to Roseville.

"Sacramento is a fantastic population with tremendous growth and an ideal market for us," said Bart Fesperman, vice president of sales and marketing for DirectBuy. Gotta pay to play

DirectBuy isn't for everybody. The company acknowledges its membership cost is high but doesn't disclose the amount, which varies by location. Those familiar with the company say it can cost as much as $8,000 for the first two years of membership, with a smaller annual fee thereafter.

The appeal for homeowners and homebuilders is access to products by more than 700 brand-name manufacturers at manufacturer prices, plus sales tax and shipping and handling costs.

The company doesn't disclose which brands it has access to or the membership cost until the potential member meets with store sales representatives. With a large remodeling project or projects, members can save big, the company contends.

Some DirectBuy customers have complained about the company on various online postings, including some with buyers remorse. Others regret the lost time they spent listening to the pitch. Buyers do have three days to cancel their membership for a full refund.

DirectBuy's strong growth demonstrates members' satisfaction, Fesperman said. Last month was the company's best November ever. And DirectBuy expects a boost from the new housing slowdown. When sales of new and existing homes slow, homeowners shift to remodeling.

"When things get tighter, people still want to get things done," he said. Staring down the competition

Franchising since 1971, DirectBuy has accelerated its growth the past few years. The company has grown its membership by 50 percent each of the past three years, Fesperman said. Merchandise revenue grew 51 percent from October 2005 to October 2006. From October 2001 to October 2006, it grew 573 percent.

DirectBuy plans to have 149 stores by July. It opened 25 stores in 2005 and 19 this year. Since entering California in October 2005, the company has opened five stores and has 11 more opening in the next year.

It's unclear to what degree DirectBuy will grab business from existing retailers and membership clubs such as Costco that sell home furnishings, flooring, appliances and kitchen cabinets. DirectBuy could generate more interest in home remodeling, as Home Depot's Expo Design Center did when it opened in Roseville a few years ago.

"It'll certainly have an impact on everybody," said Dave Hollars, president of Kitchen Mart Inc. The large Sacramento remodeler of kitchens and baths is opening a second location, yards away from DirectBuy, in March. "Personally, I don't like it. I don't like the concept."

The business model works for DirectBuy, but Hollars questions the demand locally. "We don't have a lot of people doing whole-house remodels" in Greater Sacramento, he said.

Retailers shouldn't fear DirectBuy's arrival, Bertagna said. "We're just an alternative. We're just a different way of buying for people." On the move

DirectBuy locates in communities with a population of 400,000 to 500,000. The company has "gotten out of the off-the-beaten-path industrial park," Fesperman said. Instead, it now likes high-traffic retail areas.

Broker Shaun Morrow of West Sacramento's NAI BT Commercial represented Bertagna in the Rocklin deal.

The typical California DirectBuy is about 20,000 to 30,000 square feet, many in newly constructed buildings. The stores employ 35 to 45 workers. Stores sell home furnishings, home-improvement items, flooring, accessories, entertainment items such as home theaters and outdoors products such as patio furniture and heating lamps. The top sellers are kitchen cabinets, flooring and lighting.

DirectBuy seeks customers with an average household income of at least $80,000, Fesperman said. Bertagna said the amount can be a lot lower. The Pleasanton store's figure is more like $50,000, he said. Customers can be young, expanding families or empty-nesters who want to spruce up their home after the kids leave. Members drive up to one and a half hours to a store.

Many are undertaking $10,000 to $30,000 kitchen or bath projects.

"Those people are coming to us in droves," Fesperman said. The average member spends $3,000 to $4,000 with the store annually.

Stores average 3,000 members.

"Sacramento will quickly get to a couple thousand memberships," Fesperman said.

DirectBuy Inc.