Dan’s Appliance

Photo: Steve Seifried

Wash Cycle

Established, 15,000 sq. ft. television, mattress, and appliance retailer survives agitated economy, chain competitors, and technological change.

The year 1979 was pressure-packed. Iranian militants overran the U.S. Embassy and held Americans hostage in Tehran. The Soviet Union invaded Afghanistan. At Three Mile Island nuclear power plant in Pennsylvania, a coolant accident caused a partial meltdown. The U.S. annual inflation rate was at 11 percent and rising. That summer, fears of an energy shortage caused lines to form at gas stations around the country.

That was also the year Dan and Ann Terfehr chose to begin Dan’s Appliance of Fairmont, now a 10-employee, 15,000 sq. ft. facility on Highway 15 selling and servicing appliances, televisions, and mattresses to customers in Minnesota and Iowa.

Preceding that year, in late 1978, Dan had just lost his job in Ceylon working as an implement dealer mechanic and wife Ann was caring for two young sons, Matt and Tim. Dan was only 25 and had to find stable work—fast. A Ceylon electrician offered him the opportunity to purchase a downtown Fairmont appliance store with a start date of January 1, 1979.

In a Connect Business Magazine interview, 59-year-old Dan Terfehr said, “We were in a position where I had to have a job. It’s a good thing I didn’t know then I’d be the seventh and smallest appliance dealer in Fairmont or know about the interest rates we would have to deal with a couple years later. I had to learn the job from scratch, too.”

Over the years, Dan and Ann, and son Tim, have learned more than survival. They have learned the inside secrets to beating chain stores and adapting to rapidly changing customer needs and wants. Formerly in seventh and last place, the Terfehrs are now Fairmont’s largest appliance dealer and reach deep into northern Iowa for a healthy share of business.

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Dan Terfehr began his retail career by learning manufacturing. When he was 8, his parents left Rapid City, South Dakota, for Ceylon, Minnesota, to take over Dan’s grandparents’ ag-related manufacturing business. “And for the next 10 years, my parents pretty much worked day and night, seven days a week, to make a living, which put me in a position where I learned to appreciate the benefits of a family working together in business,” said Dan. “My dad sold the manufacturing facility and retired in 1972, which was the year I graduated from high school.”

The family-owned company was DF Winter Manufacturing, which produced the “Stubble Cleaner,” a farm product marketed in a six-state area and Canada. The product collected and raked corn stalks into furrows to keep plows from plugging. Early on, Dan received plenty of “shop time” counting bolts and sweeping floors until new OSHA rules kept him from even entering the building. Later, he did odd jobs, along with working summers full-time at a local gas station.

Dan said, “In the summer, my family sometimes went on road trips to see dealers and to deliver or market product. I remember one southern Canada trip in which we stopped at a number of dealers—John Deere, Case, Allis Chalmers, and International. I was climbing all over the tractors and looking over the toy selection at each stop. I’d also go to the Spencer (Iowa) Fair on weekends with my dad to demonstrate product.”

Over time, the company’s lone farm product became obsolete, said Terfehr, and has become a collector’s item.

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After high school, Dan became a John Deere implement mechanic in Ceylon until unexpectedly being laid off when Deere began consolidating dealerships in October 1978. One day, a Ceylon neighbor, Art Stabner of Stabner Electric, asked Dan Terfehr about purchasing one of Stabner’s small businesses, a Fairmont appliance store. Dan ended up working a month without pay to see if the business was a good fit. It was, and Dan began Dan’s Appliance on January 1, 1979. The Terfehrs signed a three-year $60,000 purchase contract at six percent interest. They were the seventh largest appliance dealer in a seven-appliance dealership town, and featuring Whirlpool, Maytag, Amana, Jenn-Air, and KitchenAid appliances and RCA TVs.

“We were fortunate to have an employee working here who was a good store manager, trainer and teacher,” said Dan of one of their first employees. “She helped a great deal. We were renting a place uptown. We did creative live advertising with Channel 12 back then, when that channel was about the only one viewed around here. We did live radio broadcasting, too. We built our business by always doing what we said we were going to do in terms of getting to customer homes for service.”

The Terfehrs learned their six larger competitors all sold more appliances, such as the local Midland co-op, JC Penney, Sears, Fairmont Appliance, and Gambles, but had too many irons in the fire to focus attention on appliances. It was a market niche that could be won with lots of hard work, good service, and persistence.

From 1979-82, the Terfehrs handled RCA TVs, but because of a crowded competition field in that industry stopped carrying them to focus more on appliances.

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Early on, Art Stabner had given Dan these words of wisdom: “It doesn’t really matter what you sell your product for, only what you buy it for. You’re going to make more money by buying it right.” They learned this lesson the first month.

Said Dan, “To get Maytag to bring product in a truck, we had to buy 27 pieces to meet their minimum bracket. If choosing not to do that, we would have had to pay about $15 per piece extra for freight and we would have a lower bracket price. By being in that bracket, we made considerable improvement on price. The scary part came when the driver drove up and I had to write out a check to Maytag for the product and another to the driver for hauling. It was cash on delivery. So we then had to sell those 27 units, which was a lot because we were selling only a half-dozen per week then and paying 22 percent interest on the loan.”

Air conditioners were another buying concern. For example, the Terfehrs had no idea in November how many to buy for the coming summer. Would they sell 50 or 150? If the summer was cold, a substantial inventory could carry over to the next year and potentially create cash-flow issues. If the summer was hot, they could sell out and lose sales to competitors.

The buying issues became resolved in the early 1990s when Dan’s Appliance joined what would evolve into Brand Source buying group. Said Dan, “With it, we could work better deals through manufacturers. As distributors in our market dwindled, and some lines went direct only, the buying group was the core that held independent dealers like ours together. We got together and compared notes, and got advertising that worked.”

Suddenly, Dan’s Appliance, for example, could split a truckload of refrigerators or washers with other independent dealers to allow for more competitive pricing when necessary.

As sales grew, so did the sales floor. The business had moved from downtown Fairmont to Highway 15 south of town in 1982 after Dan bought property from Countryside Auto. The relocation was a gamble because Highway 15 wasn’t yet a major thoroughfare; however, the Terfehrs saw long-term potential due to the local high school and hospital being within eyeshot. After joining Brand Source, and being able to grow due to lower pricing, the business relocated again in 2000 four buildings north on Highway 15 into a 15,000 sq. ft. facility.

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The buying power of 4,000-member Brand Source enabled Dan’s Appliance to muscle into profitable new market niches and do it much more competitively than its early 1980s failed ventures selling TVs and microwaves. When building a larger location in 2000, the company had extra room to display televisions again and sell satellite television services. High definition television was coming. Wholesalers then couldn’t ship rear-projection televisions via United Parcel Service, so Dan’s Appliance had a leg up on Internet sellers.

Over the years, UPS started shipping up to 55-inch televisions, and that market—combined with lower profit margins—slowed, especially after the opening of the Fairmont Walmart and that company’s array of lower-priced models. The satellite television business also started slowing due to market saturation. To replace the slower sales of those lines, the Terfehrs began carrying in 2010 another of many available products offered through Brand Source: Serta mattresses, manufactured in Clear Lake, Iowa. Fairmont has five other stores selling mattresses.

Dan said, “Each mattress is made to order. If you order today, we might have it on hand, but in most cases Serta manufactures to specifications and we deliver right to your home. And we get rid of the old mattress for free. The mattress business isn’t likely to see Internet competition, like with televisions, because people need to see and lay on the mattress.”

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Besides a core group of excellent, consistent employees “that literally made our business successful,” said Dan, the company has a customer base that at times seems more like family. The Terfehrs often make appliance or mattress sales while out on personal business or talking with people at Kwik Trip, for example. Ann does sales and bookkeeping, Dan runs the service department, and son Tim does the buying.

Another factor in success has been Tim, who is just a bit older than the family business. He was born in 1978—during a pressure-packed time for new businesses—and will take over the family business one day. Most University of Minnesota Carlson School of Management graduates choose lucrative job offers from companies like Target, Best Buy or General Mills. But Tim had other ideas. After working summer construction jobs and for Best Buy, he became in 1999 an employee of Dan’s Appliance, just before the business moved into its present location, and later a one-third owner. He currently is involved in the Chamber community leadership program, which involves learning about Fairmont’s agriculture industry, law enforcement, economics, government, educational opportunities, businesses, and more.

“I just didn’t see myself working at an impersonal place, a big company,” said 35-year-old Tim of making the choice to stay in Fairmont. “I have always enjoyed living here, being part of my family, and being a small business owner. It’s a lot better working here than in a cubicle working for someone else while on the way up the corporate ladder. Here you can make decisions quickly by committee—and it’s a wonderful committee, made up of my family.”

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Back In The U-S-A!

According to Dan Terfehr, “white goods” manufacturing, such as washers and dryers, has been migrating back from overseas to America. Dan’s Appliance’s top-selling line, Whirlpool, now owns the Maytag, Amana, Whirlpool, KitchenAid, and Jenn-Air lines. Whirlpool used to have its front-load machines manufactured in Germany and Mexico, and ship that product to Ohio, where the company manufactured dryers, before sending out to markets. Whirlpool has moved all laundry manufacturing back to Ohio, where the new plant has modern technology and American engineers can be closer to the manufacturing plant to better insure product quality.

Said Dan, “Whirlpool’s corporate slogan is ‘Invest in America.’ The majority of their products are made in America. Its biggest competitors in the appliance business are in South Korea, with Samsung and LG, which are new to the appliance business.” Besides Whirlpool, Dan’s Appliance sells and services Samsung and LG, having brought them in seven and two years ago, respectively.

Friend WalMart

Dan Terfehr, owner of Dan’s Appliance, said having a Walmart nearby has helped his business. Walmart doesn’t sell “white goods” appliances or mattresses, and most Iowans heading to and from Walmart pass his store twice each trip. Quite a few stop in and account for more than 25 percent of company sales.

Dan said, “Many customers from Iowa didn’t even know we were here until they came to town to see Walmart and saw us on the way. Before they were going to Walmart in other communities. As for sales, we go twice as far into Iowa than up north because of Mankato being such a hub.”

What concerns the Terfehrs most has been hearing rumors of home stores such as Menard’s, Home Depot and Lowe’s entering smaller markets like Fairmont. Not long ago, Menard’s opened a New Ulm location.

Retail Jitters

CONNECT: What is your greatest fear concerning business?

DAN: We have handled competitors for years, but the worst day in our business by far was September 11, 2001. Not a single soul came in that day and hardly any the first month. Our customers battened down the hatches. Our fear is that our government will have some serious economic issue or crisis that will affect business. You can’t function in a climate like that. Also, another fear is getting another generation of young people interested in our type of business. Some of our current employee group will all be retiring about the same time. So many young people don’t realize there is a business like ours that maintains another person’s products. In our business, you can’t fix merchandise from a computer screen.

THE ESSENTIALS: Dan’s Appliance

Founded: In Fairmont, 1979
Address: 1255 Highway 15 South, Fairmont, Minnesota
Telephone: 507-238-2333
Hours: Open every day but Sunday
Web: dansappliance.com