After the Gold Rush

Kathy Petersen’s Rainbow Fasteners survives boom and bust in
California’s gold country.

Kathleen Petersen has led Rainbow Fasteners through boom and bust in California's gold country.

By Tom Hammel, Contractor Supply Magazine

Not that long ago, 150 years give or take, cries of “There’s gold in them there hills!” launched the great California Gold Rush.

History buffs will recall that the site was Sutter’s Mill, the year 1848. But not many know that Sutter’s Mill was near Placerville, just 30 minutes east of Sacramento, up Highway 50 today.

Kathy Rivers Petersen knows. She was born in Oakland and moved at 18 to Shingle Springs, just 10 miles from Sutter’s Mill. She exudes the warm, casual confidence that many outsiders semi-mystically ascribe to a life spent in the California sun. That confidence, and a hard-won expertise in the fastener business, opened a lot of doors early in her career.

Petersen, president and general manager of Rainbow Fasteners Inc., is the daughter-in-law of Dorothy Rivers, the original owner. Dorothy Rivers’ pioneering success as a female business owner won her recognition in 1975 as the first woman ever named the U.S. Small Business Administration’s Outstanding Small Business Person of the Year. Dorothy Rivers saw the same pioneering spirit in Kathy and hired her on.

“In 1983, Dorothy started me in the warehouse and I was hooked — I loved the business from day one,” Petersen explains. “I learned job by job and in 1996 I bought the company.  That was the goal from the day I started.”

Petersen got the traditional distributor’s apprenticeship, no holds barred.

“When my mother in law hired me, she said, ‘You’re going to do every job.’ So after learning the warehouse, I spent a couple of years in outside sales, covering the Sacramento Valley, from Galt down to Turlock. That was 25 years ago, when women were still a novelty in this business.

“I never had any trouble getting in anyplace because they wanted to see ‘the lady screw salesman.’  But it was twice as hard to get an order because they always had to make me prove I knew my stuff. You know: ‘Does she really know what she’s talking about?’ But it was fun.”

In 1997, Kathy’s then-husband Duane, joined the company. He continues to run the company with Petersen to this day.

Like many small distributorships, employees become an extended family. The lucky ones grow old together. That certainly applies here; outside sales pros Bill Halfhill and Clyde Zirbel have been with Rainbow for 35 and 30 years respectively. Order desk specialist Warren Krause has been there for 35 years, too.  In fact, the “new kid” of the Rainbow team is Kathy and Duane’s daughter Rachel, who has been with the company for three years so far.

“I’ve been doing outside sales here for 35 years, and at some customers, I’ve called on the same person for 20 years or more,” Halfhill says. “I’ve built good relationships; we’ll go golfing or to King’s games from time to time. Then there are accounts where I’ve called on maybe 15 different buyers — or more, you lose count after a while — over that same period.”

Halfhill has changed with the industry over those years.

“Everything today is computer- and Internet-oriented,” he says. “We call on the same accounts as always — manufacturing, mechanical, sheet metal and HVAC for the most part, but the way they buy is changing. They can go online and shop everything out, or they can order from us online, too; whatever they are most comfortable doing.”

“People want everything now because they can order it now online, but what many of them don’t think about is that with this recession everybody’s inventory levels are nowhere near what they were in 2007.” — Bill Halfhill

But the “instant gratification” of the Internet poses challenges for distributors as well, he notes.

“People want everything now because they can order it now online, but what many of them don’t think about is that with this recession everybody’s inventory levels are nowhere near what they were in 2007,” Halfhill explains. “When you tell a customer you’ll have to order a product for them, they look at you like you’re the only person in town who is saying that, and I know that’s not true. Some of them still live in 2007 and think, ‘I need this tomorrow so I can order it in the morning.’ That’s a big challenge for us these days.”

Another change Halfhill has seen is the disappearing receptionist act. 

“You used to go to a customer’s offices, and in many places the first person you saw was the receptionist,” he says. “Today there’s just a bell, and the person who answers it is the estimator, the buyer, the delivery guy and the receptionist all in one. All of our customers have cut down to skeleton crews.”

Clyde Zirbel, who has also sold for Rainbow for more than 30 years, has seen the same thing. 

“One of my main customers, which was at one time the largest HVAC contractor in the United States, has had to totally reinvent itself since the recession hit,” he explains. “They have added plumbing, electrical, home theater installation and most recently, a solar installation company just to keep afloat. They never would have had time to do any of that when the residential market was booming.”

“Since the recession hit, all the city, county, state and even the federal agencies, plus a lot of private companies, have been forced to review all of their spending, including their VMI programs. Many of them discovered they were being overcharged for products in their VMI programs, and that has given us opportunities that we didn’t have before." — Clyde Zirbel

However, the recession also opened some doors.

“Since the recession hit, all the city, county, state and even the federal agencies, plus a lot of private companies, have been forced to review all of their spending, including their VMI programs,” he says. “Many of them discovered they were being overcharged for products in their VMI programs, and that has given us opportunities that we didn’t have before. When they call us and find out a box of flat washers shouldn’t cost them $30, they are shocked. But those gains for us have also been largely cancelled out by the fact that many local businesses have just gone out of business.”

A Personal Internet
Petersen believes Rainbow’s Web site helps drive customers to its sales staff, which she says is still smarter than having customers buy directly off the site itself.

“With fasteners, the customer often calls in and says, ‘Give me a flat head,’ or ‘Give me a self-tapper.’ I hear that 20 times a day. With our site, we can take them to the page, show them an image and say, ‘Is it this one?’ ”  

To Petersen, the potential payoff is enough for Rainbow to expand its Web capabilities. 

“We like our fastener pages on our Web site and we want to expand into other areas to give the customer more of a catalog. I want it to work on the same principle as our original site — as a sales tool for finding products. Then the customer can call and work with us directly.”

To accomplish this Petersen has selected Web site providers 48WS to build an enhanced site, not so much to generate sales itself, but to drive more business to Rainbow’s veteran sales pros.

“We’re kind of old fashioned in that I like that personal touch,” Petersen explains.  “We don’t have voice mail. I like our customers to get a real person when they call in. Do I really want to compete with Amazon? That’s not who we are. If we can use the Web to give the customers the basic information they need and how to reach us, then I think that’s the better solution.”

As the industry’s way of doing business has changed over the years, so has Rainbow’s line card.

“Powers, ITW Buildex and Porteous Fastener are pretty much our top three lines,” Petersen says. “And our stainless steel sales are growing. The solar industry uses a lot of it and stainless is spreading into a lot of other areas as well.”

Although its core fastening, anchoring, abrasive and cutting tool lines remain the same, Rainbow has expanded into aerosols, gloves and related industrial and construction products. A key alliance has helped.

In the sphere
Petersen credits Rainbow’s membership in Sphere1 as a key help in her company’s successful line expansions. “About 10 years ago we got a contract with SMUD, the Sacramento Municipal Utility District to provide them saw blades. They wanted
Milwaukee blades, which we were able to get though our membership in Sphere1. They originally estimated maybe 400 blades over a four-year term. Then, when they decided to tear down the nuclear power plant in Rancho Seco that order went from 400 blades to several pallets. That was something that being in Sphere1 brought us.”

Rainbow’s membership in Sphere1 has also given the company renewed access to power tool lines.

“We used to sell Black & Decker power tools before they brought DeWalt in and put it in all the home stores,” Petersen says. “After they did that, my guys could make more profit selling a box of screws than a power tool so we decided, ‘Let Home Depot have the tools; we’ll sell the screws.’

“Then a great Makita rep came in from Sphere1 and got the guys comfortable with selling tools again. We still don’t sell a lot of them but we do have them today and that was a direct result of being in Sphere1. And that’s what we like best about Sphere1, the ability to try something new and see what it does, like what we did with Makita. Sphere1 has helped us a lot that way because what works for the big boys doesn’t necessarily work for us.”   

Some of the lines Rainbow has added via Sphere1 include Aervoe, Champion Cutting Tools, Milwaukee, Makita, Norseman, “and Lackmond; a new line we are trying out now.”

“As the markets change, this gives us an opportunity to change too, without having to buy $1 million in merchandise right off,” she says.  

California’s original gold rush is long past, for Kathy Petersen and her staff at Rainbow Fasteners, gold is still here to be mined, in relationships and opportunity for today and long into the future. CS

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