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DirectBuy, a Merrillville-based buyers club, used to charge members $5,000 for three-year memberships for straight-from-the-manufacturer prices on flooring, cabinetry, granite counter tops and other home products.

But that was in an era before Amazon offered same-day delivery and people shopped on their smart phones.

The Merrillville-based company, which employs around 400 workers, now offers virtual memberships for as little as $199 upfront and $39.95 a month to people who don't live within 50 miles of one of its showrooms. DirectBuy has shrunk its number of brick-and-mortar locations from around 160 to 28, which are spread across the United States and Canada but mostly concentrated in the Upper Midwest.

It now focuses more on online commerce, including with a new "I Want That!" app that lets people take pictures of things they might see in someone else's home or a hotel lobby that they'd like to own. They can use the app to see if DirectBuy sells anything similar. 

The national buying club in the past was accused of high-pressure sales tactics and not disclosing prices when signing up new members, according to a lawsuit the New York Attorney General's Office settled in 2013.

But Chief Marketing Officer Curt Hilliard said DirectBuy has reinvented itself for an era of e-commerce, smart phones and savvier shoppers. DirectBuy now lets members sort through its more than a million items online, even offering  personalized recommendations similar to Amazon, instead of requiring people to drive into showrooms to peruse catalogs of the merchandise.

"We're trying to be a much more contemporary service for our members, which requires a greater level of transparency," Hilliard said. "There had been sort of a cloak over what we did and how we accomplished the goal of saving members money. But with the proliferation of iPhones and iPads, we have to do more than just save customers money. We have to offer exceptional service."

DirectBuy had sweeping layoffs at its Merrillville headquarters last year, with its transition from a corporate support center for its stores to a customer service center providing "concierge shopping." That personalized service helps customers find products, such as for home renovations. But overall employment is now roughly the same as it was before the layoffs, and the company is hiring for about 10 more call center positions.

"Since I arrived in 2013, marquee names like Radio Shack and Walmart have been closing stores," CEO Mike Bornhorst said. "Macy's and Best Buy have started to see locations in a different way. The whole marketplace is changing, and it can't remain the same as it was 40 years earlier."

Roughly 60 percent of the company's customer service now happens in Merrillville instead of out at the clubs, said Dyan Astle, vice president of member experience. 

The company, founded in 1971 by Highland resident Jim Gagan, had more than a million members at its height. It brings in revenue through membership since the products themselves are not given a retail markup. DirectBuy now has about 205,000 members and is growing. An effort is underway to get employers to offer group DirectBuy memberships as a benefit for employees, Bornhorst said. 

DirectBuy has expanded into merchandise like electronics and sporting goods, started offering travel packages and added brands like Oakley and Salvatore Ferragamo.

The company also has been looking for more ways to reach customers, such as a trade show that drew 3,500 to Toronto and resulted in the sale of $2.4 million in merchandise. The show might be brought to Chicago. It's also launched an in-home designer program that sends decorators over for free consultations on home renovation projects. 

DirectBuy overhauled its website and launched a new app last year, and brought in $10 million from online sales last month for the first time ever.

About 60 percent of the sales now come from online transactions, which often require phone support since it sells a lot of materials for home renovation projects. Bornhorst said online revenue – which increased by 152 percent year-over-year – has not yet fully replaced in-store sales, but should eventually.

"When I started out, technology was our biggest obstacle," he said. "We surveyed our members about what they wanted and common feedback was that they didn't want to work for their savings. They wanted us to make it easier for them to save money. They didn't want to throw on some clothes, round up the kids and drive 20 minutes or an hour to a showroom. They wanted to shop from home."


Business Reporter

Joseph S. Pete is a Lisagor Award-winning business reporter who covers steel, industry, unions, the ports, retail, banking and more. The Indiana University grad has been with The Times since 2013 and blogs about craft beer, culture and the military.