How Eric built the fortune
Eric Smidt's fortune comes from a business that started out of a small building in North Hollywood. In 1977, when he was 17, he and his father, Allan Smidt, founded Harbor Freight Salvage, selling tools and equipment by mail order. The company bought closeout and surplus goods, then increasingly imported tools directly from overseas manufacturers and sold them under its own brands at prices well below those of established names.
The mail order catalog grew into a retail chain. Harbor Freight opened stores in strip malls and small towns across the United States, aimed at do it yourself homeowners, hobbyists, mechanics and contractors who wanted serviceable tools without paying premium prices. By controlling its own brands and sourcing directly from factories, the company kept costs low and margins healthy. Smidt became chief executive and has run the business for decades, and the family has kept it privately owned.
The company has expanded steadily, opening new stores at a fast pace, building large distribution centers and investing in the quality and design of its private label tools. Brands such as Pittsburgh, Hercules, Icon and Bauer have become familiar to American tradespeople. Because Smidt owns the company outright, its growth in sales and profits translates directly into his personal wealth.
Companies and holdings
Harbor Freight Tools, headquartered in Calabasas, California, is the core of his holdings. Notable points about the business include:
- More than 1,000 stores across almost every US state.
- A portfolio of in house brands covering hand tools, power tools, generators, welding equipment and shop supplies.
- A strategy of direct sourcing from manufacturers, most of them in Asia, combined with low prices and frequent promotions.
Smidt also holds real estate and other private investments. He is a licensed pilot and has interests in aviation. The chain's stores are typically smaller than big box home improvement centers, which lets the company open in towns and neighborhoods where larger competitors would not build, and keeps rent and staffing costs low.
Early life and career
Smidt was born in 1960 and grew up in Los Angeles. He was only about 17 when he and his father started the business, and he worked in it from the beginning, learning sourcing, sales and operations firsthand rather than through formal business training.
The company's change from a salvage dealer into a retailer with its own brands happened under his leadership. He has described Harbor Freight's mission in simple terms: making quality tools affordable for people who work with their hands. That focus has guided decisions on store design, product testing and pricing as the chain has grown into one of the largest tool retailers in the country.
He has kept the company out of the hands of private equity and public markets, which gives him room to invest for the long term in new stores, distribution and product development. Under his direction the company also moved away from its early image as a seller of cheap salvage goods, emphasizing testing standards and warranties on its newer tool lines.
Philanthropy and public life
Smidt and his wife, Susan, are significant philanthropists in Los Angeles and in education. In 2017 they launched Harbor Freight Tools for Schools, which runs an annual prize recognizing outstanding skilled trades teachers in public high schools, with large cash awards shared between the teachers and their programs. The initiative is meant to raise the profile of vocational education at a time of shortages in skilled trades.
The couple also made a major gift to Cedars-Sinai Medical Center in Los Angeles, which named its heart institute the Smidt Heart Institute in recognition. They support other medical research, arts and community causes in Southern California. Smidt rarely gives interviews about his wealth and keeps most public attention on the company and its programs.
In March 2020, as hospitals ran short of protective equipment early in the coronavirus pandemic, Harbor Freight donated its entire stock of N95 masks, face shields and nitrile gloves to front line hospitals across the country, a decision announced publicly by Smidt.