Hardware Retailing December 2016 by NHPA

Serving Hardware, Home Center & Building Material Retailers

A Perfect Match

How Two Retailers Paired Child Products and Safety 54 Market Measure: The Industry’s Annual Report 30 What Do You Do When Something Doesn’t Go As Planned? 50 VOLUME 211 • ISSUE 6 • DECEMBER 2016 • HARDWARERETAILING.COM

WEBSITE

JOIN MAILING LIST

FACEB

A History of Success Orgill is an Important Member of Our Team!

Family Business

Easy Access

“Rusty’s Home Center began with two people. Our

“Orgill brings such a vast array of merchandise and large

employees are like family, and Orgill is part of that family.”

variety of vendors to the table. We know Orgill can help us find anything we’re looking for, and everything our customers need.”

Staying Stocked “When the industry was in a decline, our competition slowed down, but we stepped up. It was thanks to Orgill

Amazing Deals

that we always had whatever our customers were looking

“We like to attend Orgill Dealer Markets to see the newest

for. Our customers learned that even if the competition

products and look for the best deals. The savings available

didn’t have it, we did!”

to retailers are too good to pass up.”

For more information about how Orgill can help you grow your business, contact us today! 1-800-347-2860 ext. 373 • information@orgill.com • www.orgill.com • Orgill, Inc. P.O. Box 140, Memphis TN 38101-0140

Rusty's Home Center_Spread.indd 69

You Know Retail. We Know Retail. Let’s Grow Together

“Epicor solutions are really the core of our business. The Eagle system helps automate processes from point of sale (POS) to inventory management. The rich analytics have helped us solve problems and make decisions from day one.” Nathaniel Polky, Information Technology Manager | McLendon Hardware

A Perfec Match

How Two Retailers Paired Child Prod Market Measure: The Industry’s Annual Report 30 However you define growth, Epicor® Eagle® business management solutions can take you to the next level. Designed to reinforce retail best practices, Eagle has the complete solution set for retailers who want to grow revenue and profits, tightly control inventory costs, make smarter decisions quickly, and maximize the customer experience. Contact an Epicor expert today.

What Do You Do When Something Doesn’t Go As Planned? 50

epicor.com/HWHC-HR | eagle@epicor.com | 1.888.463.4700

VOLUME 211 • ISSUE 6 • DECEMBER 2016 • HARDWARERETAILING.COM Copyright ©2016 Epicor Software Corporation. All rights reserved. Epicor, the Epicor logo, grow business, not software, and Eagle are registered trademark or trademarks of Epicor Software Corporation in the United States and certain other countries.

BOOK

ADVERTISE

Serving Hardware, Home Center & Building Material Retailers

ducts and Safety 54

“Alongside the great instructors, all of the attendees are progressive, well-respected individuals. Regardless of size, location or time in the industry, everyone is in full support of one another.”

Jonathan Miller | Miller Hardware | Valdosta, Georgia

NRHA Retail Management Certification Program Learn from professors, industry experts and fellow classmates in this college-level course geared toward future retail leaders. In this six-month program, students will work on improving their businesses and providing owners an immediate ROI on their attendance (averaging five times the cost). FOR MORE INFORMATION, GO TO NRHARMCP.COM.

CALL FOR 2017 NOMINATIONS

Young Retailer Year AD #4 of the

21ST ANNUAL AWARDS PROGRAM Learn more about the awards program and NRHA Retail Management Certification Program scholarship opportunities provided by the National Hardware Show® and Bernzomatic at www.nrha.org/yroty. Entry deadline is Feb. 24, 2017.

Presented by:

Sponsored by:

DECEMBER SPONSOR

JETCOAT professional grade pavement, foundation and roof coatings PROTECT | PRESERVE | RESTORE

JETCOAT delivers quality and durability to professionals and do-it-yourselfers who continue to appreciate the value long after the project is done. That’s because we never stop innovating. JETCOAT stands the test of time because our R&D team has developed and patented the most advanced coatings formulations in the industry.

ROOF

D R I V E W AY

F O U N D AT I O N

P E R F O R M A N C E T H AT S TA N D S T H E T E S T O F T I M E

JETCOATinc.com 800-394-0047

Serving Hardware, Home Center & Building Material Retailers

A Perfect Match

IGNITE YOUR CAREER with a Retail Management Certification Program Scholarship from Bernzomatic

SEE OUR AD INSIDE FOR MORE INFORMATION AND HOW TO APPLY

DECEMBER SPONSOR

JETCOAT professional grade pavement, foundation and roof coatings PROTECT | PRESERVE | RESTORE

ROOF

D R I V E W AY

F O U N D AT I O N

P E R F O R M A N C E T H AT S TA N D S T H E T E S T O F T I M E

JETCOATinc.com 800-394-0047

Serving Hardware, Home Center & Building Material Retailers

A Perfect Match

Same great products, new look New York Wire and FibaTape® are now ADFORS

Innovative Insect Screen & Accessories

High Performance Drywall Tapes & Accessories

There is an ADFORS screen to meet every lifestyle need. Our full line of specialty screen is designed for a variety of unique purposes, including UV blocking, small insect protection, extra strength for high traffic areas, pet resistance, allergen protection, and increased visibility.

Our full line of ADFORS wall finishing tapes includes both FibaTape® self-adhesive fiberglass mesh tapes and innovative FibaFuse® paperless drywall tapes. From Ultra-thin to Extra Strength, FibaTape is loved by DIYers and professional contractors alike!

Not sure what type of screen you need? Download our new Scene Weaver app to choose the best screen to fit your needs and see what it looks like when installed! On the App Store and Google Play.

Your partner for innovative textiles Follow us on:

www.adfors.com

These revolutionary tapes are designed to be easier, faster and stronger than standard paper joint tape while also delivering excellent value and performance.

NEXT MONTH

Working With Problem Employees

o you know how to determine if a member of your staff is a problem employee, and what steps to take to help them improve at work? Or if the best decision may be to let them go? In the January issue, we’ll answer these questions, and more. Don’t miss this story, which will include suggestions from human resources managers and other experts to

provide you with insights into what you can do when working with a difficult employee. We’ll also talk with retailers who offer unique store services. Find out how they’re providing top-of-the-line customer service and standing out from their competitors. Finally, we’ll share what you can look forward to at the 2017 National Hardware Show®, which will be held May 9-11 in Las Vegas.

CHANNELLOCK.COM | 800-724-3018 EXT. 330

440

HOW DO YOU SPOT A SEASONED PRO ON THE JOBSITE?

Easy. You’ll find hard-earned grime on his hands and CHANNELLOCK® tools

12" STRAIGHT JAW TONGUE & GROOVE PLIER

in his truck. We’re proud to be the choice of tradesmen nationwide. And we’re committed to supporting the retailers and distributors who supply the tools that keep America working. STREAMLINED ORDERING

COMPREHENSIVE SALES SUPPORT

INDUSTRY-LEADING 99% FILL RATE

FAST SHIPPING FROM OUR MEADVILLE, PA FACTORY

CONSISTENT QUALITY TO MINIMIZE RETURNS

December 2016 | HARDWARE RETAILING

Headquarters Staff PUBLISHING PUBLISHER, VICE PRESIDENT OF PUBLISHING Dan Tratensek

NRHA MISSION

The North American Retail Hardware Association’s (NRHA) mission is to help independent hardware stores, home centers and lumberyards, regardless of wholesale affiliation, become better and more profitable retailers.

COMMUNICATIONS DIRECTOR OF COMMUNICATIONS Whitney Daulton

FEATURED BOARD MEMBER

FEATURES EDITOR Liz Lichtenberger

136 N. Delaware St. #200, Indianapolis, Indiana 46204 Phone: 317-275-9400 Fax: 317-275-9403 Email: nrha@nrha.org Website: www.nrha.org HEADQUARTERS STAFF PRESIDENT AND CEO Bill Lee CONTROLLER David Gowan

EDUCATION TRAINING MANAGER Jesse Carleton, 317-275-9418, jcarleton@nrha.org MEMBER SERVICES AND COMMUNICATIONS COORDINATOR Hilary Welter, 317-275-9435, hwelter@nrha.org MEMBER SERVICES AND MEETING COORDINATOR Kamille Stokes, 317-275-9435, kstokes@nrha.org

ASSISTANT EDITOR Renee Changnon ASSISTANT EDITOR Kate Klein ASSISTANT EDITOR Melanie Moul CONTRIBUTING EDITOR-NEW PRODUCTS Marci Taschler SENIOR DESIGNER Lynnea Chom GRAPHIC DESIGNER Graeme Haase WEB DEVELOPER Kevin Trehan

PRODUCTION SERVICES PRODUCTION MANAGER Nancy A. Vondersaar SALES AND PRODUCTION ASSISTANT Freda Creech

STEVE FUSEK DIRECTOR

Steve Fusek, president of Fusek’s True Value in downtown Indianapolis, Indiana, was elected to the NRHA board of directors in 2016. He opened his store in 2004, and it has continued to grow and thrive ever since.

CIRCULATION RETAIL LEADERSHIP INSTITUTE EXECUTIVE DIRECTOR-RETAIL LEADERSHIP INSTITUTE Scott Wright, 317-275-9430, swright@nrha.org DIRECTOR OF RETAIL OUTREACH Tom Marcum, 317-275-9430, tmarcum@nrha.org

CIRCULATION DIRECTOR Richard Jarrett

CIRCULATION/SUBSCRIPTION/ LIST RENTAL INQUIRIES PHONE 314-432-7511 FAX 314-432-7665

NRHA VENDOR PARTNER

SALES

VENDOR INTEGRATION MANAGER Marci Taschler, 317-275-9421, mtaschler@nrha.org

VICE PRESIDENT OF SALES Bob Cutter

NRHA CANADA

NATIONAL SALES MANAGER Lowell Huffman

NRHA CANADA Michael McLarney, 528 Queen St. E., Toronto, Ontario, Canada M5A 1V2; 416-489-3396, mike@hardlines.ca

MIDWEST REGION MANAGER Tony Sarantakis, 404 Afton Circle, Barrington, Ill. 60010; 847-934-9515, Fax: 847-934-2494, tonytakis@aol.com

STATE AND REGIONAL ASSOCIATIONS

WEST REGION MANAGER Chris Miller, 506 Citadel Circle, Westmont, Ill. 60559; 630-234-3272, Fax: 847-934-2494, cmiller7288@gmail.com

MICHIGAN RETAIL HARDWARE ASSOCIATION Patrick Harrington, 603 S. Washington Ave., Lansing, MI 48933; 517-394-1710; Fax: 517-394-6754 MIDWEST HARDWARE ASSOCIATION John Haka, 2301 Country Club Drive, Suite A, P.O. Box 8033, Stevens Point, WI 54481-8033; 715-341-7100; 800-888-1817; Fax: 715-341-4080 PACIFIC NORTHWEST REGION Ronald F. Moore, 3857 Wolverine NE, Suite 20, Salem, or 97305 (UPS, FedEx); P.O. Box 17819, Salem or 97305 (U.S. Mail); 503-375-9024; Fax: 503-375-7980; Alaska, Idaho, Ore., Wash. SOUTHWESTERN REGION Jeff Flora, 638 W. 39th St., Kansas City, MO 64111; P.O. Box 419264, Kansas City, MO 64141; 816-561-5323; Fax: 816-561-1249; Ark., Kan., La., Mo., Neb., N.M., Texas

NORTHEAST REGION MANAGER Brian Ziff, 17 Cutler Knoll, Watertown, Conn. 06795; 203-509-0125, Fax: 317-275-9406, bziff@nrha.org GREAT LAKES REGION MANAGER Bill Mancuso, 136 N. Delaware St. #200, Indianapolis, Ind. 46204; 317-275-9424, Fax: 317-275-9403, bmancuso@nrha.org SOUTHEAST REGION MANAGER Nick O’Connor, 136 N. Delaware St. #200, Indianapolis, Ind. 46204; 317-275-9409, Fax: 317-275-9403, noconnor@nrha.org CANADA John Magner, 500 Queens Quay W., #101 W. Toronto, Ontario M5V 3K8; 416-598-0101 x220, Fax: 416-598-9191, jmagner@yorkmedia.net

Hardware Retailing (ISSN0889-2989) is published monthly by the North American Retail Hardware Association, 136 N. Delaware St. #200, Indianapolis, Ind. 46204. Subscription rates: Hardware Retailing (Payable in advance): U.S. & possessions $50.00 year. Canada $75.00 year. All other countries $100.00 year. (Air Mail $60.00 year additional). Single copy $7.00. The Annual Report issue can be purchased for $30.00. Periodical postage paid at Indianapolis, Indiana, and additional mailing offices. POSTMASTER: Send address changes to Hardware Retailing, P.O. Box 16709, St. Louis, MO 63105-1209. All editorial contents copyrighted 2016 by the North American Retail Hardware Association. No editorial may be reproduced without prior permission of the publisher. REPRINTS: Contact the Editorial Department at 317-275-9400 for price quotations. Printed in the USA.

HARDWARE RETAILING | December 2016

WHAT IS ONE OF YOUR HOBBIES OUTSIDE OF THE STORE? I used to work in the Indy racing scene. In 2012, I was asked to manage Japanese driver Takuma Sato, and my wife and I still do. He’s also lived with us off and on since 2010. When my wife is asked if we have kids, she says, “Yes, one 39-year-old Japanese boy!” NRHA BOARD OF DIRECTORS CHAIRMAN OF THE BOARD James Cabirac, Kief Hardware, Cut Off, Louisiana EXECUTIVE VICE CHAIRMAN Megan Menzer, Newton’s True Value, Cherryvale, Kansas FIRST VICE CHAIRMAN T.J. Comstock, Northwest Hardware, LLC, Billings, Montana SECOND VICE CHAIRMAN Greg Schlecht, Greg’s True Value, St. Francis, Wisconsin THIRD VICE CHAIRMAN Daniel Harris, Palos Ace Hardware, Palos Heights, Illinois; Lemont Ace Hardware, Lemont, Illinois DIRECTOR Will Aubuchon, Aubuchon Hardware, Westminster, Massachusetts DIRECTOR Jared Smith, Jared’s Ace Hardware, Bishopville, South Carolina DIRECTOR David Dishke, Grand River Home Hardware, Caledonia, Ontario DIRECTOR Steve Fusek, Fusek’s True Value, Indianapolis SECRETARY-TREASURER Bill Lee, NRHA President and CEO IMMEDIATE PAST CHAIRMAN Adam Busscher, Picton Home Hardware, Picton, Ontario

Contents DECEMBER 2016 | VOLUME 211 | ISSUE 6

54 CATEGORY SPOTLIGHT

Bringing Home Baby Childproofing products can be a perfect fit in your store. Hear from the experts about what products you should stock and why.

Departments

MARKET MEASURE

The Industry’s Annual Report

The 2016 Market Measure report is full of facts and figures that will provide some analysis of what’s happened in the home improvement industry this year and what to expect in 2017. After you read, take a look at your business’ financials to see how it compares to those of other independent home improvement retailers.

50 OPERATIONS

“Well, That Didn’t Work” Everyone makes mistakes, or faces unexpected circumstances. But learning from mistakes helps you better prepare for the next time something similar arises. Here, some retailers share stories about a time something went wrong, and how they course-corrected to come back stronger than ever. 4

HARDWARE RETAILING | December 2016

PLAN A PLAN B PLAN C

06 . . . . . . . . . . . . . . . . . On the Web 08 . . . . . . . . . Independent Thinking 10 . . . . . . . .Taking Care of Business 14 . . . . . . . . . . . . . . . . NRHA News 20 . . . . . . . . . . . . . . . . . . . . . Trends 24 . . . . . . . . . . . . . . . . . . Checkouts 62 . . . . . . . . . Newsmakers/Calendar 66 . . . . . . . . . . . . . . . . . . Last Word

On the Cover Sara Carpenter, vice president of operations, and her sister, store manager Tricia Kerth, of Steve’s Ace Home and Garden in Dubuque, Iowa, offer their customers all kinds of baby gear, as well as a variety of child safety products . NRHA photo by Graeme Haase

Easy on the eyes. Easy to install.

™

Introducing Outdoor Accents decorative hardware. Your customers can easily ® add style and strength to their outdoor projects. The new Simpson Strong-Tie Outdoor Accents line of structural connectors features an innovative screw and washer set that combines the ease of installing a screw with the look of a bolt. And, with a black powder-coat finish, this hardware offers style that’s designed to last. To learn more about Outdoor Accents decorative hardware, call (800) 999-5099 and visit strongtie.com/outdooraccents.

On the Web

RETAIL PROFILE

FREE RESOURCE

How One Store “Sprouted” a Baby Boutique

Informational Resources on Childproofing

Sprout, a baby and toddler boutique located within Steve’s Ace Home and Garden in Dubuque, Iowa, is a haven for local families. Visit TheRedT.com/sprout to learn all about how it got started, see what the store offers and check out a photo gallery of the unique space.

MARKET MEASURE

The Industry’s Annual Review The North American Retail Hardware Association’s (NRHA) Market Measure provides original data from its annual report. Visit TheRedT.com/ industry-overview to watch a video that shows an in-depth overview on the past year in home improvement, and forecasts the future of the home improvement industry.

Are you looking for more information to train your staff on childproofing the home? Head to TheRedT.com/childproofingresources to access a list of websites providing information like must-have childproofing products, educational resources and more.

This series of quick lessons on topics such as selling skills, merchandising, product knowledge and operations is geared toward all levels of employees. Visit nrha.org/freetraining to download this month’s lessons, listed below.

1 Video: Market Measure: The Industry’s Annual Review

2 PDF: Exploring Smart

FINANCIAL RESOURCE

How to Use GMROI Do you and your store managers understand how to use Gross Margin Return on Inventory data to improve your business? Visit TheRedT.com/gmroi to download a video and case study to help you utilize GMROI metrics. 6

HARDWARE RETAILING | December 2016

Home Products

55% of retailers surveyed by NRHA say their sales have increased in 2016 over 2015. Source: NRHA 2016 State of Independents Conference Research

SOCIAL MEDIA LINKS

@hardwareretail facebook.com/HardwareRetailing

style.

speed. limitless options. same day shipping. With over 1000 possible combinations of finishes, knobs, levers and roses, Schlage offers a decorative trim style to match every taste. HSI is proud to offer the full line of Schlage’s decorative trim options. And we’re proud to say we ship every Schlage order placed by 5PM EST the same day. This is how wholesale is supposed to work.

this is hsi. See all the options at hardwaresuppliers.com/decotrim

800-334-5625

hardwaresuppliers.com

Independent Thinking

What’s Your Customer Service Equation?

“Customer service is

multidimensional; all the components become part of the customer service equation.

”

recently had an interesting experience buying ordinary hardware supplies. My wife and I were helping our daughter and son-in-law get settled in a new home. When a family moves, it’s good for hardware stores. This particular morning I had a list of hardware supplies for the new house: a small paintbrush, various lightbulbs, three plate hangers, two six-foot extension cords, fireplace glass cleaner, some hooks for the garage and a café curtain rod. I had two choices for shopping in the area. About four minutes away is an independent hardware store: a typical store in a strip center on a busy street. I had not shopped there before. My second choice was a Lowe’s, about 10 minutes away. Being a great supporter of independents, I only had one choice. Each consumer has his or her own list of the things that add up to great customer service, and it varies over time and between stores. As a retailer, you have your equation, too. Most agree on a few key components of great customer service. There’s convenience, which could mean close to home, easy parking, or quick to shop. Customer service also includes friendly, knowledgeable employees. And, it means having products you would expect to find at a comparable price. So, I grab my cup of coffee and head off to my new local independent hardware store. I find an empty parking spot just at the front door. As I walk in, an employee gives me a big hello, finds me a small cart and asks if she can help me find anything. She points me in the direction of what I need. I’m in hardware store nirvana. So far, my customer service equation is really adding up—just-around-the-corner convenience, easy parking and friendly people who know their stuff. This will be great. I’ll just get through my list, and I’m out of there. I look for what I think will be the most obscure item on my list, fireplace glass cleaner. Not only do I find it, but there are two choices. This is amazing. Next are the plate hangers. I’m hoping that if your hardware department has picture-hanging supplies, you’ll have a few. My new store doesn’t carry them. I can forgive them this one, a little obscure maybe. Then I head to lighting; I want to stock up on bulbs around the house: 65-watt floods, small-base round clear bulbs and a variety of standard LEDs. Now, I’m really disappointed. There are just a few single floods, no multipacks, and they’re extremely pricy. And, no clear bulbs and a very sparse supply of standard bulbs. I can’t get lightbulbs in my hardware store? I can’t believe it. So what did I do? I was forced to drive the extra six minutes to Lowe’s, where I found I could have gotten everything on my list. I had to park farther from the store and wander around a little to find what I needed, but I got everything. Two store employees even offered to help me find things. I’m sorry to say that they scored a lot higher on my customer service equation this morning. Customer service is multidimensional; all the components become part of the customer service equation. If you’re not in stock, the rest just doesn’t matter. Your customers are doing the math. Do you know how you’ll score?

Bill Lee, President and CEO

blee@nrha.org

HARDWARE RETAILING | December 2016

Visit the Clean + Contain Expo to find more than 400 exhibitors offering the latest cleaning & organizational solutions, closet & clothes care, bath accessories and unique pet-care items.

March 18 - 21 • Chicago Free Badge Registration at

www.housewares.org

Taking Care of Business

My Hope for the New Year

“You have the

opportunity to be an example that illustrates how individual success and compassion are not mutually exclusive principles.

”

t has become a pretty tired cliché in December to look back at the proceeding 11 months, shake your head and say… “Wow, that was a crazy year.” But I think most people will give you a pass for uttering that EXACT phrase as we close the book on 2016. “Wow! That was a crazy year!” This has been a year of highly positive events, often overshadowed by a lot of ugliness and negativity. It was a year that saw the housing market continue to regain its vigor, that saw consumers continue to grow more confident. But it was also a year that saw the income gap in America grow wider. It was a year that saw small businesses continue to face greater obstacles to their success. It was a year that saw people bitterly divided over the future of the country. It was a year that highlighted the differences of Americans more than the similarities. No one person, party or event gets credit for any of the positives. Nor does any one person, party or event get the blame for any of the ugliness or negativity. We all share in both the glory and the blame of what 2016 represents. But what’s more important than looking back at what happened in the last 12 months, is looking forward to what CAN happen in the new year. No matter where you sit along the great political divide, when you look back at the meandering journey of 2016, I would hope that you come to the same conclusion I do—above all else, we have to find ways to work together. We have had enough division, enough blaming, enough “I’m right; you’re wrong.” We need more cooperation, more understanding, more encouraging of one another. So I’m going to try to start right here. I am going to start in this column by asking all of you—the small business owners, the employers, the community leaders—to play an active part in making 2017 a year where we ALL focus on not just how we can make our businesses succeed, but how we can help each other succeed. As a small business owner, you have a unique perspective and a unique responsibility. You are positioned squarely at the intersection between business and family, both in a literal and figurative sense. Unlike the head of a large corporation, you don’t have the ability to keep an arm’s length from your employees. You view your employees as an extension of your families, and you know your decisions have a direct impact on their lives. Unlike a large corporation, you don’t have the ability to outsource jobs, slip through tax loopholes or employ lobbyists. You bear the direct impact of rules, regulations and legislation head-on. It is because of this unique position that you have a perspective unlike that of private citizens or corporate captains. You have the ability to be arbiters of the real change our country so sorely needs. You have the opportunity to be an example that illustrates how individual success and compassion are not mutually exclusive principles. So as we look at the new year that lies ahead, it’s my sincerest hope that 2017 can provide the counterbalance to 2016. That it can be a year where we all celebrate and support small business owners and that small business owners set the example for how we can all succeed together. And if there’s one thing that 2016 taught us, if the Chicago Cubs can win the World Series, anything is possible if we work together.

Dan M. Tratensek, Publisher

dant@nrha.org

HARDWARE RETAILING | December 2016

Over

320 retailers

have converted to Ace from other suppliers in the last 5 years!

Be the Helpful Place. • FREE Opening Stock Order* • Higher profit margin compared to competitive hardware retailers for 5 consecutive years** • 5% gross profit dollar improvement in year one — we guarantee it*** • Access to the Best Brands • For the 10th year in a row Ace has once again been ranked “Highest in Customer Satisfaction among Home Improvement Retail Stores,” according to J.D. Power****

Service • Convenience • Quality Interested

Visit myace.com or call (630) 990-6900

*Incentive amount varies by store size/format and is based on Discovery (Ace-recommended) products. Store must accept 80% of Discovery products in reset departments to receive credit for the product. Store must also achieve Platinum Performance within 24 months of activation date and must pay for Ace designated third-party labor to perform resets. ** Ace 2010-2015 Retail Financial Report, Profit Planning Group. ***See your Market Development Manager for complete details. Does not apply to buy to convert opportunities. ****Ace Hardware received the highest numerical score among retail stores in the proprietary J.D. Power 2007-2016 Home Improvement Retail Store Studies. 2016 study based on responses from 2,995 consumers measuring six stores and opinions of consumers who purchased a home improvement product or service within the previous 12 months. Proprietary study results are based on experiences and perceptions of consumers surveyed JanuaryFebruary 2016. Your experiences may vary. Visit jdpower.com.

Ace is the place for help.

YOU BRING YOUR FIRE,

WE’LL HELP FUEL IT.

Introducing the Bernzomatic “Find Your Fire” Retail Management Certification Program Scholarship

LEADERSHIP

MARKETING

FINANCIAL

SKILLS KNOW-HOW SAVVY Fuel your retailing knowledge and take your business to the next level.

Bernzomatic wants to feed your burning desire to learn and to grow your business. The NRHA Retail Management Certification Program (RMCP), one of the industry’s most coveted certifications, can help ignite your professional growth – and a scholarship from Bernzomatic can help bring it within reach. We provide four scholarships to this college-level program – designed for independent retailers by the NRHA – to prepare today’s blazing talent for tomorrow’s challenges and opportunities. The $6,250 scholarships cover 50% of the RMCP tuition for four prospective students. “Find Your Fire” scholarship recipients will join other high-potential employees of independently owned hardware and home improvement stores for the six-month program. Industry leaders and top-level college instructors teach and coach students through group projects, in-depth case studies and more. It’s a great way to light up a new generation of independent home improvement retailers.

SPARK SOMETHING TODAY. Apply for the Bernzomatic “Find Your Fire” Retail Management Certification Program Scholarship before January 27, 2017 Apply for the “Find Your Fire” Scholarship today at: NRHARMCP.COM/SCHOLARSHIPS/FINDYOURFIRE

NRHA News

It’s the Most Wonderful Time of the Year!

s 2016 comes to a close, your trade association, the North American Retail Hardware Association (NRHA), is taking a few minutes to reflect on the culmination of exciting happenings that occurred this year. Together, the home improvement retailing industry worked to share best practices to help us all succeed. We united to provide a collective voice across the independent

channel. We gathered to support one another and strengthen the industry as a whole. As you recover from Black Friday and amp up for more Christmas shoppers, NRHA would like to wish you and your family the happiest of holidays. We’ve had a great year, and we’re excited for what’s ahead in 2017. For more information on NRHA, visit nrha.org/membership.

HAPPY HOLIDAYS To Our 40

online training tools have been created and released.

264

35,000

Retailers HARDWARE

new products have appeared in Hardware Retailing.

HARDWARE RETAILING | December 2016

NRHA visits to hardware stores have been made.

NRHA-hosted events have brought us closer together.

2016 14

332

You Know Retail. We Know Retail. Let’s Grow Together

However you define growth, Epicor® Eagle® business management solutions can take you to the next level. Designed to reinforce retail best practices, Eagle has the complete solution set for retailers who want to grow revenue and profits, tightly control inventory costs, make smarter decisions quickly, and maximize the customer experience. Contact an Epicor expert today.

epicor.com/HWHC-HR | eagle@epicor.com | 1.888.463.4700

Copyright ©2016 Epicor Software Corporation. All rights reserved. Epicor, the Epicor logo, grow business, not software, and Eagle are registered trademark or trademarks of Epicor Software Corporation in the United States and certain other countries.

NRHA News

Bernzomatic Scholarships Available for Spring 2017 RMCP Class

RHA and Bernzomatic are accepting applications for the Spring 2017 Find Your Fire scholarship program to attend the NRHA Retail Management Certification Program (RMCP). The Find Your Fire scholarship program is designed to award two retailers the opportunity to participate in RMCP, a collegelevel retail management and leadership development program designed to train future retail leaders. The course teaches advanced retail management and leadership concepts and arms participants with skills to help them advance their careers. Bernzomatic, a brand of Worthington, Ohio-based Worthington Industries, launched the scholarship earlier this year. For the 2016 class session, Bernzomatic awarded four students half-tuition scholarships, valued at $6,250 each. The Spring 2016 Find Your Fire scholarship recipients included Josh Rogers, manager of Meade’s Do it Center in Irvine, Kentucky; and Zack Dupuis, manager of R.K. Miles in Manchester, Vermont. Rogers and Dupuis recently graduated after completing three separate training sessions during the six-month program. “The NRHA Retail Management Certification Program was a tremendous growth opportunity for me, both personally and professionally,” says Dupuis. “I felt a huge difference in my confidence and skill set from the first day to the last.” As part of the program, students completed a business improvement project that provided growth opportunities for the sponsoring businesses. Dupuis developed his store’s hardscape sales strategy to capitalize on a need in the marketplace. The project has produced a nearly $200,000 sales increase for the business.

The Bernzomatic team recently visited New Albany Ace Hardware in New Albany, Ohio, to present a Find Your Fire scholarship check to RMCP student Jon Fox, who is District Manager of Sunbury Ace Hardware, New Albany Ace Hardware and Westerville Ace Hardware. Pictured from left is: Steve Caravati, director of consumer products, Worthington Industries; Mike Dwyer, store co-owner and Fox’s stepfather; Tom Marcum, NRHA director of retailer outreach; Jon Fox; Jennifer Fening, Bernzomatic marketing manager; Wendy Weiler, store co-owner and Fox’s mother; and Tom Christopher, national retail account manager, Worthington Industries.

HARDWARE RETAILING | December 2016

“The RMCP classes provided me the opportunity to network with other retailers from across the country,” says Rogers, who developed a store onboarding process and employee manual as his semester project. “The hands-on activities were particularly engaging and taught us valuable lessons about management and leadership. I am grateful for the opportunity to participate in these classes, which was made possible by my Bernzomatic scholarship.” “Bernzomatic knows that rising retail leaders have a desire to learn and grow their businesses, and we are proud to partner with NRHA to help ignite their careers,” says Jennifer Fening, Bernzomatic spokesperson. “The success that Josh and Zack achieved through the program demonstrates its role in shaping future industry leaders.” The Fall 2016 Find Your Fire scholarship recipients include Jonathan Fox, manager of New Albany Ace Hardware in New Albany, Ohio, and Daren Padgett, manager of Roselawn True Value in Roselawn, Indiana. Both are currently attending the Fall 2016 RMCP class. “We’re delighted that Bernzomatic is once again providing scholarships for independent retailers to attend the program,” says Scott Wright, executive director of NRHA’s Retail Leadership Institute, which launched RMCP in 2013. “This clearly demonstrates Bernzomatic’s continued support and dedication to the success of independent home improvement retailers, and we can’t thank them enough.” Applications for the Spring 2017 Find Your Fire scholarships are open through Jan. 27, 2017. To apply, visit: nrharmcp.com/scholarships/findyourfire.

FAMILY FARM & HOME WILL DOUBLE ITS STORE COUNT … because they joined OUR co-op Al Fansler and his family operated a chain of 27 stores, but they had an even bigger vision for Family Farm & Home. To expand the company, Al, Tim and Bob needed a true partner. That’s why they chose the best option—True Value®.

(Left to right) Son-in-law Bob Tarrant, Al Fansler and son Tim.

FREEDOM TO RUN THEIR COMPANY THEIR WAY WITHOUT INTERFERENCE Family Farm and Home proudly shares the business results the company achieved as a member of our co-op. (Your individual results will vary.)

GROWTH

FROM 27 TO

47 STORES

DOUBLE-DIGIT PROFIT INCREASE

IN KEY CATEGORIES

IF YOU VALUE WHAT WE VALUE GIVE US A CALL AT 1-888-291-7229 TrueValueCompany.com

We understood the family’s long-term business strategy. Tim Fansler, co-president and chief marketing officer, says, “True Value demonstrated a level of expertise within our wide range of product categories that we couldn’t find anywhere else.” Today, the company operates 47 stores in three states with plans to add 5 more stores this fall. True Value offers sound business solutions and resources to ensure Family Farm and Home’s future growth and profitability. Al, Tim and Bob are more than our business partners, they’re family.

TAILORED ASSORTMENTS SUPPORTED BY

MARKET DATA

NRHA News

4 Health Insurance Updates for 2017

s the end of the year approaches, one item on your to-do list should be reviewing your company’s health insurance plan in preparation for the Jan. 1 renewal deadline. Health insurance-related laws and regulations are constantly changing. Moving into 2017, there are four important health insurance updates to be aware of. Bob Chiesa, president & CEO of Custom Benefits Insurance Group, Inc., provided NRHA with the following information. 1.

The Cadillac tax has been delayed.

2 The Cadillac tax, which is a 40-percent tax on

high-cost employer medical plans, has been delayed. The tax was set to go into effect in 2018, but has been pushed back to 2020. The tax was created to charge businesses with insurance plans that the government defines as “too rich” with a high tax. Both political parties agreed that implementation of the tax should be pushed back.

The Traditional Reinsurance Fee is going away.

1 The Traditional Reinsurance Fee, which was one of the

Affordable Care Act taxes, was first introduced in 2014. At first, this cost business owners $63 per insured person per year. In 2015, the cost went down to $44. Then, in 2016, it was reduced to $27 per member per year. To put that into perspective, if an employer insured 10 employees, but each had a family of four also under the insurance plan, the business owner would be paying the $44 fee for 40 people, adding up to more than $1,000. Moving into 2017, the Traditional Reinsurance Fee will no longer be collected.

The PCORI fee will be increasing.

3 The Patient Centered Outcomes Research Initiative

(PCORI) fee was one that employers started paying in 2014. The fee was originally $2 per member per year, but has gradually increased over the years. In 2015, the fee increased to $2.08. In 2016, it reached $2.15. This fee is estimated to increase to $2.28 in the coming year. Again, using the example of 10 insured employees with four family members each, this tax would total under $100. This is lower than most fees, but is important to note as a fee that is increasing.

Dual-Slide Assortment Racking System

New Exclusively from Midwest Fastener! Double your assortments overnight with our new dual-slide specialty assortment racks. Did you know up to six out of 10 shoppers visit the fastener aisle? It is proven that specialty product drives traffic. Now, making your department a specialty destination can be accomplished without extending your fastener aisle linear feet.

2015

Ph:800.444.7313

fastenerconnection.com

4 to group plans from exchanges. 4.

Business owners are switching back Exchanges, which were created by the Affordable Care Act, allow people to go to a government exchange website to purchase individual medical plans instead of going through group medical plans in the traditional insurance market. Over the past couple of years, smaller employers did away with their group medical plans and switched to exchanges. However, Chiesa says many of these employers are going back to group plans due to a lack of satisfaction with exchanges.

If you have questions or concerns regarding health insurance, or would like to learn more about NRHA’s health insurance program, visit us online at cbigi.com/nrha-program or contact Bob Chiesa at cbigi@msn.com or 888-201-7408.

Looking for Options? Finding affordable group health insurance can be challenging. NRHA is here to help. We offer a health insurance program alternative with a host of options in group insurance. Our plan has solid benefits at an affordable rate. It offers flexibility in plan design, isn’t restricted by state boundaries and includes a national pharmacy program that can be customized to fit your specific needs. The plan includes the following: • Health insurance • Vision plans • Dental plans • Group life insurance options • Disability insurance offerings For more information or to request a quote, visit us online at cbigi.com/nrha-program.

CUSTOMERS EXPECT PROFESSIONAL GRADE PERFORMANCE. Impress Them with Jetcoat Pavement, Foundation and Roof Coatings

F O U N D AT I O N

D R I V E W AY

ROOF

J E T C O AT D E L I V E R S Q U A L I T Y A N D D U R A B I L I T Y T O P R O F E S S I O N A L S A N D D O - I T- Y O U R S E L F E R S W H O C O N T I N U E T O A P P R E C I AT E T H E VA L U E L O N G A F T E R T H E P R O J E C T I S D O N E . That’s because we never stop innovating. JETCOAT stands the test of time because our R&D team has developed and patented the most advanced coatings formulations in the industry.

JETCOATinc.com 800-394-0047

Top Brick-and-Mortar Stores Where Consumers Buy Child Safety Products

Trends Keeping Baby Safe

25.8%

16.7%

General Merchandise Stores

Home Improvement Stores

8.3%

7.6%

Independent Hardware Stores

Specialty Stores

Many U.S. homeowners use hidden latches to keep children out of cabinets and gates to prevent toddlers from tumbling down the stairs. But what are the top childproofing products consumers buy, and where do they purchase those items? Hardware Retailing surveyed two groups of about 1,000 consumers each, and found that the products they most commonly use are electrical outlet covers and safety gates. Shoppers buy those items at a variety of stores, but 25 percent turn to home improvement and hardware stores to find what they need to childproof their homes.

Applied to Retail: Consider if child safety products could sell well for your business. Less than 10 percent of consumers currently buy those items at independent hardware stores, but that may open opportunities for you. If you get into the niche and train your staffers about the products parents need and why, you could differentiate your store with the expert advice. To learn more about selling the niche, turn to Page 54.

Source: 2016 Child Safety Shopping Consumer Poll, North American Retail Hardware Association

Child Safety Products Most Commonly Used in the Home Respondents could select more than one option.

34%

30%

26%

Electrical Outlet Covers

Safety Gates

Latches for Appliances, Cabinets

18%

11%

Doorknob Furniture and Locks TV Anchoring and Covers Straps

Other

Percentage of Respondents Who Use the Products

35% 30% 25% 20% 15% 10% 5% 0%

Top Child Safety Products Used Source: 2016 Child Safety Products Consumer Poll, North American Retail Hardware Association

HARDWARE RETAILING | December 2016

SOMETIMES FORTUNE

SMILES UPON YOU.

OTHER TIMES IT SIZES YOU UP AND NODS.

Not just any product can be a Cat® product. And not just any business can be a Cat Home & Outdoor Power Authorized Sales and Service Center. We’re entering the portable generator market because we believe, as the global brand synonymous with power and durability, we’re uniquely suited to build a generator like no other. We’re out to be the best in the industry and we’re looking for partners who share that attitude. If you think you have what it takes. If you’re prepared to be an extension of the Caterpillar legacy – one of durability, reliability and raw power – we’d love to hear from you. Visit cat.com/jointheteam.

RP5500

RP7500 E

RP6500 E

© 2016 Caterpillar. All Rights Reserved. CAT, CATERPILLAR, BUILT FOR IT, their respective logos, “Caterpillar Yellow”, the “Power Edge” trade dress as well as corporate and product identity used herein, are trademarks of Caterpillar and may not be used without permission.

RP3600

Checkouts COMMUNITY EVENTS

Birding Enthusiasts Flock to Help the Community

irdseed and fire prevention typically don’t have much in common. But for one weekend in October at Reineman’s True Value in Burlington, Wisconsin, the two categories worked side by side at the store’s annual truckload birdseed sale. Jeffrey Koenen, co-owner and vice president at the store, orders a truckload of birdseed from a local company, then invites members of the local fire departments and rescue squad to help unload the bags of seed from the truck and into customers’ vehicles. All proceeds from the sale go directly to the fire department. “We usually sell more than 20 pallets of birdseed over two days,” says Koenen. “It’s been a good way to build up our community and highlight the fact that the three departments represented—the rescue squad and the city and town fire departments—are all made up of volunteers. The proceeds from the sale go toward equipment or facility improvements.” National Fire Prevention Week is in October, so since there are already fire fighters helping out during the event, Koenen invites them to park their fire trucks outside the store. He typically has a sale on smoke detectors, while the fire department has fire safety literature and comic books for children. This is the sale’s 15th year. Koenen advertises on Facebook, in a local paper and with the chamber of commerce, but customers often start calling even before the first ad goes out to ask about the next sale. He says that, despite the rainy weather this year, the community turned out to buy seed and support their local fire and rescue departments. “This year’s donation will go toward a training facility for fire and rescue training,” he says. “The event gets the community interacting with our first responders and shows them our support.”

“It’s been a good way to

build up our community and highlight the fact that the three departments represented are all made up of volunteers.

”

—Jeffrey Koenen, Reineman’s True Value

Above: Emergency vehicles parked in front of Reineman’s True Value helped to promote National Fire Prevention Week and draw attention to the birdseed sale. Below: Volunteers from the local fire departments and rescue squad helped load customers’ vehicles during the two-day sale.

Looking for creative ways to engage customers? Whether it’s promotions, merchandising, special events or unique advertising, we cover it here. Have an idea? Contact Liz Lichtenberger, llichtenberger@nrha.org, to have your story considered for publication.

HARDWARE RETAILING | December 2016

January

HARDWARE C O M PA N Y

26-28, 2017

Opryland Convention Center

Nashville, Tennessee

Margin Building

Sales Built Event

Hardware Come check us out! Call Pat McCutcheon at 800-333-0520 ext. 212 or go to www.househasson.com

Checkouts

CUSTOMER RELATIONS

Kids Color For Free

elly Bundt knows that, if she were to take the perspective of a child walking through her store, there are a lot of colorful and interesting items to see and touch in Sac City Hardware. Parents have the challenge of keeping an eye on their children while concentrating on their shopping. To help, Bundt, who along with her husband Scott owns the store in Sac City, Iowa, has a box of free coloring books along with a bucket of candy near the store’s entrance. Both items are within easy reach of children who come in with their parents. “My thought was that if we give them something to hold and carry around the store, it will help keep them from touching everything else. It gives them something to do and makes them feel welcome,” she says. To give her adult customers an extra perk for shopping, too, she offers free bottled water from a cooler. The bottles have the Hardware Hank label from the store’s wholesaler, so customers have an extra reminder of the store even after they’ve finished their shopping trip.

Above: Bundt offers thirsty customers a free bottle of water both as a goodwill gesture, and to draw their attention to her niche in high-end coolers. Below: An old-fashioned shipping box and a bucket fit in with the store’s vintage decor and also house free coloring books and candy for children visiting Sac City Hardware.

HARDWARE RETAILING | December 2016

ADTT ADJUSTABLE DECK TENSION TIE

Our ADTT-TZKT KIT has everything required to build or retroﬁt a deck to pass code. > > > >

Adjustable design accommodates multiple deck joists Installs with either 3/8” lag bolt or WS screw Transfers lateral loads from the deck to the house structure Exceeds 2015 IRC lateral attachment requirements

WATCH THE EASY INSTALLATION VIDEO at USPconnectors.com/ADTT CALL 800.328.5934 for retail locations near you

Checkouts

MERCHANDISING

A Five-Star Loyalty Program

ne way to keep loyal customers coming back is a rewards (or loyalty) program. But with so many companies offering loyalty programs today, you want to make sure yours stands out. Customers at Family Farm & Home, which has more than 50 locations throughout Michigan, Indiana and Ohio, are reminded of the Homegrown Rewards loyalty program whenever they come in the store. Not only are there booklets at the store offering customers a way to sign up, as well as some facts about how the program works, but there are signs throughout the store, on endcaps and in the aisles, reminding customers about the program and the savings it can bring. The signs match the rest of the store’s signage, keeping the company’s branding consistent throughout, and are small enough that they don’t interfere with customers’ ability to easily look at products and prices. But they serve as a reminder to customers about the loyalty program and the savings it can bring them.

HARDWARE RETAILING | December 2016

Family Farm & Home uses signage on its endcaps to remind customers that they can save with the business’ loyalty program.

The donation box at Mountain Hardware offers customers six local charities to choose from. COMMUNITY RELATIONS

Buying More Means Giving More

ustomers at Mountain Hardware in Wrightwood, California, not only support the community by shopping at a local independent store—they can support a local charity, too. “My father set up a donation box many years ago,” says Mike Troeger, owner of Mountain Hardware. “It’s a wooden box with six slots, and each is labeled with the name of a charity. “People may choose to drop their receipts into the slot of their choice, and a donation will be made to that charity,” he says. Each donation is for 5 percent of the total purchase price. Troeger and his team add the totals and write the checks to each of the charities on a quarterly basis. “We are happy to be able to help support local charities,” says Troeger. “Customers love that they can help us direct the donation dollars, and of course, charities appreciate the donations,” he says. The staff can also print a second receipt for customers, in case they have a return. The charities supported may change from time to time, but customers always have several options to choose from as they decide where they want those dollars to go. “In our small town, this works great,” says Troeger. “It’s a win for everyone.”

Be the Complete Source for all

Supplies! You’re already selling the sandpaper and paint, now offer the rest of the products they need for

SERIOUS SPEED and EYE-POPPING DETAIL

Become your area’s go-to place for all PineCar Derbies: Scouts, church groups, summer camps and more!

Low Cost Starter Assortments Available

Power Panel Asst P3869

Endcap Assortment P3878

PineCar is a division of Woodland Scenics pinecar.com • (573) 346-5555

December 2016 | HARDWARE RETAILING

HARDWARE RETAILING | December 2016

2016 Market Measure The Ups and Downs of a Positive Year

o simply state that 2016 has been a good year for home improvement retailing doesn’t do justice to the complicated path the industry has taken over the last 12 months. It is a statement of fact that the industry, by just about any measure, has seen marked growth in 2016. The North American Retail Hardware Association (NRHA) is estimating the industry’s growth this year will come in at about 5.8 percent. And organizations like the Home Improvement Research Institute (www.hiri.org) are putting their growth estimate at around 6.0 percent. If you just look at the numbers being reported by the U.S. Census Bureau, you’d see sales in the industry (NAICS 444) through September clipping along at about 6.7 percent above last year. In fact, building materials and home improvement sales have emerged among the brightest stars in the retail galaxy this year, outpacing overall retail sales increases by nearly 3 to 1. So why does this leave us with a complicated picture for 2016? Let’s just say this wealth of expansion hasn’t been felt equally across the home improvement retailing landscape. While just about every segment of the industry has seen increases this year, the majority of the increase in sales has been driven by larger-ticket purchases. Though a stronger housing market tends to benefit all home improvement retailers, the construction of multifamily dwellings has been a stronger driver in the health of the market.

Typically, multifamily housing construction has a greater impact on home centers and lumber dealers than the average hardware store. Big-box performance also contributed heavily to the stronger sales increases as consumers opened their pocketbooks more freely for remodeling projects and big-ticket purchases. The result is that hardware stores saw sales increases at a rate of about 200 basis points slower than other store types this year, according to NRHA estimates. Store type wasn’t the only determinant of retail success so far in 2016 either, as regionality played heavily into sales growth. Unfavorable weather patterns in parts of the country during the first and second quarters didn’t help sales for stores heavy in categories like lawn and garden. Additionally, stores in areas like the southeast and upper Midwest that had experienced benefits from the oil boom saw sales dip as gas prices continued to moderate.

A Stronger Upside Although sales have been a mixed bag based on store type and location, as a group, independent home improvement retailers still experienced positive results in 2016. This assertion was validated by information from a recent NRHA survey of over 500 independent home improvement retailers. More than half of the respondents to the October survey reported year-over-year sales increases in 2016. Of these retailers, a full 10 percent say they had experienced “significant sales” increases.

December 2016 | HARDWARE RETAILING

INTRODUCTION

What’s even better news for the industry is that the factors that appear to be driving these results don’t show any signs of abating in the near future. The renewed buoyancy of the housing market is one of the main catalysts for the positive sales movement in home improvement retailing, and economists see these trends continuing in the near future. According to Kermit Baker, senior research fellow with Harvard’s Joint Center for Housing, all signs indicate the strength in the housing market will continue through 2017 with housing starts, remodeling expenditures and homeownership rates all poised for additional growth. (To read more from Baker, please turn to the article on Page 44.) Added to the strength of the housing market is a renewed confidence among consumers that make them more likely to open their wallets to spend on home improvement projects. While multiple factors influence consumer confidence, two of

Many economists also agree with the positive outlook expressed by retailers in the NRHA survey, predicting that home improvement product sales should continue to outpace overall retail sales in 2017.

the biggest determiners to consumer spending —employment and disposable income—are both predicted to remain strong in the coming months. All of this has led to increased confidence among independent retailers. According to the NRHA research cited previously, 71 percent of survey respondents say they are predicting sales growth in 2017. Many economists also agree with the positive outlook expressed by retailers in the NRHA survey, predicting that home improvement product sales should continue to outpace overall retail sales in 2017. NRHA is predicting that 2017 will yield results very similar to what we are seeing this year, anticipating industry growth in the mid-5-percent range. There are many factors that could influence this prediction in both positive and negative ways. First, there is the ever-changing weather. Moderately inclement weather is usually a good thing for the industry, but over the past several years, we have seen both feast and famine— experiencing mild winters, wet springs, droughts and dry, hot summers. Unfortunately, there is no real way to accurately predict these cycles. The next wild card is the results of this year’s political activity, though the election season has ended and a new U.S. president has been selected. President-elect Donald Trump built his pre-election campaign around promises of massive change to the status quo. We don’t yet know what the impacts on areas such as consumer confidence and the housing market will be if Trump follows through on his pledge for change.

Industry Sales Methodology

NRHA and Hardware Retailing take a large number of factors into account when determining overall sales estimates for the industry.

additional data from retail and industry partners. All of this data is combined to calculate our industry sales estimates and forecasts.

We use a formula that incorporates information from NRHA’s annual Cost of Doing Business Study, direct retailer research, the U.S. Department of Commerce NAICS 444 sales reports and information from other research outlets as the basis for our calculations.

NRHA and Hardware Retailing’s industry estimates consider sales from all retailers whose primary business is selling home improvement products. We do not include sales from operations that do not utilize a retail sales model or only service other companies.

We then weigh this information against company reports from the industry’s publicly traded corporations, wholesaler sales figures and

Our estimates include sales through the industry’s hardware stores, home centers, retail lumberyards and big-box outlets.

HARDWARE RETAILING | December 2015

U.S. Home Improvement Sales (in Billions)

55% 350

$422.6

$406.8

$392.6

$358.2

of retailers surveyed by NRHA say their sales have increased in 2016 over 2015.

$338.6

400

$378.3

CAG 2015-2020 = 4.5%

300 Source: NRHA 2016 State of Independents Conference Research

2020

2019

2018

2017

2016

2015

250

200 Source: NRHA/Hardware Retailing

71%

Home Improvement Product Sales Performance (% Growth Rate)

of retailers say they anticipate sales to increase in 2017. Source: NRHA 2016 State of Independents Conference Research

2011-2015

2016

2017-2020

Consumer

4.9%

6.0%

4.1%

Professional

6.1%

3.3%

Total

5.2%

6.0%

3.9%

Source: Home Improvement Research Institute

Source: Home Depot Financial Reports

$350.0

$332.6

$317.7

$281.5

300

2016*

2015

2014

2012

250

2011

At midyear, Home Depot was predicting 2016 sales increases of 6.3% over 2015.

$269.5

350

$301.8

(in Billions)

400

2013

6.3%

Home Improvement Retail Sales

200 Source: U.S. Department of Census/Monthly Retail Sales Report NAICS 444 *Estimate

December 2016 | HARDWARE RETAILING

2016

2015-2020

Home Improvement Sales By Month

Sales By Type of Store Outlets

Sales in Billions

Hardware Stores

$44.1

Hardware Stores

19,825

Home Centers

$210.1

Home Centers

9,725

Lumberyards

$84.4

Lumberyards

9,750

January

$22.1

February

$23.3

March

$30.0

TOTAL

April

$32.5

Hardware Stores

$45.9

Hardware Stores

19,810

May

$34.8

Home Centers

$222.7

Home Centers

9,790

Lumberyards

$89.6

Lumberyards

9,760

June

$34.4

July

$30.3

2015

2016

August

$30.2

September (p)

$29.1

TOTAL

2017

INDUSTRY BREAKDOWN

TOTAL

$338.6

2016

TOTAL

$358.2

39,300

39,360

Hardware Stores

$47.8

Hardware Stores

19,850

Home Centers

$235.6

Home Centers

9,790

Lumberyards

$94.9

Lumberyards

9,760

TOTAL

2017

TOTAL

$378.3

39,400

Source: U.S. Department of Commerce/ NAICS 444/Not Seasonally Adjusted

Home Improvement Sales Growth 2016 vs. 2015 January

2018

February

17.1%

March

13.2%

April

3.2%

2019

May

4.5%

June

8.5%

July

-1.3%

August

8.2%

Compound Annual Growth Rate

YTD

6.7%

2015-2020

HARDWARE RETAILING | December 2016

Hardware Stores

$50.1

Hardware Stores

19,750

Home Centers

$244.2

Home Centers

9,740

Lumberyards

$98.3

Lumberyards

9,730

TOTAL

4.2%

Source: U.S. Department of Commerce/ NAICS 444/Not Seasonally Adjusted

2015

2020

2018

TOTAL

$392.6

39,220

Hardware Stores

$53.3

Hardware Stores

19,700

Home Centers

$252.3

Home Centers

9,720

Lumberyards

$101.2

Lumberyards

9,710

TOTAL

$406.8

2019

TOTAL

39,130

Hardware Stores

$55.6

Hardware Stores

19,700

Home Centers

$262.2

Home Centers

9,700

Lumberyards

$104.8

Lumberyards

9,690

TOTAL

$422.6

Hardware Stores

4.7%

Home Centers

4.5%

Lumberyards

4.4%

TOTAL

4.5%

Source: NRHA/Hardware Retailing

2020

TOTAL

Percent Change 2015-2020

39,090

Hardware Stores

-0.6%

Home Centers

-0.3%

Lumberyards

-0.6%

TOTAL

-0.5%

Source: NRHA/Hardware Retailing

Market Share Profile Top Chains: Industry Share

Top Chains: Combined Performance

Sales

No. of Stores

(as % of total industry)

2011

49.1%

13.8%

2011

$136.7

5,441

2012

50.0%

14.7%

2012

$146.4

5,780

2013

50.2%

15.0%

2013

$154.8

5,885

2014*

49.4%

16.1%

2014*

$159.4

6,308

2015

49.7%

16.4%

2015

$168.5

6,447

0.6%

2.6%

Compound Annual Growth Rate

5.4%

4.3%

2011-2015 Percentage Point Change

Net Sales (in billions)

No. of Stores

2011-2015

*For 2014, new chain stores were added and others were removed in a top chain reevaluation process.

CHAIN RESULTS

Top Chains: Individual Performance 2015 Sales (in billions)

Home Depot Atlanta, Georgia

Lowe’s Mooresville, North Carolina

Menards Inc. Eau Claire, Wisconsin

Tractor Supply Brentwood, Tennessee

84 Lumber Eighty Four, Pennsylvania

Northern Tool + Equipment Burnsville, Minnesota

Carter Lumber Kent, Ohio

Sutherland Lumber Kansas City, Missouri

Stores at End of 2015

Stores in 2016 (as of November 2016)

$88.5

2,274

2,275

$59.1

1,857

2,108

$8.7

297

300

$6.2

1,488

1,542

$2.5

241

250

$1.5

$1.1

146

142

$0.9

Source: Company Reports and Hardware Retailing Estimates The above represent home improvement retail chain stores that carry at least two core categories and have sales of approximately $1 billion or more.

December 2016 | HARDWARE RETAILING

Study Points to Another Strong Year

COST OF DOING BUSINESS STUDY

or more than 90 years, the North American Retail Hardware Association (NRHA) has been gathering financial and operational data from the industry’s hardware stores, home centers and lumberyards to produce its annual Cost of Doing Business Study. This study provides the industry with valuable benchmarking tools and information about the performance of its retail operators. Retailers throughout the industry use the study for planning, goal setting and measurement. Study participants contribute their financial information to include in aggregate in the report. These real-world numbers give an accurate picture of how home improvement retailers of all sizes and store types are performing. This year, 1,077 retailers participated in the study. This year’s study includes information from the 2015 fiscal year, composite income statement and balance sheet information and financial performance ratios. The information is segmented for hardware stores, home centers and lumberyards. The data shows both average and high-profit store performance, as well as breaking out operations by sales volume and whether they are single- or multistore operations.

Methodology NRHA gathers the study’s data by mailing questionnaires to a sampling of hardware stores, home centers and lumberyards in the U.S. Retailers can mail their information or upload it online. NRHA provides the analysis in the final report after extensive reviewing the data. Individual company responses remain confidential. Most of the figures in this report are medians, which are the middle numbers in the data when arranged from highest to lowest. The median represents the typical company’s results, without extremely high or low outliers skewing them. To determine high-profit stores, NRHA ranked all participating companies based on net profit before taxes. The high-profit companies in each segment are in the top 25 percent. To access guides and videos that discuss ways to improve your business’ metrics, please visit NRHA.org/freetraining.

HARDWARE RETAILING | December 2016

How to Use This Study The Cost of Doing Business Study presents financial and operational data that retailers can use to evaluate their own businesses and plan strategic changes. Here are some pointers for using the report effectively. • Determine your expenses as a percentage of sales and calculate your balance sheet as a percentage of total assets. Compare your numbers to the study results for both typical and high-profit stores. • Don’t look at percentages alone. Compare your real-dollar expenditures, as well. • Compare your numbers to stores of a similar size. Don’t limit your comparison to one type of store. Defining hardware stores, home centers and lumber outlets is practical for statistical purposes, but your store may have attributes of more than one type. • When your numbers differ significantly, determine the cause and develop a plan to bring your numbers in line with highprofit stores. • Although high profits have little to do with size, sales growth is one of the keys to profitability. Remember, there are basically four ways to generate additional revenue—traffic count, closure rate, transaction size and margins. When reviewing the numbers on the following pages, it is extremely important to note that this report contains figures from a different sample group of stores each year. Overall figures have the potential to vary widely from year to year based on the group of stores participating each year. We use year-to-year comparisons to illustrate general trends over time, not to draw specific year-over-year conclusions.

HARDWARE

Profit Margin

Total Operating Expense

Sales Per Square Feet

Gross Margin Per Employee

HOME CENTER

LUMBERYARD

3.8%

4.1%

3.7%

Highest profit margin reported since the study began, driven by the highest transaction size ever: $21 per customer.

Highest profit margin ever, despite retailers reporting sales per customer at 2012 levels.

Profit margin reached 2013 levels as sales per customer grew to an all-time high of $157.

40.1%

32.6%

26.5%

Up slightly over the prior year due to an increase in other operating expenses.

Operating expenses decreased for the fourth consecutive year due to other operating expenses dropping to 10-year lows.

Up for the fourth year in a row as other operating expenses reached the highest level ever at 9.1 percent.

$176

$253

$565

Hardware stores average $156 of product per square foot, resulting in $176 in sales per square foot.

Sales per square foot are up for the third year in a row as inventory per square foot increased to $60.

Sales per square foot reached a respectable level despite inventory per square foot hitting its lowest since 2008.

$75,252

$68,196

$96,597

The number of employees remained the same as the prior year, but sales per employee hit an all-time high of $175,812.

While the number of employees stayed steady at 16, the gross margin per employee dropped slightly.

Even with smaller staffs, lumberyards were able to attain the highest gross margin per employee since the study began.

Source: 2016 Cost of Doing Business Study

December 2016 | HARDWARE RETAILING

Home Improvement Sales By the Numbers

o offer a better perspective on the independent home improvement industry, NRHA segments the data in the Cost of Doing Business Study into hardware stores, home centers and lumberyards. Within each segment, the data is broken out by typical, high-profit, single-unit and multiunit stores, as well as by sales volume.

RETAIL STORE PERFORMANCE

Hardware Stores Hardware stores participating in this year’s study showed record results thanks to market growth and better expense controls. Hardware stores recorded the study’s highest-ever sales per customer at $21 and the highest-ever gross margin after rebate at 42.8 percent. This led to the highest-ever profit before taxes at 3.8 percent. The record results came despite the fact customer counts were relatively flat, showing that stores were doing an effective job of selling more products to current customers. The study numbers were better for high-profit hardware stores, as they saw sales per customer of $23, a gross margin after rebate of 44.7 percent and profit before taxes of 9.2 percent. They also had flat customer counts, but continued doing more with less by applying practices honed during the recession. As is typically the case, high-profit hardware stores had tighter control of their expenses than typical hardware stores, reporting lower numbers in every major expense category. High profits had 19.4 percent payroll expense vs. a typical 21.3 percent, lower occupancy of 7.2 percent vs. 7.6 percent and lower other operating expenses of 9.9 percent vs. 11.2 percent. The efficiency doesn’t stop there, as high-profit store sales per square feet are $214 vs. a typical store’s $176. High-profit store employees are also more productive, with sales per employee at $198,126 vs. a typical store of $175,812. High profits had one more employee than typical stores.

Home Centers Just like hardware stores, home centers reached record net profits before taxes, coming in at 4.1 percent. This store type was one of the hardest hit during the recession, and owners clearly learned lessons during those lean years that are paying dividends as the market returns to normal. The expenses were controlled throughout home centers

HARDWARE RETAILING | December 2016

as they reached record net profits, despite sales volume dropping over the previous year and sales per customer being at the lowest level since 2012. On the up side, gross margin increased for the third year in a row and other operating expenses were down for the third consecutive year, driving more dollars to the bottom line. Even more impressive were high-profit home centers, as they experienced lower sales volume and lower customer count. Their sales per customer were $51 and they had 250 basis points lower payroll expenses, driving them to nearly double the profit before taxes to 7.5 percent. High profits sold more inventory per square foot, at $334 vs. a typical store of $253. From an employee productivity perspective, high profits operated with three fewer employees but sales per employee were $232,886 vs. $192,170. Inventory turnover was also slightly higher at a highprofit home center, coming in at 3 vs. a typical 2.7.

Lumberyards Much like home centers, lumberyards saw a decline in customer counts for the second straight year. However, lumberyard owners are finding ways to be more efficient, as is evident from the increase of 150 basis points in profit before taxes to 3.7 percent and a highestever sales per customer of $157. All of this was accomplished while reducing their work force and by driving up sales per employee to $321,689, which is the highest level since the study began. Lumberyards also saw an increase in gross margin to 30 percent, reaching levels not seen since 2012. The high-profit lumberyards accomplished even more in the 2016 study, seeing profit before taxes reach 5.25 percent of sales. The $219 sales per customer at the high-profit stores led to $974 of sales per square foot. The employees at highprofit stores were very productive, with sales per employee at $409,120. High-profit lumberyards had inventory turns of 5.2 compared to 3.8 at typical lumberyards. Lumberyards historically have had the lowest participation in this study, so their data are more susceptible to greater fluctuation. This year, lumberyards with 141 locations participated in the Cost of Doing Business Study.

Median Sales Per Customer $25

Typical

Key Business Indicators

High-Profit

50%

High-Profit

44.7% 42.8%

$23

Hardware Stores

Typical

40.1% 36.5%

40%

$22 $21

30%

$21

$20

$19

$20

21.3% 19.4%

$20 20%

$18 $18

10%

$17 $15

2011

2012

2013

2014

2015

Median Sales Per Customer

Home Centers

$60

Typical

Total Payroll

High-Profit

50%

40%

Typical

High-Profit

35.5%35.8% 32.6% 28.9%

$49

$50

30%

$45 $41

$41

Total Operating Expense

Key Business Indicators

$51

$40

Gross Margin After Rebate

$42

19.4% 16.9%

20%

$38 $36 $36

10%

$34 $30

2011

2012

2013

2014

2015

Median Sales Per Customer $250

Typical

Gross Margin After Rebate

Total Payroll

Total Operating Expense

Key Business Indicators

High-Profit

50%

Typical

High-Profit

$219

Lumberyards

40% $200

$167 $157

$152

30%

30.0% 27.2%

26.5% 23.4%

$150 20%

$141 $100

$50

$85

$105

10%

$76

$69 2011

15.8% 15.2%

$87

2012

2013

2014

2015

Gross Margin After Rebate

Total Payroll

Total Operating Expense

Source: North American Retail Hardware Association. Figures based on responses to the 2016 Cost of Doing Business Study. December 2016 | HARDWARE RETAILING

Financial Profile of Leading Publicly Held D-I-Y Chains 2015 Operating and Productivity Profile

Home Depot

Lowe's Cos.

Number of Stores (at end of 2014)

2,274

1,857

Average Size of Selling Area (sq. ft.)

104,000

112,000

Total Sales

$88.5 Billion

$59.1 Billion

Total Asset Investment

$42.5 Billion

$31.3 Billion

Total Inventory

$11.8 Billion

$9.5 Billion

Sales Per Square Foot

$370.55

$292.45

Inventory Turnover

4.9x

4.1x

Net Sales to Inventory

7.5x

6.2x

Total Sales Per Employee

$229,870

$218,793

Average Size of Transaction

$58.77

$67.26

Gross Margin Return on Inventory

289.8%

217.5%

Home Depot

Lowe's Cos.

Net Sales

100.0%

Cost of Goods Sold

65.8%

65.2%

Gross Margin

34.2%

34.8%

Total Operating Expenses

20.9%

27.3%

Net Income (Before Taxes)

12.5%

7.5%

Balance Sheet

Home Depot

Lowe's Cos.

Total Current Assets

40.0%

33.9%

Cash

5.2%

1.3%

Receivables

4.5%

1.0%

Inventory

27.8%

30.3%

Other

2.6%

1.3%

Fixed Assets

52.2%

66.1%

Total Assets

100.0%

Current Liabilities

29.4%

33.6%

Long-Term Liabilities

55.7%

36.9%

Net Worth

14.9%

24.5%

Total Liabilities and Net Worth

100.0%

FINANCIAL PROFILES

Income Statement

Source: Home Depot and Lowe’s annual reports

HARDWARE RETAILING | December 2015

Profile of Top Four Distributors Do it Best Corp.

True Value Co.

Orgill Inc.

Number of Distribution Centers

20 1

Current Number of Members

4,300 3

3,700

4,400

N/A

Dollar Volume Most Recent Fiscal Year

$5.0 Billion

$3.02 Billion

$2.03 Billion

$1.84 Billion 4

Estimated Dollar Volume Calendar 2016

$5.1 Billion

$3.10 Billion

N/A

$2.0 Billion 4

% Sales Out of Warehouse

81.0%

35.0%

70.0%

71.0%

% Sales Out of Pool/Relay

0.0%

% Sales Direct-Drop Ship

19.0%

65.0%

30.0%

29.0%

% Sales in LBM

0.0%

19.0%

15.0%

8.9%

Number of Employees

7,100 3

1,477

2,400 3

2,079 5

Avg. Number of SKUs in Warehouse

75,000 3

67,000

80,000 3

75,100

Sales/Inventory Ratio for 2015

7.1

11.63 6

5.2

5.2 2

2015 Member Rebate Distributed

$145.9 Million

$115.5 Million 6

$19 Million

N/A

% Cash

38.0%

77.0%

100.0%

N/A

% Stock

40.0%

23.0%

0.0%

N/A

% Other

22.0%

0.0%

N/A

Source: Annual company reports and NRHA/Hardware Retailing Estimates

1 Includes 17 domestic and 3 international retail support centers.

2 Warehouse sales only.

3 Approximately.

5 U.S. operations.

4 Net of all returns, allowances and rebates.

FINANCIAL PROFILES

Ace Hardware Corp.

6 Fiscal year ended June 25, 2016.

Profile of Wholesaling Merchandising Groups PRO Group Inc.

Distribution America

Val-Test Group

Current Number of Wholesale Members

104 1

Number Member Wholesalers End 2015

200+ 1

Dollar Volume for 2015 Fiscal Year

$3.25 Billion

$1.0 Billion

$780 Million 2

Estimated Dollar Volume Calendar 2016

$5.25 Billion 1

$1.0 Billion

$700 Million 2

Number of Retail Stores Served by Members

35,000

9,000

4,500

Number of Program Stores

800

1,500

400

Number of Employees

Number Member-Operated Distribution Centers

Source: Annual company reports and NRHA/Hardware Retailing Estimates 1 Merged with Reliable Distributors in October 2016. 2 Val-Test Group’s numbers also include pro sales, hardware, sundries, marine and flooring.

December 2015 | HARDWARE RETAILING

DECEMBER (2015)

INDUSTRY YEAR IN REVIEW

• A labor union that represents workers in New York, New Jersey and Connecticut filed a charge against Menards, alleging that the retailer limits employees’ rights with “an unlawful and overbroad written employment agreement.”

• Two years after a data breach exposed payment card information from more than 50 million of its customers, Home Depot announced plans to compensate some of the shoppers out of a pool of $19.5 million.

• PRO Group, Inc. announced that Lancaster would join PRO Group as its newest distributor member.

• The Sherwin-Williams Company and The Valspar Corporation announced they had entered an agreement in which SherwinWilliams would acquire Valspar for $11.3 billion.

JANUARY

APRIL

• Walmart announced plans to close 269 stores, including 154 locations in the U.S., which marks a change for the company. The closures included all 102 Walmart Express locations, 12 super centers, 23 Neighborhood Markets, six discount centers and four Sam’s Clubs.

• Lowe’s Orchard Supply Hardware announced it would be expanding outside of California with plans to open new stores in Florida and Oregon.

• Regional distributor Handy Hardware retired its name at its spring buying market, rebranding as national distributor World and Main.

• Former Do it Best Corp. president and CEO Bob Taylor received a state award from Indiana Gov. Mike Pence. Pence named Taylor a Sagamore of the Wabash, the highest civilian honor Indiana’s governor can bestow.

FEBRUARY

MAY

• Lowe’s announced an agreement to buy home improvement retailer and distributor RONA Inc. in a $2.3 billion deal, growing the U.S. company’s presence in Canada. Despite the deal, the 2014 partnership between RONA and Ace Hardware remained in place, meaning Lowe’s now owns the licensing rights to the Ace brand in Canada.

• J.C. Penney made the decision to return to appliance sales at 500 stores after a decades-long hiatus. The changes came after a successful pilot program in three markets and under the leadership of CEO Marvin Ellison, a former Home Depot executive.

• After news of RONA selling to the U.S.-based Lowe’s, Home Hardware CEO Terry Davis announced that the company was staying Canadian and was not for sale.

MARCH

HARDWARE RETAILING | December 2016

• Walmart sued Visa, saying the credit card company would not let it require customers to use PINs rather than signatures to secure purchases made with chip-embedded debit cards.

AUGUST • Orgill, Inc. announced plans to expand its network of distribution facilities with the addition of an approximately half-millionsquare-foot distribution center located in Post Falls, Idaho. • Wal-Mart Stores, Inc. announced it entered into a definitive agreement to acquire online retailer Jet.com for $3 billion in cash. The purchase highlighted Walmart’s drive to boost its online business. In August, Orgill announced plans to open an additional distribution center in Post Falls, Idaho.

JUNE

• On June 9, Walmart officially discontinued its ad-matching program at 500 store locations. In place of the program, the company launched “longterm price rollbacks” on products, sending customers to its app. • Home Depot filed a lawsuit saying Visa and MasterCard aren’t making transactions as secure as they should and are working with banks to create chip debit and credit cards that are expensive for retailers to accept.

JULY • Do it Best Corp. announced it surpassed $3 billion in total sales for its 2016 fiscal year. The numbers reflected a year of strong member growth and expansion supported by retail performance programs and new product introductions. • Amazon has become one of the top 10 biggest companies in the U.S., and is moving toward No. 1 in size, a report explains. The retailer has more areas with potential growth than other companies the same size or bigger, such as Facebook, Google and Apple.

• Amazon amassed its own delivery fleet of trucks and cargo planes, competing with companies that used to deliver millions of its boxes. The e-commerce retailer now owns 4,000 truck trailers and leases 40 jets. • Sears has returned to the paint business, looking for ways to help it compete with bigbox stores such as Lowe’s and Home Depot.

OCTOBER • PRO Group, Inc., merged with Reliable Distributors, Inc., which is based out of Chicago and has more than 200 distribution centers across the country. The merger added 74 distributors and over $2 billion in volume to PRO Group.

INDUSTRY YEAR IN REVIEW

• Searching for ways to improve its business after reporting ongoing financial losses, Sears Holdings decided to look at alternative approaches to selling its popular Kenmore, Craftsman and DieHard brands.

SEPTEMBER

• Bass Pro Shops announced it was acquiring Cabela’s Incorporated for about $5.5 billion. The companies are expected to close the deal during the first half of 2017. • Target announced plans to test vertical farming in some U.S. stores in spring 2017, potentially allowing customers to see how green vegetables are grown and harvested indoors in carefully controlled conditions.

NOVEMBER • To help retailers remain competitive among big-boxes and online shopping, True Value Company has enhanced its ship-to-consumer initiative. Abhinav Shukla, chief operations officer, shared with Hardware Retailing the importance of omnichannel efforts. December 2016 | HARDWARE RETAILING

The State of the Housing Market A Q&A With Kermit Baker

HOUSING MARKET

Kermit Baker is a senior research fellow at the Joint Center for Housing at Harvard University and the project director of the Remodeling Futures Program. The goal of this program is to develop an improved understanding of the dynamics of the U.S. repair and renovation industry so businesses can better take advantage of opportunities the market offers. Baker is also chief economist for the American Institute of Architects. In this role, he analyzes business and construction trends for the U.S. economy.

What kind of growth have you seen in existing home sales this past year? The market for existing-home sales has been recovering. We are getting close to about 5 million at an annualized rate, which are the numbers we were seeing before the downturn. Recovery has been slow and steady, but it’s picking up momentum, so that’s a healthy sign. There had been quite a few homeowners who were underwater on their homes and couldn’t sell, but we are now seeing fewer and fewer owners in that situation. There’s been more job growth, too. A homeowner may want to sell and move across the country for a new job, and now they can do that more easily than in the past few years. This segment of the market seems to be unfreezing pretty nicely.

What about growth in new housing starts? There are two types: multifamily homes and single-family homes. Multifamily came back from the recession a lot stronger, as there was more demand for rentals as we came out of the recession. We’ve seen some reasonably healthy growth in single-family construction, too, but it’s still well below where I’d say is the trend line for the market. It will continue to grow, though, I think. There is a lot of potential on the single-family side of the market, but not as much on the multifamily side, as some of those markets may be not only saturated, but overbuilt.

HARDWARE RETAILING | December 2016

What does the remodeling segment look like? According to our estimates, 2015 was the year we reached a new record high for spending on remodeling projects. We matched or exceeded what we saw in 2007, which was when we were at the peak, before the downturn began. We’ve seen healthy growth in 2016, and that same growth is projected for 2017. I think some of the upper end of the market disappeared— we aren’t seeing as many of those $150,000 kitchen remodels as we had before. There aren’t those high-priced projects you were hearing about before the downturn, but it’s still strong. Contractors are, in some cases, overwhelmed. They are continuing to get projects done and continuing to look for more labor.

What are the biggest housing trends that we should be looking at as we head into 2017? There are two we should really consider. One is the split between single-family and multifamily housing and how those markets have recovered so differentially. Multifamily home prices are about 40 percent above what they were at their last peak. We also have a strong single-family market; prices are OK, but not anywhere near that level. I think that plays in to the second trend: We’ve seen some pretty significant declines in the homeownership rate. In fact, reports from over the summer say the national homeownership rate is the lowest it’s been in 50 years. By and large, our population is getting older, and those are the ones who are more likely to be homeowners, so to see that rate so low is pretty dramatic. As far as younger people becoming homeowners, one of the biggest challenges continues to be saving up for a down payment and finding financing. Financing is much more difficult to get than it was a decade or so ago. During and right after the recession, there was a large number of those under 30 living at home, and that number is starting to come down, too. In 2010, at the lowest point of the downturn, those in their 20s or 30s, at an age where you might be more likely to be a first-time homebuyer, were not buying homes. The peak

HOUSING TRENDS

”

year of birth was 1990, and people tend to buy in their late 20s or early 30s, so those born in 1990 are moving into that buying stage. We might see higher rates of homeownership in the near future. The economy is improving and there are favorable demographics and a favorable housing market—these factors all could help the homeownership rate rise.

What do these trends and statistics have to say about the economy as a whole? Quite frankly, I think it’s doing pretty well. When you listen to economists talk about what might happen next year, one of the bright spots is the topic of single-family construction. It’s been slow in recovering, but that recovery has to happen at some point.

There are also generally favorable consumer confidence scores, which tend to correlate with the unemployment rate. For a typical consumer, that’s good news. There’s a lot of optimism from the consumer perspective, which is the most critical factor in generating economic growth. Home prices are going up, and while mortgage rates are going up, they are still surprisingly low, so there are good reasons to take out or refinance a mortgage. People are also taking out home equity loans, some for as many as $20,000, $30,000 or $40,000. That money is traditionally used for home improvements. Many aren’t too inclined to trade up to a nicer home where they might have a mortgage with a higher interest rate, so they improve their homes instead.

HOUSING MARKET

“

There’s a lot of optimism from the consumer perspective, which is the most critical factor in generating economic growth.

What should retailers be aware of as we head in to 2017? The fundamentals look pretty favorable. I think we will continue to see strong house prices. Households continue to build up equity, which encourages home improvement activity. We’re seeing a lot of smaller remodeling projects. Contractors are working hard to keep up. They have to ask themselves if they have the labor to staff those jobs, and they may be running in to material shortages. This hasn’t been an issue in so long that we’ve kind of forgotten about it, but now more and more people want to buy or fix up a home.

December 2016 | HARDWARE RETAILING

Where Is the Economy Growing? A Q&A With Jack Kleinhenz Jack Kleinhenz is chief economist for the National Retail Federation (NRF), the world’s largest retail trade association. Formerly with the Federal Reserve Bank of Cleveland, Kleinhenz is a contributing forecaster to The Wall Street Journal, CNBC, Federal Reserve Bank of Chicago and the Federal Reserve Bank of Philadelphia.

ECONOMIC OUTLOOK

What is the state of home improvement retail? We’re seeing a considerable strength in home improvement spending and that translated into spending at retail establishments. From what we’ve seen, retail sales in the building materials area have been really steady. Housing has softened a little bit. From a retail standpoint, people have to outfit their homes. They’re looking at supplies for repairs. It looks like it’s OK—just a bit of a softening in the last few months. It’s hard to say. I think some of the home improvement activities that go on are part of a housing cycle and timing. Homes get sold earlier in the year, not in the fall. We’ve seen strength in the retail side in building materials, and in the garden supply areas. It’s been a very healthy pace since 2014, and it picked up in 2015 and then kind of started to tail off in 2016. I think it’s a good trend that we’re seeing. I expect that will continue. Numbers can offset each other from month to month, but the overall trend is a healthy 6 percent, which is much stronger than overall retail sales.

What do current economic indicators say about the end of 2016 and 2017? We saw a big uptick in consumer confidence at the end of September. Overall, there’s elevated optimism about the economy. As we start looking at some of the indicators, certainly payroll growth has been good because, I think, as we get closer to full employment, there are fewer and fewer hires businesses are going to make.

HARDWARE RETAILING | December 2016 2015

My expectation for the gross domestic product (GDP) for the remainder of 2016 will probably be at a 2-percent growth rate, which is probably double what we saw in the first half of the year. So, going into the holidays, and hopefully with momentum pushing us into 2017, we’ll see the consumer continue to be the driver. And hopefully housing stays in a positive state of affairs and continues to help push the economy, because that’s where we’ve been seeing the benefit of growth coming from—consumers and housing, and a limited amount of growth coming from the business sector. We might see more spending on equipment, but probably not on physical structures, per se, or a considerable amount of money in the nonresidential area. There just doesn’t seem to be enough demand for it.

What is driving consumers’ optimism? The job growth, and some pickup in wages are propelling consumers. That gives our retailers an opportunity to actually see more spending, more dollars in their wallets.

What do you think economic conditions in the U.S. will look like in 2017? I think we should see a continuation of the overall momentum we’re seeing in the latter part of 2016, with a 2.2-percent growth rate. I’m thinking we’re going to maintain that same pace in 2017. We aren’t going to see a significant pickup in the economy. The throttle on our engine is just set around 2.2 percent or so. I think the consumer, the household, can continue to drive the economy. The consumer represents close to 70 percent of the economy. I think employment will continue to grow, but at a decelerated rate. The economy’s getting closer and closer to full employment. As we get to full employment, will there be enough domestic or even international demand to lift up business? There’s a lot of capacity still from a business standpoint, but we could see more business investment and production if we had increased demand. Most obviously, it would have

“We’re seeing some

growth in use of consumer credit, which means that the consumers are confident they can repay whatever they’re borrowing.

”

What other thoughts do you have on the economy as we look to next year? The key one for households is income growth. Wages and salaries. That’s highly correlated. We’re seeing some growth in use of consumer credit, which means that the consumers are confident they can repay whatever they’re borrowing. They’re in a better place than they were six months or a year ago, especially three years ago. Households are not over leveraged. The amount of debt that they are servicing is at 30-year lows. They have the income to spend, to borrow the money and pay it back on a regular basis. That’s another positive indication that things are better and good for the future.

ECONOMIC OUTLOOK

to come from outside the United States. We’re really dependent on the world economy. There’s a lot of uncertainty. We don’t know what the new administration is going to do or what public policy will do in 2017. We still are at a point in the economy where we don’t know where fiscal policy is going to come out. Monetary policy for the Federal Reserve has done the heavy lifting for this economy. There’s really no more room for them to do anything. That’s why they’re planning on normalizing interest rates, and that’s why I’m expecting an interest rate increase in December. That could

have a bit of an impact on consumers. That’s a bit of an uncertainty. I think businesses are not confident about their future, about whether they’re going to have to pay larger or smaller taxes, what kind of programs might be there to stimulate or not. We just don’t know. That’s a big question, and it’s going to have to get through Congress. You don’t know where interest rates are going to go, and you don’t know if there are going to be challenges in terms of higher tax burdens.

December 2016 | HARDWARE RETAILING

Canadian Market Realizes Slower, Steady Growth Provided by Michael McLarney, Managing Director of NRHA Canada

CANADIAN RETAIL REPORT

hile not as buoyant as the U.S. market, especially coming out of 2015, Canada’s retail hardware and home improvement industry is enjoying solid growth. But will it last? Last year, sales by hardware stores, building centers, home centers and big boxes, and related sales by mass merchants in Canada, grew by a modest 2 percent, due mainly to harsh weather at the beginning of 2015. But coming into 2016, weather was on the side of retailers in most parts of the country. With a good start to the year, business stayed strong right into the fall, with notable exceptions in Alberta, which is the heart of Canada’s oil industry, and Newfoundland and Labrador. As a result, growth overall for 2016 has been revised upwards to exceed 4 percent. This is good news, given the headwinds the industry is facing. While spending on new construction was up for the first part of the year, new housing starts are forecast to fall this year and next, according to Canada Mortgage and Housing Corp. The collapse of the energy sector, exacerbated by the fire that swept through Fort McMurray, has had a drastic effect on retailers in Alberta. Falling natural resources prices have further impacted Newfoundland and Labrador. However, 2017 is expected to slow down slightly, with growth closer to 3 percent.

Regional Growth Many parts of the country enjoyed healthier sales despite the downturn in the energy sector, which affected the country in general, Alberta in particular and, to a lesser extent, Newfoundland and Labrador. But despite a slow start to 2015, the market maintained strength during the latter half of the year. British Columbia began to enjoy an uptick in 2015, especially in the Lower Mainland, but that growth was late in coming and focused mostly on the Lower Mainland for much of the year. As a result, the province was down overall. B.C. has been showing greater growth in 2016 across the province and is expected to sustain that

HARDWARE RETAILING | December 2016

growth through next year, as retailers catch up to improving conditions there. The Prairies continue to suffer a downturn, with Alberta showing the greater dip in dollar terms: it lost almost $150 million in home improvement sales in 2015. Last year, total retail home improvement sales coming out of that province totaled just over $5 billion, down 1.1 percent from the previous year. The Maritimes showed healthy increases, albeit on smaller overall sales. New Brunswick showed the greatest growth, up 0.6 percent, while the other provinces were virtually flat in 2015. Newfoundland and Labrador managed to show a slight increase, up 0.1 percent, despite the downturn there. That region is forecast to show negative sales growth in 2016.

Industry Marked by Consolidation Just four retailers, Home Depot Canada, Lowe’s Canada, Home Hardware Stores Ltd., and Canadian Tire Retail, account for well over half of all sales in the country now. Home Depot remains No. 1 with sales exceeding $7 billion. However, it faces tough competition: Lowe’s $3.2 billion acquisition of RONA Inc., which closed in the spring of this year, moved Lowe’s Canada up into the No. 2 spot with combined sales of approximately $6.6 billion. Even though two U.S.-based companies now dominate the scene here, the No. 3 position is held by a group of independents. Through a combination of aggressive retailer recruitment and growth by existing retailers, Home Hardware Stores Ltd. maintains third place in the top four. In fact, independent retailers across a range of banners and buying groups remain a large and vital part of the home improvement landscape, generating more than half of all sales in the sector. In terms of sales, the largest groups after the top four, ranking No. 5 through No. 8, are: TIMBER MART, Independent Lumber Dealers Co-operative, Sexton Group, and Castle Building Centres Group Ltd. the No. 9 and No. 10 spots are held by regional players: Groupe BMR in Quebec and Kent Building Supplies in Atlantic Canada, respectively.

Home Improvement Industry Sales Growth in Billions 50

$47.9

$46.5 $44.6

$43.8 Billions

$42.2 $40.0

$40.4

2011

2012

Big-Box Stores’ Market Share

2013

2014

2016 (fc)

2017 (fc)

Top 10 Home Improvement Retailers Rank

75.8% Rest of the Market

2015

2015 Sales in Millions

Company

Home Depot Canada

$7,195

Lowe’s Canada

$6,600

Home Hardware Stores

$5,865

Canadian Tire Retail

$5,435

TIMBER MART Group

$2,840

ILDC

$2,650

Sexton Group

$1,836

Castle

$1,875

Groupe BMR

$1,700

Kent Building Materials*

$769

16.1% Home Depot Canada 4.0% RONA* 3.4% Lowe’s Canada 0.6% Kent* * Big-box stores only

*Kent is part of ILDC, so its sales have been backed out of the total to avoid double-counting.

Source: 2015-2016 Home Improvement Retail Report, Hardlines

December 2016 | HARDWARE RETAILING

PLAN A PLAN B PLAN C

“Well, That Didn’t Work” How Four Retailers Course-Corrected When Things Didn’t Go As Planned

ypically in Hardware Retailing, we talk about best practices and what retailers have done well. We like to highlight successes, because when we share ideas that work, everyone can learn and become better. But usually, we’re only telling half the story. Forward-thinking retailers are always trying something new. They are not afraid to take risks. Sometimes those risks pay off, and sometimes they don’t, but as the saying goes, “If you ain’t failing, you ain’t trying.”

HARDWARE RETAILING | December 2016

So as we wrap up the year, we asked four best-in-class retailers to share a time when circumstances didn’t always go according to plan, or how they were able to find a solution to correct an ill-timed business decision. While each of these retailers have had plenty of times when they’ve used their retail savvy to grow their businesses, each will attest that behind those successes are a few times when they had to correct a slip in judgment or navigate circumstances beyond their control. So the next time things don’t work out the way you had hoped, remember that you’re not alone. Even the best have times when they wish they could turn back the clock and do it again. But we can learn from each other’s mistakes as well as successes. What’s important is that even if you’re failing, you’re always trying—and learning.

Retaining Good Employees Brenton Alexander Alexander Hardware & Supply Wiggins, Mississippi

Several years ago, Brenton Alexander, CEO of Alexander Hardware & Supply, saw the store was having issues with employee retention. “We were losing a lot of employees, especially our high-caliber employees,” he says. “It was discouraging to see those employees who were doing so well in their jobs here with us leave.” Through exit interviews with those employees, he learned many were leaving for jobs that offered better compensation and benefits packages. Alexander discovered that while the wages he offered were good, the lack of benefits had his high-level employees looking elsewhere. So he set out to make some changes, which have paid off. “We’re now considered to be an above-average employer in town, in terms of compensation and benefits. And we haven’t had anyone leave for a job with better benefits since we made these changes.”

Alexander began by surveying the market to see what types of compensation packages other employers in the areas were offering, even contacting the companies where former employees had gone. By doing so, he was able to make a plan to offer a more competitive compensation package. He now provides health insurance (Alexander Hardware & Supply pays 100 percent) to full-time employees, and offers dental and vision plans for any employees who wish to take part. He also offers a SIMPLE IRA for those who wish to save for retirement. The company contributes 3 percent. Alexander says it took time to decide how to put together a new set of benefits, spending three to six months doing their homework. “For example, we wanted to make sure the insurance was supported by doctors in our town. And we needed to look to the future. Once you offer these benefits, you don’t want to take them away after a few years because you can no longer afford them, so we had to do some long-term budgeting to ensure we were making financially sound decisions.”

Recover From Disaster

Lessons Learned

Heather Kreffer High River Home Hardware Building Centre High River, Alberta, Canada

Kreffer and her team rebuilt the store, and did so in less than five months after the flood. Today, sales increases are back to their pre-flood levels. Looking back, Kreffer can see several lessons learned through that time.

When Heather Kreffer, along with her husband and another business partner, purchased High River Home Hardware Building Centre in 2013, she had no idea her timing couldn’t have been worse. While the first few months of their new ownership brought a steady increase in sales and a wellattended grand opening, everything would soon turn out quite differently than expected. In June of that year, floodwaters up to 5 feet deep swept away most of the store’s inventory and severely damaged the building. The entire town was evacuated for 10 days. The business, in which Kreffer had invested so much money, was nearly in ruins. When she was finally able to return to the store, Kreffer faced a daunting challenge. In addition to all of the cleanup work, the store would have to be torn down to the frame and completely restored. “We had only been in business for three months, and truthfully, we panicked at first,” she says.

Lessons Learned

HARDWARE RETAILING | December 2016

One was from opportunities missed. The flood presented a good chance to update the store’s aging POS system with a new system. Now she wishes she had taken advantage of the opportunity. “We were so overwhelmed with everything else there was to do, we didn’t take the time to look at what it would take to replace those computers. In reality, I think it was fear that kept us from doing that at the time. We missed a great opportunity to get it done.” She also learned that when faced with a task as monumental as rebuilding a store, that it’s OK to ask for help. “I learned that I wasn’t expected to know it all. I had a lot of resources, and I learned to use them. It’s my personality to want to do everything on my own. I had to learn to let go. I learned when you have to ask for help, it’s not a sign of weakness; it’s the smart thing to do.”

Change With the Market Jared Sawyer Sawyer’s True Value The Dalles, Oregon

Jared Sawyer is not afraid to try something new. In fact, he’s explored many successful niches that have increased traffic to his store. He’s also not afraid to make mistakes or change his plans when the market changes. That was the case when he recently explored the wood pellet and gas stove market. His initial market analysis indicated he was in a good position to take advantage of the opportunity. Getting started required a significant investment in inventory, but there was only one other competitor in town. Then, just months after bringing in a starting set of inventory, a new competitor opened. “Turns out, they put a huge wood pellet and gas stove showroom,” he says. “They had much more space to dedicate to the category than we did.” Given the high cost of the inventory and the slow sales it was generating, Sawyer decided it was time to exit the category.

Closing A Location Dave Umber Umber’s Do it Best Hardware Fort Wayne, Indiana

Dave Umber is president and CEO of two successful stores in Fort Wayne, Indiana. At one time, though, he also operated a third location. “It was on the west side of town, near where I live,” Umber says. “We opened it in 1987 and moved to a better location in 1998. It was a good hardware store, and its niche was Weber Grills—one of the largest Weber dealers in the state at the time. This was before the big-boxes carried Weber.” The store had plenty going for it—well-merchandised, in a good location, with a strong product selection—but some trouble started in 2002, when two things happened at the same time: Major road construction began in the area, and a Menards moved in less than a mile away. What’s more, the construction included detours that took drivers right by the new Menards store. Suddenly, Umber saw his sales dropping. And eventually he was forced to close that location.

Lessons Learned When Sawyer made the decision to sell stoves, one problem that plagued him from the start was not having the correct person to sell them. “Selling stoves is very technical. You have to be ready to sell the complete package and understand all of the technical aspects. I was never able to find the right person to sell it.” The limited retail space he had for the category also made it difficult for him to go against a competitor who clearly made selling stoves one of their chief categories. Sawyer tends to adopt a “go big or go home” attitude. If one category doesn’t work, he will pull it out and replace it with something that will. “Generally, I feel if we can’t be No. 1 or 2 in a niche category, we have to take a good hard look at if it’s worth doing, especially when there’s a big investment attached to it. We decided to close out this category because we’re not in a position to win at that business right now. In hindsight, we should have been more thorough in talking to more retailers who were successful in this niche.”

Lessons Learned Umber says that, looking back, there were a few issues with that particular location. For one, he thinks the store was too large for the sales it was generating, and despite the good location in town, it was difficult for customers to access from the highway. “We tried working through the construction issues, but when Menard’s came in, that sealed the deal,” Umber says. “People were avoiding our intersection.” While he was dealing with some bad circumstances that had come his way, Umber says there are things he could have done differently, too. Due to being emotionally invested in the store and very pleased with its location— it was also near where he lives, and was the location where his friends shopped—he waited longer than he thinks he should have to make the decision to close. “We kept justifying it,” he says. “We said it would be OK, and that we could ride it out. A lesson we learned, and are reminded of often, is that business is a numbers game.”

December 2016 | HARDWARE RETAILING

By Renee Changnon, rchangnon@nrha.org

Bringing Home Baby Experts Discuss How Retailers Can Sell the Childproofing Category

hen couples are expecting a baby in Dubuque, Iowa, they know they can find everything they need to take care of and protect their bundle of joy at Steve’s Ace Home and Garden. In addition to hardware, the store features mini-storefront businesses, including Sprout, a 1,600-square-foot baby boutique that offers everything from car seats to cloth diapers. To supplement its wide selection of baby products, Steve’s Ace Home and Garden stocks several items parents need to keep their babies safe and secure. For Sara Carpenter, the store’s vice president of operations, and her sister Tricia Kerth, store manager, expanding upon the business their parents started has widened their customer base. Together, they have brought products important to them to their customers.

HARDWARE RETAILING | December 2016

The sisters’ passion for their own children led to opening Sprout because they wanted healthy and safe homes for all families. They have even taken safety to the next level by becoming certified car seat technicians, which has allowed them to offer any parent access to their free car seat installation service. While adding a baby and toddler boutique such as Sprout doesn’t make sense for all retailers, childproofing products are a perfect fit at any home improvement location. To learn a little more, Hardware Retailing spoke to two experts in the childproofing industry from the International Association for Child Safety, Inc. (IAFCS). On the following pages, we’ll share their insights about child safety products, discuss ways to educate your staff, show how you can teach customers about this category and provide resources that you can utilize in your own business.

December 2016 | HARDWARE RETAILING

Products For Parents It doesn’t matter if it’s their first or fifth child—parents are always thinking about how to keep their homes safe for their children. As a retailer, you have a wide variety of products you can stock to help them do just that. Below, babyproofing experts associated with IAFCS share a few important items you should invest in if you want to expand your child safety category. Safety Gates On average, more than 93,000 children under the age of five go to the emergency room for stair-related injuries each year, according to a report by Safe Kids Worldwide on protecting children in the home. For Peter Kerin, an Advanced Professional Childproofer, IAFCS board member and owner

“Hardware retailers can benefit from offering quality safety gates, however, they must be educated on different gate types and their uses.

”

—Peter Kerin, IAFCS Board Member

of Foresight Childproofing, Inc., one product parents should invest in is safety gates. “Hardware retailers can benefit from offering quality safety gates,” he says. “However, they must be educated on different gate types and their uses.” In the home, the best way to prevent babies and young toddlers from falling or accessing rooms that are off limits is to add safety gates, both pressure gates and mounted gates. “Mounted gates are needed at the top of the stairs,” Kerin says. “The gate should be mounted into a stud.” Pressure gates are the more common type of gates people purchase. They are best used between rooms and at the bottom of the stairs, as the gate is held in a doorway or opened by applying pressure against the doorframe or walls. Having a gate at both the top and bottom of the stairs is vital, says Colleen Driscoll, executive director for IAFCS. “Safety gates help prevent babies and young children from falling and injuring themselves on the stairs,” Driscoll says. “However, a baby can still crawl up the stairs and potentially fall, which is why you need gates at both ends. Retailers should educate their customers on why both of these gates are necessary.”

Why Childproofing Matters For most parents, protecting their child begins the moment they’re born and continues until the day they move out. While outside threats are everywhere, millions of children are injured annually in the home. Below are just a few statistics that highlight why homeowners should purchase and install childproofing products in their homes. Visit TheRedT.com/childproofing-resources for a list of resources to learn from and share.

Safe and Sound

2.3 Million

Use Caution With Furniture and Fixtures

16 Thousand

children are accidentally injured every year and more than 2,500 are killed.

children under the age of 5 went to the hospital in 2006 when furniture and appliances tipped over on them.

Source: U.S. Centers for Disease Control and Prevention

Source: U.S. Consumer Product Safety Commission

HARDWARE RETAILING | December 2016

Furniture-Anchoring Products A falling television or heavy piece of furniture is one of the most dangerous accidents a child could face in the home. In fact, “every 24 minutes, a child in the U.S. is injured as a result of a TV or furniture tip-over incident,” the U.S. Consumer Product Safety Commission’s (CPSC) Anchor It! Campaign says. With this in mind, anchoring products are must-haves in any home where children are present. “It’s so important that homeowners are proactive and anchor the furniture and televisions in their homes,” Driscoll says. “If a curious child starts opening all of the drawers on a dresser or tries to climb up on furniture to reach something, the center of gravity changes.” While Driscoll says many parents anchor furniture in a child’s nursery, other rooms in the home pose just as much of a risk. While statistics show that incidents of child injury have been improving, furniture tip-overs are a major risk in most homes, Kerin says. “Furniture safety straps are an important product for homeowners to invest in,” he says. “Small children tend to explore and play on their own. Safety straps for anchoring heavy furniture and televisions is something retailers should carry. Share with your customers tips on installing anchoring products, and explain the necessity of finding the stud in the wall to secure the strap to the furniture.” Recommend consumers mount their flatscreen TVs on the wall or secure them by anchoring them to the wall. Existing furniture can be anchored with anti-tip brackets. Latches, Locks and Knob Covers Since small children are apt to explore their surroundings, parents must keep dangerous items out of reach or locked away. One way to do so is by installing latches on cabinets, drawers and even toilet bowl lids. According to the CPSC, safety latches can be installed in kitchens, bathrooms and other areas to prevent poisonings or other injuries. Installing these products lowers the risk of small children being exposed to household cleaners, medicines and other toxic items. In addition to latches, Driscoll suggests retailers offer parents items that they may not immediately think of when childproofing the home. “Sometimes people don’t think of locks as a childproofing item,” Driscoll says. “Locks prevent access to lots of things. I recommend homeowners add locks to exit doors so kids can’t get out of the home, and they stay out of harm’s way.”

Steve’s Ace Home and Garden stocks a wide selection of childproofing products so parents visiting Sprout can get all the items they need in the hardware store.

Another way to protect children is by installing knob covers to doorknobs or even to stoves. However, customers should know that knob covers on doors are not foolproof. Sometimes they don’t fit door handles or children defeat them because they are in reach. One area in the home many people may not think to secure is the toilet. Toilet lids should be secured shut for a number of reasons, says ChildproofingExperts.com, the IAFCS website. A baby can drown in a toilet if they fall in; they could get sick from the bacteria or a strong chemical cleaner in the toilet; or a child could even flush valuables and clog up the system.

December 2016 | HARDWARE RETAILING

Education and Knowledge Are Key

Sisters Tricia Kerth (left) and Sara Carpenter offer childproofing products in the hardware section of Steve’s Ace Home and Garden. Helping families stay safe and healthy is important to them both, so offering items like furniture anchors and cabinet latches are a great supplement to Sprout’s eco-friendly, baby safe products.

Just like any category a retailer offers, childproofing requires knowledgeable and informed employees. Rather than just knowing the basics of this category, it may be advantageous to have an employee with in-depth knowledge. Refer Customers to Professionals “One word of advice I have for retailers is to realize childproofing products is a very serious category to sell,” Kerin says. “You’re selling products that people want to buy to protect children. I don’t think a retailer needs to be paranoid about this, but they should know the limits of their knowledge.” Kerin suggests retailers provide resources or lead customers in the direction of even more professional advice to keep the home safe. “When talking to customers purchasing child safety items, focus on creating safe areas in

HARDWARE RETAILING | December 2016

“By taking small measures through childproofing, parents won’t feel the need to hover, and kids can explore safe areas without potential injuries.

”

—Peter Kerin, IAFCS Board Member and Owner of Foresight Childproofing, Inc. the home,” he says. “I recommend the kitchen, family room and nursery as safe spaces that should be childproofed. To avoid childproofing the entire home, designate neutral rooms that are only accessed with adults present, as well as off-limit rooms that are locked and away from children, like attached garages or a home office.”

While Driscoll thinks it’s important for retailers to learn and educate customers as much as they can, she recommends partnering with a local childproofing expert or reaching out to IAFCS to provide parents with anything they’d need to know to keep their little ones safe from harm. “When it comes to childproofing, consider if you are the right person to provide your customers with specific advice,” Driscoll says. “Developing a partnership for problem solving would be great. If you have access to a certified childproofing expert, perhaps refer your customers to them for help with installation.”

A Look Inside Sprout Sprout, a baby store located inside Steve’s Ace Home and Garden, started when sisters Sara Carpenter and Tricia Kerth began having kids and wanted to bring products like cloth diapers to other parents. Look at the photos below and go to TheRedT.com/sprout to read about the store and view more pictures.

Become an Informed and Helpful Resource For Carpenter and Kerth, childproofing the home is important, but so is making the home safe and healthy for the entire family. “Child safety is very important, but a big emphasis we support as well is knowing the components of the products in your home,” Kerth says. “We offer safety gates, latches and anchoring products, but I think we also make an effort to focus on eco-friendly items.” The sisters’ idea for Sprout came about as they searched for items they believed would be better for the environment, like reusable cloth diapers rather than single-use diapers, but eventually led to a space parents could shop for health and safety products. Driscoll urges retailers to understand that child safety is about more than the bottom line. “Childproofing is about preventing injuries,” Driscoll says. “Our goal is to provide education to families so they can make the necessary changes in their homes to prevent injuries. We’re looking at injury data and learning from the past.” For further educational resources for retailers, Driscoll says membership with IAFCS is a way to continually learn. Members are primarily professional childproofers, but they also support manufacturers and distributors of childproofing products through associate memberships. Providing knowledge and leading homeowners to the products and advice they need to secure their home will take the pressure off of parents, Kerin says. “Parenting is hard enough without considering all of the dangers that can be found inside the home,” he says. “By taking small measures through childproofing, parents won’t feel the need to hover, and kids can explore safe areas without potential injuries.”

December 2016 | HARDWARE RETAILING

Jonathan Miller | Miller Hardware | Valdosta, Georgia

Don’t miss out! The deadline for the Spring 2017 session is Feb. 28! These companies support the success of independent retailers by providing scholarships.

Newsmakers

Hardware Hank Celebrates 60 Year Milestone in 2017

Upcoming Events December 8 North American Retail Hardware Association State of Independents Conference Chicago

January 5-7 World and Main Houston 2017 Spring Market Houston

6-8

ext year, United Hardware Distributing Company and its branding icon, Hardware Hank, will turn 60. In January, as the Plymouth, Minnesota-based wholesaler heads to downtown Minneapolis for its Spring and Summer Buying Market, it will celebrate a diverse array of retail programs and a strong membership base, many of whom are farm and home retailers serving rural communities in 16 states across the upper Midwest. The company’s longevity speaks to its ability to change while maintaining its founding principles, says President and CEO Steve Draeger. “When United Hardware began operations, the landscape across the country was dotted with many hardware distributors,” Draeger says. “Yet by sticking to our principles of putting the retailer first, we have been able to successfully adapt to a changing wholesale and retail marketplace over time.” The company began in 1957 when a group of retailers purchased a controlling interest of the hardware division of a distribution company owned by businessman E.J. Koblas. The seven-member board of retailers set in place a precedent of a member-directed organization, a model which continues to govern the company. Members also created the Hardware Hank character as a way for retailers to brand their stores in their communities. Today, United Hardware is a member of Distribution American and serves nearly 670 members, with services tailored to their unique needs. For example, United’s Power Programs, such as its Paint Design and Back Yard Chef programs, offer retailers complete merchandising and signage packages to establish market dominance in key categories. The Dealer’s Choice circular program allows retailers to customize ads using an online portal. One of the more recent tools is the STARS program, or Steps to Achieving Retail Success. STARS allows retailers to take a comprehensive look at their business, then identify opportunities for growth and set goals for the future. Being a regional distributor also gives them strength in the marketplace, says Draeger, because they can specialize in the unique needs of their customers. “United’s position as a strong regional distributor gives us the ability to focus on both products and customer types that are important to our members,” he says. “The customer base of the Midwestern retailer does indeed differ at times from those located on the east and west coasts of the country.” United Hardware’s biannual buying market will be held Jan. 6-8 in Minneapolis, and events will include a birthday bash for Hardware Hank and free giveaways. “Independent retailers have made United Hardware the company it is today,” says Draeger. “I thank each of our members for their continued support and loyalty.”

HARDWARE RETAILING | December 2016

United Hardware Spring and Summer Buying Market Minneapolis

10-12 The Kitchen & Bath Industry Show (KBIS) Orlando, Florida

10-12 2017 NAHB International Builders’ Show Orlando, Florida

15-16 Do it Best Winter Conference Orlando, Florida

15-17 2017 Retail’s BIG Show New York

February 16-18 Orgill Spring Dealer Market New Orleans

17-19 True Value Spring & Rental Reunion Anaheim, California Find more details about these events and others online at TheRedT.com/calendar. To have your event added, contact Kate Klein at kklein@nrha.org.

CALL FOR 2017 NOMINATIONS

Young Retailer Year of the

Presented by: