Hardware Retailing December 2017 by NHPA

Serving Hardware, Home Center & Building Material Retailers

Greeting Growth How Porters Building Centers Tackled a New Opportunity 44

Market Measure: Facts and Figures From the Industry’s Annual Report 24

VOLUME 213 • ISSUE 6 • DECEMBER 2017 • HARDWARERETAILING.COM

Become a Special Events Destination With Rental 52

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How Porters Building Centers Tackled a New Opportunity 44

Education

Awards

Greeting Growth

SAVE THE DATE

Products

Networking

See you in Vegas on May 8! The 2018 North American Retail Hardware Association (NHRA) All-Industry Conference is the only industry event focused on educating independent home improvement retailers, celebrating your achievements and giving you an exclusive space to connect, all while surrounded by tens of thousands of new products at the National Hardware Show®. Join us in Las Vegas, May 8-10, 2018.

FOR MORE INFORMATION, GO TO NRHACONFERENCE.COM

VOLUME 213 • ISSUE 6 • DECEMBER 2017 • HARDWARERETAILING.CO 2018 NRHA ALL-INDUSTRY CONFERENCE

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Serving Hardware, Home Center & Building Material Retailers

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INDUSTRY NEWS

OPERATIONAL TIPS

NEW PRODUCTS

Get your week started off right with the Hardware Retailing newsletter, which is packed with the latest industry news, retailer stories and association updates. Sign up now to get the newsletter delivered to your inbox every Monday. To subscribe to the newsletter, visit hardwareretailing.com/subscribe.

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Serving Hardware, Home Center & Building Material Retailers

Greeting Growth How Porters Building Centers Tackled a New Opportunity 44

Market Measure: Facts and Figures From the Industry’s Annual Report 24

VOLUME 213 • ISSUE 6 • DECEMBER 2017 • HARDWARERETAILING.COM

Become a Special Events Destination With Rental 52

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Making a Comeback

n the first Hardware Retailing of 2018, find out what it takes for a retailer to revitalize their business after hardship. These “comeback kids” share their stories so others can avoid similar mistakes or see the light at the end of the tunnel. The January issue also takes readers on a tour of store services in the issue’s Category Spotlight. Learn how you can

differentiate your operation by offering installed services and performing handiwork to round out your home improvement knowledge. We also launch a series on process best practices with a look at how to take special orders, and we preview the International Hardware Fair, which takes place in Cologne, Germany, in March.

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December 2017 | HARDWARE RETAILING

Headquarters Staff PUBLISHING EXECUTIVE VICE PRESIDENT AND PUBLISHER Dan Tratensek

COMMUNICATIONS DIRECTOR OF COMMUNICATIONS Whitney Daulton SPECIAL PROJECTS EDITOR Liz Lichtenberger

136 N. Delaware St. #200 Indianapolis, Indiana 46204 Phone: 317-275-9400 Fax: 317-275-9403 Email: nrha@nrha.org Website: nrha.org HEADQUARTERS STAFF PRESIDENT AND CEO Bill Lee COO Bob Cutter DIRECTOR OF FINANCE AND BUSINESS SERVICES David Gowan

MEMBER SERVICES 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, 317-275-9419, kstokes@nrha.org MEMBER GROWTH AND DEVELOPMENT MANAGER Marci Taschler, 317-275-9421, mtaschler@nrha.org EVENT MANAGER AND RETAIL SUPPORT Katie McHone-Jones, 317-275-9426, kmchone-jones@nrha.org

RETAIL LEADERSHIP INSTITUTE

FEATURES EDITOR Melanie Moul PROFILES EDITOR Renee Changnon ASSISTANT EDITORS Kate Klein Chad Husted Todd Taber SENIOR DESIGNER Lynnea Chom

GRAPHIC DESIGNER Kelsey Truex WEB DEVELOPER Kevin Trehan

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

CIRCULATION DIRECTOR Richard Jarrett

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

SALES/NRHA VENDOR PARTNER

DIRECTOR OF RECRUITMENT Tom Marcum, 317-275-9430, tmarcum@nrha.org

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

STATE AND REGIONAL ASSOCIATIONS MIDWEST HARDWARE ASSOCIATION John Haka, 5000 Woodward 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; AK, ID, OR, WA 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; AR, KS, LA, MO, NE, NM, TX

1. Make it personal. Whether it’s a book about something they love or a handwritten card thanking them for something specific they did this year, make it all about the employee.

2. Make it utilitarian. Trinkets like tree ornaments are pretty, but don’t serve a long-term purpose. Consider letting employees choose an item in the store they’ve been eying as their gift.

CIRCULATION

NATIONAL SALES MANAGER Lowell Huffman

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

Gift cards to local restaurants and catered lunches are great options for showing employee appreciation during the season of giving, but this year, take these tips to heart to show your employees how much you appreciate the hard work they do all year long.

MULTIMEDIA DESIGNER Graeme Haase

EXECUTIVE DIRECTOR Scott Wright, 317-275-9417, swright@nrha.org

NRHA CANADA

3 Ways to Be Sincere About Employee Appreciation

WEST/MIDWEST REGION MANAGER Chris Miller, 506 Citadel Circle, Westmont, IL 60559; 630-234-3272, Fax: 847-934-2494, chris@millermediainc.net WEST REGION MANAGER Jon Dawson, 136 N. Delaware St. #200, Indianapolis, IN 46204; 317-275-9420, Fax: 317-275-9403, jdawson@nrha.org NORTHEAST REGION MANAGER Jason Harper, 136 N. Delaware St. #200, Indianapolis, IN 46204; 317-275-9414, Fax: 317-275-9403, jharper@nrha.org GREAT LAKES REGION MANAGER Bill Mancuso, 136 N. Delaware St. #200, Indianapolis, IN 46204; 317-275-9424, Fax: 317-275-9403, bmancuso@nrha.org SOUTHEAST REGION MANAGER Nick O’Connor, 136 N. Delaware St. #200, Indianapolis, IN 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

3. Make it fun. Encourage holiday cheer with seasonal music, festive treats in the break room and a welcoming atmosphere that makes your employees excited to come to work.

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. NRHA BOARD OF DIRECTORS CHAIRMAN OF THE BOARD Megan Menzer, Newton’s True Value, Cherryvale, Kansas EXECUTIVE VICE CHAIRMAN T.J. Comstock, Northwest Hardware, LLC, Billings, Montana DIRECTORS Greg Schlecht, Greg’s True Value, St. Francis, Wisconsin Daniel Harris, Palos Ace Hardware, Palos Heights, Illinois; Lemont Ace Hardware, Lemont, Illinois Will Aubuchon, Aubuchon Hardware, Westminster, Massachusetts Jared Smith, Jared’s Ace Hardware, Bishopville, South Carolina

Hardware Retailing (ISSN0889-2989) is published monthly by the North American Retail Hardware Association, 136 N. Delaware St. #200, Indianapolis, IN 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.

David Dishke, Grand River Home Hardware, Caledonia, Ontario

Periodical postage paid at Indianapolis, Indiana, and additional mailing offices.

Steve Fusek, Fusek’s True Value, Indianapolis

POSTMASTER: Send address changes to Hardware Retailing, P.O. Box 16709, St. Louis, MO 63105-1209. All editorial contents copyrighted 2017 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 2017

SECRETARY-TREASURER Bill Lee, NRHA President and CEO IMMEDIATE PAST CHAIRMAN James Cabirac, Kief Hardware, Cut Off, Louisiana

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Contents DECEMBER 2017 | VOLUME 213 | ISSUE 6

52 CATEGORY SPOTLIGHT

MARKET MEASURE

The Industry’s Annual Report

The end of 2017 has arrived, and with it comes Hardware Retailing’s annual overview of the state of the independent home improvement industry. This resource offers you an opportunity to look back at a year of changes, successes and challenges in the industry and get insights into how things might change or stay the same in 2018.

44 OPERATIONS

Planting the Seeds Identifying the right time, securing the funds and managing the logistics of business growth can be overwhelming for any retailer. Hardware Retailing spoke to retailers who grew their businesses to help others navigate acquisitions, store moves and department additions.

50 MARKETING

Understanding Marketing Basics Marketing your business can be a full-time job considering all the different platforms you need to be present on to reach all potential audiences. Hardware Retailing spoke to integrated marketing expert Meag Shaffer to get the details on how to manage all the bits and pieces. 4

HARDWARE RETAILING | December 2017

Get the Party Started Help your customers throw the party of the month—or the party of the year—by delving into rental. Party equipment rental is a growing segment that can offer a good return on investment. Learn how to get started and help build your reputation as party central.

Departments 06 . . . . . . . . . . . . . . . . . On the Web 08 . . . . . . . . . Independent Thinking 10 . . . . . . . .Taking Care of Business 12 . . . . . . . . . . . . . . . . NRHA News 18 . . . . . . . . . . . . . . . . . . . . . Trends 20 . . . . . . . . . . . . . . . . . . Checkouts 60 . . . . . . . . .Newsmakers/Calendar 63 . . . . . . . . . . . . . . . . . . Last Word

On the Cover Kent Porter owns Porters Building Centers, a four-store operation in Missouri and Kansas . Porter took on a business growth effort to introduce a new product lineup in one store . NRHA photo by Kevin Trehan

The International Home + Housewares Show features hundreds of exhibitors offering the latest cleaning & organizational solutions, closet & clothes care, bath accessories and unique pet-care items.

March 10 - 13 • Chicago Free Badge Registration at

www.housewares.org

On the Web

RESOURCE LIST

Plan for Your Future With These Documents You need to have a few records on hand when making decisions for your company, such as business projections and credit history. For the full list, visit TheRedT.com/growth-checklist.

EXPERT INSIGHT

How Manufacturers Fared in 2017 The home improvement industry was booming this year, and it’s not only on the retailing side. Hardware Retailing spoke to Chad Moutray, chief economist for the National Association of Manufacturers, to find out the forecast from the manufacturing side of home improvement. Check out TheRedT.com/manufacturing-outlook to read a Q&A with Moutray.

This series of quick lessons on topics such as selling skills, merchandising, product knowledge and operations is made for all employee levels. Visit nrha.org to download this month’s lesson, listed below.

PRODUCTS

What to Bring to the Party If you want to start or expand your special events rental category, some items will likely become clear customer favorites. For valuable product information you’ll want to know before you get started, visit TheRedT.com/party-rental.

Video: Market Measure— The Industry’s Annual Review Use this video to give employees a big-picture overview of what happened in 2017 in the home improvement industry. Then, talk about how you can improve sales in 2018.

MARKETING

Are Your Marketing Efforts Working? If you’re spending time and money to market and brand your business, you want to make sure it’s effective. Visit TheRedT.com/marketing-ideas for a few examples of marketing tactics you can test and evaluate. 6

HARDWARE RETAILING | December 2017

SOCIAL MEDIA LINKS

@hardwareretail facebook.com/HardwareRetailing

Not just a pretty faucet

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Independent Thinking

Now More Than Ever

“Your association

will continue to listen to your concerns and will make your voice heard with your channel partners.

”

am positively, unabashedly optimistic about your future as an independent retailer. Wherever opportunity presents itself, an entrepreneur will step forward to give it a go. We are blessed to live in a place where individual freedom is valued, where risk-takers like you can pursue their dreams of building a business for themselves and their families. Right now there are unprecedented opportunities for independents who want to grow. This is my last column in Hardware Retailing, as I am retiring at the end of this month as CEO of your association, the North American Retail Hardware Association (NRHA). I want to leave you with a positive message about your future. Since the 1960s, the trajectory of our industry has been one of consolidation. First, the wholesale distribution segment consolidated from hundreds to just a few major wholesalers and cooperatives. Then, the retail segment consolidated, leaving just two big boxes controlling about half of our $320 billion market. Parallel to this, manufacturing consolidated as well. Amazingly, 35,000 of you—resilient, family-owned home improvement businesses— have continued to thrive through this ongoing consolidation and change. You are a $160 billion-plus retail market, and you provide about half a million jobs to families in your local communities! Don’t ever sell yourself short. You are doing something truly important. Succession and business transition have been big concerns in our industry, but our free markets have begun to sort out these issues. There is an accelerating trend toward retail consolidation among independents, driven by opportunities in the market. Retiring owners are looking for buyers, and buyers are looking to grow their store counts. All around the country, retailers are seizing the opportunity to grow, from the single-store owner buying a second store to small regional chains steadily expanding. These trends will continue and will bring their own challenges. So, now more than ever, the independent retailer will need a strong trade association. NRHA will help you meet the challenges of the coming years. Your trade association will continue to provide retail management education programs to develop the people you will need to grow your business. NRHA will continue to provide opportunities for you to network with your peers across wholesale affiliations to learn from each other and share management best practices. And, with the concentration of market power in the hands of fewer distributors, independent retailers will need a strong voice of advocacy. Your association will continue to listen to your concerns and will make your voice heard with your channel partners. My successor, Bob Cutter, grew up in a family business and is totally committed to your association’s mission. He is a great friend, with great values, who deeply respects the risks you take operating your businesses. He is supported by a committed board of independent retailers and is surrounded by great people with deep experience. You can count on him to make your association more relevant and valuable than ever. To all of our friends in the manufacturing and wholesale communities, thanks for your support. Without it, we couldn’t do all we’ve done to help the independent retailer succeed. We all have a stake in their success. Please continue to support NRHA as the association, and the industry, move forward. Personally, there are just too many people to thank for all the support and kindness I have received during my 20-plus years at NRHA. I have been richly blessed with more friends than anyone deserves. I’ll just say that I have had the best job, with the best people, in the best industry there is—the hardware industry!

Bill Lee, President and CEO

blee@nrha.org

HARDWARE RETAILING | December 2017

H A R DW A R E C O M P A NY

SPRING Forward HARDWARE SAVINGS EVENT

We invite you to join us to see what we have to offer: • • • • • • • • • •

“Grow your business and your future with House-Hasson”

Hot deals at Bonus Buy Breakfasts Unbeatable Prices and Payment Terms Electronic Ordering Educational Seminars Marketing & Store Service Solutions Travel Rewards Program Great Food and Entertainment Family Friendly Attractions The Grand Ole Opry Opry Mills

February 1-3, 2018 • Opryland Convention Center • Nashville, TN Come check us out! Call Pat McCutcheon at 800-333-0520 ext. 212 or go to www.househasson.com

Taking Care of Business

A History Lesson

“Rather than just

turning the page on another year and celebrating successes or bemoaning misfortunes, you will truly give some thought to what happened and how it has shaped your operation.

”

few weeks ago, our daughter came home from college with her boyfriend. We had just finished dinner, and it seemed her homesickness had gotten the best of her because she asked if we could break out the family photo albums. (I’m sure her boyfriend was thrilled with this suggestion.) My wife happily obliged and dashed up the stairs to retrieve the photo-filled plastic totes. We proceeded to spend the next couple hours drinking coffee, flipping through old family photos and reminiscing about everything from past Halloween costumes to infamous family gatherings. I’m sure most of you have had these spontaneous walks down memory lane yourselves, and it’s likely you might be headed for more with the holidays on the horizon. While browsing through the photos, our conversation turned to thoughts about the future, about the prospect of holidays, graduations and vacations yet to come. By the time the photos went back into their envelopes and the totes were once again shut away in the end table, we had created some new memories, and we were excited about the plans we’d made. As I worked through this year’s Market Measure report, I realized that what we do in this special issue is not all that different from the evening my wife and I spent with our daughter and her boyfriend. In this issue, we take a look back at the year that has passed. We dissect what happened, and we reminisce about the good and not-so-good events that shaped the course of the industry. Hopefully, many of you do the same thing this time of year with your own businesses. Rather than just turning the page on another year and celebrating successes or bemoaning misfortunes, you will truly give some thought to what happened and how it has shaped your operation. Although looking at old photos, pondering operational data and discussing events that occurred in the past is incredibly important, the exercise doesn’t offer any value unless you use these insights to plan for what’s ahead. After all, the past is behind us, and aside from the sentimental thoughts that reflection can evoke, it is important that you honor the past by using the experience and insights you have gained to change your future in a positive direction. (Wow, I went a little Tony Robbins there for a minute.) As you flip through this month’s Market Measure (which starts on Page 24) and look at the numbers and events that shaped the past 12 months, I also encourage you to look at the predictions we are making for the future of the industry. In the coming months, there will be growth! Some businesses will succeed and others will fail and outside events will shape the course of our economy and the way consumers shop. How you respond to these changes is up to you. This holiday season, as you gather with your own family and friends to look through old family photos, I hope you cherish that time, reflect on happy memories and resolve that the future will be filled with even more!

Dan M. Tratensek, Publisher

dant@nrha.org

HARDWARE RETAILING | December 2017

Education

Awards

SAVE THE DATE

Products

Networking

FOR MORE INFORMATION, GO TO NRHACONFERENCE.COM

2018 NRHA ALL-INDUSTRY CONFERENCE

NRHA News

Thank You and Farewell, Bill Lee!

fter more than 20 years of serving the independent home improvement industry through various roles at the North American Retail Hardware Association (NRHA), president and CEO Bill Lee will retire at the end of 2017. Here, we highlight Lee’s career, the path the association has taken under his leadership and how his time in this industry has changed him for the better.

A Brief Career History Lee worked with NRHA as an outside marketing consultant for 12 years before being hired as the association’s marketing director in 1996. During the early 1990s and late 2000s, NRHA launched its custom publishing department and catalog business under Lee’s guidance. In 2008, Lee took over as CEO and focused on making NRHA a more informative and relevant resource for members. “I wanted the association to become even more valuable to the members it serves,” Lee says. “My goal was to strengthen the organization and bring the industry together through NRHA.”

Career and Industry Accomplishments Lee’s focus in developing NRHA programs was always to fulfill the association’s mission: to help independent retailers become better and more profitable merchants. NRHA staff and incoming president and CEO Bob Cutter are prepared to continue serving retailers through future association endeavors.

To read more about the impression Lee has had on the industry, read this month’s Last Word on Page 63.

The Industry’s Impact on Lee “Over the past 20-some years, my wife Jane has been a huge industry supporter, too,” Lee says. “This industry is focused on family, and some of the families that own and operate the businesses NRHA works with have become Jane’s and my best friends. That’s probably the richest, most positive byproduct of my career.” As Lee enters retirement, he feels blessed to have friendships with people all over the country and the world that he’s developed through his career at NRHA. “The people in this industry are what have kept me passionate for all of these years,”Lee says. “I love the industry, and I love the amazing people who take risks every day to run their businesses. I’ve had a lot of fun along the way, and my work has been very rewarding.” Next Steps for Lee In the immediate future, Lee will stay involved in a handful of association initiatives he enjoys, such as supporting the Retail Leadership Institute and moderating some roundtables. Additionally, he plans to continue volunteering with The Fuller Center for Housing. He also plans to relax, reflect and spend time with his family before starting his next chapter.

Lee’s Contributions to NRHA and the Industry First Website and Training Course

New NRHA Headquarters

With the help of association staffers, Lee launched NRHA’s first website. Additionally, he developed the original version of the product knowledge training course, a resource that the industry needed at the time. Training has since become a significant resource for independent retailers.

Under Lee’s leadership and fiscal management, the association was able to purchase and renovate its new headquarters in downtown Indianapolis. The three-story building includes two floors of office space, one that serves as home base for NRHA staff and the other of which is rented out.

NRHA now offers eight online training courses of 240 modules, as well as more than 45 Trainer’s Toolbox lessons and more than 60 downloadable resources. Visit nrha.org/membership for more.

The building is also home to the William J. Lee Education & Conference Center. The new building is a great investment for the association, and it serves as a place for retailers to meet and call home.

HARDWARE RETAILING | December 2017

NRHA’s Retail Leadership Institute Alongside NRHA leaders, longtime members and educators, Lee is proud of NRHA’s Retail Leadership Institute and within it, the Retail Management Certification Program, a college-level training program for independent retailers. “It’s important that NRHA provides higher-level educational programs to help owners and future owners understand their businesses,” Lee says. “The key for the industry’s future is developing next-generation leaders, and that’s what the Retail Leadership Institute does.”

YOUNG RETAILER OF THE YEAR

+ 150 The need to identify and promote the next generation of aspiring independent home improvement retailers has never been greater.

HONOREES RECOGNIZED

DO YOU QUALIFY?

22 YEARS AND COUNTING OF HONORING THE NEXT GENERATION OF INDEPENDENT RETAILERS LEARN MORE AT NRHA.ORG/YROTY.

NRHA News

NRHA: 2017 in Review

ooking back on the past 12 months, NRHA has made quite an impact this year. Your association launched and released many exciting programs, services and events. Additionally, NRHA added six new employees to its staff who all work hard every day to provide independent retailers with the resources and materials they need to succeed. Check out the recap below, and for more information, visit NRHA online at nrha.org/membership.

Basic Retail Accounting This online introduction to retail accounting explains the terms used in the income statement and balance sheet and defines financial ratios that can be used to compare your operation against others in the industry.

Young Guns Roundtable This year, NRHA added a new discussion group to its long list of retailer roundtables. Designed to connect the future leaders of our industry, the Young Guns Roundtable creates an environment for high-impact young retailers to share ideas and network.

HARDWARE RETAILING | December 2017

New Research and Downloadable Resources To help you make decisions for your business, this year, NRHA released the 100th annual Cost of Doing Business Study, holiday social media graphics, 13 Trainer’s Toolbox lessons, the Home Sweet Home Pros’ Edition and signage, the Merchandising for Profit Study and a verbal coaching worksheet. Access these resources at TheRedT.com/2017-tools.

ZipRecruiter Partnership ZipRecruiter helps business owners find great employees by allowing them to distribute job postings affordably. NRHA Business Services gets retailers a 35 percent discount on any of ZipRecruiter’s three basic plans.

Free POP Display with your first order of cart liners.

Foundations of Leadership Program This 16-week online course is now available under NRHA’s Retail Leadership Institute. The course is designed for new and upcoming independent retail leaders and teaches students their personal leadership styles and the key concepts of leadership.

Toter’s Powerfresh™ odor eliminators and cart liners curb the smell of trash day every day from the inside out. You could be saving over 100 million households from stinky, messy trash carts.

To learn more, visit: try.toter.com/odorcontrol

December 2017 | HARDWARE RETAILING

NRHA News

Enter Now! How to Submit a Stellar Young Retailer of the Year Nomination

upporting the next generation of business leaders is vital for the future of the independent home improvement industry. For more than 20 years, NRHA has honored young industry professionals, highlighting their achievements and giving them recognition and exposure throughout the industry they serve with the Young Retailer of the Year awards program. The first step to becoming a Young Retailer of the Year honoree is to submit a complete nomination online or by mailing in a nomination packet. The best nominations showcase meaningful professional accomplishments, detailed community involvement and proof of commitment to industry education. Young Retailer of the Year nominees should be role models to other aspiring young retailers. Their nominations should

consistently demonstrate their potential for a promising career in the home improvement industry. Nominees should be sales associates, supervisors, managers, owners or hold other management-level positions. The program is open to retailers living in the U.S. or Canada who are 35 years old or younger. Honorees are selected from three separate categories including retail outlets with sales under $2 million, outlets with sales over $2 million and retailers who manage multiple stores. Young Retailer of the Year entries should cover any details that distinguish the retailer as a leader. Be sure to include press clippings, photos, letters of recommendation and any other relevant materials to help judges learn as much about the nominee as possible. As a new component this year, video submissions are also being accepted.

Nomination Information The nomination deadline is Feb. 28, so think of the ways you’ve led and inspired others in your career and what the independent home improvement industry means to you. To learn more, head to nrha.org/YROTY.

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HARDWARE RETAILING | December 2017

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December 2017 | HARDWARE RETAILING

Trends Making Big Splashes With Shower Updates Homeowners who are planning to remodel their master bathrooms are making a big deal out of shower upgrades. Master bathrooms are one of the top spaces homeowners remodel, according to research from online home improvement community Houzz. And showers are top priorities during those remodels, Houzz reports. Houzz surveyed more than 2,000 homeowners who finished, were currently working on or planned a master bathroom remodel within the past 12 months. When changing major features, about 80 percent of the respondents were updating their showers and more than half of them were enlarging their showers.

Cleaning Up With Shower Updates

81 percent

55 percent

of homeowners are upgrading showers when updating major features in master bathrooms.

are increasing the size of their showers.

42 percent

27 percent

are splurging on showers during master bath remodels.

remove a bathtub, typically to make space for a larger shower.

Source: 2017 U.S. Houzz Bathroom Trends Study

HARDWARE RETAILING | December 2017

Applied to Retail Accessories for shower upgrades can be important products for your operation, even if your business doesn’t stock or special order actual showers. Follow trends so you can talk to customers about what’s stylish for shower improvements when they mention bathroom-remodeling projects. If the inventory your business stocks is limited, then create displays that show off trendy or unusual styles you can special order. Handheld sprayers, various types of overhead rain or wall-mounted showerheads and decorative drains are on trend, according to designers who spoke with Hardware Retailing for a recent article on plumbing trends. Visit TheRedT.com/bath-trends for more insight from the designers.

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Checkouts OPERATIONS

Building a House, Creating a Home

This year, Burney Hardware in Aberdeen, North Carolina, has been donating a $100 gift card to new homeowners through Habitat for Humanity. The business has also sponsored home builds and allowed employees to volunteer on homes while being paid.

eveloping relationships with customers is a high priority for any retailer. For Burney Hardware in Aberdeen, North Carolina, that extends to some of the newest homeowners in its area. For several years, Burney Hardware has worked closely with Habitat for Humanity, an organization dedicated to helping individuals and families build sustainable, self-reliant lives and shelters. Since many of Habitat’s partners are first-time homeowners, Burney Hardware has dedicated significant time and effort helping these new residents get started on the right foot. Initially, Burney Hardware donated a full toolkit during the dedication of new Habitat for Humanity homes. Last year, Habitat representatives came to Burney Hardware co-owner Kristy Ransdell and made a request that changed the company’s donations. “Habitat let us in on a secret. While the toolkits were useful, the real area of need was in yard maintenance. Most of the Habitat families had never had a yard before,

so we switched it up and began donating $100 gift cards to our store so they can buy what they need,” she says. The card also allows the new homeowners to come into Burney Hardware and request assistance from the knowledgeable staff, something that just a donation of tools or equipment wouldn’t do. Burney Hardware has even taken its donations a step further, with the business stepping in as a sponsor for a new Habitat home. The program had been designed to build a home sponsored by area churches, Ransdell says. Burney Hardware wanted to take part as well, so Habitat allowed the hardware store to become another sponsor. Employees were given the opportunity to work on the home while being paid. The donations to these new homeowners has led to some strong relationships, Ransdell says, particularly with one homeowner who reached out to Burney Hardware and made a personal invitation to the dedication of her family’s new home. “We’re about service and community. We want these new homeowners to be successful,” Ransdell says.

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

HARDWARE RETAILING | December 2017

EVENTS

Funds Are ‘In the Bag’ in Ontario

or its third annual Ladies’ Night, JL’s Home Hardware Building Centre in Guelph, Ontario, decided to put on a real show. The event, designed to raise funds for a worthy charity each year, is also one the community looks forward to for a night of fun and entertainment. In previous years, Ladies’ Night has donated funds to the Canadian Breast Cancer Foundation, says marketing manager Rick Lackovic. For the 2017 event, Lackovic and JL’s Home Hardware decided to look more local, with funds going to the Guelph-Wellington Women in Crisis, a community-based organization that provides services to women and children suffering from abuse and violence. “We were really excited to go more local for this year’s event, and it’s really nice that everyone involved, from the attendees to the vendors, know where the money is going and who it is helping,” Lackovic says. The fashion focus was inspired by the honored guest at the event, Montreal-based fashion designer and Beauti-Tone Paint’s creative director Simon Chang. While Chang was eager to be involved in the event, he didn’t want it to be a fashion show. So Lackovic came up with another idea. “It’s called Helping Handbags, and we borrowed that theme for what we called, ‘It’s in the Bag,’” Lackovic says. “We set up a catwalk in the store, and some of our staffers served as models to show off 21 designer purses that we had filled with gift cards, certificates for local restaurants, cosmetics and other items. We auctioned off the purses and raised about $7,000.”

The night also included samples from area restaurants as well as a local brewery, something that Lackovic says is a big part of the community feel for the event. He rotates the restaurant selection each year in hopes of making sure everyone has a chance to be represented. “Ladies are very influential in design decisions. We want these attendees to feel comfortable and know we’re a trusted location for the products they need,” he says.

From left, JL’s Home Hardware Building Centre marketing manager Rick Lackovic, owner J.L. Belisle, owner Deborah Belisle, owner Andre Belisle and Montreal-based fashion designer Simon Chang pose during the 2017 Ladies’ Night at the Guelph, Ontario, hardware store.

CUSTOMER RELATIONS

Forget Your List? Have a Seat

an’t remember why you came into the hardware store? Edele & Mertz Hardware in the Soulard neighborhood of St. Louis can help. “For customers who come into the store and can’t remember what they came in for, we tell them, ‘Go sit in the Thinking Chair and see if you can remember,’” says owner Steve Edele. Whatever it is you finally decide you need, the store likely has it. Edele is a fourth-generation owner of the business that has served the community’s hardware needs since 1912, and they’ve collected a little bit of everything. The antique chair sits alongside matching nail bins and a service counter, which are all likely at least as old as the store itself. If sitting in a comfortable chair can’t help you conjure up the list of items you intended to buy, Edele and his staff don’t mind if you just stay and chat for a while. The Thinking Chair is a relic from the past that adds personality and a bit of humor to Edele & Mertz Hardware.

December 2017 | HARDWARE RETAILING

Checkouts

OPERATIONS

Waving Proudly

atriotism and proudly representing the U.S. is not a sometimes thing for Bloomington Hardware. The Bloomington, Indiana, store offers a year-round program for customers to bring in any American flags that are worn and no longer meet the standards for display. The business then turns the flags in to a local American Legion or Amvets post, where they will be retired in a ceremony. To show the store’s appreciation, each flag turned in earns the customer a $5 credit toward the purchase of a new flag from the store. “It usually picks up around the Fourth of July, when people are bringing out flags that they don’t use every day and realize they’re not up to code anymore. But this is a year-round program for us, and we appreciate the fact that we can retire flags in a ceremony and do it the proper way,” owner Vickie Davison says. Bloomington Hardware, on top of several different sizes of American flags, also has an extensive accessories selection for displaying the stars and stripes. Along with several types of flag poles and mounting brackets, the business has flags in multiple fabrics fit for different types of use.

A sign detailing the American flag turn-in program at Bloomington Hardware hangs at the Bloomington, Indiana, store.

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Aged Oak

Weathered Wood

MERCHANDISING

Custom Displays Clean Up Housewares

hen Len Hunt found an antique refrigerator for sale on eBay, he knew it was an offer he couldn’t pass up. “We removed the doors, painted them with some specialty craft paint and then attached the door to the wall as a way to display refrigerator magnets,” he says. “It grabs people’s attention, and they usually try to open the door.” The collection of magnets is just a part of the extensive housewares department at Eastman’s Home & Hardware in Falmouth, Massachusetts, where Hunt is general manager. In fact, customers walking into the store’s houseware’s department could easily be overwhelmed with choices. Hunt and his staff have filled the department with everything from the ordinary to the unusual. Products range from cocktail napkins to high-end cutlery to unusual, regionally themed items, such as a pair of salt and pepper shakers shaped like lighthouses. The merchandising techniques Hunt and store manager Jackie Kozens use in the department are as unique as some of the products they carry. In one area of the store, a ceiling-mounted rack constructed of black iron pipe holds hanging pots and pans. In another area, Kozens created a towel display using wooden spoons mounted into a wooden frame attached to the wall. Kitchen towels have been one of the department’s best-sellers.

Merchandisers such as this reimagined antique refrigerator add to the unique atmosphere in Eastman’s Home & Hardware.

December 2017 | HARDWARE RETAILING

HARDWARE RETAILING | December 2017

2017 Market Measure The Industry’s Annual Report

ooking at external factors alone, one might come to the conclusion that 2017 is shaping up into a booming year for the home improvement retailing industry. After all, this year has seen strong performance in the housing sector, lower unemployment, an energized stock market, a relaxation of lending restrictions and a consumer base with no shortage of home improvement ideas. So, why is it that the growth experienced by the industry so far this year has amounted to more of a pop than a boom? Let’s start with the weather. This has been a particularly odd season for weather across most of the U.S. Some regions had particularly short winters followed by unusually wet springs and summers. Neither of these conditions favors home improvement projects. In other areas of the country, short winters were followed by incredibly hot and dry spring and summer months where nary a plant would grow (if it were even planted to begin with). While it is not particularly unusual to see weather have a regional impact on home improvement activities, in 2017, there was hardly an area of the country that was immune to some kind of unfavorable weather conditions. In addition to an inhospitable visit from Mother Nature this year, there were other manmade obstacles holding industry growth in check.

What We’ll Cover 28 Industry Breakdown 29 Chain Results 30 Cost of Doing Business Study 32 Retail Store Performance 34 Financial Profiles 36 Industry Year in Review 38 Housing Market Outlook 40 Economic Outlook 42 Canadian Retail Report The information in this Market Measure was gathered by Hardware Retailing staff from a variety of resources that are attributed throughout.

December 2017 | HARDWARE RETAILING

The primary culprit here was the double-edged sword we are facing in the housing market. With banks lending money to consumers again and with unemployment continuing to drop, you would think there would be a ready market for home sales. However, the downside to these positive factors is the increasing price of homes. According to a housing market forecast from the Home Buying Institute, the rising cost of homes in many areas is literally pricing some consumers out of the market. “In recent years, home values in many cities have been rising rapidly, to the point that they outpaced wage and income growth. This was mostly the result of an imbalance between supply and demand. In many cities across the country, housing inventories are falling short of demand,” the forecast article states. Rising prices in many markets have seemingly caused some potential homebuyers to take a wait-and-see attitude on moving, which negatively impacts home improvement product sales. The final factor that might be restraining the industry from more positive momentum is a little tougher to get your arms around. Let’s just call it a sort of consumer malaise. If you look at the retail industry in general, consumers seem to be stepping back a bit from spending on material goods. Home improvement has continued to be a bright spot for all retail sectors, but even in the hammer and nail set, consumers are still not letting go of as much of their hard-earned dollars.

We also anticipate that consumers who choose not to move may begin to tap more readily into their home equity to engage in remodeling projects.

HARDWARE RETAILING | December 2017

The Results By our estimates, what this analysis amounts to is that the home improvement retailing industry is growing at a rate of about 4.5 percent in 2017, a full 110 basis points slower than growth during the previous year and slightly below our predictions. While a good bit of that can be attributed to unpredictable and temporary issues such as bad weather, the other economic factors facing the industry may persist in the months to come. That being said, we are anticipating slightly stronger growth in 2018 (4.7 percent), fueled in part by the continued economic momentum we are experiencing, as well as a modest uptick from building in areas heavily impacted by hurricanes. We also anticipate that consumers who choose not to move may begin to tap more readily into their home equity to engage in remodeling projects. This slightly stronger sales trend should continue through 2019, and then we are anticipating a period of slight cooling as we head into 2020.

The Wildcards There are a few factors to consider that make predicting the direction of any industry difficult. First is the general unrest many consumers feel about the socio-economic climate of the country. Uncertainty about the economic direction the country, foreign affairs and even social issues can cause a general constriction on consumer spending. These factors can have a mixed impact on the home improvement industry. On one hand, consumers concerned over world events or economic direction may tighten spending, but they may also spend money on improving their homes. That’s why 2018 and 2019 might prove to be the best years from growth in the industry if all other factors remain constant. The presidential election looming in 2020 could be enough to make consumers sit on their wallets until all the ballots are counted. Another more immediate factor that could provide a headwind to industry growth is the direction of interest rates. There has been a general discussion that interest rates will rise in the near future. How much and to what extent this could impact consumers’ willingness to buy remains to be seen. The final wildcard is, as always, the weather. While we have seen a few years of unfavorable weather conditions for home improvement product sales, one might expect that we are “due” for a weather cycle that could benefit the industry. Of course, no one has ever gotten rich on their ability to predict the weather.

U.S. Home Improvement Sales (in billions)

84%

Compound Annual Growth 2016-2021 = 4.37%

5.6%

500

4.5%

4.7%

400

$357.60

$373.60

$391.20

4.6%

$409.20

4.1%

4.0% $442.90

$425.90

300

200

of independent retailers surveyed by NRHA expect their e-commerce sales to increase in 2018.

100 Source: NRHA 2017 State of Independents Conference Research 0 2016

2017

2018

2019

2020

2021

Source: NRHA/Hardware Retailing

Home Improvement Product Sales Performance (% growth rate) 2012-2016

2017

2018-2021

Consumer

5.2%

5.5%

4.4%

Professional

6.4%

3.4%

2.9%

Total

5.5%

4.9%

4.0%

5.3% Home Depot’s overall sales growth projections for 2017 at midyear. Source: Home Depot Second-Quarter 2017 Financial Report

Source: Home Improvement Research Institute/HIS/Current Prices

Home Improvement Retail Sales (% change year over year) 400

4.5%

7.2%

5.5%

4.2%

$318.4

$331.6

7.3%

5.0%

$376.1

350 300 250

5.7%

$281.5

$301.8

$357.6

Lowe’s overall sales growth projections for 2017 at midyear.

200 150 100 50

Source: Lowe’s Second-Quarter 2017 Financial Report

0 2012

2013

2014

2015

2016

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

2017

December 2017 | HARDWARE RETAILING

Industry Breakdown

2017

2016-2021

Home Improvement Sales by Month

Sales by Type of Store

Outlets

(in billions)

Hardware Stores

$45.4

Hardware Stores

19,810

Home Centers

$222.8

Home Centers

9,790

Lumberyards

9,760

January

$23.9

February

$24.1

March

$31.5

TOTAL

April

$33.8

Hardware Stores

$48.2

Hardware Stores

19,850

May

$38.6

Home Centers

$232.8

Home Centers

9,790

Lumberyards

$92.6

Lumberyards

9,760

June

$36.3

July

$32.6

August (p)

$33.0

YTD

$253.8

2016

2017

Lumberyards

TOTAL

2018

$89.4

2016

TOTAL

$357.6

2017

TOTAL

$373.6

39,360

39,400

Hardware Stores

$48.9

Hardware Stores

19,750

Home Centers

$244.1

Home Centers

9,740

Lumberyards

$98.2

Lumberyards

9,730

TOTAL

2018

TOTAL

$391.2

39,220

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

Home Improvement Sales Growth 2017 vs. 2016 January

8.6%

February

4.2%

March

5.3%

April

4.4%

May

11.5%

June

6.1%

July

8.1%

August

9.8%

YTD

Compound Annual Growth Rate

7.3%

2016-2021

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

2019

2020

2021

Hardware Stores

$51.6

Hardware Stores

19,700

Home Centers

$255.3

Home Centers

9,720

Lumberyards

$102.3

Lumberyards

9,710

TOTAL

$409.2

TOTAL

39,130

Hardware Stores

$54.1

Hardware Stores

19,700

Home Centers

$265.3

Home Centers

9,700

Lumberyards

9,690

Lumberyards

$106.5

TOTAL

$425.9

2020

TOTAL

39,090

Hardware Stores

$57.2

Hardware Stores

19,675

Home Centers

$275.9

Home Centers

9,680

Lumberyards

$109.8

Lumberyards

9,675

TOTAL

$442.9

Hardware Stores

4.7%

Home Centers

4.4%

Lumberyards

4.2%

TOTAL

4.4%

Source: NRHA/Hardware Retailing

HARDWARE RETAILING | December 2017

2019

2021

TOTAL

Percent Change 2016-2021

39,030

Hardware Stores

-0.7%

Home Centers

-1.1%

Lumberyards

-0.9%

TOTAL

-0.8%

Source: NRHA/Hardware Retailing

Chain Results

Market Share Profile Top Chains: Industry Share

Top Chains: Combined Performance Net Sales

Sales

No. of Stores

(as % of total industry)

2012

50.0%

14.7%

2012

$146.40

5,780

2013

50.2%

15%

2013

$154.80

5,885

2014*

49.4%

16.1%

2014*

$159.40

6,308

2015

49.7%

16.4%

2015

$168.55

6,447

2016

51.3%

17.4%

2016

$183.60

6,846

1.3%

2.7%

Compound Annual Growth Rate

5.8%

4.3%

2012-2016 Percentage Point Change

No. of Stores

(in billions)

2012-2016

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

Top Chains: Individual Performance 2016 Sales (in billions)

Home Depot Atlanta

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 2016

Stores in 2017 (as of October 2017)

$94.6

2,278

2,282

$65.0

2,129

2,141

$10.7*

305

306

$6.8

1,595

1,665

$2.9

249

256

$1.5**

$1.2

145

147

$0.9**

Sources: Company reports and Hardware Retailing surveys The above represent home improvement retail chain stores that carry at least two core categories and have sales of approximately $1 billion or more. * Source: 2017 STORES Hot 100 Retailers, National Retail Federation **Source: Hardware Retailing estimates

December 2017 | HARDWARE RETAILING

Cost of Doing Business Study

Another Strong Year for Independents

or nearly 100 years, the North American Retail Hardware Association (NRHA) has collected financial and operational data from the independent home improvement industry’s hardware stores, home centers and lumberyards. The result of that research is the annual Cost of Doing Business Study, which assesses the performance of retailers who submit their confidential financial reports to NRHA. The study provides composite income statements, balance sheets and averages for key performance ratios. Highlights from the 2017 study are presented in the following three pages, revealing healthy growth for the sector. This year’s study uses data from the 2016 fiscal year to offer information about the performance of the industry’s retail operators, as well as tools they can use to improve their businesses. Retailers throughout the industry use the study for benchmarking, goal setting and planning. The real-world numbers that study participants contribute give an accurate picture of how home improvement retailers of all sizes and store types are performing. Retailers representing 989 independent home improvement stores participated in the 2017 study. The information is segmented by store type, as well as by typical and high-profit store performance.

Methodology NRHA gathers the study’s data by mailing paper questionnaires to a sampling of hardware stores, home centers and lumberyards in the U.S. Retailers can mail their information to NRHA or upload it online. NRHA provides the analysis in the final report after extensively reviewing the data. 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 the data. 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.

HARDWARE RETAILING | December 2017

How to Use This Study Here are some pointers for using the 2017 Cost of Doing Business Study 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 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 business’s performance differs significantly from the study data, determine the cause and develop a plan to bring your numbers in line with high-profit stores. • Although high profits have little to do with size, sales growth is one of the keys to profitability. • When reviewing the numbers on the following pages, note that this report contains figures from a different sample group of stores each year. Overall figures can vary widely from year to year based on the group of stores participating. Year-to-year comparisons are helpful for illustrating general trends over time.

Hardware Stores

Profit Margin

Total Operating Expense

Sales Per Square Feet

Sales Per Employee

Home Centers

Lumberyards

4.2%

2.7%

4.2%

Highest profit margin reported since the study began, driven by the highest average transaction size: $22.

Home center profit margin dipped, decreasing by 1.4 percentage points from 2016’s all-time high of 4.1 percent.

Profit margin increased 0.5 percentage points above 2016 to 4.2 percent. Average transaction size hit $199 for typical stores.

40.3%

27.9%

19.8%

Total operating expenses were up slightly due to increases in total payroll and occupancy expenses.

Total operating expenses for typical stores dropped for the fifth consecutive year.

Total operating expenses went down 6.7 percentage points as lumberyards worked toward running leaner operations.

$188

$607

$712

Hardware stores averaged $51 in product per square foot, resulting in $188 in sales per square foot.

Sales per square foot doubled year over year for typical stores, likely due to the unusually high number of multistore respondents.

Sales per square foot increased from the prior year, with $129 in inventory stocked for every square foot of selling space.

$176,657

$84,303

$92,138

The average number of employees per typical store increased from 10 to 11, and sales per employee hit an all-time high of $176,657.

Gross margin per employee increased from the prior year. Plus, employee counts went up from 16 to 22.

Gross margin per employee went down more than $4,000 from the year prior, though staff counts increased by one person.

Source: 2017 Cost of Doing Business Study

December 2017 | HARDWARE RETAILING

Retail Store Performance

Financial Performance, by Store Type

he following segmented data from the 2017 Cost of Doing Business Study allows retailers to compare their operations’ performance against businesses similar to theirs. NRHA divides the analyses into three categories: hardware stores, home centers and lumberyards. The complete study, with an even more detailed breakdown of the data, is available for free to NRHA members or for purchase by nonmembers. Visit nrha.org to become a member or to purchase hard copies of the full 28-page report.

Hardware Stores Hardware stores that participated in the 2017 study saw growing sales and profitability and record performance in areas such as sales per customer, gross margin after rebate and net profit per store. As an entire group, including high-profit, typical, multistore and single-store operations, hardware stores experienced same-store sales increases of 3.6 percent year over year. Respondents seemed to be driving sales growth by simply selling more to customers. Employee productivity looked particularly good, with average sales per employee of $176,657 and average transaction sizes of $22 per customer—record highs. Top-performing stores averaged $30 per transaction. Customer counts for the typical stores participating in the study were 86,162, the best that performance indicator has looked since 2007. High-profit stores’ average customer counts were lower at 75,236, suggesting that those businesses are succeeding at selling more product to top-tier customers. High-profit operations saw average sales of $244 per square foot, compared to $188 per square foot for an average store.

Home Centers Home centers generated their highest-ever sales per customer figures in this year’s study. High-profit stores more than doubled the

HARDWARE RETAILING | December 2017

bottom-line performance of typical stores, churning out net profits of 5.9 percent of sales compared to the others’ 2.7 percent. At the same time, the top-performing group had a cost of goods sold that was 1,000 basis points lower than that of the average sample stores. These metrics suggest that high-profit stores are more disciplined with cost management. A major difference between the typical stores and top performers was driven by the volume of customers at the high-profit operations, which experienced an average customer count of 82,958 compared to 57,942 at typical stores. Typical stores saw inventory turns hit 4.2 percent, which was nearly a 10-year high, while high-profit home centers registered average inventory turns of 2.1 percent. Typical stores also averaged $607 in sales per square foot versus $581 at high-profit stores.

Lumberyards Lumberyards continued to drive profits as sales improved, according to the 2017 study. Same-store sales for lumberyards increased 3.8 percent, for an average of nearly $5.8 million in sales. Higher margins and careful expense management helped high-profit stores yield particularly strong results in this year’s study. This group netted profits of 7 percent compared to a still healthy 4.2 percent at the typical lumberyard. High-profit respondents’ sales of $4.8 million were slightly lower than the average stores. Top performing stores’ higher net profits reflected more frugal management, shrewd buying and careful expense controls than at typical operations. Overall, lumberyards have driven labor costs down, resulting in the study’s lowest-ever recorded payroll expense of 11.5 percent. Managing these numbers along with other expenses made an important difference for high performers versus average stores. Top performers also profited from margins that are a full 2.5 percent higher than their average counterparts.

Hardware Stores Median Sales Per Customer Typical

$30

Key Business Indicators $30

High-Profit

Typical

50%

High-Profit

45.7%

43.9%

40.3%

40% $25

$23

36.3%

30%

$22

22.2%

$21 $20

$19

$22 $21

$20

20%

20.1%

$20 10%

$18 $15

0% 2012

2013

2014

2015

Gross Margin After Rebate

2016

Total Payroll

Total Operating Expense

Home Centers Median Sales Per Customer Typical

$120

Key Business Indicators

High-Profit

Typical

50%

$105

High-Profit

41.5% 37.0%

40%

$100

$96

30.0%

27.9%

30%

$80

24.4%

$60

$41 $40

$36

$45

$49

$41

$42

2013

2014

20%

$51

17.3%

10%

$36

$20

0% 2012

2015

Gross Margin After Rebate

2016

Total Payroll

Total Operating Expense

Lumberyards Median Sales Per Customer Typical

$250

Key Business Indicators

High-Profit

Typical

50%

High-Profit

$219 $199

$200

$167

30%

$152 $150

40%

$157

24.0%

$165

26.5% 19.8%

20%

$141

14.9% 11.5%

$87

$100

$105

21.3%

10%

$76 $50

0% 2012

2013

2014

2015

2016

Gross Margin After Rebate

Total Payroll

Total Operating Expense

Source: North American Retail Hardware Association. Figures based on responses to the 2017 Cost of Doing Business Study.

December 2017 | HARDWARE RETAILING

Financial Profiles

Financial Profile of Leading Publicly Held DIY Chains 2016 Operating and Productivity Profile

Home Depot

Lowe’s Cos.

Number of Stores (at end of 2016)

2,278

2,129

Average Size of Selling Area (sq. ft.)

104,000

100,000

Total Sales

$94.6 billion

$65.0 billion

Total Asset Investment

$43.0 billion

$34.4 billion

Total Inventory

$12.5 billion

$10.5 billion

Sales Per Square Foot

$398.46

$305.24

Inventory Turnover

4.9x

4.1x

Net Sales to Inventory

7.5x

6.2x

Total Sales Per Employee

$232,993

$270,904

Average Size of Transaction

$60.35

$68.82

Gross Margin Return on Inventory

257.50%

214.80%

Home Depot

Lowe’s Cos.

Net Sales

100.0%

Cost of Goods Sold

65.8%

65.4%

Gross Margin

34.2%

34.6%

Total Operating Expenses

20.0%

23.3%

Net Income (Before Taxes)

13.2%

8.0%

Home Depot

Lowe’s Cos.

Total Current Assets

41.3%

34.9%

Cash

5.9%

1.6%

Receivables

4.7%

0.3%

Inventory

29.2%

30.4%

Other

1.4%

2.6%

Fixed Assets

58.7%

65.1%

Total Assets

100.0%

Current Liabilities

32.9%

34.7%

Long-Term Liabilities

57.0%

41.8%

Net Worth

10.1%

18.7%

Total Liabilities and Net Worth

100.0%

Income Statement

Balance Sheet

Source: Home Depot and Lowe’s annual reports

HARDWARE RETAILING | December 2017

Profile of Top Four Distributors Ace Hardware Corp.

Do it Best Corp.

True Value Co.

Orgill Inc.

Number of Distribution Centers

Current Number of Members

4,400

3,800

4,400**

6,225*

$5.1 billion

$3.2 billion

$2.07 billion

$2.19 billion

% Sales Out of Warehouse

81.0%

33.0%

70.0%

71.6%

% Sales Out of Pool/Relay

0.0%

% Sales Direct-Drop Ship

19.0%

67.0%

30.0%

29.4%

% Sales in LBM

N/A

22.0%

15.0%

9.0%

Number of Employees

7,000**

1,450

2,350**

2,385

Avg. Number of SKUs in Warehouse

95,000

67,000

80,000

75,000

Sales/Inventory Ratio for 2016

6.9

12.16

5.4

8.36

2016 Member Rebate Distributed

$157.9 million

$115.5 million

$23.1 million

N/A

% Cash

38.0%

77.0%

92.0%

N/A

% Stock

35.0%

23.0%

8.0%

N/A

% Other

27.0%

0.0%

N/A

% Other

22.0%

0.0%

N/A

Dollar Volume Most Recent Fiscal Year

Sources: Annual company reports *Number of stores served, since Orgill is not a cooperative and does not have members. **Approximate numbers.

Profile of Wholesaling Merchandising Groups PRO Group Inc.

Distribution America

Val-Test Group

Current Number of Wholesale Members

Number of Member-Operated Distribution Centers

150+

Dollar Volume for 2016 Fiscal Year

$5.25 billion

N/A

$720 million

Estimated Dollar Volume Calendar 2017

$5.25 billion

N/A

$680 million

Number of Retail Stores Served by Members

35,000

10,000

4,000

Number of Program Stores

800

2,000

200

Number of Employees

Source: Annual company reports

December 2017 | HARDWARE RETAILING

Industry Year in Review

December (2016)

February

● The National Labor Relations Board (NLRB) addressed a potential labor law violation by Menards. The NLRB’s complaint alleged the big-box home improvement retailer violated labor laws by classifying delivery drivers as independent contractors instead of employees.

● 84 Lumber caused a stir with a politically charged advertisement featuring immigration and a wall during the Super Bowl. The ad directed viewers to the 84 Lumber website, which crashed from an overload of visitors. The full-length commercial garnered millions of views on YouTube.

● Walter Hachborn, former president and Home Hardware Stores Ltd. co-founder, died Dec. 17 at the age of 95. He helped grow Home Hardware into Canada’s largest independent home improvement retailer. ● Lowe’s Canada announced plans to grow the Canadian company RONA and Ace Hardware Canada. Lowe’s also acquired licensing rights to the Ace brand in Canada.

January ● Sears Holdings Co. announced 150 store closures to “enhance liquidity and stabilize operating performance.” The company also confirmed its sale of Craftsman to Stanley Black & Decker for $900 million. ● United Hardware celebrated its 60th anniversary at its January market. ● Walmart planned to eliminate about 1,000 human resources, technology and e-commerce jobs by month’s end.

● Lowe’s announced another round of staffing cuts at its corporate headquarters and two support facilities, eliminating more than 500 positions.

March ● Home Depot agreed to pay $25 million for damages that financial institutions faced as a result of the retailer’s September 2014 data breach. ● The Sherwin-Williams Co. announced its $11.3 billion deal to buy The Valspar Corp. would be delayed until June 2017. ● Central Network Retailing Group (CNRG), bought McLendon Hardware, a company with seven stores in Washington state. ● Lowe’s Canada announced plans to consolidate Ace Canada operations so the big-box retailer and cooperative would share Canadian distribution functions. Ace Canada was set to close two distribution centers and its main office in the country, planning to move into the Lowe’s Canada office.

April ● Ace Hardware Corp. hired Grainger executive Mark Spanswick to be president and general manager of Ace Wholesale Holdings LLC. He spent 27 years working for industrial supplier W.W. Grainger. At Ace, Spanswick leads the wholesale division, which is a compilation of the co-op’s two acquisitions it made with Emery-Waterhouse Co. and Jensen Distribution Services in addition to a new distribution arm created in 2015. 36

HARDWARE RETAILING | December 2017

August ● True Value president and CEO John Hartmann addressed a Bloomberg story that the Chicago-based co-op was considering a potential sale. Hartmann told Hardware Retailing that their retailers “own the company and anything that would change that, they would have a say in.” ● The company that owns T.J. Maxx and HomeGoods in the U.S. introduced Homesense, a new big-box chain with its first location in Massachusetts.

May ● Lowe’s announced its $512 million purchase of Texas distributor, Maintenance Supply Headquarters, to grow its pro business. ● Hardware Distribution Warehouses Inc. announced its purchase of a 670,000-square-foot facility in Marshall, Texas, to serve as the new corporate headquarters. The facility will also allow consolidation of its Houston and Shreveport, Louisiana, distribution centers to the new location.

June ● Amazon announced it would acquire the high-end grocery chain Whole Foods Market for $13.7 billion, giving the online retailer a network of more than 460 brick-and-mortar stores. ● Do it Best Corp. was named the largest private company in Indiana by the Indianapolis Business Journal. The ranking is based on annual revenue.

September ● The Equifax data breach may affect small business owners differently than everyday consumers, according to a class-action lawsuit filed on behalf of about 28 million small business owners in the U.S. ● Walmart announced plans for a new corporate headquarters in Bentonville, Arkansas. Amazon announced plans to build a second headquarters somewhere in the U.S. or Canada, with more than 200 cities bidding for the business.

October ● Ace Hardware Corp. purchased the majority stake in e-commerce startup The Grommet. ● Walmart purchased Parcel, a delivery logistics startup that focuses on overnight and same-day last-mile delivery. ● Sears Canada Inc. will liquidate its assets after its board rejected a business plan proposed by the company’s top executive.

● Orgill Inc.’s Post Falls, Idaho, distribution center began serving retailers in five states throughout the northwestern U.S. as well as customers in western Canada. The company originally announced the new center in August 2016.

● Menards founder John Menard Jr. is the wealthiest person in the state of Wisconsin, with a net worth of $9.9 billion, according to Forbes’ list of the 400 richest people in America.

July

November

● Home Depot announced an agreement to purchase Compact Power Equipment Inc., a national provider of equipment rental and maintenance services, for $265 million in cash.

● Westlake Ace Hardware announced it will acquire Buikema’s Ace Hardware, an independently owned business that operates seven stores in the Chicago area.

December 2017 | HARDWARE RETAILING

Housing Market Outlook

Checking the Foundation of the 2017 Housing Market A Q&A With George Ratiu Solid demand and steadily increasing home prices have been two of the biggest housing headlines in 2017. To learn more about housing trends this year and predictions going into 2018, Hardware Retailing spoke with George Ratiu, director of quantitative and commercial research at the National Association of Realtors (NAR). He oversees a portfolio focused on macroeconomic trends, commercial real estate and global investments. Overall, Ratiu and his organization maintain a moderately optimistic outlook for the 2018 housing market.

Hardware Retailing (HR): What trends have you seen develop in the 2017 U.S. housing market? George Ratiu (GR): This year, the housing market saw pretty solid demand, especially during the first half of the year. From the midpoint of the year on, there was an extremely tight inventory, both for new home sales and especially for existing homes. A lot of buyers are finding a very tight market, which prevents them from buying homes, and in turn, lowers sales. Just as importantly, we’ve seen a pickup in sale prices each month this year.

HR: New housing starts and existing home sales are increasing slightly over 2016 levels. What does that say about the housing market? GR: There’s sort of a domino effect at work here. Many homebuilders are not building enough new inventory, so first-time homebuyers are finding it increasingly difficult to enter the housing market due to higher prices and more competition.

HR: In August, housing prices reached their 66th consecutive month of gains. NAR said high prices have prevented many prospective homebuyers from entering the housing market. How might continually rising existing home prices impact the housing market in the long term? GR: Rising prices are good and bad. They’re a reflection of market dynamics. But when we look at price trajectory from the perspective of a growing population, comprised mostly of Generation X, millennials and Generation Z, rising home prices, mortgage prices and high student debt, then accelerating home prices will harm the housing market in the long term because first-time homebuyers simply won’t be able to afford it.

HR: How do you foresee tax reform impacting the housing market? GR: For homeowners, tax reform is a very important issue. As the proposal currently stands, it’s likely to have an impact on the prices of homes across

HARDWARE RETAILING | December 2017

the country. By our estimate, it would be a roughly 10 percent decline in home prices. When you look at homeowners who are staring at a 10 percent loss in their homes, they’re looking at an immediate $26,000 loss for an average-priced house. I don’t think any homeowner will be in a position to think about remodeling or building a new home given that significant loss. For new home sales, I foresee a tremendous impact as well. I see a negative impact for new home sales and the remodeling industry if the tax reforms go forward as currently written.

a 6 percent price appreciation on the residential side, which is significant because it far outpaces the trajectory of income growth. Obviously that impacts a lot of potential buyers. When we look at the fact that interest rates are expected to increase, that impacts first-time buyers. I see tightness of inventory, accelerating prices, strict mortgage underwriting standards and availability of capital as the major factors in residential and commercial real estate markets.

HR: What do 2017 U.S. housing trends say about the economy overall?

HR: What should homeowners and retailers be mindful of as we head into 2018?

GR: Considering that before the recession, it was the housing industry that put the economy in recession, in a sense it’s been housing that brought the economy back. With price appreciation, homeowners’ wealth has also been increasing, which has meant that homeowners have been a whole lot more optimistic and have been spending a lot more, which drives the economy. In 2017, due to a slowing housing market, we’re likely restraining some level of economic growth. Going into 2018, my expectation is that at the current rate, we’ll continue to see soft economic gains.

GR: Consumers have been feeling a lot more optimistic about the market and have been spending a lot more freely. We see that in auto sales and household appliance sales. I think going into 2018, as long as unemployment and wages remain on an upward trajectory, consumer optimism and spending are likely to grow. I think consumers should pay attention to tax reform. There are significant changes proposed to the treatment of taxes for individuals and corporations and any of those changes are likely to impact their bottom lines. So consumers and retailers should pay attention to Congress and make their voices heard. For retailers, I think the outcome of tax reform is likely going to alter a lot of business practices moving forward. If we’re seeing a decrease in wealth across the board, that’s likely going to reduce the optimism and lead to lower spending, which for retailers, means a reduction in sales in the future.

HR: What growth and challenges have the residential and commercial real estate markets experienced this year? GR: The one common challenge that both residential and commercial markets have experienced this year is a tightness of inventory. From there, the other common thread is price appreciation. We’ve seen

December 2017 | HARDWARE RETAILING

Economic Outlook

Hurricanes and Home Improvement 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 in Cleveland, Kleinhenz is a contributing forecaster to The Wall Street Journal, CNBC, the Federal Reserve Bank of Chicago and the Federal Reserve Bank of Philadelphia.

I recently went to four different stores looking for nylon paracord. I finally found a hardware store that, even though they didn’t carry what I needed, the owner got online with me to find somewhere that did. I asked him if I could pay him for his help, and he said, “I just want you to come back sometime in the future.”

Hardware Retailing (HR): What trends are impacting the home improvement retail sector?

JK: Strong momentum in the second quarter carried us through into the third quarter. The third quarter is a bit of a surprise. I expected more of a speed bump from the hurricanes. We don’t know yet if it’s an overall loss or just delayed spending. We do know that the supply chains were impacted, whether ports, factories or trucking. In general, we believe that the economy should return to its pre-hurricane path and any loss of spending will be made up going into 2018. We saw the first vestiges of the impact of the hurricanes in the employment data. They couldn’t get the surveys and collect the data from firms in Florida and Texas, so that causes a concern. On the other side of the coin, the retail sector navigated reasonably well through September. There was a boost in spending on building supplies and materials, but some sectors didn’t do so well because people were displaced from the region. The momentum before the hurricanes was the combination of rising incomes and employment. Reasonably, we’ll see a rebound into the fourth quarter and into next year, but it will be a delayed response. Looking at GDP, a softer first quarter is possible, with 2.3 to 2.5 percent growth. It remains to be seen, but there is room to be optimistic. The most recent consumer confidence index reading was a new cycle high. Some of that is due to wage increases, which are up 2.9 percent year over year and are up 2.7 percent year over year for the quarter.

Jack Kleinhenz (JK): According to data from the American Society of Interior Designers, singlefamily and multifamily residential sectors have show positive revenue trending gains since December 2016. Interior design firms are optimistic, which will have a positive impact on home improvement spending. Residential and nonresidential construction are also clocking a monthly average of 12 percent and 3 percent respectively in the first eight months of 2017. Residential construction spending includes any spending related to existing homes, new homes, second homes and anything people will need to invest, repair, replace or update. This is a very positive outlook for the home improvement sector, and the trend seems to be on the uptick. I regularly review a monthly report of retail sales in the building materials sector, and it’s coming in at a fairly nice rate, in excess of 5 to 6 percent. With strengths in the housing market and higher wages, people feel good about their own wealth from home prices and the values of their investments, which all point in the direction of continued home investment, repair and renovation projects. The retail sector, in general, has been suffering from a lack of pricing power. And if you’re a convenience-style hardware store, you can’t rest your business on price. So, it has to be about offering something else.

HARDWARE RETAILING | December 2017

HR: What do current economic indicators say about the end of 2017, going into 2018? What does that mean for consumers?

Consumer spending continues at a good sturdy rate, but it’s not a breakout speed, largely because consumers continue to be very pragmatic about their spending. Although wages have recently risen, they have not kept pace with higher inflation activities like health care, rent and medical services. Those expenses have been outpacing inflation, and wages have barely been meeting inflation. Consumer spending continues at a good sturdy rate, but it’s not a breakout speed, largely because consumers continue to be very pragmatic about their spending. It still bodes well for a good start in 2018.

HR: How might the economy affect small businesses in 2018? JK: Running small businesses will continue to be an ongoing balancing act of having the right pricing and the product when the customer needs it. Small business optimism is also a function of local demographics. It’s not all one monolithic economy. We have much different spending paces,

for example, in the Southwest compared to the Southeast. Some areas will continue to require a lot of effort and “stick-to-itiveness” to be successful. Population growth has flatlined in some parts of the U.S., which can affect small businesses, especially with aging populations. Sometimes that can be good, with people staying in their homes, but older people also delay improvements because of fixed incomes and other expenses. Medical spending, taxes and utilities could delay projects that would happen if they were 10 or 15 years younger. But I think the home improvement industry is on the front line of these aging-in-place developments. On the other side of the coin, you have to ask, “What’s going on with millennials?” There has been some delayed purchasing, but now they’re getting back on track, buying homes, making improvements and spending wisely, which should be a positive development in a broader sense for the industry.

HR: What will consumer optimism be in 2018? JK: What you should be asking is, “Does consumer confidence translate to spending?” I haven’t seen that to be the case. Consumers are asking, “Do I have a job, am I making more money, what do my retirement investments look like?” All of those seem to be on the right trajectory, which gives them the ability to spend. Their willingness to spend is a different issue. We’re different than we were before the Great Recession. We’re not taking out as much credit, and banks have tightened up credit requirements for consumers.

December 2017 | HARDWARE RETAILING

Canadian Retail Report

Canadian Retailers Face Challenges, Opportunities Provided by Michael McLarney, Editor-in-Chief, Hardlines Inc.

anada’s retail home improvement market grew at a modest but healthy pace in 2016, up 2.9 percent from the year before. Conditions helping this growth included Canada’s red hot housing market, low interest rates and aging housing stock—all factors driving renovation sales. And that modest growth has maintained itself in 2017 and is forecast to continue in 2018. Varying economic conditions, not to mention weather, impacted Canadian retailers through last year, while 2017 has proven to be steady, if not exceptional, for most regions. A few exceptions persist: The Greater Toronto Area of Southwestern Ontario has seen healthy growth over the past two years, and despite changes last summer to real estate laws in British Columbia, that province’s Lower Mainland around Vancouver also remains strong. As a result, the industry is forecast to grow by a slightly higher rate in 2017 of 3.5 percent.

Big-Box Format Makes Big Gains Big boxes enjoyed the greatest sales growth of all the retail formats, thanks both to strong incremental gains by Home Depot Canada and to new stores built by Lowe’s Canada in 2016. While Lowe’s has built some new stores in 2017, the focus has been on converting some of its RONA Home and Garden big boxes to the Lowe’s banner. In fact, the market share of these big-box retailers is now at a record high, accounting for more than one-quarter of all retail home improvement sales.

Industry Consolidation Continues Along with Home Depot Canada and Lowe’s Canada, Home Hardware Stores Ltd. and Canadian Tire Retail make up well over half of all sales by hardware stores and building supply retailers in Canada. These “Top Four” retailers collectively grew their sales at a rate almost double the industry average last year, driving more consolidation at the top and ensuring that the big players in this industry continued to get bigger in 2016. However, the majority of Canada’s home improvement retailers are members of a lumber

HARDWARE RETAILING | December 2017

and building materials (LBM) buying group, offering an effective way for smaller businesses to pool their purchasing power into larger volumes. While affiliation with buying groups helps independent retailers stay competitive, the groups nevertheless faced tough market conditions in 2016. Much of that came in the form of competition from the industry’s top retail chains, such as Home Depot Canada and Lowe’s Canada. In terms of sales volume, the largest group in Canada is represented by the building center retailers within Home Hardware. Collectively, sales by LBM retailers in Home Hardware exceed $4 billion. That group is followed closely by Independent Lumber Dealers Co-operative, with collective retail sales by its members of $3.8 billion. TIMBER MART and Castle follow, with estimated sales of $2.8 billion and $2 billion respectively. The other noteworthy groups in Canada are Sexton Group, Delroc Industries and Quebec-based Groupe BMR and Pilon Ltée.

Challenges to Retailers The list of issues shared by retailers across the country is topped by the insurgence of internet sales. Retailers are looking for ways to create an experience in their stores that ensures they remain a destination for their local markets. Some are doing this through increased customer service and better product knowledge, niches within the store that are carefully tailored to local needs and a strong involvement in community events and fundraising. Finding—and keeping—good employees also looms large as a challenge everywhere. The sense by many young people that retail is a job and not a career choice makes staffing a big concern for many. And competition from other fields is just part of the problem. In many instances, retailers will look to their competitors to poach good people. Finally, creating growth in a relatively stable marketplace puts the onus on retailers to look for ways to steal market share. These conditions are expected to persist into 2018.

Home Improvement Industry Sales Growth (in billions) 50

$49.10 $47.54 $46.00 $44.62 $43.76 $42.19

$40.01

$40.42

40 2011

2012

2013

2014

2015

2016

2017*

2018*

*Forecasted numbers

Market Share by Store Format

45.1% Building Centers 25.9% Big Boxes

Top 10 Home Improvement Retailers Rank

Company

2015 Sales in Millions

2016 Sales in Millions

Percentage of Change

Home Depot Canada

$7,195

$7,700

7.0%

Lowe’s Canada

$6,600

$6,900

4.5%

Home Hardware Stores

$5,865

$6,140

4.7%

Canadian Tire Retail

$5,435

$5,690

4.7%

ILDC

$2,650

$3,800

43.4%

TIMBER MART

$2,840

$2,800

-1.4%

Castle Building Centres

$1,875

$1,950

4.0%

Sexton Group

$1,885

$1,800

-4.5%

Groupe BMR

$1,200

0.0%

Kent Building Materials

$769

$784

2.0%

12.4% Canadian Tire** 7.7% Store Format 4.7% Club Stores** 4.2% Mass Merchants **Hardware and home improvement stores only

Source: 2017 Hardlines Retail Report

December 2017 | HARDWARE RETAILING

Picture This Uncovering the Best Growth Opportunities for Your Business

HARDWARE RETAILING | December 2017

By Chad Husted, chusted@nrha.org

top us if you’ve heard this mantra before: Business is a world for sharks, and just like those fabled predators of the depths, moving forward is the only way to survive. While the comparison to the same creatures that kept plenty of people out of the water after “Jaws” hit theaters might be a bit overwrought, the basic premise is still one preached to everyone from first-year MBA hopefuls to CEOs alike. Sit still and you’ll quickly be sinking. What does moving forward mean for your business? Just as the types of home improvement retailers vary in size, scope, ambition and requirements, so do the definitions of growth. Hardware Retailing consulted three retailers who have grown their businesses in different ways to remain relevant, bring in a larger customer base and increase sales. We explored several different types of business growth to learn about the obstacles and benefits that so often determine a retail location’s success or failure. Some retailers look to surrounding communities for opportunities they believe can spur their businesses to bigger and better things. Others double down on an existing storefront and look outside the box for growth ideas. Every attempt to grow is unique, and each comes with its own hurdles involving finances, personnel, real estate and other factors. Take a look at these stories of business growth and get inspired to evaluate your business to see if there is something there that you can take and grow yourself.

December 2017 | HARDWARE RETAILING

Growing Ambitions: Meet the Retailers

Porters Building Centers Kearney, Missouri

Home Lumber and Supply Co. Ashland, Kansas

Gold Beach Lumber Gold Beach, Oregon

At the Porters Building Centers location in Kearney, Missouri, growth came in the form of a Hallmark Gold Crown store situated just inside the main entrance. With four locations in the area, Porters Building Centers has established itself as a strong option for building materials, rental equipment and premade delivered sheds. However, the closure of a stand-alone Hallmark store in Kearney led to a store within a store that is drawing a whole new crowd to the business. The Porters’ story outlines the need for proper personnel decisions when making plans to grow and highlights how different product groups can exist in a shared space.

Home Lumber and Supply Co. based in Ashland, Kansas, upgraded its Ellsworth, Kansas, location thanks to the right conditions at the right time. The Home Lumber store was successful, but the location was not ideal because there wasn’t space to increase product variety or expand services. When a former Walmart location went up for sale, the Home Lumber team crunched the numbers and decided to snap up the property to convert it into a hardware and lumber destination. With a more visible storefront and more space for big-ticket items like appliances, the business in Ellsworth has blossomed.

Oregon business Gold Beach Lumber, which opened in 1959, has grown to five locations since its first expansion in 2008. Beginning with owner Ryan Ringer’s first acquisition, the site of a former auto dealership, the business has grown its footprint and its culture throughout southwestern Oregon. Pressure from another potential buyer nearly derailed Ringer’s first attempt at expansion, but knowledge gained from that experience has helped Gold Beach Lumber’s growth. With each acquisition, the business has followed Ringer’s foundation for store expansion, which has allowed it to extend its culture of customer service to even more markets.

“They made us an “Some of our more “On paper, having offer we couldn’t refuse. Hallmark has the quality name, and that fits with how we have built our business.

niche categories, like fishing and outdoor equipment, have expanded. All the lakes here have made it a big category for us.

a new business in 2008 wasn’t ideal, but we captured those homeowners and maintenance types that we needed.

—Kent Porter, Porters Building Centers

—John Humphreys, Home Lumber and Supply Co.

—Ryan Ringer, Gold Beach Lumber

”

HARDWARE RETAILING | December 2017

”

Store Within a Store

or Porters Building Centers, growth wasn’t something external like a new location or added square footage. Instead, owner Kent Porter, his daughter Natalie and his son Alex saw expansion in the form of an added category within their Kearney, Missouri, location. Beginning with an encounter with Hallmark Cards representatives at a buying market, Kent Porter and his team began the process of adding a Hallmark Gold Crown location within their hardware and building supply store. To put it in Porter’s words, Hallmark simply made too much sense to turn down. “They made us an offer we couldn’t refuse,” Kent says. “Hallmark has the quality name, and that fits with how we have built our business. We only stock items of the highest quality, and we felt Hallmark only added to that.” Porters Building Centers entered into an agreement with Hallmark where the retail business agreed to carry Hallmark products for five years. The business would also need to create a segmented space for the Hallmark products to be housed. Luckily, they already had the building materials needed for the project in their lumberyard. Porters was able to source several of the items needed for the upgrade from its own suppliers, like bulbs for the track lighting, keeping costs down during the renovation. Hallmark provided the fixtures and covered the initial inventory, but Natalie Porter, who has taken on the buying

responsibilities in the Hallmark store, and her team have been able to customize the product selection according to customer feedback. One of those customizations has been the addition of Simply Southern products, which offers clothing, accessories and gifts geared toward women. “Simply Southern is something that shows how we’ve grown our customer base. We’re a great destination for couples now, with the hardware and lumber and now with Hallmark, gifts and clothing,” Natalie says. “It’s a different, more diverse clientele. It just keeps increasing our add-on sales.” Product rotation and staff buy-in have been key for the new concept’s success, Alex Porter says. The first order of business after the Hallmark store was fully installed was to hire someone who could work in both the new gifts area as well as the rest of the store. “You need someone really invested in these products in that area, someone who can interact with customers and be excited about gifts and cards,” Alex says. “Otherwise, you aren’t offering the atmosphere that those customers expect.” The Porters have also kept products rotated by design and necessity. Hallmark staggers release dates for items like Christmas tree ornaments, which also keeps the selection fresh. “We keep products rotating, especially with Christmas rollouts and cards,” Natalie says. “When 65 percent of the store is cards, variety is really important.”

Kent Porter and his family decided to put a Hallmark Gold Crown store within the Kearney, Missouri, location of Porters Building Centers.

December 2017 | HARDWARE RETAILING

Trading Up Spaces

Home Lumber and Building Supply’s new location in Ellsworth, Kansas, gives the store more space for products like outdoor seating and appliances.

hen considering a new building for its Ellsworth, Kansas, location, Home Lumber and Supply had some specific needs that had to be met. One was an increase in size, both for the salesfloor and warehousing space. Another was a more trafficked area to increase the store’s visual appeal and ability to bring in drive-by business. Even when a location that fulfilled all of these requirements became available, corporate sales manager Hervey Wright says the Home Lumber team approached the situation with caution. In the end, Wright’s, Home Lumber CEO John Humphreys’, yard supervisor Roy Hoffman’s and store manager Brandon Rohr’s caution paid off with an improved Ellsworth location that achieves the company’s goals. “At our previous location, the local staff grew demand dramatically, but we were out of space. We kept adding extensions on our gondolas until they were nearly at the ceiling,” Wright says. Home Lumber’s new location, a converted Walmart Neighborhood Market, allowed the business to expand from 1,500 square feet to 12,000. About a quarter of the former grocery store was walled off from the salesfloor to serve as warehouse space, but the new location still offers space for multiple expanded departments. Home Lumber wanted to focus on increasing its paint selection and even had space for a separate mixing room near the paint department. Power tools

HARDWARE RETAILING | December 2017

have expanded to more shelf space, and appliances, which were simply too large to be featured in the previous store, have become a big seller. “Niche categories like fishing and outdoor equipment offer further expansion opportunities. Our improved location with the lakes’ proximity make it a good category for us,” Humphreys says. Personnel and conversion costs were the primary concerns with the location. Having the right management and staff involved in a store move can be the determining factor in its success, Wright says. Finding a buyer for leftover equipment, like coolers, and converting old Walmart fixtures for Home Lumber’s use were a few ways they offset costs for the new location. Another was working with the Ellsworth community, including seeking grants and working with local economic development officials to find resources available to businesses seeking growth. For example, the company took advantage of reimbursements available for businesses making infrastructure improvements in the community and was awarded a grant that was put toward the costs of removing the gas pumps in the parking lot. “Those were all things we researched before we committed to the move. You have to take advantage of your due diligence period, and it was in that time that we tried to talk ourselves out of the deal. If you can’t find a good reason not to do it, then you’re probably OK,” Humphreys says.

Location, Location

xpansion can mean more than just adding a location or moving into a new market. For Gold Beach Lumber, the idea of adding a second location was initially based on market evaluations and opportunity. Yet when the economic situation shifted in 2008, the added product variety and customer base of the second location was a boon for the entire company. Owner Ryan Ringer’s first expansion was opening a lumberyard in Brookings, Oregon. Ringer had been hoping to expand his family’s business into Brookings for some time, and by chance, he saw land for sale that had previously been used for an auto dealership. He went to his father, then-owner of Gold Beach Lumber, with a business plan and enthusiasm to add a new location. Gaining his father’s blessing wasn’t Ringer’s largest obstacle, however. The land was being scouted by a local auto dealer for their own expansion into the town, so his plans were accelerated. “They said I had 48 hours to put money in escrow and 30 days to close. I knew it was a good deal. I knew we were doing 70 percent sales in pro trade, but we weren’t selling lights, paint and maintenance products that people need,” Ringer says. The deal closed in January 2008, just in time for the Great Recession. “On paper, having a new business in 2008 wasn’t ideal, but we captured those homeowners

and maintenance types that we needed,” Ringer says. “It helped solidify us through the downturn, because our transactional growth just skyrocketed.” Gold Beach Lumber followed the Brookings expansion with two more in the coming years. First was a store in Port Orford, Oregon, where Gold Beach bought out a retiring owner of a retail hardware location. The most recent was the acquisition of two Cascade Home Center storefronts. For his expansions, both groundup builds and acquisitions, Ringer analyzed how quickly a new store can be self-sustaining. In Gold Beach Lumber’s first expansion, he factored in that the new store would cut sales in the area from the original location. Ringer determined that the new store could still be profitable. In another acquisition, he determined the location was already viable, but a new infusion of products and services would bring its sales into a more sustainable level. Most importantly for Ringer was a location’s ability to quickly be profitable and self-sustaining. He warned that opportunities in some locations could become burdensome to the entire business and should be approached with a healthy amount of skepticism. “There’s a lot in this industry that say you won’t turn a profit in two years, but I’m not interested in that. We’re conservative in the fact that we don’t like to take risks,” he says.

Gold Beach Lumber owner Ryan Ringer, second from left, and his family celebrate their newly acquired storefront along with its former owners.

December 2017 | HARDWARE RETAILING

Ways to Reach Customers

How to Communicate Using Different Methods

HARDWARE RETAILING | December 2017

ack is in the market for luggage. Soon after he searched for suitcases online, he got an ad on Facebook for a brand whose website he’d visited. Over the next few weeks, he saw digital advertisements from the same company and heard a commercial while listening to a podcast. The brand managed to stay on his radar for weeks, convincing him to consider their product when making a purchasing decision. This company deployed an integrated marketing plan, which involves sending messages across various channels that work together to catch a customer’s attention. Each of the pieces works together holistically as part of a larger marketing campaign to get the consumer to buy a product.

Hardware Retailing spoke to communications and social media expert Meag Shaffer about which vehicles retailers should be utilizing in their marketing efforts. As executive vice president of social media for public relations and social media firm Kel & Partners, Shaffer has years of experience working with retailers in many industries on various marketing initiatives and has presented on marketing-related topics at retail markets and conferences. Here, Shaffer shares the tactics that she believes are crucial to a marketing campaign, including traditional initiatives, like circulars, radio and TV advertising, along with digital efforts. For examples of how to test and evaluate your marketing efforts, visit TheRedT.com/marketing-ideas.

Get Active on Social

Test Ideas With Email

Mail Something New

“Imagine being able to drop your business into a phone call between two friends. That’s basically what you’re doing on social media. Facebook is where people go to interact with friends and family, and they’re spending more time on this platform than any other.”

“Email marketing is inexpensive and tracking your efforts is easy. You can try out new visuals, messaging or promotional offers and can track things like opens, link clicks and coupon redemptions to see how your customers react.”

“Direct mail continues to be an important piece for many retailers. If you have success with circulars, consider trying different types of direct mail marketing, like postcards or coupons, and see what type of response you get.”

Pro Tip: Social media is a place to converse with customers. Share how-to videos and blogs, ask questions and host giveaways.

Pro Tip: To make sure you’re sending emails at optimal hours, try sending messages at different times to see when your customers are more likely to open emails.

Get Noticed Online

Polish Your Website

Utilize the Media

“Millennials and the generations after them live online. They go there to get news, socialize, do research and more. It’s where the sales cycle starts, so you want your brand to be present.”

“There’s a sense of validity that’s imparted to your business just by virtue of having a website. If a customer is searching for information about your company, you want them to find something presentable and representative of your business.”

“Having a presence in local news requires work and a bit of knowledge, but it doesn’t cost much to make it happen. The media can be valuable from a storytelling perspective if you’re celebrating an anniversary or hosting an event.”

Pro Tip: Look through your website monthly to ensure all information is up-to-date.

Pro Tip: Get to know reporters and journalists so they’re more likely to report on your business.

Pro Tip: Impressions are more important than engagement with online ads. When customers see your ads repeatedly, they’re more likely to recall your brand.

Pro Tip: Send the same coupon to your customer via mail and email, and see which medium delivers a higher redemption rate.

December 2017 | HARDWARE RETAILING

Jesse Carleton, jcarleton@nrha.org

Welcome to the P A R

How to Be Successful in Special Event Rental

ental at Kempker’s True Value started out the way it might at countless other independent home improvement businesses. Owner Chuck Kempker rented tools and equipment mostly to contractors. But then he started getting requests for tables and chairs. Soon he was renting tents, then table linens and china. Today, nearly two decades later, he rents hundreds of items that can help customers host a party or a banquet. If you’re looking for a way to diversify your business with a new revenue stream, consider a niche in special event rental. But renting out a tent and chairs is different than renting out a jackhammer or skid loader. You need a different set of skills. Rather than

HARDWARE RETAILING | December 2017

just renting tools and equipment to help customers complete a project, you are helping them host a successful event. To understand the nuances of this category, Hardware Retailing spoke with Kempker, who has four hardware and rental locations in southeastern Iowa, and Dan Fitzgerald of McAuliffe’s Ace Hardware in Marysville, Ohio. Both retailers have been successful in special event rentals. We also consulted Chuck Shipp, president of Shipp Cleaning systems (shippcleaningsystems.com and cleanatent.com), who has more than four decades of experience in the rental industry, specializing in equipment cleaning and maintenance. All three offered tips for success in the special event rental category.

December 2017 | HARDWARE RETAILING

Establish Your Market Potential customers are everywhere. Families have birthday parties, weddings and graduation celebrations. A local church may want a tent for its annual picnic. The nearby community college may need a few extra tables and chairs for a fundraiser. Use your entrepreneurial skills to uncover opportunities. “The party rental market has grown over the past 10 to 15 years,” Shipp says. While homeowners may have always been a solid market for party rentals, business-to-business opportunities are growing as more and more companies choose to rent rather than own their supplies. “A lot of companies across different industries are finding it is far less expensive to rent items for special events. They don’t have to clean and store all that equipment,” he says. As you look for potential customers, understand your limits. Identify a target market rather than trying to serve everyone. Fitzgerald, for example, has established his business as a destination for backyard parties. “We do a lot of backyard birthday parties, graduation parties, backyard weddings and barn weddings,” he says. “We usually refer larger events to someone else because we’ve found that we can’t provide the products and labor needed for those larger orders while maintaining our profit and quality standards. It’s important to identify exactly who you want to be, and then listen carefully to that customer base as you’re starting out.”

Owners Chuck and Dawn Kempker have been building up their party rental inventory for two decades in response to customer demand.

HARDWARE RETAILING | December 2017

Start Small As with any category, start small and build your special event rental selection as you learn the types of products your customers want. Ask yourself three questions, says Shipp. First, what are the opportunities in the market? While any size of market holds potential, rental can be strong for retailers in rural areas, as there may be fewer competitors but still a high demand. Second, Shipp says retailers should consider their storage space commitment. Third, retailers should consider their labor commitment. Are you willing to dedicate a full-time person to the category? These questions will guide you in setting up your ideal rental category. A good starter assortment might include tables and chairs. If that goes well, add a tent. As your department grows, you can add ancillary items to improve your selection, but the core products will make you money. “You’ll likely find that 20 percent of your inventory does 80 percent of your rental,” Shipp says. Rental is a category that should pay for itself quickly. “Your return on investment may be better than you initially think. For most items, you can recoup your expenses within 10 times of that item being rented,” he says. “After that, it’s all profit.”

Hire Seasonal Help As your special event rental category expands, you may discover peak seasons when you need to hire temporary staff. Or you may want to find part-time workers willing to work evening and weekend hours, which are often required in this department. Both Kempker and Fitzgerald agree: Staffing is the largest learning curve in special event rental and can make or break your success there. The average backyard party, for example, might require a tent, tables and chairs. Employees not only need to be in good physical shape to handle delivery and setup for multiple customers in a day, but they must also be professional, as they are still representing your business. “Your reputation is on the line,” Kempker says. “Your employees have your name on their backs.” In addition to dealing with customers who are anxious about the success of their event, employees must ensure the event setup is professional. Fitzgerald finds college students home for the summer are the perfect fit for hiring during the busy summer season. During that time, he might have two crews each making seven to 10 deliveries or pickups per day.

Melissa converted to Ace four years ago and her business has kept its unique character while generating impressive numbers that drive real growth.

Gross Profit Dollars

Let Melissa tell you all about it.

Average Transaction

melissawade@verizon.net

Sales Increase YTD

Free Initial Inventory* 5% gross profit improvement in year one Lowest cost of goods – We can prove it!** * Incentive varies by store. Format/size are based on Discovery recommended products and quantities. Incentive given as a credit, not as cash or a loan. **Ace 2015 Retail Financial Report, Profit Planning Group. Based on comparison to competitive suppliers.

myace.com 630.990.6900 TXT

Keep It Clean Just as your staff represents you every time they head out the door for a delivery, so do the products you rent. It’s important to establish a routine for cleaning each item as it comes back from a rental customer so no item leaves the store dirty or in poor operating condition. Remember that each time your rental items show up at a party, they will be surrounded by a large group of people. For example, if the chairs or tents you rent are dirty and not well-maintained, they will reflect poorly on your entire business. Only buy the highest quality products for special events rental. Subpar products will only damage your reputation. Those items generally do not hold up to the rigors of repeated use, will wear out quickly, and customers will not be satisfied with the way they perform. In addition to buying quality products, also look for products that will appeal to a wide range of styles and tastes. For example, if you’re renting dance flooring, choose a style that could be used for a variety of occasions. Stay classic and simple. Universally appealing styles and colors are the best choices for an assortment that will appeal to a wide audience.

HARDWARE RETAILING | December 2017

Be a Party Planner Customers who come to you for special event rental items may never have planned an event before, but they want their occasion to be perfect. And they want your help. “When a contractor wants to rent a tool, they usually want it that day,” says Kempker. “When I get a phone call about someone wanting rental for a party, it’s usually not about renting this week. They want to rent in three months. That first call just starts the conversation. They’re likely to call several more times before the party with questions as they plan their event.” Essentially, he’s helping them plan the party. Customers tell him how many partygoers they will have at the event, and they ask for advice on how large of a tent they should get and how many tables they need. He says it’s important to ask them plenty of questions to help them think through everything they might need. Kempker has a lot of different design options to offer his customers, so it helps to have someone running the department who has a designer’s eye and a flair for style. “The customer wants their event to have the wow factor,” he says. “They have their ideas about what

they need for a perfect event, but we can also share with them about what we’ve seen or done with someone else’s event and help them brainstorm. We’ve even gone to the site where they’re having the event and helped them plan the setup.”

Establish Expectations When those planning a special event ask for your help, clearly communicate your role in the process and what their responsibilities are. Establishing expectations early will avoid confusion later, which can lead to a disgruntled customer. “For a parent planning a graduation party, for example, that is the most important thing in the world to them,” says Fitzgerald. “They will have high demands. Managing those expectations becomes a challenge.” One common detail that needs to be covered is who will do the setup. During the peak busy season, Fitzgerald may have as many as 20 event deliveries in one weekend. Clear communication will help the delivery and setup for each go smoothly. For example, if he is delivering a package that includes a tent, tables and chairs to an event site for a customer, he will set up the tent, not only for liability reasons, but also to make sure those doing

Retailers who rent tents often find they have the opportunity to build the transaction with add-on items such as tables, chairs and linens.

Build Successful Team Leaders

Foundations of Leadership Program December 2017 | HARDWARE RETAILING

the setup treat the tent with care. But if the customer also wants him to set up the tables and chairs, he’ll need to build more time into the delivery schedule and charge an extra fee for the service. Those kinds of details need to be worked out ahead of time. “Communication up front when the customer first starts talking about the rental is critical,” he says. “We try to have only one or two of our staff talk to customers about their orders to minimize the chance for cross communication or conflicting information.”

Get Everything Online

Customers for special event rental can include families hosting backyard weddings or businesses holding company picnics or fundraisers.

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HARDWARE RETAILING | December 2017

The best marketers for your special event category will be satisfied customers. But it is also important to get your entire rental catalog online. “It’s very important to have a good website that includes everything you have to offer,” says Fitzgerald. Don’t just have a list of items, either. “Post pictures of everything so customers can see what you have.” Including item, delivery and setup costs is vital, too. The total rental cost of each item may include setup fees for certain items and extra delivery charges, which may vary based on the distance from the store or whether you need to pull a trailer to make the delivery. While the website is the place for listing your catalog of items, use social media and other marketing to draw attention to your rental service. Facebook is a great place to share photos of events you’ve helped set up and reminders to customers to get their reservations in early for the busy party season, which usually starts as the weather warms up and people start scheduling weddings, graduation parties and family gatherings. Another way to market your rental offering is by talking with other businesses that might have a frequent need for special event rental items. You could also build a relationship with local event coordinators and see if there is any way you can help them serve their customers.

Create Add-On Sales With every rental, there may be opportunities for building the transaction with add-on rental items or retail items. For nicer events, customers may want linens for the table and even china. Kempker also has outdoor lighting, dance floors, a sound system and food-service items such as chafing dishes. For more informal parties, he offers bounce houses and cotton candy machines. If you have the right selection, you could end up providing the customer with an entire package of items. In addition to rental, look for opportunities with retail items. Some customers will be looking for disposable table covers or party decorations, such as balloons and streamers. But those items are not as popular in some markets as they were a few years ago, he says. More people are looking for a way to personalize their parties, and that shows in the way they decorate. Table centerpieces for weddings, for example, are often homemade. Social media sites such as Pinterest help people share ideas, but the decorations don’t always come with instructions. “Customers often bring in a picture of what they want to make on their phone, and we’ll help them figure out how to make it,” Kempker says. He has a gift area inside each of his hardware stores, which means customers might already be shopping there looking for decoration ideas, and offering the rental service makes him a destination for event planners. If you do not have a party supply store in your area, there may be an opportunity in stocking disposable tableware. “There are opportunities for seasonal and holiday-themed items,” Shipp says. “You might even consider looking for a way to sell tableware in the colors of your local high school teams or have their mascot printed on a disposable tablecloth.”

Dan Fitzgerald (right) and his son, Sean, hire seasonal staff during the peak party rental season to help with equipment deliveries, setup and teardown.

Wishing you a . . .

Rust-free Holiday Season!

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December 2017 | HARDWARE RETAILING

Newsmakers

The Costly Competition to Land Amazon’s HQ2

Upcoming Events December 7 North American Retail Hardware Association (NRHA) State of Independents Conference Chicago

January 5-7 United Hardware Spring and Summer Buying Market Minneapolis

9-11

n Oct. 19, Amazon received 238 proposals from regions across North America, all competing to become the home of HQ2, Amazon’s second headquarters. Landing HQ2 was an enviable prospect for politicians and business leaders across the country. Amazon says it will invest more than $5 billion in construction costs and bring 50,000 jobs to the winning region. Competing for HQ2 became a high-stakes game when many elected officials uploaded videos touting their regions’ economic and recreational advantages. Some even advertised in The Washington Post, a newspaper owned by Amazon’s chief executive, Jeff Bezos. The mayor of Stonecrest, Georgia, offered to name 354 acres of industrial land “Amazon” if it was chosen to house HQ2. HQ2 applicants also devised appealing incentive packages to woo Amazon. The e-commerce giant requested “a stable and business-friendly environment” and advised that “special incentive legislation” may be required from the city it chooses for HQ2. The details of the financial incentives that cities and states are offering are mostly confidential, The New York Times reports, but some information has become available. New Jersey has offered $7 billion in potential tax credits if Amazon chooses Newark, New Jersey, as the site of HQ2. California has offered Amazon $300 million in incentives and if recently proposed legislation passes, Amazon could receive up to $1 billion in tax credits from the state over the next decade, the Times reports. However, many wonder if offering Amazon eye-catching financial incentives will be worth it in the long run. The Los Angeles Times’ Editorial Board published an opinion piece saying the “groveling” to win HQ2 had “gotten embarrassing.” The piece pointed to a study from the Pew Charitable Trusts which stated that only 10 states have “well-designed plans to regularly evaluate tax incentives, experience in producing quality evaluations that rigorously measure economic impact, and a process for informing policy choices.” The paper advised the eventual site of HQ2 to get binding agreements with Amazon before making any final commitments. Small business owners across the country wonder if local governments should focus on helping their businesses grow to the same degree they’ve courted HQ2. “I think all small businesses want a level playing field with the giant corporations like Amazon and we want government at all levels to consider what they can do to help small businesses establish themselves, to grow and survive and continue to hire thousands of employees,” Dan Marshall, toy store owner, says to Minneapolis’s Fox affiliate KMSP. Amazon is expected to announce the location of HQ2 in early 2018.

HARDWARE RETAILING | December 2017

Kitchen & Bath Industry Show Orlando, Florida

9-11 NAHB International Builders’ Show Orlando, Florida

14-16 NRF 2018: Retail’s Big Show New York

19-21 HDW Inc. Spring Market Dallas

February 1-3 House-Hasson Spring Market Nashville, Tennessee

9-11 Monroe Hardware Spring Market Myrtle Beach, South Carolina

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.

Ace-Sponsored TV Show ‘Make48’ Goes National A TV show that Westlake Ace Hardware has sponsored in the past now has a sponsorship from Ace Hardware Corp. and debuted nationally this fall. TheRedT.com/make48

Michigan Supreme Court Declines to Hear Menards Tax Case The Michigan Supreme Court recently declined to hear a case from big-box home improvement retailer Menards regarding its property taxes. TheRedT.com/menards-taxes

Sears, Whirlpool End 101-Year Partnership In an employee memo, Sears Holdings Corp. announced it will no longer sell Whirlpool products at its stores, ending a partnership between the two companies that has spanned more than a century. TheRedT.com/sears-whirlpool

Craftsman Products Coming to Lowe’s in 2018 Earlier this year, Sears sold the Craftsman brand to Stanley Black & Decker in a $900 million deal. Now, Lowe’s has announced Craftsman will be available in its stores in the new year. TheRedT.com/craftsman-lowes

Home Depot’s Strategy for Reaching America’s Largest Age Group Home Depot and other retailers are altering their marketing campaigns, product design and consumer outreach programs to better target 26-year-olds, currently the largest age group in the U.S. TheRedT.com/home-depot-millennials

Menards Founder Is Wealthiest Person in Wisconsin John Menard Jr.’s net worth is $9.9 billion, according to Forbes’ list of the 400 richest people in America. TheRedT.com/menards-founder

Why Did Ace Hardware Buy an E-Commerce Business? John Venhuizen, Ace Hardware president and CEO, recently took questions from Hardware Retailing about the co-op’s purchase of The Grommet. TheRedT.com/ace-e-commerce

December 2017 | HARDWARE RETAILING

Newsmakers Sears Canada Moves to Liquidate Assets

Walmart Purchases Delivery Business

Sears Canada Inc. will liquidate its assets and begin to “wind down” after its board rejected a business plan proposed by the company’s top executive. TheRedT.com/sears-canada

Walmart purchased Parcel, a delivery logistics startup that focuses on overnight and same-day last-mile delivery. TheRedT.com/walmart-parcel

CANADA Sears CEO Provides Retailer Another $100M Loan CEO Edward Lampert has loaned his company approximately $1.7 billion over the past two years. TheRedT.com/sears-loan

True Value Exec: New Marketing Program Is Flexible and Locally Focused Dave Elliott, senior vice president of marketing, announced a new marketing program at the last reunion. TheRedT.com/true-value-marketing

Canadian Building Supply Council: New Name, Enhanced Mandate The organization that joins most of Canada’s regional lumber and building materials associations combines the Atlantic Building Supply Dealers Association, the Lumber and Building Materials Association of Ontario, the Western Retail Lumber Association and the Building Supply Industry Association of British Columbia. Its new name, the Building Material Council of Canada, better reflects the group’s aim to represent retailers and suppliers.

UFA’s Farm and Hardware Stores Strive for a “One-Stop” Experience With 35 Farm & Ranch Supply stores in Alberta, UFA is a major player in hardware retailing in western Canada.

Canada-Wide Deliveries Available for Reno-Depot Online Orders Lowe’s Canada is expanding its e-commerce program to offer parcel delivery in most of Canada.

Home Hardware Launches Commercial Program At Home Hardware’s latest market, the focus was on getting retailers to consider a large, but often overlooked segment: the commercial customer. For the full story of these briefs, visit hardlines.ca/hardwareretailing.

AD INDEX Ace Hardware ..................................................................................55 www.myace.com; 630-990-6900

Midwest Fastener............................................................................17 www.fastenerconnection.com; 800-444-7313

Ajax Wire Specialty Co.....................................................................58 www.ajaxwire.com; 855-966-2529

NRHA Foundations of Leadership Program ..........................................................57 www.NRHA.org/RLI

Channellock Inc..................................................................................1 www.channellock.com; 800-724-3018

NRHA Young Retailer of the Year.........................................................13 www.NRHA.org/YROTY

Cole’s Wild Bird .............................................................................. BC www.coleswildbird.com; 877-426-8882

NRHA All-Industry Conference ......................................................................11 www.NRHACONFERENCE.com

Delta Faucet Company.......................................................................7 www.deltafaucet.com; 800-345-3358

Old Masters .....................................................................................22 www.myoldmasters.com; 800-747-3436

Do it Best Corp. .................................................................................3 www.independentsdoitbest.com; 888-364-8237

Oneida Air Systems .........................................................................56 www.oneida-air.com; 800-732-4065

Flame Engineering ...........................................................................23 www.flameeng.com; 800-255-2469

Orgill Inc. .................................................................................. 64-IBC www.orgill.com; 800-347-2860

HSI................................................................................................. IFC www.hardwaresuppliers.com; 800-334-5625

Rust Patrol .......................................................................................59 www.rustpatrol.com; 713-400-3100

House-Hasson Hardware Company ...................................................9 www.househasson.com; 800-333-0520

SKM Industries Inc. .........................................................................57 www.skmproducts.com; 800-851-8464

International Home+Housewares Show ............................................5 www.housewares.org

True Value........................................................................................19 www.truevaluecompany.com; 888-291-7229

Koelnmesse Inc. ..............................................................................16 www.eisenwarenmesse.com; 773-326-9925

Wastequip ...........................................................................................15 www.toter.com; 800-424-0422

Metaltech Scaffolding ......................................................................61 www.metaltech.co; 800-363-7587

Woodland ............................................................................................14 www.pinecar.com; 573-346-5555

*This index is provided for the convenience of our advertisers and readers. The Publisher assumes no liability for errors or omissions.

HARDWARE RETAILING | December 2017

Last Word

A Legacy and Looking Ahead

ill Lee, the North American Retail Hardware Association’s (NRHA) president and CEO, has devoted his career to helping independent retailers, regardless of wholesale affiliation, become better, more profitable business owners.

As he retires this month, Hardware Retailing wanted to hear from Bill’s industry friends and his family the impression he has made on NRHA and the industry. Visit TheRedT.com/bill-lee for more from Lee’s family and friends. Congratulations, Bill!

“Bill has changed the entire philosophy of NRHA into a member-driven organization, which tries to do what’s best for the industry and its retailers. Bill will be remembered for his outstanding leadership at NRHA, building it into the outstanding organization it is today. Bill has been a great friend of mine and my wife’s, and we look forward to our travels together in the future.” —Dick Thomes, Thomes Bros.

“Bill Lee came to NRHA with little hardware experience, but quickly grasped the industry and its needs. He took NRHA to a new level by surrounding it with talented people. He oversaw the expansion of industry training and used the financial resources to move NRHA into an association-owned building. Today, he leaves NRHA financially strong with an engaged staff and an association that is a strong resource and conduit for our industry.” —Jerry Meis, Lenoch & Cilek Ace

“I think Bill would agree with me that his time at NRHA has been an adventure full of challenges and opportunities. We have been fortunate to visit many independent hardware stores and home centers around the world. We’ve enjoyed seeing how different they all are and making great friends. I am proud of the hard work and achievements Bill has made at NRHA. Now we embark on a new adventure and I can’t wait to see where we go!” —Jane Lee, Bill Lee’s wife

“Warm, considerate, thoughtful, open-minded, intelligent, retail-focused, fun. When I reflect on my experiences with Bill Lee as a retailer and a member of the NRHA board of directors, these are just a few words that pop up. Bill always thought about how a decision would affect the retailer and if it fit our mission statement. I’ve learned a lot from my involvement with NRHA and from Bill, much of which I apply to my business today.” —Linda Johnson, Village True Value

December 2017 | HARDWARE RETAILING

Rusty Flamm Rusty’s Home Center Illinois

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

“Orgill brings such a vast array of merchandise and large

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Staying Stocked

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

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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.”

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