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A New Vision Retailer Invests in a Community Fixture Page 52

2019 Market Measure: The Industry’s Annual Report Page 27 Volume 217 • Issue 6 • December 2019 • hardwareretailing.com

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Volume 217 • Issue 6 • December 2019 • hardwareretailing.com nrha.org/rmcp

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Serving Hardware, Home Center & Building Material Retailers

A New Vision Retailer Invests in a Community Fixture Page 52

2019 Market Measure: The Industry’s Annual Report Page 27 Volume 217 • Issue 6 • December 2019 • hardwareretailing.com

CUSTOMER SUCCESS STORY

Fruitland Hardware RockSolid MAX® Delivers Productivity Gains and a Robust Growth Platform When Steve and Patti Holland bought Fruitland Hardware in Jackson, Missouri in September 2017, it was almost like a dream come true. After nearly 30 years in the U.S. Navy, including 12 years in Japan and 8 in Kuwait, Steve was ready to come home. Where better than to the small town in heartland America where he grew up? And what better place for a self-confessed “tinkerer who just likes fixing stuff” to begin a new career than a hardware store?

A smooth transition halted by a computer crash

development for growth-oriented small and mid-sized enterprises. “I looked at about half a dozen different options, but RockSolid MAX was built specifically for hardware stores and that made a big difference,” Steve explains. “Plus, my contact with the company had grown up in his own family’s hardware business and he knew it inside and out. He was able to answer all my questions about running the business and came up with solutions to many of the challenges I was facing as a new owner.”

There was the added benefit that the store’s longtime general manager, Steve Martin, was staying on to serve as a valuable resource while Steve Holland learned the business. It seemed like all the stars were perfectly aligned to transition Steve smoothly back into the civilian world. That is, until just three months after he bought the business when the store’s computer crashed and he lost all his data, including most of his backup files.

Cloud-based software provides automatic backups, software upgrades, and data security

In one way, the computer crash had a silver lining. “When I bought the business, it was running on a QuickBooks POS system tied in with QuickBooks financial software,” Steve recalls. “It was an old version of POS and needed updating but regardless, would have been very limited for hardware store operations.”

Following the transition, the team would be able to dedicate its resources and time to businesscritical matters, rather than IT functions.

Unwelcome as it was, the crash forced Steve to begin looking for new software, and it didn’t take too long to find the logical choice: RockSolid MAX from ECI Software Solutions, the leader in software

Also making a big impact on Steve’s decision was RockSolid MAX’s status as a cloud-based software. “After my computer crashed, I really wanted a system that offered reliable off-site backups, automatic upgrades, and additional security; that was also very important to me.”

A solid implementation plan with support empowers the team with confidence

Once Steve decided to switch to RockSolid MAX, he found even more benefits from the move. “About a month before the rollout date, we sat down with RockSolid MAX and started working with some dummy inventory just to test things out. It took us less than two hours of playing with the

program before we were high-fiving each other because we saw how much it could do and how easy it was to do it.” Things only got better as Steve’s go-live date drew nearer. “The implementation team was great,” he recalls. “They would contact me on a daily basis in the time leading up to our go-live day and after we went live, they stayed in touch to make sure everything was running smoothly. They just made the whole process effortless.” Fruitland Hardware is an Orgill house and the implementation team was able to load past Orgill buying history and pricing into the system. “That made a big difference,” says Steve. “It meant that everything we needed was there from day one. When we went live, we were up and running right away.”

Support and training continue to be a great asset after go-live Steve also gives kudos to the RockSolid MAX team for its support after his store went live. “Any time I

had a technical issue, all it took was just one phone call,” he says. “I always got through to a live person when I called and they had no problem talking me through the solution I was looking for.” Thanks to the comprehensive training resources, those calls quickly became few and far between. “The online training videos are fantastic,” says Steve. “They’re very easy to use, you can go through them on your own schedule, and they do a great job of explaining the program and getting you ready to use it. If there’s anything that isn’t covered by the videos, I can go to the RockSolid MAX support portal and search for what I’m looking for there.” For most small business owners, switching software can be among the most stressful tasks they ever face, but not for Steve Holland.

Like what you’ve read so far? Continue reading this article at www2.ecisolutions.com/fruitland-hardware

Get Protection in the Cloud! RockSolid MAX™ cloud-based software for hardware stores and home centers protects your data from fire, natural disaster, or cyber attacks. With automatic backups to the cloud, you will save time and rest easy knowing that your business information is always safe.

Watch this 2min video to see what cloud software can do for your business: www2.ecisolutions.com/cloud-video 800.588.5128 | rocksolidmaxinfo@ecisolutions.com | How business gets done.

Headquarters OUR MISSION

The North American Retail Hardware Association (NRHA) helps independent hardware stores, home centers and lumberyards, regardless of wholesale affiliation, become better and more profitable retailers.

136 N. Delaware St. #200 Indianapolis, IN 46204 317-275-9400 nrha@nrha.org nrha.org

@NorthAmericanRetailHardwareAssociation @nrha_official North American Retail Hardware Association @nrha_official

EXECUTIVE STAFF

EDITORIAL, DESIGN AND PRODUCTION

PRESIDENT AND CEO Bob Cutter

EXECUTIVE VICE PRESIDENT AND EXECUTIVE EDITOR Dan Tratensek

VICE PRESIDENT OF FINANCE AND BUSINESS SERVICES David Gowan

NRHA BOARD OF DIRECTORS CHAIRMAN OF THE BOARD TJ Comstock, Northwest Hardware LLC, Billings, Montana EXECUTIVE VICE CHAIRMAN Greg Schlecht, Greg’s True Value, St. Francis, Wisconsin DIRECTORS 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 David Dishke, Grand River Home Hardware, Caledonia, Ontario SECRETARY-TREASURER Bob Cutter, NRHA President and CEO IMMEDIATE PAST CHAIRMAN Megan Menzer, Newton’s True Value, Cherryvale, Kansas

MEMBER SERVICES TRAINING MANAGER AND EDITOR Jesse Carleton, 317-275-9418, jcarleton@nrha.org RETAIL OUTREACH COORDINATOR Renee Changnon, 317-275-9442, rchangnon@nrha.org EVENT MANAGER AND RETAIL SUPPORT Katie McHone-Jones, 317-275-9426, kmchone-jones@nrha.org

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

NRHA CANADA NRHA CANADA Michael McLarney, +1 416-489-3396, mike@hardlines.ca 330 Bay Street, Suite 1400, Toronto, ON, Canada M5H 2S8

MANAGING EDITOR Melanie Moul ASSISTANT EDITORS Kate Klein Todd Taber PRODUCTION EDITOR Hans Cummings

Making succession planning a priority today means being prepared for tomorrow. Join Hardware Retailing every month in 2020 for a year’s worth of succession planning insights and tools.

12 MONTHS

GRAPHIC DESIGNER Autumn Ricketts WEB DEVELOPER Kevin Trehan PRODUCTION MANAGER Nancy A. Vondersaar SALES AND PRODUCTION ASSISTANT Freda Creech

SALES AND MARKETING VICE PRESIDENT OF SALES AND PUBLISHER Kevin Hohman, 317-275-9430, khohman@nrha.org DIRECTOR OF MARKETING AND COMMUNICATIONS Whitney Daulton CORPORATE COMMUNICATIONS MANAGER & EDITOR Julie Leinwand

CIRCULATION, SUBSCRIPTION AND LIST RENTAL INQUIRIES

GREAT LAKES REGION MANAGER Kevin Hohman, 317-275-9430, khohman@nrha.org

PHONE 314-432-7511 FAX 314-432-7665

NORTHEAST REGION MANAGER Brad Lyons, 317-275-9424, blyons@nrha.org SOUTHEAST REGION MANAGER Scott Gilcrest, 317-275-9414, sgilcrest@nrha.org WEST REGION MANAGER Matt Caruso, 317-275-9443, mcaruso@nrha.org CONTACT NRHA SALES 136 N. Delaware St. #200, Indianapolis, IN 46204 Fax: 317-275-9400 CANADA John Magner, 500 Queens Quay W., #101W Toronto, ON M5V 3K8 416-598-0101 x220; Fax: 416-598-9191, jmagner@yorkmedia.net

STATE AND REGIONAL ASSOCIATIONS

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

HARDWARE RETAILING | December 2019

A Year of Preparation

SENIOR DESIGNER Lynnea Chom

MIDWEST HARDWARE ASSOCIATION John Haka, 201 Frontenac Ave., P.O. Box 8033 Stevens Point, WI 54481-8033; 715-341-7100; 800-888-1817; Fax: 715-341-4080

COMING IN JANUARY

CIRCULATION DIRECTOR Richard Jarrett 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. Periodical postage paid at Indianapolis, Indiana, and additional mailing offices. POSTMASTER: Send address changes to Hardware Retailing, P.O. Box 16709, St. Louis, MO 63105-1209. All editorial contents copyrighted 2019 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.

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Contents

High Performance Retailing

DECEMBER 2019 | VOLUME 217 | ISSUE 6

H1 SPECIAL ISSUE

Adding It Up You are likely always looking for ways to bring in new customers. In the Winter 2019 issue, High Performance Retailing discusses how different generations of consumers respond to digital, print and TV advertising. Plus, learn how to ease shoppers’ renovation stressors while boosting your transaction size. High Performance Retailing Brought to You by Hardware Retailing and The Farnsworth Group

Winter 2019 V1

Zero Regrets Boosting Kitchen Renovation Sales Page H4

Sales Focus Outside Sales Teams Deliver New Leads Page H12

Paths to Purchase

COVER STORY

Find the Marketing Resonating Across Consumer Generations

A Tale of Transformation

Page H6

The building that today houses Small Town Supply in upstate New York previously was home to a business from a completely different industry. Learn from store owner Clark Porter about all the details that went into restoring an old car dealership into a unique and comprehensive hardware store.

46 CATEGORY SPOTLIGHT Hardware stores had the highest ever overall average sales per location:

$2.2 million

Source: 2019 Cost of Doing Business Study

27 MARKET MEASURE

2019 in Review Market Measure gives you insider info. In this comprehensive annual resource, find experts on economics and housing, Cost of Doing Business Study insights and industry financial overviews. 4

HARDWARE RETAILING | December 2019

A Well-Dressed Department Clothing can be a challenging category to do well, partly because of its breadth and partly because it relies on trends and compelling merchandising more than traditional hardlines. Get some pointers from the team at Hoover Do it Center on how to set up a dapper department.

58 OPERATIONS

The 7th Generation Succession planning is not an easy process, no matter how long your family has been in business. Margaret Clark is the seventh generation of her family to own Clarks Hardware. Hear what she learned as she and her father made the ownership transition.

Departments 06 . . . . . . . . . . . . . . . . . On the Web 08 . . . . . . . . . Independent Thinking 10 . . . . . . . .Taking Care of Business 12 . . . . . . . . . . . . . . . . .NRHA News 16 . . . . . . . . . . . . . . . . . . . . . Trends 18 . . . . . . . . . . . . . . . New Products 24 . . . . . . . . . . . . . . . . . . Checkouts 76 . . . . . . . . . . . . . . . . Newsmakers 78 . . . . . . . . . . . . . . . . . . Last Word

On the Cover Clark Porter, owner of Small Town Supply spent two years renovating his store from a car dealership into a hardware store. Photo by Lynnea Chom

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On the Web

MERCHANDISING

MARKET MEASURE

2019 in Motion

The last 12 months have been filled with retail innovation and opportunity. Join NRHA executive vice president Dan Tratensek as he reviews some of the key performance indicators of the 2019 Market Measure report. Take full stock of 2019 now at TheRedT.com/market-measure.

A Clean Bill of Merchandising Give your setups a checkup and make a commitment to healthy merchandising in 2020. Head to TheRedT.com/merchandising for examples from your peers and get started on a fresh vision for your operation.

$24 is the highest ever sales per customer recorded for typical hardware stores, up from $22 last year. Source: 2019 Cost of Doing Business Study

PROFILE

One Block at a Time Hoover Hardware Do it Center has a long history of meeting the needs of residents in Troy, Pennsylvania. Visit TheRedT.com/hoover to learn more about the company’s recent expansion projects, including opening a clothing store in town when similar operations have closed. OPERATIONS

How They Did It All All year, Hardware Retailing has captured the stories of retailers who pushed beyond the ordinary and achieved exceptional results. From boosting sales in a small space to operating 24/7, catch up on the entire series now at TheRedT.com/did-it-2019. 6

HARDWARE RETAILING | December 2019

PROFILE

Start Your Engines A century ago, Small Town Supply was a bustling auto dealership. Today, it’s a thriving hardware store. Take a tour of the 104-year-old building by heading to TheRedT.com/building-reborn.

SOCIAL MEDIA LINKS

@HardwareRetailing @hardwareretail

WWW.EISENWARENMESSE.COM/TICKETS

WORK HARD! ROCK HARD! EISENWARENMESSE – INTERNATIONAL HARDWARE FAIR COLOGNE / GERMANY, 1 – 4 MARCH 2020

Koelnmesse Inc., Darrin Stern, 8600 West Bryn Mawr Avenue, Suite 410 North, 60631 Chicago IL, USA Tel. +1 (773) 326 9925, d.stern@koelnmessenafta.com

ER R EG I S T E O N LI N ! W O N

Independent Thinking

We’ve Got You Covered

uring the past several months, I’ve had the pleasure of moderating several of the North American Retail Hardware Association’s (NRHA) Retailer Roundtables across the country. The hottest topic on the agenda is developing people and building the bench. It’s on everyone’s minds. As we head into a new year, I encourage you to examine your people-related processes and training strategies to see if they are in line with your growth goals for 2020. No doubt the people in your business—the ones who take care of your customers— are your greatest competitive advantage against the big boxes and Amazon. We recently hosted a Human Resources & Training Roundtable in Indianapolis, and participants talked at length about how we as an industry need to do a better job of mentoring—from the start of the onboarding process to integrating new hires into our culture through the moment when it’s time for them to step up and become tomorrow’s leaders. Roundtable attendees said they rely on NRHA, specifically the programs we offer though the Retail Leadership Institute, to prepare their people to succeed. They don’t have to reinvent the wheel when it comes to developing educational programs for their employees. As you develop your plans and budgets for 2020, I want to remind you of the programs NRHA has available to help develop your greatest asset.

“Helping your

people grow and succeed is perhaps the best investment you can make.

”

• Basic leadership skills. NRHA’s Foundations of Leadership program is a 16-week online class developed with input from leading independent retailers and Ball State University professors. It covers the basics of leadership—from determining your leadership style to communication and team building. It will educate your managers on becoming leaders because, yes, there is a difference between the two. The deadline to apply for the next session is Jan. 3. Visit nrha.org/fol to learn more. • Retail management development. The NRHA Retail Management Certification Program is the industry’s gold standard for educating your key people on how to grow top-line sales and bottom-line profits. It fires up your people to take your business to new levels of success. We hold two classes each year in the spring and fall. More than 200 program graduates swear by its results. Learn more at nrha.org/rmcp. • Peer-to-peer retailer roundtables. As a trade association, one of our key responsibilities is to associate—bringing retailers together to share ideas and discuss the pertinent issues of the day. In 2020, a key initiative of NRHA is to launch more of these best practice sharing sessions. If you are interested in participating, fill out the form at nrha.org/roundtables and we’ll prepare a seat for you at the table. • In-store team building. This one is new for 2020. Through this new organizational development assessment program, we come to you for an intensive two-day boot camp designed to get your people working together and develop a culture that is conducive to success. We’ll work with you to develop a cohesive team, while conducting a thorough review of your people processes and training procedures. Helping your people grow and succeed is perhaps the best investment you can make in your business and in your people. If you are curious about how NRHA can help, please check out our lineup on nrha.org or give me a call at 317-275-9417. Happy holidays!

Scott Wright, Executive Director, Retail Leadership Institute swright@nrha.org

HARDWARE RETAILING | December 2019

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Taking Care of Business

Unlocking Your Data Potential

“Retailers typically

only use about 10 percent of the data at their disposal when it comes to running their operations.

”

uring a recent conversation with Scott Wright, executive director of the North American Retail Hardware Association’s Retail Leadership Institute, we discussed the concept of how data is used in different retail operations (Yes, we are really that boring.) Scott pointed out retailers typically only use about 10 percent of the data at their disposal when it comes to running their operations. He also remarked this is similar to the familiar statistic we hear about how human beings only use about 10 percent of the capacity of their minds. This led us to this observation: If you could unlock greater potential by using a larger portion of your brain’s capacity, wouldn’t you do it? Of course you would. So, using that same logic, why wouldn’t you seek to unlock greater potential for your business by taking advantage of the 90 percent of data available to you that you don’t currently utilize? This is exactly what companies like Home Depot, Walmart and Amazon do. In fact, many retail observers say these companies’ abilities to harness consumer and operational data has been the real difference in their ability to grow market share. So here is my challenge to you. As you set goals for 2020, I encourage you to commit to utilizing more data in your decision-making process. This issue of Hardware Retailing serves as a great starting point because it is chock-full of data points for you to consider. We have information about the macroeconomic state of the market that can help you budget your growth. We feature excerpts from our 2019 Cost of Doing Business Study, which can help you better understand your operational performance, and we have insights into broader issues—like the U.S. housing market—that can help you better understand the industry. All of this data can help you make better decisions. Another incredibly valuable data source for retailers can be found in your point of sale (POS) systems. As part of this challenge to you in 2020, I suggest you become more familiar with the data these powerful systems provide and consult with your POS provider or distributor about how to put this data to better use. Lastly, I encourage each of you to gather more data on your customers. Conduct customer satisfaction surveys in 2020. If you don’t already have one, start a loyalty program and gather data from it. There is no limit to what you can do with this kind of data once you start getting your arms around it. But here’s the tricky part and the part where most business owners throw up their arms and walk away. Gathering, processing and utilizing data can be a daunting process and knowing how and where to start is challenging. Start small. Commit to looking at one or two data points, like transaction size, customer counts or customer satisfaction scores. Then set about gathering that information and making it part of your planning and managing process. The good news is retail and operational data is relatively easy for you to access and utilize. In fact, utilizing business data is a lot easier than figuring out how to use that other 90 percent of your brain (with all due respect to Dr. Timothy Leary).

Dan M. Tratensek, Executive Editor

dant@nrha.org

HARDWARE RETAILING | December 2019

NRHA News

Do You Know a 2020 Young Retailer of the Year?

ominations are open for the North American Retail Hardware Association’s (NRHA) 2020 Young Retailer of the Year program. Now in its 24th year, the program identifies young leaders who represent the future of the independent home improvement industry.

Why Nominate? The Young Retailer of the Year program is the premier award in the industry honoring the next generation of independent home improvement retailers. Honorees benefit from exposure for themselves and their businesses, and they build a network with like-minded retailers in their generation. Honorees also have the opportunity to participate in additional programming and scholarships through NRHA.

How Does It Work? The deadline to submit nominations is Feb. 28, 2020. Entries are scored based on certain nomination criteria,

including contributions to operational growth; community involvement; engagement in industry education; and industry and organizational innovation. Honorees are selected from three categories: stores with less than $2 million in sales; stores with more than $2 million in sales; and multiple-store operations. Honorees are invited to accept their awards at a ceremony on May 4, 2020, the evening before the National Hardware Show, in Las Vegas.

Judging Criteria Young Retailer of the Year nominees should be 35 years old or younger as of Feb. 28, 2020. They must work at independent hardware stores, home centers or lumberyards in the U.S., its territories or in Canada. Past entrants who were not chosen as previous honorees are invited to submit new applications. For more information, visit nrha.org/yroty.

The 2019 Young Retailer of the Year honorees: (front row, left to right) TJ Colson, Wilco Farm Stores; Jacob Hagan, Hagan Ace Hardware; Samantha Post, T & M Hardware & Rental; Franklin Cloninger, Triangle True Value Hardware and Rental; (back row, left to right): Kevin Harris, Harris Home Hardware; Trey Hamilton, Arab Lumber & Supply; Morgan Godfrey, Select Source.

HARDWARE RETAILING | December 2019

Make Training Part of Your 2020 Growth Strategy

hat’s your training goal for the new year? NRHA makes executing a plan easy, no matter how many team members you have or where there are opportunities in your operation for additional education Here are highlights from some of NRHA’s 10 comprehensive online courses, available only to NRHA Training Members. Visit nrha.org/online-training to learn more about accessing these resources and how they will benefit your operation.

Basic Training in Merchandising This course teaches merchandising fundamentals and explains how your staff can maximize the impact of every display.

Basic Training in Hardware Retailing This course teaches the benefits of common products, along with selling skills and frequently asked questions about eight core hardlines categories.

Basic Inventory Management This course offers an overview of the basic concepts and best practices of managing inventory in a home improvement store.

Basic Retail Accounting This course explains components of common financial statements. Business owners and employees involved with financial management will benefit from this course.

NEW: Basic Retail Pricing This course provides a high-level view of pricing fundamentals and shows the connection between your pricing strategy and your overall profitability.

Trainer’s Corner: Leadership

strong team leads to lower turnover and higher productivity. Strengthen the leadership capabilities of your managers to build up your entire team of employees. NRHA gives you the opportunity to develop your key employees to be better managers and take the next step in their careers. The Foundations of Leadership Program is a 16-week, online leadership development course designed to cultivate leaders within your business. It was developed with guidance from leading independent home improvement retailers and course instructors who specialize in leadership development and entrepreneurship. The online course is divided into six learning modules, each of which can be completed within a two-week period to accommodate students’ busy schedules. Students are also encouraged to collaborate with others in the class and with instructors to enhance the learning experience. If you want to start developing the next generation of leaders, there’s still time to register for the Spring 2020 Session. The registration deadline for that session is Jan. 3, 2020, so reach out today to get started. To learn more, visit nrha.org/fol or contact Scott Wright, executive director of the NRHA’s Retail Leadership Institute, at swright@nrha.org.

December 2019 | HARDWARE RETAILING

NRHA News

Join Free Webinars on Harassment and Inclusion

etailers today are increasingly concerned about protecting their businesses and providing a safe and inclusive work environment for their employees. To help retailers brush up on these topics, NRHA has partnered with Member Insurance to offer free one-hour webinars on harassment in the workplace and diversity and inclusion. These real-time online presentations will take place every Tuesday in February.

There will be opportunities for interactivity and time for Q&A at the end. Rod Janis, retail law expert, and Carl Dent, vice president of claims and risk services at Member Insurance, will present industry-specific case studies along with tactics to improve workplace culture and prevent harassment. Does this sound like something that could benefit your team? Register now at memberinsurance.com/webinars.

Preventing Harassment

Investing in Culture

How to Successfully Protect Your Business and Your Employees

Inclusion and Diversity Strategies to Help Your Business Soar

Learn what constitutes harassment, factors that tend to create a hostile work environment and ways to avoid exposure to claims of harassment. Choose a Date to Join This Webinar • Tuesday, Feb. 11, 2020 at 2:30 p.m. - 3:30 p.m. EST • Tuesday, Feb. 25, 2020 at 2:30 p.m. - 3:30 p.m. EST

Create an environment fueled by engagement and innovation. Ensure all employees are heard, recognized and appreciated to enhance productivity. Choose a Date to Join This Webinar • Tuesday, Feb. 4, 2020 at 2:30 p.m. - 3:30 p.m. EST • Tuesday, Feb. 18, 2020 at 2:30 p.m. - 3:30 p.m. EST

Improve Your Business With Help From NRHA

ach year brings new services, programs and partnerships from NRHA to streamline your business and strengthen your team. Keeping track of each offering from your association has never been easier. Included with this issue of Hardware Retailing is the 2020 NRHA Member Guide, your complete resource for all things NRHA. Each page of the guide introduces you to the innovative and comprehensive ways NRHA can help you improve your operation.

Membership Benefits Learn how an NRHA Training Membership can create a stronger team through retail-specific training programs designed to help your staff excel.

Business Services NRHA partners with a variety of organizations to find new ways to facilitate your business’s success, including custom health insurance options and increasing online visibility.

Digital Outreach

Individual Offerings

NRHA produces two original podcasts featuring interviews with engaging, innovative industry leaders, while the Hot Products Hub e-newsletter highlights new products.

Get more details on NRHA’s Retail Leadership Institute, which offers results-focused retail training to help guide high-potential employees to the next step of their careers.

December 2019 | HARDWARE RETAILING

Trends Your Customers Are Shopping Online

80%

Homeowners are increasingly likely to buy home improvement products online, according to recent research from the Home Improvement Research Institute (HIRI). About 33 percent of homeowners HIRI surveyed bought home improvement products online within the past year, but half of the respondents plan to buy related items online in the next year. In addition, 44 percent say they are shopping online more frequently for home improvement products than they did a year ago.

of online buyers got free shipping on their most recent purchase.

CHECKOUT

This data shows “an upward trajectory in consumer acceptance” of online shopping for home products, according to HIRI. Average in-store spending remains higher than online spending, but that might be because homeowners are more likely to buy large items, such as lumber and major appliances, at stores, HIRI reports. Learn more about HIRI and access market sizing and category data by joining HIRI at HIRI.org.

Breaking Down Online Spending Where people made home improvement purchases in the past 12 months.

How much are consumers spending (on average) in stores and online?

$1,500

$1,200

$1,371

$900

Home improvement shoppers ages 18-34 were most likely to make purchases online.

$941

$600 In store only . . . . . . . . . . . . . . 50%

$300

In store and online . . . . . . . . . 42% Online only . . . . . . . . . . . . . . . . 8%

HARDWARE RETAILING | December 2019

In stores

Online

Source: Online Home Improvement Consumer Study, HIRI and The NPD Group

Performance in the field and on the shelf.

Introducing the new Simpson Strong-Tie® anchor retail sets. Our code-listed, high-strength anchoring solutions address the needs of professional contractors and DIYers alike. Our program comes with eye-catching displays and POP collateral as well as informative packaging to drive sales. Combined with our multiple pack sizes and price points, the new retail sets make it easier than ever to put Simpson Strong-Tie® anchors in your customers’ hands. To learn more, contact your local sales representative at (800) 999-5099.

New Products

3 4

2 1. Jigsaw Puzzle

New York Puzzle Co.’s Makers Collection Puzzle features a collection of handy things you might find in a garage, toolshed, kitchen or studio. Anvils to putty knives, sewing machines to whisks, this puzzle has it all for the creative handyperson in each of us. These puzzles are made with 100 percent 80-point chipboard. Linen-style paper is used to reduce glare while playing. New York Puzzle Co. pledges 1 percent of the sale of each puzzle to environmental nonprofits committed to creating a healthy planet. New York Puzzle Co. 347-815-1234 or newyorkpuzzlecompany.com

Perky-Pet’s Top Fill Hummingbird Feeders fill from the top to prevent messy refills. They’re easy to clean with removable parts and come in a variety of styles and colors. Their feeding ports are inspired by nature, designed for comfortable feeding and specially shaped to keep bees out of the nectar. A gasket in the feeder base prevents leaking. Perky-Pet 855-737-5973 or perkypet.com

4. Smart Thermostat

FireEx is a chimney fire suppressant for use in wood-burning stoves and fireplaces. It uses a specialized zinc oxide compound that, when burned, emits a cloud of smoke thick enough to extinguish a chimney fire in minutes without the use of water.

This Energy Star-certified thermostat features Home & Away Aware technology that automatically adjusts temperatures to homeowners’ preferred settings once they enter their home radius using cloud-based geofencing. Greenlite’s G² Smart Thermostats are compatible with Amazon Alexa, Google Assistant and Apple HomeKit.

Meeco Mfg. 206-427-9372 or meecomfg.com

Greenlite Lighting Corp. USA 949-261-5300 or greenliteusa.com

2. Fire Suppressant

3. Top Fill Hummingbird Feeder

HARDWARE RETAILING | December 2019

5. Bath Drain

7. Fly Trap

Keeney Manufacturing Co. 860-666-3342 or keeneymfg.com

Bug Ball 678-520-7006 or bugballkit.com

6. Bungee Strap

8. Weed Killer

Keeney’s Full Soak Bath Drains include a push-close overflow feature allowing water to rise to a greater depth than conventional drains. They fit most tubs up to 22 inches deep with a 1 ½-inch schedule 40 PVC tube installed. They also include a flat toe touch drain stopper and are available in polished chrome, brushed nickel and bronze.

The Better Bungee’s Slotted Strap adjusts size to meet the desired length of the user. They come in two colors, black and blue, and two hook end types—a nonmarring over-molded nylon hook end and a galvanized hook end. The cords are made from a proprietary blend and do not break or become brittle even when exposed to extreme hot and cold temperature variations, UV, water, saltwater, oils, fuels or hydraulic fluids and are perfect for a multitude of applications. The Better Bungee 610-360-1032 or thebetterbungee.com

Made from heavy-duty, weather-resistant black PVC, the Bug Ball is designed to catch and hold biting insects. Inflate, hang and use with Tangle-Trap sticky coating (included) to control horseflies, yellow flies, deer flies, greenhead flies and more. It’s safe to use around children and pets.

Sedge Stop™ Nutsedge Weed Killer from Gordon’s® offers season-long control of sedges and kyllingas, plus control of select broadleaf weeds in cool- and warm-season turfgrasses. It features a granular formulation to reduce drift, and the innovative shaker can makes application easy. A single 2 lb. shaker can of Sedge Stop covers up to 500 square feet. PBI/Gordon Corp. 816-421-4070 or gordonsusa.com

December 2019 | HARDWARE RETAILING

New Products

9 11

10 9. Ink & Stain Remover

Amodex’s Stain Swipes are saturated with a nontoxic stain-fighting formula and are perfect to on-the-go stain treatment. They remove stains from porous and nonporous surfaces, including fabric. Stain Swipes can be used to remove white board ghosting and also work on permanent marker, inks, dyes, crayon, scuffs, wine and more. Amodex® 877-866-1255 or amodexink.com

10. Garment Steamer

12 11. Appliance Pulls

Create a seamless look across the kitchen with Ashley Norton’s collection of appliance pulls. Designed to coordinate with its line of cabinet pulls, these pulls are engineered with the human hand in mind, ensuring a comfortable feel and sturdiness. Ashley Norton appliance pulls are available in a wide array of lengths and finishes to fit every appliance, from dishwashers to oversized refrigerators. Ashley Norton Inc. 973-835-4027 or ashleynorton.com

The PureSteam Portable Fabric Steamer’s fast-heating water tank is ready within two minutes and provides 10 minutes of nonstop steaming. Its portable design and long cord make it suitable for travel and it includes auto shut-off safety protection if it gets too hot or runs out of water.

12. Dust/Debris Collector

Pure Enrichment 714-668-0300 or pureenrichment.com

Skamp Containment Systems 317-442-6699 or skampcan.com

HARDWARE RETAILING | December 2019

Skampcan replaces the dustpan. It installs into the floor and can be removed and emptied at your convenience. A vented version is available that can replace floor registers, and it’s suitable for use in homes, workshops and RVs.

13. Hunting Seat

15. Odor Eliminator

ThermaSeat 603-784-5671 or thermaseat.com

Whiff Wizard 315-682-4953 or whiffwizard.com

14. Water Bottle

16. Bar/Prep Faucet

AMEICO 860-354-8765 or ameico.com

Delta Faucet 800-345-3358 or deltafaucet.com

Produced with Softek™ closed-cell foam, ThermaSeat® won’t absorb moisture. It stays pliable in cold weather and features a Velcro® strap for attachment and transport. ThermaSeat is available in ¾-inch and 1 ½-inch thicknesses.

The SquireMe bottle is handmade from lightweight borosilicate glass and is wrapped in a silicone sleeve. It is BPA-free, phthalate-free, odorless, nontoxic and mildew- and corrosion-resistant. SquireMe bottles are dishwasher safe.

Using a special gel and activated charcoal, each 14 oz. Whiff Wizard jar eliminates odors for about 400 sq. ft. It has a two-year shelf life and works for 45 to 90 days after opening.

Delta’s Trinsic® Single Handle Pull-Down Bar/Prep Faucet features Touch2O™ technology—touch it on, touch it off. MagnaTite Docking holds the spray wand firmly in place. It is backed by Delta Faucet’s five-year limited warranty.

December 2019 | HARDWARE RETAILING

New Products

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The patented interlocking leveling system fixes wobbly legs by adjusting to fill the gap between the leg and the floor on any surface. Once the weight of the table or chair rests on the shim, it locks into place. Pro Leveler® 954-383-9442 or proleveler.com

With a variety of clearly marked spring assortments,Ajax offers your customers ease of selection for their specific needs.Each assortment comes in their own unique case.Our storage cabinets and kits,provide assortments of Steel Lock,Brass Lock,Music Wire,Stainless Steel,Extension,Compression and more,each making dispensing efficient and economical. Ask for our Product Catalog which provides product descriptions and size specifications.

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HARDWARE RETAILING | December 2019

18. Can Crusher

Make crushing cans easier and more efficient with the Easy Pull Aluminum Can Crusher. Its patented design requires less effort to crush cans, and they automatically eject from the bottom after crushing. An optional collection bin slides onto the bottom of the crusher to collect up to 48 cans. Dial Industries 323-263-6878 or dialind.com

19. Lock Lubricant

3-in-1 Lock Dry Lube’s aerosol formula penetrates quickly and deeply to loosen stuck locks and leaves a long-lasting corrosion protection film. It is safe to use on metal, wood and most plastic surfaces and dries clear to the touch in minutes. WD-40 888-324-7596 or wd40.com

20. Stairs Platform

Hailo’s TP1 Stairs Platform features a nonslip working surface and aluminum frame. It can serve as a working platform or as a base for folding steps and stepladders. The adjustable legs fit staircases with turns or landings, as well as straight staircases. The platform includes a built-in level. Hailo 706-286-8484 or hailo-home.de

December 2019 | HARDWARE RETAILING

Checkouts COMMUNITY RELATIONS

Making Community Generosity Easier

or the third year running, Lugbill Supply Center in Archbold, Ohio, provided everything necessary for community members to give Christmas gifts to children throughout the world who are impacted by war, poverty, natural disasters and disease. Deb Nafziger, co-owner of the business, has packed shoeboxes full of small gifts as part of Operation Christmas Child with her family for many years. Operation Christmas Child is a program that Samaritan’s Purse, an international relief organization, coordinates annually. Nafziger’s idea three years ago was to make participating in Operation Christmas Child as easy as possible for other community members who want to buy gifts for needy children. Once a year, Lugbill Supply Center orders products it doesn’t typically stock. The staff sets out the items—which include

inflatable balls, toiletries, small toys and school supplies— on tables for customers to buy, pack and then donate to Operation Christmas Child. The store posts a list of items Samaritan’s Purse recommends people donate, offers a 20 percent discount on the products and provides free cardboard boxes to pack. People bring their children and grandchildren to the store to buy products and fill the boxes together, Nafziger says. After the six-week collection period, store manager Dan Beck delivers the packed boxes to a local church, along with money community members and the store donate to pay for shipping. “I go more by my heart than my business sense for this project,” Nafziger says. “We’re really doing it to provide a service to the community to fill these shoeboxes.”

Lugbill Supply Center in Archbold, Ohio, orders products and displays them with cardboard boxes to make donating Christmas gifts to needy children easy for local families. Community members fill the boxes and donate them to Operation Christmas Child.

Looking for creative ways to engage customers? Whether it’s promotions, merchandising or special events, we cover it here. Have an idea? Contact Kate Klein at kklein@nrha.org to have your story considered for publication. 24

HARDWARE RETAILING | December 2019

Customer Experience: Beautiful Blocks Bobbi Delzer, owner and manager of Sawyers Ace Hardware in Phillipsburg, Kansas, began painting quilt patterns on squares of wood as a hobby. Making the decorative squares has become a popular pastime in her community, and customers not only enjoy seeing the wooden quilt blocks decorating the side of Sawyers Ace, but they also can buy the supplies they need from the store to make their own.

Community Relations: Stuffing Stockings On the Saturday before Christmas in 2018, Stratton Hardware of Watertown, New York, hosted a stocking stuffer event to raise funds for the local high school swim team. Shoppers bought small Christmas gifts at the store or put cash in a donation bucket. The store donated 20 percent of sales from the event to the swim team, which was used toward a new natatorium board for displaying swimming records at the school.

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Market Measure The Industry’s Annual Report

December 2019 | HARDWARE RETAILING

What We’ll Cover 30 Industry Breakdown 31 Chain Results 32 Cost of Doing

Business Study

34 Retail Store Performance 36 Financial Profiles 38 Industry Year in Review 40 Housing Market Outlook 42 Economic Outlook 44 Canadian Retail Report

More Online Hardware Retailing is providing further Market Measure analysis via a video discussion from the magazine’s executive editor, Dan Tratensek. To hear Tratensek’s perspective on the current state of the industry and its outlook, visit TheRedT.com/market-measure.

The information in this Market Measure report was gathered by Hardware Retailing staff from a variety of resources that are attributed throughout the feature.

HARDWARE RETAILING | December 2019

hough there has been a lot of hushed talk in recent months about the R-word looming on our economic horizon, economist opinions are certainly split about whether a recession may be headed our way. While market watchers continue to debate the meaning of current economic indicators and the state of the housing market, all the signs we look at point to slower economic growth for the home improvement industry over the next several years. Similar to 2018, unemployment is low, wages are up and home prices have been on the rise. Since the last recession, home improvement spending and investment in housing and remodeling have all seen steady growth. This growth has helped sales through home improvement retailers outpace overall retail growth for years. However, in 2019, we saw signs that the strength of the home improvement retail market may be slowing. After getting year-end results for 2018, we revised our year-over-year growth predictions from 2017-2018 down to 4.8 percent (from 5.5 percent). We saw growth throttle back in 2019 and are currently predicting the year will end with sales of $407.1 billion for the industry, with year-over-year growth in 2020 of about 3 percent.

Market Expectations Looking ahead to year-end results and beyond, the slightly grim news is that we see 2019 being the best growth year for the industry in our five-year forecast. We expect compound annual growth from 2018-2023 to run only at slightly more than 3 percent, well below the 4 to 5 percent we saw in the recent past. An article in the Oct. 25 edition of The Wall Street Journal uses data from the Joint Center for Housing Studies of Harvard University to sum up rather well some of the challenges the home improvement industry is facing. “Following years of 5 percent to 7 percent growth in spending since last decade’s housing crash, Harvard’s model has been predicting slower growth for the past year or so and an outright decline next year for the first time since 2010,” the article states. The reasons for the market softening mainly revolve around fewer large construction projects and less homebuilding activity, slower sales of existing homes and diminished remodeling work. However, as we have seen in the past, even as some of these higher-priced projects slow, homeowners don’t stop spending when their bathroom sinks need to be repaired and kitchen walls need to be painted. What all this means is that we expect home improvement industry sales to slow in the coming years as larger projects get put off, though interest rates could impact this trend in either direction. At the same time as large construction and remodeling projects slow, smaller home updates and repairs will take on more prominence for home improvement customers. Over the next five years, we predict people will continue investing in their existing houses, even if large-scale remodels diminish in priority.

U.S. Home Improvement Sales (in billions, NRHA/Hardware Retailing projections)

$500

$400

$391.4

$407.1

$418.9

$430.6

$442.3

$454.6

2.3% Home Depot’s projected total sales growth for 2019

3.0% CAG 2018-2023 $300

Source: Home Depot report, August 2019

2018

2019

2020

2021

2022

2023

Year

U.S. Home Improvement Sales (in billions, Home Improvement Research Institute & IHS projections/Current Prices)

$500

$400

$389.2

$405.1

$417.1

$429.9

$440.8

$451.0

3.0% CAG 2018-2023 $300

2018

2019

2020

2021

2022

2023

Year

60% Percent of independent retailers who expected sales to increase moderately or significantly by the end of 2019 (at midyear) Source: 2019 NRHA Midyear Review research

U.S. Home Improvement Sales (in billions, U.S. Department of Census/Monthly Retail Sales Report NAICS 444/Not Adjusted)

$400

$300

$301.8

$318.4

$331.6

$349.4

$365.7

$377.5

4.6%

Lowe’s overall projected sales growth for 2019

CAG 2013-2018 $200

2013

2014

2015

2016 Year

2017

2018 Source: Lowe’s report, August 2019

December 2019 | HARDWARE RETAILING

Industry Breakdown

A Closer Look at Home Improvement Sales The following monthly and annual breakdowns of industry sales in the U.S. include results from large privately held chains, public companies and independent home improvement businesses. The store counts also reflect the entire industry.

2019

2018-2023 Sales by Type of Store (in billions)

Home Improvement Sales by Month

Total

Hardware Stores

Home Centers

Lumberyards

2018

$391.4

$49.7

$244.0

$97.7

2019

$407.1

$51.8

$251.7

$103.6

2020

$418.9

$52.1

$259.1

$107.7

2021

$430.6

$53.2

$266.0

$111.4

(in billions)

January

$27.3

February

$24.6

March

$30.5

April

$34.7

May

$37.8

June

$34.1

2022

$442.3

$55.5

$272.7

$114.1

July

$34.4

2023

$454.6

$57.8

$281.6

$115.2

August (p)

$33.1

3.0%

3.1%

2.9%

3.4%

YTD

$256.5

2018-2023 Compound Annual Growth Rate

2018-2023 Outlets

2018 vs. 2019 Home Improvement Sales Growth

Hardware Stores

Home Centers

Lumberyards

2018

38,620

19,170

9,780

9,670

2019

38,480

19,100

9,730

9,650

January

11.4%

February

0.8%

March

-1.0%

April

4.2%

2020

38,395

19,050

9,710

9,635

May

-3.3%

2021

38,255

19,000

9,680

9,575

June

-5.3% 2022

38,125

18,900

9,675

9,550

July

-0.9%

August (p)

0.3%

2023

38,060

18,850

9,670

9,540

YTD

0.5%

-1.5%

-1.7%

-1.1%

-1.3%

Source: U.S. Department of Census/ Monthly Retail Sales Report NAICS 444/Not Seasonally Adjusted

Total

HARDWARE RETAILING | December 2019

2018-2023 Percentage Change

Source: NRHA/Hardware Retailing

Chain Results

Top Chains: Individual Performance The home improvement industry’s public companies and large privately held chains have seen consistent sales growth. Notably, Home Depot’s sales increased 37.3 percent and Lowe’s sales grew 33.5 percent from 2013 to 2018. Lowe’s store count fell when the company left Mexico and closed all Orchard Supply Hardware stores as well as some underperforming Lowe’s stores. 2018 Sales (in billions)

Stores at End of 2018

Stores in 2019 (as of fall 2019)

Home Depot

$108.2

2,287

2,291**

Lowe’s

$71.3

2,015

2,003**

Menard Inc.

$10.3*

316

325

Tractor Supply

$7.9

1,765

1,814

84 Lumber

$3.9

252

251

Carter Lumber

$1.5

153

160

Northern Tool + Equipment

$1.5*

105

114

Sutherland Lumber

$1.0*

Sources: Company reports and Hardware Retailing research 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: Hardware Retailing estimates **Store counts include operations in the U.S., Canada, Mexico and all other locations.

Market Share Profile The performance results below include information from the publicly traded and largest privately held home improvement companies in the U.S. The percentages show the total growth of these businesses specifically.

Top Chains: Industry Share

Top Chains: Combined Performance

Sales

No. of Stores

Net Sales

(as % of total industry)

(in billions)

2014*

49.4%

16.1%

2014*

$159.4

6,308

2015

49.7%

16.4%

2015

$168.6

6,447

2016

51.3%

17.4%

2016

$183.6

6,846

2017

51.9%

17.7%

2017

$193.9

6,988

2018

52.5%

18.0%

2018

$205.6

6,941

3.1%

1.9%

Compound Annual Growth Rate

6.6%

2.4%

2014-2018 Percentage Point Change

2014-2018

No. of Stores

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

December 2019 | HARDWARE RETAILING

Cost of Doing Business Study

A Record-Breaking Look at Retailers’ Financials

or more than a century, the North American Retail Hardware Association (NRHA) has gathered data from independent hardware stores, home improvement centers and lumberyards to compile its annual Cost of Doing Business Study. As the industry’s only financial benchmarking tool, the study gives retailers the information to compare their finances to typical and high-profit peers. The 2019 Cost of Doing Business Study features data from the 2018 fiscal year, including critical financial information from income statements, balance sheets and key performance ratios. You’ll find highlights from this year’s study in the following pages, showing an overall positive year for hardware stores, home centers and lumberyards. Historically, retailers have used the study to understand the financial health of their stores compared to similar operations. Retailers can use the study data to establish new financial goals and help individual retailers identify areas where they may be able to lower expenses and save money. This year’s study includes financial information from a record-breaking 1,117 independent home improvement store participants, representing a wide swath of retailers. The high number of participants ensured results were more accurate and relevant than ever before.

Study Methodology Each year, NRHA fields the Cost of Doing Business Survey by mailing questionnaires to hardware stores, home centers and lumberyards in the U.S. NRHA then completes an analysis of the aggregate numbers in the final report after extensively reviewing retailers’ financial data. Individual responses are kept in the strictest confidence. Most figures in this report are medians, meaning 50 percent of businesses fall below that number and 50 percent are above it. The median represents a typical company’s financial results, without extreme figures skewing the data. To identify high-profit operations, NRHA ranks all participating companies in their category based on net profit before taxes. The high-profit companies are in the top 25 percent of their store type.

HARDWARE RETAILING | December 2019

Using This Study To get the most out of these selected results from the 2019 Cost of Doing Business Study, follow these tips. •

Compare numbers. Determine your operating expenses as a percentage of sales and calculate your balance sheet as a percentage of total assets. Compare those numbers to the study results for typical and high-profit stores.

•

Look beyond the percentages. Take time to compare your real-dollar expenditures as well.

•

Consider the results. If you find your store’s individual data veers sharply from what’s contained within the study, explore the cause behind the discrepancy and develop a plan to bring your numbers on par with high-profit stores.

•

Participation counts. Note that this report contains figures from a different sample group of stores each year. Overall figures can vary from year to year based on the group of participating operations. Year-to-year comparisons are helpful for illustrating general trends over time.

Figures to Know •

Average Transaction Size Average transaction size is the total sales over a period of time divided by the total number of transactions in that same period. Use It: Measure your average transaction size weekly to spot shopping trends and establish a baseline for your business.

•

Payroll Payroll is the total cost of owner and employee salaries, insurance payments and benefit plans. Use It: Compare your payroll expenses to typical and high-profit operations to find areas you could cut.

Training Hours Per Employee

Health Insurance Costs 1.58%

Average Percent of Sales

Average Hours

Median Hours

Average Health Insurance Expense

$198,168.98

Median Health Insurance Expense

$47,754.00

Capital Expenditures Average Expense

$276,864.32

Median Expense

$31,707.54

Percent of Unsold Inventory (Last 24 Months) Credit Card Fees $120,242.50

Average Credit Card Fees

15% Average Inventory

11%

Average Fees Percent of Sales

Median Inventory

Total Sales Increases (Year Over Year) 10%

Shrink Expense as a Percent of Sales

1.0%

Average Percent Increase Median Percent Increase

2.3%

1.22%

5.10%

4.68%

5.04%

5.86% 5.66%

2.39% 2%

Average Shrink

Median Shrink

Hardware Store

Home Center

LBM Outlet

This section is based on 483 survey respondents to the Hot Topics Section of the 2019 Cost of Doing Business Study. The sample size represents approximately 43 percent of all companies responding to the survey.

Source: 2019 Cost of Doing Business Study

December 2019 | HARDWARE RETAILING

Retail Store Performance

Overall 2018 Business Performance

he following data from the 2019 Cost of Doing Business Study is divided into three sections so retailers can compare their businesses’ performance with home improvement operations similar to theirs. NRHA divides the numbers by three types of retail outlets—hardware stores, home centers and lumberyards. The complete study, which also includes financial overviews of U.S. paint stores, is available at nrha.org and is free to study participants.

Hardware Stores Overall, 2018 appears to have been a strong year for hardware stores, which reported the highest-ever sales per location with an average of $2,193,172. This record-setting level enabled hardware store owners to achieve higher profits before taxes at 4.1 percent. In addition, ales per customer in 2018 rose to the highest level ever recorded at $24. These higher profits were motivated by a range of factors, including trends like increased transaction sizes, customer counts which rose by 4.1 percent, and the highest inventory per square foot figure ever recorded. Respondents to the 2019 Cost of Doing Business Study seemed to wring additional profit by utilizing better expense controls than in previous study iterations. The average payroll expense was the lowest level reported in more than two decades, and the average occupancy cost of 6.6 percent was the lowest figure in a decade. It appears gross margin impeded overall profitability. The typical hardware store experienced a decline of 160 basis points from the previous year. This year’s gross margin after rebate was the lowest level for hardware stores since 2001.

Home Centers Home centers showed remarkable stability in key performance indicators year over year, with a trio of encouraging developments. The average home center recorded sales per location of $3.6 million, one of the highest figures of the last decade. For respondents who submitted data for both 2017 and 2018, revenue rose by 6.4 percent. In addition, all home center respondents saw some of the highest average sales of the past decade. Furthermore, the average home center reported some of the highest customer counts since 2011.

HARDWARE RETAILING | December 2019

The average cost of payroll for hardware stores was 20.4 percent of sales, which was the lowest level owners reported to NRHA in more than two decades.

While sales for this group were up, the average profit before taxes was down 20 basis points from the prior year, dropping to 2.9 percent. To understand why higher sales would be accompanied by lower profits for the average respondent, it’s important to consider total operating costs were up to 32.3 percent, the highest figure in the past three years.

Lumberyards Lumberyards that participated in the most current Cost of Doing Business Study report all-time highs in several critical metrics: sales per store, inventory turnover, GMROI, sales per square foot, gross margin per square foot, inventory per square foot and sales per employee. These higher sales could be attributed to a number of factors. One reason may be because lumberyard reported their highest customer counts since 2014 at 45,939 shoppers in total. It is also important to note the number of lumberyards participating in the Cost of Doing Business Study has a major effect on annual results. Lumberyard operators who offered data for both 2017 and 2018 saw sales increase by 9.8 percent on average. However, overall profitability was eroded by a drop in average net profit to 3 percent in 2018, down from last year’s figure of 3.8 percent. This loss is partly explained by the uptick in average payroll expense reported from respondents at 16.2 percent, the highest figure since 2013.

Hardware Stores Median Sales Per Customer $35

Typical

High-Profit

$30 $30

$25

$20

$15

$22

$20

$23

$21

$23 $22

$22

2016

2017

$24

$21

Hardware Stores The highest ever overall average sales per location:

$2.2 million

2014

2015

2018

Year

Home Centers Median Sales Per Customer $120

$105

Typical

High-Profit

$91

$100

$96 $80 $60 $40 $20

$68 $49 $42 2014

$51

Home Centers

$36 2015

2016

$43

$40

2017

2018

Year

89,029 transactions— some of the highest customer counts since 2011

Lumberyards Median Sales Per Customer $250

Typical

$219 $199

$206 $191

$200

$167

$157

High-Profit

$165

Lumberyards

$150

$104

$105 $100

2014

2015

2016 Year

Source: 2019 Cost of Doing Business Study

2017

$112 2018

The highest gross margin return on investment (GMROI) ever recorded:

238.1 percent

December 2019 | HARDWARE RETAILING

Financial Profiles

Leading Publicly Held DIY Chains 2018 Home Depot remains the biggest player in the home improvement industry in North America. Both Home Depot and Lowe’s have now seen 10 consecutive years of sales growth, despite a dip in sales in 2008 due to the recession and lingering economic pressure in the years following. Home Depot

Lowe’s Cos.

Operating and Productivity Profile Number of Stores (at end of 2018)

2,287*

2,015*

Average Size of Selling Area (sq. ft.)

104,000

112,000

Total Sales

$108.2 billion

$71.3 billion

Total Asset Investment

$44.0 billion

$34.5 billion

Total Inventory

$13.9 billion

$12.6 billion

Sales Per Square Foot

$446.86

$341.15

Inventory Turnover

5.1x

3.9x

Net Sales to Inventory

7.8x

5.7x

Total Sales Per Employee

$261,985

$291,020

Average Size of Transaction

$65.74

$75.79

Gross Margin Return on Inventory

267.6%

182.4%

Income Statement Cost of Goods Sold

65.7%

67.9%

Gross Margin

34.3%

32.1%

Net Sales

100.0%

Total Operating Expenses

20.0%

26.5%

Net Income (Before Taxes)

13.5%

4.8%

Balance Sheet Cash

4.1%

1.5%

Receivables

4.3%

0.6%

Inventory

31.6%

36.4%

Other

1.9%

2.7%

Total Current Assets

42.0%

41.2%

Fixed Assets

58.0%

58.8%

Total Assets

100.0%

Current Liabilities

38.0%

42.0%

Long-Term Liabilities

66.3%

47.4%

Net Worth

-4.3%

16.3%

100.0%

Total Liabilities and Net Worth

Source: Home Depot and Lowe’s annual reports; highlighted lines added by Hardware Retailing represent totals of preceding lines *Figure represents companies’ total store count in the U.S. and other countries.

HARDWARE RETAILING | December 2019

Financial Profiles

Top 4 Distributors For the past five years, the four largest independent home improvement distributors have experienced sales growth. In April 2018, True Value transitioned away from a co-op model to become a privately held company. As such, the company no longer discloses financial information. Ace Hardware Corp.

Do it Best Corp.

Orgill Inc.

True Value Co.

Number of Distribution Centers

17*

Current Number of Stores Served

5,298

3,800

N/A

4,500+

$5.7 billion

$3.5 billion**

$2.5 billion

N/A

% Sales Out of Warehouse

80.0%

32.0%

N/A

% Sales Direct-Drop Ship

20.0%

68.0%

N/A

% Sales in LBM

0.0%

24.0%

N/A

Number of Employees

8,700

1,528

N/A

2,500

Avg. Number of SKUs in Warehouse

117,000

67,000

N/A

90,000

Sales/Inventory Ratio for 2018

6.1

11.9

N/A

2018 Member Rebate Distributed

$141.8 million

$114 million

N/A

% Cash

40.0%

77.0%

N/A

% Stock

34.0%

23.0%

N/A

% Other

26.0%

0.0%

N/A

Dollar Volume Most Recent Fiscal Year

Sources: NRHA distributor surveys *17 domestic and 13 international. **Fiscal year ended June 29, 2019. N/A in this chart represents data the companies did not provide.

Wholesaling Merchandising Groups PRO Group Inc. is the only one of the major wholesaling merchandising groups that has seen significant growth in the past five years. Its merger with Reliable Distributors in 2016 grew its wholesaler membership, number of distribution centers and dollar volume. In 2014, PRO had 29 members, 41 member-operated distribution centers and a dollar volume of $3 billion. PRO Group Inc.

Distribution America

Val-Test Group

Current Number of Wholesale Members

Number of Member-Operated Distribution Centers

150+

Dollar Volume for 2018 Fiscal Year

$6 billion

$1 billion

$650 million

Estimated Dollar Volume Calendar 2019

$6 billion

$1 billion

$600 million

Number of Retail Stores Served by Members

35,000

9,000

1,500

Number of Program Stores

800

1,500

100

Number of Employees

Sources: NRHA distributor surveys

December 2019 | HARDWARE RETAILING

Industry Year in Review

A 2019 Retrospective

rom new store openings to investments in supply chains and e-commerce, one of the major trends of 2019 was an increased focus on making life easy for customers.

December (2018) January February March April May June July August September October November

Review some of the top headlines Hardware Retailing captured from the past 12 months and read each story in full at TheRedT.com/2019-news.

True Value and Carter Lumber Announce Partnership Carter Lumber’s 140-plus locations in 12 states now have access to True Value’s suite of products, support services and industry knowledge.

Hardware Distribution Warehouses Closes Distribution Facilities On Jan. 4, Hardware Distribution Warehouses announced the closure of its warehouses in Texas and Mississippi. The company previously served more than 2,000 retailers across the southern U.S.

Orgill, Unilog Announce New E-Commerce Offering Orgill and its e-commerce partner Unilog collaborated on a promotional e-commerce program, which enabled Orgill customers to establish e-commerce presence quickly at a monthly rate.

House-Hasson Invests $10M in Inventory, Warehouse Expansion After purchasing inventory from HDW and hiring several of its salespeople, House-Hasson began a 10,000-square-foot expansion of its warehouse in Knoxville, Tennessee.

Ace Hardware Begins E-Commerce Delivery Service Ace Hardware introduced a “buy online, deliver from store” program and said it was an important component of its overall e-commerce strategy.

Do it Best Names New Director of International Sales In his new role, industry veteran Scott Sproul will lead a team of international sales professionals serving hardware retailers in more than 50 countries. Sproul has worked for Do it Best since 1999.

Orgill Announces Plans for New York Distribution Center The 780,000-square-foot distribution center in Rome, New York, will be the company’s eighth distribution center. The facility will service customers in seven states in the Northeast.

Ace Names Benjamin Moore Its Preferred Paint Supplier The partnership will make Benjamin Moore paints more widely available to DIY customers in Ace stores beginning in spring 2020. Benjamin Moore will also manufacture Ace’s private-label paint brands.

Lowe’s Lays Off Thousands of Employees The big-box company, which is headquartered in Mooresville, North Carolina, announced the elimination of thousands of positions, including many maintenance and assembly workers.

Ace Acquires Home Repair Franchise The company, which will be known as Ace Handyman Services, will provide basic improvement and repair services to residential and commercial customers.

United Hardware Names New CEO Douglas Audette will replace retiring president and CEO Steve Draeger. Audette has 30 years of experience in retail merchandising, category management and wholesale distribution.

True Value Confirms Opening of New Distribution Center The 1 million-square-foot facility in Wilkes-Barre, Pennsylvania, will coordinate with New Hampshire and Ohio facilities. The three centers will serve roughly 40 percent of True Value’s overall customer base.

HARDWARE RETAILING | December 2019

February

Amazon Changes HQ2

August

FedEx Ends Amazon Contract

Due to pressure from residents and politicians, the company pulled its plan for a second headquarters in Queens, New York.

The delivery service provider says it plans “to focus on the broader e-commerce market.”

March

September

Target Sets New Climate Goals

Do it Best Launches New Website

By 2030, Target aims to lower its greenhouse gas emissions by 30 percent from 2017 levels.

The new site serves as an informational hub for current and prospective members, prospective employees, vendors and the public.

May

Ace Expands Texas DC The upcoming expansion will add more than 450,000 square feet to the existing 450,00-square-foot facility.

November

Sears to Close Nearly 100 More Stores The closures will leave the retail company with less than 200 locations. December 2019 | HARDWARE RETAILING

Housing Market Outlook

Looking at 2019 Housing Trends and Beyond

ay Cororaton, a senior economist with the National Association of Realtors, offered Hardware Retailing magazine insight on the housing market in 2019 and also shared her expectations for 2020.

Hardware Retailing: What key trends are you seeing in the current housing market? Gay Cororaton (GC): Existing home sales have rebounded in the metro areas. The pending contracts indicator also rebounded across all markets. Essentially, the low mortgage rates are helping in the recovery of the housing market. Moving forward, I think that will continue to be the case, although the housing shortage is always a roadblock. We expect to see modest growth in existing home sales. Based on the most recent indicator, we’re now looking at slight growth of 0.6 percent in existing home sales in 2019 and about 3 percent growth in 2020. Sales had dropped on a year-over-year basis for most of the first part of 2019, but with lower mortgage rates, we saw a rebound. Mortgage rates have gone down again to a very low level—about 3.6 percent—and that should provide a lift to home sales.

HR: Is real estate a key area of growth for future economic expansion? GC: Yes. If you look at other indicators, there’s a dip in investor confidence. But with housing, you have a boost coming from millennials and from low mortgage rates, so housing will provide support for economic growth. Consumers are still spending and they still have positive expectations because job growth is so strong. Housing will continue to provide an economic boost within the next 10 years as millennials form their own households and are able to work out their student debt issues over time because they will be moving up the income ladder.

HR: How is the remodeling market doing? GC: Remodeling has very bright potential and that’s because of baby boomers who are aging and want to age in place. They want accommodations for growing older, such as wider doorways. We’re also seeing the length of time homeowners live in their houses increasing. It used to be that people moved every seven years and now we’re seeing them move in 10 years. Perhaps some people will buy a house and never move. If you’re making a place your forever home or you’re staying longer, you’ll want to be making improvements to accommodate your life changes. You may want to have an additional patio as the kids grow older or maybe add on an extra bedroom as you have more kids. All of those factors provide a positive outlook for remodeling.

“We’re still going to see a continued increase in home prices and we’re looking at about a 3 percent price appreciation in 2020.”

HARDWARE RETAILING | December 2019

Housing Market Outlook

HR: Are there other reasons people are remodeling? GC: If you want to sell your house, you do some remodeling so you can sell it for a higher price. For some people who are buying, especially for millennials, they want to buy a move-in ready house right away. If you’re a seller, you want to remodel to make it more attractive for homebuyers and definitely homebuyers just want to get places that are move-in ready. Most people, when they sell their home, want to get as much as possible out of that sale, so they remodel to make it more attractive. About 90 percent of homes being sold in the U.S. are existing homes. The supply that’s out there is existing homes. New homes are more expensive than existing homes. In the end, buyers are making decisions based on price and if they think the remodeled house has the features that they want.

Incomes are also rising. The thing is, the labor market is tightening, so there’s a lower unemployment rate right now and wages are increasing. Wages have actually been rising at a rate of about 3 percent and that’s close to the 3 percent home price appreciation. Homes overall have become more affordable because of the wage growth. Prices will continue rising, but wage growth is also rising. Housing will be a pillar of growth for the economy in 2020. Just because of the low mortgage rates and the fact that the labor market has tightened, and assuming we don’t go into a severe economic downturn, wage growth will help compensate for home price growth. The natural progression of millennials forming households as they grow older and advance in their careers contributes to housing market growth as well.

HR: What can we expect to see in the housing market in 2020? GC: We’re still seeing that low inventory is going to limit home sales, but we’ve seen some improvement also in labor. There is still a shortage of construction workers and the fact that the labor market is becoming tighter, so we don’t foresee a significant boost in home supply. We’re still going to see a continued increase in home prices and we’re looking at about a 3 percent price appreciation in 2020.

Gay Cororaton is senior economist and the director of housing and commercial research at the research group for the National Association of Realtors. She manages the production and delivery of the trade association’s proprietary housing statistics and other research.

December 2019 | HARDWARE RETAILING

Economic Outlook

Insight Into Economic Concerns of 2019

o better understand the factors influencing the U.S. and global economies, Hardware Retailing spoke to Frank Steemers, associate economist of The Conference Board, a research association that monitors how trade, manufacturing, retail and other factors shape economic conditions. Learn Steemers’ perspective on 2019’s prevailing economic trends and what your business can do to anticipate future economic shifts.

Hardware Retailing (HR): What are some of the biggest economic trends The Conference Board has observed in 2019? Frank Steemers (FS): Last year (2018) was an especially strong year for economic growth, but about a year ago there were many stock market sell-offs, which prompted some fears that we were at the end of a strong global economic cycle. I think most of these fears were overblown, but we have seen some market volatility. With 2018 being an especially strong year for economic and employment growth, we expected 2019 would see a gradual slowdown and that is what occurred. We’ve also seen that slowdown in the global economy, which has affected the U.S. economy. Albeit slower than in 2018, growth in 2019 has been solid so far but it’s more around its long-term potential of 2 percent. We see a very healthy labor market—employment growth is still strong. One of the major trends we’ve observed is that employers who hire blue collar workers are having a hard time finding qualified workers, putting pressure on them to raise wages which may ultimately affect profits.

HR: Your organization releases the monthly Consumer Confidence Index. What did that reveal about the U.S. economy? FS: At the end of 2018, we saw a very big decline related to the big stock market sell-off that caught the attention of a lot of people, but these fears faded away relatively quickly. While we see some volatility, compared to historical averages, the index is especially high at the moment. With a strong labor market, we see that disposable incomes and consumption spending are rising. So it’s clear that at the moment the consumer is driving economic growth in the U.S.

HARDWARE RETAILING | December 2019

HR: Has your organization taken note of any specific retail trends that have stood out to you in 2019? FS: It’s no surprise that the retail industry has been through a lot of changes over the last couple of years. We’ve seen negative growth in retail employment since 2017, and that continued through 2019 as well. On the other hand, businesses related to housing may have also benefitted, like home improvement stores with garden centers. Part of the improvements in the housing sector are related to a decline in mortgage interest rates. Lower interest rates provide some incentive to start looking for a home, which means that there is more demand for home goods and services.

Economic Outlook

“Small business owners should be aware that the labor market will continue to tighten and they must prepare their businesses with that in mind.”

HR: How have tariffs and overseas trade tensions affected the U.S. economy in 2019? FS: When we talk about the consumer being optimistic, we also see a big divergence that started this year with businesses actually being much less confident about the U.S. economy. Part of this is related to a global economic slowdown which has especially impacted manufacturing. We know that tariffs raise prices and businesses must decide whether to pass them along to consumers. I think the biggest economic effect from tariffs is the uncertainty they have created. Tariffs have weakened business confidence and that’s something we see when we review our CEO Confidence Index and other metrics of business sentiment.

HR: What economic forces do you believe independent retailers should pay attention to in 2020? FS: The Conference Board doesn’t currently forecast a recession in 2020, but it is important to note that forecasting such a thing in advance with any degree of certainty is very difficult. We expect the economy is only slowing down at the moment. In 2018, we saw economic growth at 3 percent. In 2020, we expect growth will fall to 2 percent, which is still a very solid figure. I think small business owners should be aware that the labor market will continue to tighten and they must prepare their businesses with that in mind. With the current unemployment rate as low as it was in the late 1960s, retailers should expect job applicants to have more bargaining power and it will become more difficult for employers to find qualified workers.

Frank Steemers is an associate economist at The Conference Board where he analyzes the labor market and the overall economy in the U.S. and other mature economies. Steemers is one of the primary researchers of The Conference Board’s wage, population and labor shortages models.

December 2019 | HARDWARE RETAILING

Canadian Retail Report

Canadian Retailers Can Expect Moderate Growth Provided by Michael McLarney, president of Hardlines Inc.

hile the Canadian home improvement market saw weaker growth in 2018 than in the previous year, it still grew more than expected. And the forecast for 2019 remains cautiously optimistic, despite another slow start to the year, according to the 2019 Hardlines Retail Report. The report estimates that the industry is expected to benefit from a stabilization of the real estate market, as interest rates remain low and the industry adapts to tougher mortgage rules. These factors will help drive the all-important renovation and repair markets, both factors which outweigh new housing as a driver for retail sales in this sector. By the end of 2019, the Canadian market should see some increases, but will fall short of the growth seen in 2018. Overall, the report estimates the total industry size to be just under $50 billion for 2018 and anticipates the end of 2019 will see the numbers rise to about $51.7 billion, a growth of 3.2 percent. Looking further out, the Canadian industry is forecast to regain some momentum in 2020 and 2021, with real growth being realized as commodity prices stabilize and sales volumes recover, with projections of $53.7 billion and $56.4 billion. The Retail Report also includes the results of a retailer survey conducted by Hardlines, which revealed widespread concern that sales would not rise enough through the remainder of the current year to generate positive sales growth. This concern was shared by retailers across the country.

Growth by Region Growth across the country continues to vary widely by region. Prince Edward Island led all provinces in growth. However, its small size—representing less than 1 percent of the overall market in Canada—was not enough to lift sales overall. On a regional basis, in 2018, the West tracked well below the industry average of 3.8 percent growth with an increase of only 1.9 percent. The slower growth was seen most prominently in Alberta and Saskatchewan. However, British Columbia experienced strong growth, seeing an increase of 4.2 percent—ahead of the industry average.

HARDWARE RETAILING | December 2019

Atlantic Canada showed steadier growth than the West, but at 2.9 percent, overall sales were still below the industry average, with Prince Edward Island as the one exception. The greatest share of the retail home improvement market still resides in the provinces of Ontario and Quebec. Together, they represent almost 57 percent of the Canadian market, and the retailers Hardlines surveyed in central Canada were fairly optimistic about opportunities for growth continuing through 2019 and into the near future. However, the growth seen in 2018 includes an inflation rate of 2.4 percent for Canada, as well as large price increases in commodity products realized through most of last year, which tempered some of the growth seen across the country.

Growth by Store Type The report found that building centers proved to be the best format for weathering tough variable business conditions, with growth of almost 6 percent for 2018, driven by a solid renovation market and by healthy increases in key commodities such as lumber, plywood and insulation. Comparatively, hardware stores as a sector saw a negative net growth of 6 percent, following a slight gain of 1.4 percent from the year before. Overall market share of hardware stores likewise declined, to 6.6 percent of total retail sales in the industry, down from 7.3 percent in 2017. However, there’s no indication that individual hardware retailers are suffering. In fact, Hardlines believes these declines reflect a trend by banners to support their retailers to expand from hardware stores into full-line building centers, with the addition of lumber and building materials. This is based on the fact that the positive growth enjoyed by existing hardware retailers is not enough to register overall growth for the segment, as the overall number of stores declines. Gains by big boxes were below the industry average, as analysts expect some stores were vulnerable to the slowdown in the renovation market in some regions, and the falloff of business in Western markets. The gains they did experience came mostly from same-store sales, as Home Depot has not been opening new stores in Canada and Lowe’s Canada has slowed expansion of its big boxes.

Market Share by Store Format

Top 10 Home Improvement Retailers Rank

Company

2017 Sales (in billions)

2018 Sales (in billions)

Percentage Change

Home Depot Canada

$8.2

$8.5

4.0%

Lowe’s Canada

$7.2

$7.4

2.2%

Home Hardware Stores

$6.4

$6.6

3.4%

Canadian Tire Retail

$5.9

$6.1

3.4%

ILDC

$3.9

$4.0

2.3%

25.2% Big Boxes

TIMBER MART

$2.9

$3.2

8.1%

12.2% Canadian Tire*

Sexton Group

$2.1

$2.4

14.7%

6.6% Hardware Stores

Castle Building Centres

$2.1

$2.2

8.4%

Groupe BMR

$1.2

$1.3

4.8%

Kent Building Materials

$0.9

2.5%

47.2% Building Centers

4.8% Club Stores* 4.0% Mass Merchants* *Hardware and home improvement stores only

Home Improvement Industry Sales Growth (in billions) $50

$42.2 $40.0

$44.6

$43.8

$45.9

$45.6 $44.0

$40.4

$40

$30

2011

2012

2013

2014

2015

2016

2017

2018

Year Source: 2019 Hardlines Retail Report, Estimated related hardware, decor and home improvement sales only.

December 2019 | HARDWARE RETAILING

By Melanie Moul, mmoul@nrha.org

GET THE LOOK Mastering Your Clothing Department Displays

HARDWARE RETAILING | December 2019

ick Hoover’s family has been in the hardware business for more than 50 years, serving a small community of just over 1,200 people in northern Pennsylvania. As the clothing retail industry started shifting and malls were no longer traffic-drivers, Hoover saw an opportunity to expand into clothing. Hoover Hardware Do it Center opened a clothing department on its second floor that primarily focused on workwear for tradespeople and a small selection of men’s and women’s casual wear. In 2015, after many successful years in that space, it was time to grow. An empty storefront which had housed another hardware store many years before sat just one block away from Hoover Hardware. The two-story building weighed on Hoover’s mind. After deliberating with his wife Cheri about what the building could become, Hoover bought it and began an extensive renovation process. “We decided it would be perfect for a standalone clothing store,” Hoover says. When The Clothing Store opened in the refurbished building in 2017, the department significantly expanded.

“Back at the hardware store, we were busting at the seams with sales and inventory in about 4,000 square feet of salesfloor,” Hoover says. “This new building gave us 10,000 square feet of salesfloor on two floors.” A teamwide commitment to strong merchandising is a core philosophy of The Clothing Store. “Even from the beginning, when the clothing department started in the hardware store, we wanted it to have a really nice presence,” Hoover says. “It needed to have well-displayed product and be a very inviting department, not just be some aisles in a hardware store.” Each department has its own needs depending on the audience—men’s casual wear, women’s casual wear and workwear—and The Clothing Store team takes merchandising seriously. Check out the merchandising and inventory management tips for clothing on the following pages. For the complete story on Hoover Hardware Do it Center and The Clothing Store, visit TheRedT.com/hoover.

December 2019 | HARDWARE RETAILING

WORKWEAR Clothing for tradespeople was where it all started for Hoover’s. The company’s ability to get specialty items—such as flame-retardant clothing for gasfield workers—helped build their reputation as a place to buy hard-to-find or specialized items. Having cold-weather accessories such as socks and gloves in stock for workers who needed them on their way to the work site also served as a powerful differentiator. On your workwear displays, highlight well-known brands and make items easy to grab and go.

“Stocking workwear really became a great strength for us. We are happy we can be workers’ one-stop shop for those types of products.”

Organize by brand. When it comes to workwear, people tend to have brand preferences or even allegiances. Highlight the brands you carry with clear signage and group them together to make the segment easy to shop.

Put it on the wall. If you have the space, a shoe wall display can make a dramatic statement showing your commitment to the category. From steel-toed boots to galoshes, show off your stock.

Make it simple to accessorize. Workers may stop in to quickly grab an extra pair of gloves or thermal socks on their way to the job site. Create an impulse display that makes it easy for them to find what they need and entice shoppers who are on their way to check out.

HARDWARE RETAILING | December 2019

MEN’S CASUAL WEAR Depending on your market, there may be some crossover between men’s casual wear and workwear. At The Clothing Store, both departments are housed on the second floor because of their similarities. Clear brand signage helps lead shoppers to the areas that appeal to their immediate needs. For your menswear department, offer a variety of items that can serve both work and casual purposes, and use displays that show the difference between working and relaxing.

“When we first opened the department in the hardware store, people received it very well. They were excited they could buy basic clothing items in town.”

Use unique merchandisers. The staff at The Clothing Store displays clothing on items they have laying around, from small wooden boxes to nail kegs. Not only does it add visual interest, but it also brings back the heritage of the building and the town in small details.

Show it in action. The clothes may be casual, but your customers want to know their quality. Encourage employees to wear what you sell so they can speak to its comfort and utility.

Depend on the basics. You may not have space for extensive outerwear selections or shoes, so use the space you have for the things people need. Highlight T-shirts, socks and jeans to capture the everyday sale.

December 2019 | HARDWARE RETAILING

WOMEN’S CASUAL WEAR One of the biggest adjustments Hoover says he has to make when he stops into The Clothing Store is to let shoppers browse, especially when it comes to women’s casual wear. One of the biggest differences between hardware and clothing shoppers is that people don’t often need assistance with clothing. Hoover says it’s better to let them browse, and smart merchandising can do the talking. Occasionally a customer requests to purchase every item in a display, especially those in the large exterior-facing windows.

“We knew having women’s clothing would be challenging, but it’s a classic product. We knew we could have a strong product mix and variety.”

Don’t overdo it. Simple displays make it easier for shoppers to see individual items. Keep your racks full, but not stuffed, and make sure your aisles are clear. Combine racks as needed if your inventory gets low to avoid empty spaces.

Change outfits regularly. Trends move quickly in clothing, and that can make merchandising challenging. Show shoppers what’s in style from head to toe and make a plan to swap it out each month.

Make it easily giftable. Women often pick up accessories as quick gifts, so make that part of the shopping process easy. Offer tissue paper at checkout and cross-merchandise gift bags with gloves, scarves and handbags, especially during the holidays.

HARDWARE RETAILING | December 2019

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

January 30-February 1, 2020 Opryland Convention Center Nashville, TN • • • • • •

Spring SUPER SAVINGS EVENT

Dealer Market

Top Reasons to Attend Our Dealer Market Unmatched Super Saver Deals Hot deals at Bonus Buy Breakfasts Unbeatable Prices & Payment Terms Industry Leading Vendor Participation Exciting New Items Electronic Ordering

• Cutting Edge Marketing & Store Service Solutions • Educational Seminars • Travel Rewards & Room Reimbursement Program • Great Food and Entertainment

Top 10 Benefits of Partnering with House-Hasson Hardware 1. Stable — Our company is 113 years old, solid, stable, debt-free and adapts to dealer’s needs and desires to improve dealer profitability. 2. Strong Management — A hands-on president whose philosophy of focusing on dealer profitability and customer service is shared by his management team and guides House-Hasson Hardware’s entire staff. 3. Flexible — House-Hasson Hardware’s position as the nation’s leading regional hardware distributor gives us the size and flexibility to adjust programs and policies for individual customers. Knoxville, TN 4. Experienced Sales Reps — Your sales service comes from the industry’s most experienced salesmen, who you can use as your profitability advisors and counselors, enabling you to compete and excel. 5. On-time Delivery — House-Hasson operates two state-of-the-art distribution centers--one in Knoxville, TN and one in Prichard, WV. 6. Competitive — Our competitive buying programs will meet your needs and generate year-end cash rebates for you based on dollar volume. 7. Efficient — House-Hasson Hardware’s advanced technology--Etoolbox.net webPrichard, WV site, POS communication and technical support are unmatched in the industry. 8. Buy Right — We feature three regional buying markets a year--more than any other industry wholesaler and monthly promotions to help customers maintain strong gross margins all year long. 9. Meet Your Product Needs — We warehouse more than 55,000 name-brand items and our private-label Hardware House line with a 96 percent service level. 10. We Make You Look Incredible — We offer a complete state of the art marketing program with three national store programs, advertising and merchandising solutions, while maximizing your sales and profits.

We invite you to join us to see what we have to offer! For more information about our Market, contact us today!

1-800-333-0520 ext. 212 • www.househasson.com • House-Hasson Hardware Co., Knoxville, TN 37914 • service@househasson.com

By Kate Klein, kklein@nrha.org

A Building I Reborn Hardware Store Gives Old Structure New Life

HARDWARE RETAILING | December 2019

n 2016, Clark Porter took on the massive project of converting a 100-year-old car dealership into a 21st century hardware store. When he bought the old structure that became Small Town Supply, Porter saw potential for a profitable retail location on Main Street in the village of Gouverneur, New York. He wasn’t going into the project blindly. He had hardware retailing experience from owning a separate home improvement store and remodeling skills gained from other ventures. Porter saw a business opportunity in the long-empty building, but also the chance to revitalize a corner of his community in upstate New York. The conversion from a century-old Chevrolet dealership into Small Town Supply’s modern retail space came with unexpected challenges and major investments of time and money. But Porter values the community and cares about seeing it improve and thrive, so he decided to invest instead of choosing the easiest route to opening a new store. With his reimagination of the building, which opened as Small Town Supply in 2017, Clark Porter created a beautiful and unique community enhancement for Gouverneur. “I went into it knowing it was going to be a labor of love and there were going to be challenges,” he says.

With his reimagination of the building, which opened as Small Town Supply in 2017, Clark Porter created a beautiful and unique community enhancement.

December 2019 | HARDWARE RETAILING

The Entrepreneur Porter is a serial entrepreneur who helped pay for college with a business he started at age 12 selling sports trading cards and Ty® Beanie Babies®. He sees high quality of life, business opportunities and prospects for community revitalization in the rural area where he’s from, in part because it’s home, but also because he’s ambitious. He has remodeling experience from buying, fixing and reselling homes in the area. In fact, he currently has two house flipping projects in the works. He also owns an empty commercial building across the street from Small Town Supply he expects to develop into a multiuse facility. But his ambitions are both passionate and grounded in reality. He had his eye on the empty two-story car dealership for a few years before buying it. He thought it was a prime location for a retail store, and he was right. The first year Small Town Supply was open, the store beat the sales goal Porter’s home improvement co-op set for him by 50 percent.

The Old Building Small Town Supply is located in the former Seaker-Graves Motor Co. building, which local businessmen built in 1915 to assemble and sell Dodge, Hudson and Buick vehicles.

HARDWARE RETAILING | December 2019

The company went on to become a Chevrolet dealership, and, until its closure about 10 years ago, still hauled new Corvettes up its freight elevator to display in the second-story windows. When the economy tanked in 2008, the building ended up empty and for sale for years. The building was dilapidated by the time Porter showed up at a tax auction, his mind made up that he wanted the prime spot on Main Street for a hardware store. The location and size of the building appealed to him. Porter attended the foreclosure sale with another local businessman, who advised him that going in determined to buy wasn’t the wisest course of action. But when the bidding only rose to $5,500, his apprehensions evaporated. Porter was one of very few people who had a new vision for what the old building could become.

When Porter pulled down the building’s original musty plaster ceiling, he discovered treasures a new building wouldn’t have offered.

He saved money on the purchase price, but he knew his heaviest investment would be in the remodel. Just from touring the building before the auction, he knew the facility was filthy, home to pigeons and insects, and would need plenty of work. He found out quickly the renovations would be more extensive than he initially thought. For example, the building needed a new roof within the first year. A bigger surprise was Porter’s realization that the first floor of the building was at grade with the sloping street, which meant it was 18 inches lower in the back than in the front. That may have worked for driving cars in and out of the dealership, but the slope meant Porter couldn’t install store fixtures for stocking and displaying products. He had planned to keep the original first-story concrete floor, but had to tear it out and haul in 12 dump truck loads of dirt to pour a level concrete floor. He put in a hydronic heating system in the new floor and insulated the building from top to bottom with spray foam insulation—not cheap projects. The facility also needed new electrical wiring and windows, among other major repairs. “The building wasn’t ideal for small retail,” Porter says. When Porter pulled down the building’s original musty plaster ceiling, he discovered treasures a new building wouldn’t have offered. Underneath the ceiling were wooden beams that, when sandblasted clean, became eye-catching store features.

December 2019 | HARDWARE RETAILING

“It’s really cool. There are little intricacies to the building you just have to see,” Porter says. The refinished hardwood floor on the second story has the weather-beaten look only years of use can achieve. For nearly a century, cars rolled across that floor. Paint from the paint booth dripped and motor oil dribbled, leaving scars Porter thinks are beautiful. And the old freight elevator, which Porter decided was too expensive to repair, now makes for an interesting spot to merchandise products and cut keys.

The Store The remodeled store, with its exposed wooden and metal beams and other rustic details, is crammed with products and has become a destination for a range of categories. The 13,000-square-foot salesfloor carries the core hardware categories, as well as paint, boots, some clothing and a large toy and gift department. The hand and power tool selection appeals to highly skilled tradespeople who live near Gouverneur but work all throughout the U.S., Porter says. And residents from the village and its surrounding area come to find unique home decor and gift items. “It doesn’t have the feel of a big-box store or dollar store,” Porter says. The nearest large national retail stores are about 30 miles away. Small Town Supply

HARDWARE RETAILING | December 2019

provides competitive pricing and unique items, so locals don’t have to leave the area to shop for home improvement supplies. Plus, visitors travel from miles away to see the unique building and buy from the store’s broad product selection, which is unusual for the area. Porter initially wasn’t sure how popular the upstairs selling space would be, but shoppers consistently climb the steel and wooden stairs to enjoy the beautifully merchandised gift and toy area. “We’re bringing people into the community because we’ve got a cool store,” Porter says. Area residents often pause to thank Porter for cleaning up a large building that used to be a community eyesore. “It was very deteriorated,” he says. “People in the community say, ‘I can’t believe how gorgeous this store is now. Thank you so much.’”

See More of the Updated Store Walk through Small Town Supply via video at TheRedT.com/store-tour. In the video, Porter points out original features of the building, which started out as a car dealership in 1915. The remodeled store sells the core home improvement categories, plus gifts and toys.

G R E TA I L E R

OF EY

• 2020 N

UN O Y

EAR •

R P S

2 4T N

AL A

WARD

Recognizing young leaders who represent the future of independent home improvement retailing

Nominations are open for the 2020 Young Retailer of the Year awards. Do you know someone outstanding? See Page 12 for details. Learn more or submit a nomination today at NRHA.ORG/YROTY

By Jesse Carleton, jcarleton@nrha.org

HOW I DID IT ...

Became the 7th Generation Owner

Margaret Clark became the seventh generation to own the family business when she bought it from her father, Andy Clark, in 2017.

“Anyone who is going to be buying a business needs at least three people: a succession planning consultant, a lawyer and a banker.” —Margaret Clark Clarks Hardware

HARDWARE RETAILING | December 2019

usiness training and a long family history in entrepreneurship still weren’t enough to prepare Margaret Clark for the challenges of passing a business from one generation to the next. The seventh-generation owner of Clarks Hardware in Ellicott City, Maryland, Clark grew up working in the family business and went to business school. But she still doesn’t recommend tackling a succession plan on your own.

Seeking outside help was critical to her own transition, she says. During its more than 170-year history, Clarks Hardware has survived two world wars, economic downturns and hurricanes. And each generation has had to deal with the challenges of passing the business from one owner to the next. Every time, those challenges have changed. Clark’s father, for example, never had the opportunity to craft a formal succession plan.

He and his brother left the armed services to run the store after their parents were killed in a car accident. Clark was one of five children growing up in the family business. Her siblings now have occupations elsewhere, and up until a few years ago, Clark didn’t have a career in hardware in mind either. “Despite the long family history in the business, my parents were always clear that we were never expected to take part in the business,” she says. After serving in the U.S. Marines, Clark went to business school and a few years later returned to the family hardware store where she began working in various leadership capacities and learning more about the inner workings of the company. As her father neared retirement, she began to pursue the idea of succeeding him as owner. She finally purchased the business toward the end of 2017, about two years after she and her father started talking about their succession plan. In hindsight, she recommends starting a lot sooner. “I’d recommend taking a couple of years just to learn about the process and go through more training,” she says. “Have a conversation as far ahead as possible with the current owner you’ll be replacing.”

Clark hired a consultant to help guide the succession planning process. She says that move was critical to the successful transfer of ownership. She also found a lawyer she could trust and a banker to help with the financing. “Anyone who is going to be buying a business needs at least three people: a succession planning consultant, a lawyer and a banker,” she says. “Then try to get as much knowledge as possible, anywhere you can get it.” Understanding the succession process is only part of the preparation, Clark says. She recommends having at least a basic understanding of accounting and the inner workings of a business. While she gained a lot of experience working on the salesfloor and in management, Clark never had much exposure to the financial side of the business, which gave her a lot to learn as she started exploring ownership. Finally, be aware of the personal dynamics at play, Clark says. There will be some difficult discussions, especially among relatives who have a lot of personal investment in the business. “Be respectful of each other,” she says. “If you need to have a potentially heated discussion, whether it’s business or personal, do it at home, not at work.”

Margaret Clark Clarks Hardware Ellicott City, Maryland

Problem Resolved Clark’s family never talked about succession planning until it was time for the transition to happen. The topic was never discussed in business school, either. But her move into ownership was successful because she hired professionals she trusted who specialized in family business and were qualified to help navigate a succession plan. She also looked for further business training anywhere she could find it, including from her distributor.

Key Takeaway “Have a conversation about your succession plan as far ahead of time as possible. Also make sure you are prepared for ownership by understanding all of the internal workings of the business, including a basic understanding of accounting,” says Clark.

Future Plans Staying viable for 174 years has meant Clarks Hardware has had to adapt to market and economic changes. Clark says that is the strategy that will carry them into the future. “Constantly learn and improve yourself,” she says. “Know and watch the trends. Maintain a high level of customer service. Those are the reasons we’ve been in existence so long.” Andy Clark (left) and his brother Ed were the sixth generation owners of Clarks Hardware, taking over the business after the sudden death of their parents.

December 2019 | HARDWARE RETAILING

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High Performance Retailing Brought to You by Hardware Retailing and The Farnsworth Group

Winter 2019 V1

Zero Regrets Boosting Kitchen Renovation Sales Page H4

Sales Focus Outside Sales Teams Deliver New Leads Page H12

Paths to Purchase

Find the Marketing Resonating Across Consumer Generations Page H6

Contents Winter 2019 | Volume 1 | Issue 2

Features

High Performance Retailing

High Performance Retailing is a collaboration between the North American Retail Hardware Association and The Farnsworth Group. Both organizations are committed to helping the home improvement industry prosper with relevant, informative and timely data.

Right on Target Home improvement retailers have more options than ever to reach customers. But which methods are most effective, and how do different generations respond to your marketing? Business analyst Mark Harris offers suggestions to help reach customers of every generation effectively.

H12

Senior Partner, The Farnsworth Group Jim Robisch, jrobisch@thefarnsworthgroup.com

H12

An Outside Perspective Builders is a chain of seven building materials centers. One force driving its forward momentum is its powerful outside sales team. Dave Hoglund, vice president of purchasing at Builders, highlights how the team delivers new leads and ensures high performance.

Market Research Analyst, The Farnsworth Group Amy Theophilus, atheophilus@thefarnsworthgroup.com

Editorial, Design & Production Managing Editor Melanie Moul, mmoul@nrha.org

Departments H3 . . . . . . . . . . . . . . Foundations H4 . . . . . . . . . . . In Conversation H14 . . . . . . . . . . . . Springboard H15 . . . . . . . Between the Lines

Online Exclusive Generational Milestones Mark Harris, founder of the Harris Development Group, explains the social and historic milestones that characterize each of the three most active generations in home improvement retail. Learn what makes your different customers tick at HPRmag.com/generations.

Executive Vice President and Executive Editor, NRHA Dan Tratensek, dant@nrha.org

TAX

Project Editor Todd Taber, ttaber@nrha.org Copy Editors Kate Klein Hans Cummings Senior Designer Lynnea Chom Production Manager Nancy Vondersaar

67%

of surveyed retailers believe tariffs on foreign products entering the U.S. will have a negative effect. Source: North American Retail Hardware Association

High Performance Retailing Winter 2019

Sponsorship Opportunities Vice President of Sales and Publisher/ Great Lakes Regional Manager Kevin Hohman, khohman@nrha.org 317-275-9430 West Regional Manager Matt Caruso, mcaruso@nrha.org 317-275-9443 Southeast Regional Manager Scott Gilcrest, sgilcrest@nrha.org 317-275-9414 Northeast Regional Manager Brad Lyons, blyons@nrha.org 317-275-9424

Foundations

Wisdom of the Ages

Communicating With Confidence

’m not really sure when it happened. But I guess that’s what everyone says when they realize they have moved from being on the forward edge of pop culture and trends to being firmly planted at the back end of the curve. When it comes to my decided lack of understanding of most things current, I get daily reminders of how far behind this curve I actually am. Sometimes I will read comments online and not understand half the references people are making. Don’t even get me started about how badly I do when the “Pop Music” category comes up in Jeopardy! I mean, that used to be my sweet spot. Honestly, there are times when I feel like the younger generations are just speaking an entirely different language than I am. But hey, that’s not their fault. It’s not really my fault either. It just is a part of the evolution of our culture—good, bad or somewhere in the middle. As times change, so do the ways people communicate and how they expect to be reached by the people and businesses they trust. So where does this slow shift leave us if we are marketers, advertisers or business owners trying to appeal to consumers who range in age from 18 to 80? How can we best promote our businesses and create authentic, long-lasting connections with customers? In this issue of High Performance Retailing, we take a look at some of these communication challenges thanks to some recent research from our friends at The Farnsworth Group. Discover how you can best tailor your marketing to ensure you’re hitting the bull’s-eye with customers of any age. In light of what the research says, I think it is important to remember that no matter the differences in how we may communicate or the pop culture references we may use, we all have common wants and needs that can be appealed to. It is our job as marketers and business owners to let our prospective customers know we can meet their needs and solve their problems. I hope you enjoy reading about this research, and I hope it gives you a little bit of insight into how you can best communicate with any audience you may be trying to reach. So for now I’ll leave you with: #TTYL. (See, I can be hip!)

It is our job as marketers and business owners to let our prospective customers know we can meet their needs and solve their problems.

Dan M. Tratensek Executive Editor, NRHA dant@nrha.org

Winter 2019 High Performance Retailing

In Conversation

Let Sales Simmer

Helping Customers Overcome Kitchen Remodel Regrets

s the chief of insights for the Research Institute for Cooking and Kitchen Intelligence (RICKI), Erin Gallagher says understanding the path to purchase for customers undertaking kitchen renovations is critical. Discover the data RICKI has compiled to help streamline kitchen renovations hurdles and boost your transaction size.

High Performance Retailing (HPR): Can you tell our readers about RICKI’s mission and some of the research it does? Erin Gallagher (EG): RICKI has conducted more than 100 studies on home kitchens since 2006. The Remodelers 360 study gauges homeowners’ sentiments about the kitchen remodeling experience. We also track the regret factor, which asks people whether they would spend more, less or the same amount if they had a do-over. It’s striking that close to half would spend more money if they were doing the same project today. That’s a sign retailers are leaving money on the table.

HPR: From your research, how can home improvement retailers capture more sales from customers undertaking a kitchen remodel? EG: I think home improvement retailers should market ways to overcome the regret factor to their customers. Whether you have someone sitting on the fence about splurging on a few items or debating whether to increase a room’s footprint, close to half of all customers will regret not going for what they really wanted when they first had the chance.

High Performance Retailing Winter 2019

Erin Gallagher studies the ways homeowners draw inspiration for their renovation projects, pain points they encounter during renovations and how satisfied they are with their project once it’s completed. Discover more of RICKI’s insights into kitchen construction and renovation by visiting them online at kitchenintelligence.org.

HPR: What does RICKI’s research reveal about how customers are getting inspiration for their kitchen remodels? EG: We ask respondents where they got ideas for their kitchen projects, and the No. 1 response for three survey periods running is “big-box retail stores.” Followed by that come magazines and TV as sources of inspiration. But drawing inspiration from TV can be problematic. A lot of homeowners and the design professionals we interviewed about the regret factor mentioned “the magic pixie dust” of networks like HGTV. Homeowners feel frustrated that renovation TV shows fail them by not revealing accurate pricing on products and labor as well as showing unrealistic timelines. Homeowners believe their remodels will be done a lot faster than what is feasible. This discrepancy negatively impacts the retailers they buy from and the design pros they hire. I think it’s important to help customers manage their expectations but still get the kitchen they want. Ask customers what their dream kitchen looks like. It may take a bit more time, but the regret factor reflects the importance of the kitchen in the minds of consumers. It’s the heart of the home.

HPR: How can independent retailers help reduce the regret factor? EG: One of the questions we asked homeowners recently was what stressed them out the most during the kitchen renovation process. Staying on budget and making decisions were two of the biggest concerns, so anything a retailer can do to help streamline decision-making and suggest ways to stay on budget is helpful. They need to uncover ways to reduce stress from homeowners.

Know Your Customers Use this data to overcome common consumer obstacles.

44%

What Shoppers Wish They Spent More On Respondents were allowed to choose more than one option.

say they wish they had spent more money when doing a kitchen remodel in 2018.

Refrigerator 41%

Managing the Stress Factor RICKI’s research reveals trends about common kitchen renovation stressors. Use the challenges below to understand the objectives of homeowners undertaking a renovation and how you can help them stay on budget and stress-free.

Flooring 36%

Staying on Budget Prioritize the most important parts of their dream kitchen.

Storage and Organization 32%

Making Decisions on Products Build trust by sharing your own product knowledge with customers.

Daily Routine Being Disrupted Provide a reliable timeline for project completion.

Countertops 32%

Source: Research Institute for Cooking and Kitchen Intelligence

Winter 2019 High Performance Retailing

High Performance Retailing Winter 2019

Get on Message Reaching Diverse Customers Via Targeted Marketing

dvertising your home improvement business is critical. Whether you rely on print, radio, TV, digital or some combination therein, every home improvement retailer must decide on a message and a medium to let potential customers know about their business.

Winter 2019 High Performance Retailing

But how can you be sure you’re maximizing your advertising reach and ensuring as many customers as possible respond to your messaging? Experimenting with different advertising formulas can be a slow and costly process. While you search for the winning combination, you may be siphoning off customers to competitors. To answer that question, market research firm The Farnsworth Group recently surveyed 1,200 consumers from three different age groups. Their incisive data reveals how millennials, Generation X and baby boomers digest different types of marketing and which marketing messages resonate with them most strongly. Advertising isn’t an exact science, but it also shouldn’t be a gamble for your business. Discover what kinds of information different generations seek and how you can best meet their needs with clear and compelling marketing outreach.

Generational Import

The Playing Field

Mark Harris is the founder of The Harris Development Group, an organization that works with businesses from an array of industries to help teams strengthen communication, augment diversity and collaborate more effectively. Through his 25 years of experience, Harris says he has seen younger generations place a greater emphasis on digital communications, and that is something retailers should notice. Harris says each generation has different cultural, economic and personal touch points that define their views on every aspect of life, including retail. “If you can truly reach out to customers and understand what’s important to them, the messages they respond to and the communication vehicles that interest them, you’re going to drive more sales,” he says.

It’s important to understand that while The Farnsworth Group data reveals different generations use different forms of media to get home improvement marketing, separate generations are still searching for the same kinds of information. When shopping for home improvement products, data reveals television is the most frequently used method of communication at 49 percent for all generations. Text messages were the least frequently sought method of communication when shopping for home improvement products at just 6 percent for all age groups. The communication method with the greatest variance between age groups proved to be flyers and circulars included with newspapers. Just 21 percent of millennials reported using this type of messaging for their home improvement shopping, while 38 percent of baby boomers relied on them.

Most Frequently Sought Advertising By Generation

50%

49%

50% 50%

Total

46%

Millennial Gen X

38%

40%

Baby Boomers

29%

30%

28% 21%

20%

10%

TV Source: The Farnsworth Group

High Performance Retailing Winter 2019

Flyers/Circulars

Text Messages

Harris says being able to convey the same message, whether it’s about sales prices, in-store events or new products, across multiple forms of communication is critical and only growing more important as younger generations show a preference for digital marketing. “The data shows different generations look for the same kinds of information, using that to guide your marketing is critical,” he says.

Methodology The Farnsworth Group surveyed 400 millennials (ages 22-38), 400 generation Xers (ages 39-53) and 400 baby boomers (ages 54-72) via a questionnaire in 2019 to understand how consumers use media and integrate technology into their home improvement product shopping. All respondents were active hardware and home improvement shoppers.

What Customers Want By knowing where your customers look for home improvement information, you can fortify your marketing reach by including the specific information customers seek. When asked what information they look for in home improvement advertising, sales prices were the clear driver. At 78 percent for all age groups and 84 percent for baby boomers, information about sales proved persuasive across generations and was strongly desired by all age groups. It may be surprising to some retailers that project information was the least frequently sought element of home improvement communications at just 29 percent for all respondents and 23 percent for baby boomers specifically. “It’s clear that younger customers still seek information on new products and sales, but there’s also an indication they need project how-to videos and other resources,” Harris says.

Top 3 Reasons Consumers Research Online Retailers should take note of the reasons customers research home improvement products online.

77% Price Check/ Price Shop

44% Read Product Reviews

38% Check Availability and Stock Source: The Farnsworth Group

Winter 2019 High Performance Retailing

More than one-quarter of millennials are researching products and visiting brick-and-mortar locations to get in-store advice, according to the data. Preparing resources to guide young customers and incorporating those into your marketing are critical. One of the main reasons customers shop or research in-store is to check prices, but touching and seeing products are also driving in-store visits. Promoting live product demonstrations could be a persuasive way to bring more customers through your doors.

The Social Side Social media plays a large role in modern home improvement communications. Roughly 88 percent of all home improvement customers have a social media account, so Harris says developing your social media outreach is critical. “As millennials and Generation Z grow, having a social media presence and using that to drive foot traffic and sales will become even more important,” he says.

What Information Generations Seek on Social Media Across All Generations

67% 49% 36% 34% 26% 22% 0%

10%

20%

How-to Articles and/or Videos

Project Photos

Information About Events, Sales and/or Promotions

Store Advertisements

Receive Customer Service Help

Option to Communicate With a Store Directly

30%

Source: The Farnsworth Group

H10 High Performance Retailing Winter 2019

40%

50%

60%

70%

80%

Smart home and home automation devices were the most popular products researched online or online and in stores for all consumer segments. When asked how often they use social media for information on home improvement products, 36 percent of millennials report always or frequently using it, compared to 29 percent of Generation X and just 8 percent of baby boomers. Interestingly, 42 percent of baby boomers report never using social media for product information. Facebook, YouTube and Pinterest were the three most popular social networks across all generations.

The Search Continues

Taking Action

As online engagement and e-commerce become more important, understanding the products that drive online searches can benefit retailers. By recognizing the products most commonly researched online or online and in store, retailers can refine their ads for greatest impact. Smart home and home automation devices were the most popular products researched online or online and in stores for all consumer segments. Major appliances followed at 70 percent. Kitchen and bath remodeling products were the third most common drivers at 65 percent. Conversely, of the products consumers had purchased in the last year, live goods were the least popular at 21 percent. Basic hardware was the next at 23 percent. “Retailers should take note and be sure they’re using the information they know customers need in their advertising,” Harris says.

The Farnsworth Group’s data is clear: Consumers’ media use is changing rapidly, but all customers are seeking the same type of information from home improvement marketing. A truly compelling ad works for all generations, but customers often access them through different media. Establishing a digital presence for your business is critical, particularly among younger generations who research home improvement products before buying at least half of the time. Millennials have grown up with technology and expect to use it in all aspects of their lives. The research shows this mentality applies to home improvement purchases and instructions, too. Find ways to incorporate how-to resources in your marketing or on your website to establish a closer bond with young customers as they start their own families and manage their homes. —Todd Taber

Product Categories With High Online Shopping or Research Total

Millennials

Gen X

Baby Boomers

Smart Home and Home Automation Devices

79%

83%

76%

72%

Major Appliances

70%

75%

71%

62%

Kitchen and Bath Remodeling Products

65%

64%

67%

61%

Product Categories With Lower Online Shopping or Research Cleaning Supplies

24%

35%

28%

15%

Hardware (Such as nuts, bolts and screws)

23%

29%

27%

15%

Live Goods (Such as flowers, shrubs and trees)

21%

31%

22%

14%

Source: The Farnsworth Group

Winter 2019 High Performance Retailing

H11

Seeking New Sales Builders’ Outside Sales Team Delivers 3 Decades of High Sales

cross the western U.S., the Builders chain of home improvement stores offers a complete selection of building materials and design services. One central element of the company’s decades-long success is its outside sales team, a group of 21 salespeople who constantly seek new sales opportunities for the company. Dave Hoglund, vice president of purchasing at Builders, says the outside sales team is core to the operation’s success. Read on to learn some of his tips for starting and managing an outside sales team.

Early outside sales were critical. Builders has been in operation since 1977, and Hoglund says the internal promotion of the first outside salesperson in 1984 was key in driving sales and momentum in those early days. More importantly, he says its effects are still being felt three decades later. “We were in a growth mode and made a point to visit other businesses that were using outside sales teams,” Hoglund says. “We wanted to capture more sales from contractors and we knew having an outside sales team could help us do that.”

H12 High Performance Retailing Winter 2019

Hoglund says Builders didn’t enter into managing its outside sales team with a set outline of how to grow the team and find new sales. Instead, promoting team members from within helped unite the goals of the outside sales staff with Builders’ existing management. After more than 35 years of operation, Hoglund says the outside sales team is now responsible for a significant portion of the company’s overall sales. “Without our outside sales team, our volume would be about 10 percent of what it is today,” he says.

Sales can come from anywhere.

The right personality succeeds.

Hoglund says only one of the company’s 21 salespeople is focused on a specific geographic region to find new sales. The rest of the team operates throughout seven states surrounding their core operations in Nebraska and Colorado. “Our core market is Nebraska and Colorado as well as several surrounding states, but we’ll go anywhere the customer goes,” Hoglund says. “We’ll figure out how to deliver materials anywhere in the U.S.” Earlier this year, the Builders team provided materials for a hotel in Rhode Island and is currently readying a shipment to Idaho.

“You need an outgoing person who can communicate properly with a diverse audience, one-on-one and in a group. If we can find that person, we can teach them everything they need to know about the products we sell,” Hoglund says. Another component of Builders’ outside sales force is providing the team with administrative support. “We have a support staff to write the orders and mind the nuts and bolts,” he says. “It’s best to have the sales team out on the ground, building relationships and knowing what’s going on in the market to understand who the next players will be.”

Don’t underestimate training.

It’s best to have the sales team out on the ground, building relationships and knowing what’s going on in the market to understand who the next players will be.

The tenure of the average outside sales team member at Builders is more than 10 years, and part of that longevity is the emphasis Builders places on training.

Hoglund says the company has promoted from within whenever possible, but has also hired fresh faces. In either case, creating a results-focused training program is crucial. Internal promotions usually come from inside sales coordinators who provide support to the outside sales team. Hoglund says that linked experience has been a good indicator of success in the role. “Once someone is identified as a potential outside sales team member, they work with a local branch manager and other salespeople to learn best practices,” he says. For retailers who may consider adding an outside sales team, Hoglund says patience is a virtue. “There’s no perfect way to begin,” he says. “Success doesn’t happen overnight. Don’t be so rigid that you’re unwilling to adjust your plan; that’s the best way to move forward.” —Todd Taber

—Dave Hoglund, Builders

Winter 2019 High Performance Retailing

H13

Springboard

Raise Your Voice

3 Ways to Optimize Your Website for Voice Search

our company’s SEO strategy is a moving target. With each year come new tech advances requiring retailers to shift their tactics and find new ways to rank as highly as possible for maximum exposure on customers’ search engine results pages.

Responding to voice searches made on tablets, mobile phones or personal assistants is a new piece of the puzzle. You can ensure your website is one of Siri, Cortana or Alexa’s top choices. Learn three ways you can cut through the chatter and promote your business using voice search.

Answer their questions. Create a special page of your website answering common questions about your business. Designate each question as an H2 and respond with original text. This tactic feeds personal assistants like Siri information and creates a connection between new customers and your business.

By 2020, 30 percent of all browsing sessions will include voice searches. Source: Gartner

Improve your mobile site.

Confirm your information. Studies show people using voice searches are looking for immediate, local results. Ensure your business fits the bill by updating your Google My Business listing. Make sure your hours of operation, phone number and website link are all up to date. This will give voice assistants reliable information to relay to customers.

H14 High Performance Retailing Winter 2019

Voice searches are usually made on mobile devices, meaning users are more likely to visit your website’s mobile listing. SEO rankings are in part decided by site speed, so ensure your mobile website loads quickly by reducing image sizes and deleting unnecessary plug-ins to get your site lightning fast.

Between the Lines

Tense Trade

National Retail Federation CEO Says Retailers Must Diversify

riting for the National Retail Federation (NRF)’s blog, president and CEO Matthew Shay reflected on the effects recent tariff escalations between the U.S. and China have taken on retail supply chains. Review some of his takeaways here.

Retailers can’t move everything from China. In response to tariffs, many retailers have sought supply chains outside China. Shay writes that alone won’t be enough to overcome supply chain disruption.

“There simply isn’t another nation that duplicates what is available in China,” he says. He credits Chinese infrastructure, workers’ product knowledge and quality control as factors that place China as one of the world’s leading manufacturing nations.

It takes more than time to rebuild a supply chain. Shay says even if businesses wanted to use supply chains outside China, establishing them would take years and present major logistical hurdles. Beyond the time commitment,

Shay says placing trust in shipping reliability and product quality in a new supply chain would be a tall order for many vendors.

The U.S. and China need to resolve the issues. Shay says the NRF supports the U.S.’s stance on the lack of intellectual property protections and other issues, but “the overwhelming sentiment is that tariffs are not the right approach.” Shay believes the U.S. cannot afford to walk away from a valuable trade partner like China.

How are you responding to price increases due to tariffs? 87.9% 30.9% 16.4% 12.1% 6.3% 3%

Raising Prices Losing Margin Finding New Suppliers Cutting Costs Elsewhere Other Method I Have Not Seen Prices Rise

67% The North American Retail Hardware Association recently surveyed retailers to gather perspectives on tariffs. Learn more at HPRmag.com/tariffs.

of surveyed retailers believe tariffs on foreign products entering the U.S. will have a negative effect.

Source: North American Retail Hardware Association

Winter 2019 High Performance Retailing

H15

Newsmakers

The Growth of Dollar Stores

any retail segments have contracted in recent years, but dollar stores are on the rise. They compete with home improvement businesses in several categories, such as small hardware items, cleaning supplies and other consumables. Neil Saunders, with data analytics company GlobalData, answered questions about why dollar stores represent a major growth segment. Hardware Retailing (HR): How are dollar stores performing compared to other types of retail? Neil Saunders (NS): They’re one of the top growing segments in the U.S. market. They’re outperforming retail market growth as a whole, growing at a faster clip than a lot of traditional segments. Dollar General is doing the best. It’s expanding rapidly, has a very solid proposition and is delivering very good growth. If you look at the scale of Dollar General, it has 15,000-plus stores. It’s an enormous operation because you need that scale in order to make the low-margin business work. HR: Why are they growing so quickly? NS: For a lot of consumers of all income groups, dollar stores have become a convenient go-to choice for picking up everyday products. A lot of dollar stores are located in rural areas where there isn’t a lot of choice and people would have to drive a fair distance to get to a larger store. Another reason is that consumers, ever since the economic downturn in 2008, are value sensitive. They’re careful about how they spend their money. Dollar stores are very good options for them to get really good value for the money on consumables, household goods and food, as well as some hardware and home improvement products. HR: Why are consumers so value sensitive, even with a strong economy? NS: The economy is generally doing very well on the surface. When you look at some of the underlying statistics, many groups of people are doing OK, but they’re not seeing much of an increase in their disposable income. A lot of households are still financially pressured. They’re not necessarily fearing they’ll lose their jobs, but they still have to make choices about where they spend and what they buy. They shop at dollar stores out of necessity because they need to make their money stretch as far as they can. Even consumers who have a lot of disposable income and fairly robust budgets don’t want to waste money. It’s seen as being really savvy to shop carefully and be selective about where you buy, which plays into the hands of the dollar stores. HR: What are dollar stores doing to compete with larger retailers? NS: The point of differentiation is where they’re located. Dollar stores have shops in locations that Walmart and other large retailers just couldn’t enter because it wouldn’t make economic sense. The simplicity of the dollar store offer is also important because when you go into a dollar store, everything is low price. It’s really difficult to spend too much there. Because the dollar stores are a very one-dimensional proposition, it’s much more difficult to overspend.

Upcoming Events December 5 NRHA 2019 State of Independents Conference Indianapolis

January 10-12 United Hardware Buying Market Minneapolis

21-23 Kitchen & Bath Industry Show and NAHB International Builders’ Show Las Vegas

February 7-10 Do it Best Spring Market Indianapolis

14-16 True Value Spring Reunion New Orleans

27-29 Orgill Spring Market Orlando

March 12-14 Ace Hardware Spring 2020 Convention & Exhibits Chicago

14-17 International Home + Housewares Show Chicago

19-21 Neil Saunders is managing director of the retail division of GlobalData, which provides data analytics and consultant services internationally. He oversees the development of the company’s retail proposition and research output. He also works with clients to help them understand the retail, shopper and market landscape, advising them on how best to develop, evolve and implement business strategies.

HARDWARE RETAILING | December 2019

Blish-Mize Spring Market Overland Park, Kansas Find more events online at TheRedT.com/calendar. To have your event added, contact Kate Klein at kklein@nrha.org.

UNITED STATES

CANADA

United Hardware Names New CEO

Departure of Lowe’s Canada CEO May Signal Other Changes

Douglas Audette will be the new president and CEO of United Hardware Distributing Co. Audette will replace Steven Draeger, who announced his decision to retire in May after serving as president and CEO of the co-op for 10 years. Audette has 30 years of experience in retail merchandising, category management, wholesale distribution, brand stewardship and profit and loss management, according to United Hardware.

Sylvain Prud’homme, former president and CEO of Lowe’s Canada, left the big-box retailer Oct. 7. The announcement officially described the exit as his retirement from Lowe’s. However, the company has not named a successor, and pending a permanent replacement, executive vice president of finance, real estate and dealers Tony Cioffi is acting as interim president. Prud’homme’s exit may be the beginning of more changes. In fact, just three days after he left, the company terminated Guy Baumier, executive vice president of operations.

True Value Focuses on Future at 2019 Fall Reunion Thousands of independent home improvement retailers gathered for True Value’s 2019 Fall Reunion, which offered opportunities for retailers and the wholesaler’s leadership to share success stories, explore special buying opportunities and look ahead to the company’s future.

Do it Best Celebrates New Products, Expands Paint Options at 2019 Fall Market At Do it Best’s fall buying show, vendors hosted enhanced product demonstrations for attendees so they could see the capabilities and the advantages of the products. At the market, the co-op highlighted learning opportunities, new products and fresh options in the paint category.

“I feel the time is right for me to spend more time with my wife and family and hand over the reins of the company,” Sylvain Prud’homme says in a statement.

Home Depot Complies With Court Order After three years of fighting in court, Home Depot Canada has complied with an order issued on behalf of the Canada Revenue Agency (CRA) to disclose the retailer’s list of professional customers that use its commercial credit card program. In an effort to enforce tax collection laws, the CRA is targeting contractors to determine who is being paid without being taxed. Home Depot Canada is the last holdout among home improvement retailers that were instructed to comply. The CRA campaign started three years ago. In August 2017, RONA was an additional holdout, taking its fight to the Supreme Court to resist the CRA’s demand for a list of its commercial clients.

Want to Read More? At the market, the company highlighted its new relationship with Benjamin Moore and its brand new stocking program with PPG’s Glidden paint line.

For the full story on these briefs, head over to TheRedT.com/1219-news. To read the Canadian briefs, visit hardlines.ca/hardwareretailing. For the latest independent home improvement news, interviews, trends and videos, visit hardwareretailing.com.

December 2019 | HARDWARE RETAILING

Last Word

Just 3 Steps to Increase Awareness

ow do you communicate your uniqueness to your customers? The nugget of differentiation that defines your business should be the core of your next general awareness campaign. A general awareness campaign isn’t tied to a sale or a product. Instead, it’s a chance to tell your company’s story. Here are three components of a multichannel campaign, and three steps you can take to create your own. Each component can stand alone, but the campaign is stronger when they are deployed together to enhance your operation’s reach and share your core message to a larger audience. When you’re done reviewing these steps, turn to Page H6 to learn more about using digital marketing to reach consumers across generations.

Creating video doesn’t need to a complicated process because most of your staff has the capability to record high-quality videos in their pocket. 1. Have a staff member record you talking about the services you provide. 2. Share the video on social media and your website so it’s the first thing visitors see when they land online. 3. Learn more about how to use video to promote your business, visit TheRedT.com/video.

Print Media

Local Media

Sending out circulars in your trading area is still a valuable way to market your operation.

Local TV news and hometown newspaper reporters are always looking for a human interest story, and your business may fit the bill.

1. Using the data you get from rewards program participants or your email marketing list, send out circulars to a targeted area. 2. Sort by ZIP code and send communications to residents who aren’t frequent shoppers is an easy way to capture this audience. 3. For some guidelines on using print media to increase awareness, check out TheRedT.com/promotion.

Social Media

HARDWARE RETAILING | December 2019

1. If you’re coming up on a significant company anniversary, invite the media to your celebration events well in advance to get some coverage. 2. When your employees complete a new training program, send out press releases to share the news 3. Learn more about harnessing the power of local news at TheRedT.com/local-news.

Ad Index

Ajax Wire Specialty Co. .............................................................................22 www.ajaxwire.com; 855-966-2529

Midwest Fastener .......................................................................................5 www.fastenerconnection.com; 800-444-7313

Allway Tools .............................................................................................BC www.allwaytools.com; 718-792-3636

NRHA Foundations of Leadership Program ..............................................79 www.nrha.org/fol

Coles Wild Bird Products Co. ....................................................................26 www.coleswildbird.com; 877-426-8882

NRHA Retail Management Certification Program .....................................60 www.nrha.org/rmcp

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

NRHA Young Retailer of the Year .............................................................57 www.nrha.org/yroty

ECI Solutions ....................................................................................... IFC, 1 www.ecisolutions.com; 800-588-5128

Orgill Inc. ............................................................................................80-IBC www.orgill.com; 800-347-2860

House-Hasson Hardware Co. ....................................................................51 www.househasson.com; 800-333-0520

Sashco .........................................................................................................9 www.trycleanz.com; 800-767-5656

Impress Art ................................................................................................15 www.impressart.com; 631-940-9530

Simpson Strong-Tie Company Inc. .........................................................17 go.strongtie.com; 800-999-5099

Ironclad Performance Wear Corp. .............................................................14 www.ironclad.com; 972-996-5664

Soudal ........................................................................................................23 www.soudalusa.com; 877-873-8739

Jeske Company Inc. ..................................................................................25 www.jeskecompany.com; 800-677-3383

U-Haul International ...................................................................................11 www.uhaul.com/hardware; 800-468-4285

Koelnmesse Inc. ..........................................................................................7 www.eisenwarenmesse.com/tickets; +1 773-326-9925 *This index is provided for the convenience of our advertisers and readers. The Publisher assumes no liability for errors or omissions.

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