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Serving Hardware, Home Center & Building Material Retailers

Published by the North American Hardware and Paint Association

Market Measure 2020 Insights From a Remarkable Year Page 18

What Are You Missing in Rental? Page 36

A Year’s Worth of Reliable Resources Page 44

Volume 219 • Issue 5 • December 2020 • hardwareretailing.com

DECEMBER SPONSOR

PEACE HOPE & JOY 2020 brought many unexpected challenges and opportunities. Through it all, local businesses were resilient and worked incredibly hard to help their customers and communities. Your association was also hard at work to ensure lawmakers deemed home improvement operations essential. We developed resources and hosted virtual town halls to provide retailers from across North America with a safe space to share their experiences because we truly are stronger together. We hope you, your staff and your families have a safe and happy holiday season. We look forward to continuing to serve you in 2021.

Serving Hardware, Home Center & Building Material Retailers

Published by the North American Hardware and Paint Association

Market Measure 2020 Insights From a Remarkable Year Page 18

What Are You Missing in Rental? Page 36

A Year’s Worth of Reliable Resources Page 44

Volume 219 • Issue 5 • December 2020 • hardwareretailing.com

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Do you have all of the pieces to build a strong team? Improve your team’s productivity and communication skills with NHPA’s TeamBuilder assessment, which provides you with a customized strategy for your business and people.

TeamBuilder

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A Year’s Worth of Reliable Resources Page 44

Volume 219 • Issue 5 • December 2020 • hardwareretailing.com

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Headquarters EDITORIAL, DESIGN & PRODUCTION 317-275-9400, editorial@nrha.org

COMING IN JANUARY

EXECUTIVE VICE PRESIDENT & EXECUTIVE EDITOR Dan Tratensek MANAGING EDITOR Melanie Moul, mmoul@nrha.org PROFILES EDITOR Kate Klein, kklein@nrha.org

136 N. Delaware St. #200 Indianapolis, Indiana 317-275-9400 YourNHPA.org

@NorthAmericanHardwareandPaintAssociation @your_nhpa North American Hardware and Paint Association @your_nhpa

OUR MISSION

The North American Hardware and Paint Association (NHPA) helps independent home improvement and paint and decorating retailers, regardless of affiliations, become better and more profitable retailers. NHPA BOARD OF DIRECTORS CHAIRMAN OF THE BOARD Daniel Harris, Palos Ace Hardware, Palos Heights, Illinois; Lemont Ace Hardware, Lemont, Illinois EXECUTIVE VICE CHAIRMAN Greg Schlecht, Greg’s True Value, St. Francis, Wisconsin

Meet Your Chairman Start off the new year getting to know Dan Harris, owner of Palos Ace Hardware and Lemont Ace Hardware in Illinois. Harris is a successful and seasoned retailer who is serving his second term as chairman of the board for the North American Hardware and Paint Association. In his role, he has been instrumental in the association’s recent expansion to welcome independent paint retailers as members.

PRODUCTION EDITOR Hans Cummings, hcummings@nrha.org SENIOR DESIGNER Aubrey Smith GRAPHIC DESIGNER Autumn Ricketts DIGITAL MEDIA SPECIALIST Kevin Trehan EDITORIAL & RESEARCH PRODUCTION COORDINATOR Natalie Harris PRODUCTION MANAGER Nancy A. Vondersaar SALES & PRODUCTION ASSISTANT Freda Creech

MARKETING & COMMUNICATIONS DIRECTOR OF MARKETING & COMMUNICATIONS Whitney Daulton CORPORATE COMMUNICATIONS MANAGER & EDITOR Julie Leinwand

NHPA SALES

Dan Harris NHPA Chairman of the Board and owner, Palos Ace Hardware and Lemont Ace Hardware

sales@nrha.org

VICE PRESIDENT OF SALES & PUBLISHER Kevin Hohman, khohman@nrha.org MIDWEST SALES DIRECTOR David Brodowski, dbrodowski@nrha.org, 440-520-9551 SOUTHERN SALES DIRECTOR Scott Gilcrest, sgilcrest@nrha.org, 317-508-7680 NORTHEAST & NORTHWEST SALES DIRECTOR Jordan Rice, jrice@nrha.org, 217-808-1641 CANADA SALES DIRECTOR Matt Caruso, mcaruso@nrha.org, 224-456-3366

DIRECTORS Will Aubuchon, W.E. Aubuchon Co. Inc., Westminster, Massachusetts

EXECUTIVE STAFF

David Dishke, Grand River Home Hardware, Caledonia, Ontario

PRESIDENT & CEO Bob Cutter

Ryan Ringer, Gold Beach Lumber Yard Inc., Gold Beach, Oregon

VICE PRESIDENT OF FINANCE & BUSINESS SERVICES David Gowan

Jared Smith, Jared’s Ace Hardware, Bishopville, South Carolina

MEMBER SERVICES

800-772-4424, nrha@nrha.org

Matt Woods, Woods Hardware, Cincinnati, Ohio SECRETARY-TREASURER Bob Cutter, NRHA President and CEO IMMEDIATE PAST CHAIRMAN TJ Comstock, Northwest Hardware LLC, Billings, Montana

Hardware Retailing (ISSN0889-2989) is published monthly by the North American Paint and 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.

STATE & REGIONAL ASSOCIATIONS 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

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

CIRCULATION, SUBSCRIPTION & LIST RENTAL INQUIRIES CIRCULATION DIRECTOR Richard Jarrett, 314-432-7511, Fax: 314-432-7665

TRENDS EDITOR Todd Taber, ttaber@nrha.org

HARDWARE RETAILING | December 2020

POSTMASTER: Send address changes to Hardware Retailing, P.O. Box 16709, St. Louis, MO 63105-1209. All editorial contents copyrighted 2020 by the North American Paint and Hardware Association. No editorial may be reproduced without prior permission of the publisher. REPRINTS: For price quotations, contact the Editorial Department at 317-275-9400 or fax requests to 317-275-9403. Printed in the USA.

TRAINING MANAGER & EDITOR Jesse Carleton, jcarleton@nrha.org RETAIL OUTREACH COORDINATOR Renee Changnon, rchangnon@nrha.org EVENT MANAGER & RETAIL SUPPORT Katie McHone-Jones, kmchone-jones@nrha.org EXECUTIVE DIRECTOR, PAINT & DECORATING PROGRAMS LeAnn Day, lday@nrha.org

RETAIL LEADERSHIP INSTITUTE EXECUTIVE DIRECTOR Scott Wright, swright@nrha.org

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Contents DECEMBER 2020 | VOLUME 219 | ISSUE 5

Departments Editorially Speaking . . . . . . . . . . . 06 Taking Care of Business . . . . . . . . 08 NHPA News . . . . . . . . . . . . . . . . . 10 Trends . . . . . . . . . . . . . . . . . . . . . 13 Checkouts . . . . . . . . . . . . . . . . . . 14 Newsmakers . . . . . . . . . . . . . . . . 60 Last Word. . . . . . . . . . . . . . . . . . . 62

STAY CONNECTED

@hardwareretailing

INDUSTRY REPORT

Market Measure 2020 In the industry’s annual report, look back on the highs and lows of what has certainly been an unprecedented and unexpected year. With insights and projections from the North American Hardware and Paint Association and economic and housing market experts, get a well-rounded review of 2020 and what’s ahead in 2021.

@hardwareretail

HIGH PERFORMANCE RETAILING, WINTER 2020

H1 Investing in Technology

CATEGORY SPOTLIGHT

Let Rental Enrich Retail For nearly 25 years, the team from T & M Hardware & Rental has carefully positioned its rental category to serve as a second revenue stream for the company. Learn how connecting DIYers and pros with well-maintained machinery can boost your sales and local reputation.

RESOURCES

A Year in Resource Review Find out what book helps David Strano of Ambridge Do it Best Home Center aim for success and take a look back at all the helpful resources retailers shared this year.

HARDWARE RETAILING | December 2020

For 80 years, Knudson Lumber in Washington state has pivoted with the times to meet changing customer needs. Learn how a timely investment in e-commerce enabled their team to connect shoppers with products quickly, safely and profitably this year.

On the Web WEBINAR

A Strong Year for Retail North American Hardware and Paint Association executive vice president Dan Tratensek reviews the 2020 Market Measure in a special webinar, sponsored by Epicor. Visit TheRedT.com/market-2020 to take your seat at this Dec. 16 online event.

PREVIEW

Plan Your Year With Powerful Tools

VIDEOS

NHPA is launching a series of webinars that will check all your boxes and keep on the path to business growth and personal improvement in 2021. Get a sneak peek of what’s coming every month next year, and share with the rest of your team to give them the tools they need to succeed. Visit YourNHPA.org/webinars for more.

Disrupt Your Day With Industry Insight The North American Hardware and Paint Association is proud to offer a full suite of informative videos to train and inspire independent home improvement retailers. Best of all? Many videos are free to stream and share with your team, and others cost just $4.99. Visit YourNHPA.org/disruption to view all the courses now. NHPA’s Disruption Series gives home improvement retailers the tools and strategies they need for success in 2020 and beyond.

HIGHLIGHTS

Reflect on 2020 It has been a monumental year for home improvement retail. Take a look back at the new challenges, lasting innovations and the ways home improvement retail stayed essential. Review all of Hardware Retailing’s 2020 cover stories at TheRedT.com/2020-covers.

December 2020 | HARDWARE RETAILING

Editorially Speaking

Reasons to Have Hope Start Checking Your List(s) for 2021

e’ve made it to December 2020. For some people, this year has been one of the longest and most challenging of their lives. For me, my family and I were spared the heartache that so many others experienced, and we recognize our good fortune in a difficult year. This year went by so quickly that here we are, in the thick of the giving season, and I haven’t even made my list and checked it twice. To be honest, there were a lot of lists that I didn’t get to make this year because other tasks and responsibilities took precedence. And there are other lists that I may never get back to making because they seem less important to me now, or at least less urgent than I considered them before. With virus cases increasing in nearly every pocket of the country, the remainder of this year and the first quarter of 2021 will likely continue to produce challenges. But there is reason to have hope. For one, our industry was largely spared this year due to being deemed essential and DIYers coming out in droves to improve the spaces that needed to accommodate work, school and entertainment. As a result, many of you saw sales records that beat previous records by significant margins. That puts you in a unique position at the end of the year: With extra money to reinvest in your business and in your people who have worked tirelessly this year to continue serving customers. You can read more about this year and what the North American Hardware and Paint Association is projecting for next year in our annual Market Measure report, which starts on Page 18. While much of the report includes numbers from fiscal year 2019, before we even had a hint of how the virus would impact us, it includes insights from NHPA alongside a housing market expert and an economist who offer their take on what this year means for the future. Another cause for hope are the promising reports regarding vaccines, which just came out within one week of each other as I’m writing this column. Knowing there are two vaccines that are remarkably more effective than experts anticipated is certainly a

bright spot at the end of the year. The overall economic recovery depends on a viable vaccine alongside treatment options, and there is reason to believe a vaccine (or more than one!) will be widely available within the next six months. Back in March, when NHPA staff were directed to work from home, we certainly never expected we would still be writing about the impacts of COVID-19 in December. But here we are. On the cusp of relief, but knowing there will be challenges ahead. Early on, our team rallied to develop resources to help you and your teams adjust as new information was coming out daily. And throughout the year, we have published stories about your peers who were adapting their operations to give you ideas on how to keep your staff and customers safe. As we head into what experts predict will be a difficult winter, I’ll remind you that all of those resources and stories live at YourNHPA.org/covid. Various wholesalers at this point have announced their spring 2021 markets will be virtual. All of us here at NHPA were looking forward to seeing you at markets and in your stores as soon as the calendar flipped, and we know the decisions wholesaler executives have been making are difficult. They are checking lists way more often than twice to be sure they are meeting your needs and getting you products your customers need. Until it’s safe to gather again in person, we’ll see you online and in the pages of Hardware Retailing magazine. Thank you for giving us the opportunity to serve you as you continue serving your communities. We’ll see you next year, full of hope.

“Early on, our team rallied to

develop resources to help you. As we head into what experts predict will be a difficult winter, I’ll remind you that all of those resources and stories live at YourNHPA.org/covid.

HARDWARE RETAILING | December 2020

”

Melanie Moul Managing Editor | mmoul@nrha.org

Taking Care of Business

Beyond the Budget Don’t Forget to Set Your Non-Financial Goals

or the better part of two and a half decades, I have been involved in putting together Hardware Retailing’s annual Market Measure report. In this report, we take a more detailed look at how the home improvement industry is performing and try to provide some insights into what is driving this performance. Then, we look ahead at where the industry might go in the near-term future. I can honestly say that sorting through the numbers this year, crunching said numbers and then trying to take all of this analysis and come up with a predictive look at the next several years was more confounding than it has ever been. Most of you likely just completed your budgeting for 2021 and were probably faced with some of the same challenges our team faced in this process. Let’s take a look at a few mitigating factors making economic prognostication and budgeting for your business extra challenging at this point in time. During some months this year, retailers were experiencing 20, 30 or even 40 percent increases in sales over the same period last year. At the same time, unemployment hit its highest numbers in decades. Yet, interest rates and the housing market seemingly held strong. All the while, the entire planet was dealing with a pandemic that may or may not continue to plague us for months to come. Oh yeah, all of these issues caused problems in the supply chain that in many cases made it extremely difficult to get products to market. OK, now take all of these “once-in-a-lifetime” factors and try to come up with a cohesive overview of where your 2021 budget will land or where the industry is headed. Not an easy task! In the end, however, we did put our fingers on some predictions (and you can see those starting on Page 18), just as I’m sure you managed to pound out a budget for your operations. Setting numbers aside, however, I want to focus for a moment on a part of the annual planning process that takes a little less spreadsheet time and a little bit more thoughtful reflection— setting your non-financial goals.

“Non-financial goals,” you say? Yes! In addition to accounting for your annual financial goals and zeroing in on what aspect of your income statement or balance sheet you want to address, every business should also set annual goals that have nothing to do with finances. Non-financial goals are important for a number of reasons. The first, and possibly most important, is they provide a check and balance for your business against focusing too much on the bottom line. Sure, every company runs on its financial engine, but there are other highly important building blocks that make for a successful business over the long-term and many of these have little to do with finances. Consider questions like, how will you better cement the culture you want to embody within your organization? How can you work toward building a more diverse workforce? What can you do to help your employees or your community? All of these questions, while non-financial in nature, are critical for you to consider in order to evolve as a business and can arguably be every bit as important as your financial goals. So, if you are done breaking pencils, running through erasers, punching holes in your calculator and your budget for 2021 is all finished, take a few moments before the end of the year and think through the goals you want to accomplish that don’t have dollars and cents attached to them. Your business will be better for it.

“ Take a few moments before the

end of the year and think through the goals you want to accomplish that don’t have dollars and cents attached to them.

HARDWARE RETAILING | December 2020

”

Dan M. Tratensek Executive Editor | dant@nrha.org

CALL FOR 2021 NOMINATIONS

• 202

N G R E TA I L U ER YO

Recognizing young leaders who represent the future of independent hardware and paint retailing

NHPA

North American Hardware and Paint Association

The deadline to submit nominations is February 28, 2021. Learn more at YourNHPA.org/yroty

25TH

Nominations are open for the 2021 Young Retailer of the Year awards. Do you know someone outstanding?

L A

WARDS P

G O R

NHPA News

Nominations Open for 2021 Young Retailer of the Year

o you know an outstanding young retailer? Nominations are now open for the North American Hardware and Paint Association’s (NHPA) 2021 Young Retailer of the Year program. For 25 years, the program has identified up-and-coming leaders who exemplify the future of the independent home improvement industry. Program Benefits The Young Retailer of the Year program is the premier award in the industry honoring the next generation of independent hardware and paint retailers. Honorees benefit from industrywide exposure for themselves and their businesses and also have the opportunity to participate in additional programming and scholarships through NHPA. Nomination Process Nominations are due Feb. 28, 2021. Entries are scored based on nomination criteria, including contributions to operational growth; community engagement; participation in industry education; and industry and organizational ingenuity. Honorees are selected from three categories: • Stores with less than $2 million in sales • Stores with more than $2 million in sales • Multiple-store operations

2020 Young Retailer of the Year honorees (from left) include Cody Goeppner, Matthew Holmes, Ryan Buck, Katie DeMaris, Weston Jacobs and Sam Olson.

Judging Criteria Young Retailer of the Year nominees should be 35 years old or younger as of Feb. 28, 2021. They must work at independent hardware stores, home centers, lumberyards or paint and decorating outlets in the U.S., its territories or in Canada. Past entrants who were not selected as previous honorees are encouraged to submit new applications. Visit YourNHPA.org/yroty to learn more about the award program.

DEC. 16 AT 2 P.M.

Join Us for a Webinar

Featuring the 2020 Market Measure Report

ith all the ups and downs the economy has seen throughout 2020, it is more important now than ever to have a clear understanding of where the home improvement industry has been and where it may be headed. Join NHPA’s Dan Tratensek and The Farnsworth Group’s Jim Robisch for this webinar as they discuss the various factors impacting the industry’s performance this year and share their predictions for what might lie ahead as part of the 2020 Market Measure report.

HARDWARE RETAILING | December 2020

Discussion Topics • How have independent retailers fared during the pandemic? • While the pandemic has pushed home improvement sales to record highs this year, will this persist in 2021? • Can the strong housing market continue once the dust from COVID-19 has settled? • How will supply chain challenges impact retail sales in the coming months? Visit YourNHPA.org/webinars to reserve your seat.

Save Time and Money With NHPA Business Services

unning a home improvement operation requires your full attention. One way NHPA supports independent home improvement retailers is by developing partnerships with trusted business services organizations. Learn more about these services below or visit YourNHPA.org/business-services. Health Insurance Health insurance is a major concern for every employer. Whether you have one employee or 1,000, the NHPA Health Insurance Plan makes offering insurance to employees more affordable. The plan is available to retailers in every U.S. state and offers great benefits with low group rates and the flexibility to choose your plan design.

Workers’ Compensation and Liability Insurance Member Insurance provides risk management and insurance services and education to independent home improvement retailers. Their services include business insurance, workers’ compensation and more.

Credit Card Processing and Payment Services Clearent provides quality payment solutions for your business. They offer low credit card processing fees and the latest payment service technology, including mobile, wireless and e-commerce payment solutions.

Human Resources Management Group Management Services (GMS) is a human resources company that serves small businesses that may not have in-house HR staff. They manage human resources tasks that small and midsize businesses don’t have the time or expertise to effectively manage, such as payroll and tax, risk management and employee benefits.

POS Integration Your web presence is more important than ever. Pointy’s POS integration helps you drive online traffic directly to your brick-and-mortar store by connecting to your barcode scanner. Each product you sell or scan populates online, allowing customers to discover your store and products on Google search results pages. Connect via the Pointy app or box, which is now available for $79.

Catch Up on Our Latest Podcast Episodes Editorially Speaking: Episode 6 – Market Measure See inside Market Measure on ”Editorially Speaking” this month. Podcast host and Hardware Retailing managing editor Melanie Moul talks to NHPA executive vice president Dan Tratensek about the history of Market Measure and why it's such a powerful annual resource from your association. After you listen to the podcast, visit YourNPHA.org/webinars to register for the webinar on Dec. 16 that takes a deeper dive into the data. Taking Care of Business: Episode 28 – Darrin Stern Dan Tratensek, host and executive editor of Hardware Retailing magazine, talks with Darrin Stern from Koelnmesse about the International Hardware Fair scheduled for late February. Stern shares the extraordinary safety measures show organizers are putting in place to ensure attendees are protected. He also provides an update on how the pandemic is impacting home improvement markets throughout the world. Tell Me More: Episode 21 – Renee Tells You More NHPA retail outreach coordinator Renee Changnon introduces listeners to her journey in the home improvement industry and shares about her experience visiting retailers’ stores while traveling for work or fun. If you haven’t made pit stops at home improvement stores in the past, you may be inspired to take it up during your next road trip. Subscribe or listen to the podcasts at TheRedT.com/pod.

December 2020 | HARDWARE RETAILING

NHPA News

Trainer’s Corner: Focus on Financials

n this month’s issue of Hardware Retailing, the Market Measure report includes results from NHPA’s 2020 Cost of Doing Business Study, a valuable tool as you make plans for the coming year. By comparing numbers in this study against your own financial records, you can gauge the health of your overall operation and identify areas of your business that need special attention in 2021. Are you making the most of this valuable report? If you or any of your staff have questions about the meaning of the numbers in your financial statements, NHPA has a training

tool to help. The course in Basic Retail Accounting from NHPA offers a refresher on the basic terms and numbers found in typical financial statements. In this course, you’ll learn about the various numbers in the income statement, the balance sheet and key financial ratios, and how they can help you draw conclusions about your business and plan for the coming year. This online course is available to NHPA Training Members. If you want to learn more about becoming an NHPA Training Member, visit YourNHPA.org/membership or call 800-772-4424.

Basic Retail Accounting Introduction to the Income Statement and Balance Sheet. This module explains why it is important to understand financial statements and the difference between the two documents covered in the course. The Income Statement. After learning how to read this statement, you will understand where you are spending your money and how much you are making.

The Balance Sheet. By studying the balance sheet, you can see how well you are managing your business and how much profit you have in it. Financial Ratios. Combine the raw numbers used in the income statement and balance sheet to draw conclusions about your business. Use these ratios to develop your strategy for improving your operation.

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Trends Monitoring the Market Use the following industry metrics to anticipate emerging trends and opportunities in the channel. Data is not seasonally adjusted, meaning these graphs represent real-time shifts in the market.

Analyze total retail sales for building material and garden equipment centers to track your business’s performance against national averages.

Understand consumers’ desire to save or spend by gauging overall consumer confidence levels.

Serve customers renovating or upgrading homes more effectively by observing housing starts and existing home sales.

Consumer Confidence

Monthly Home Improvement Sales

Existing Home Sales

SEP

AUG

JUL

JUN

APR

MAR

FEB

JAN ‘20

$10

DEC

$20

NOV

$30

OCT

SEP

AUG

JUL

JUN

MAY

APR

FEB

MAR

JAN ‘20

$40

DEC

120

NOV

$50

OCT

150

MAY

(Building material and garden centers; in billions)

(Measured by surveys sent to U.S. households; in basis points)

Housing Starts

600

500

(in thousands)

400

300

200

100

OCT

NOV

DEC

JAN ‘20

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEPT

Sources: The Conference Board; U.S. Department of Commerce, NAICS 444; National Association of Realtors; U.S. Census Bureau

December 2020 | HARDWARE RETAILING

Checkouts

Masks for Heroes

arly in the COVID-19 pandemic, Sam Ransdell of Burney True Value Hardware in Seven Lakes, North Carolina, realized that ordering face masks to sell wasn’t going to meet his community’s needs. Demand was too high nationally for Ransdell to get enough masks through the usual wholesalers and manufacturers. Local first responders and other medical workers were rewearing disposable surgical and N95 masks to care for COVID-19 patients. Mike Lomax, owner of a 3D printing company, suggested Ransdell start printing masks for construction workers. Ransdell was on board with the idea, but he and Lomax realized the need was bigger and they could work together to protect people whose lives were at risk. “Once I understood how one printer could impact a great deal of people, I began to realize how a whole farm of printers could impact a huge group of people,” Ransdell says. In early March, Ransdell bought three 3D printers to help manufacture durable plastic masks. A 3D printer could make a mask in six hours that could hold a disposable filter cut from vacuum bags and HEPA filters, be molded to a user’s face when heated and be sanitized repeatedly for safe reuse. Ransdell used social media and the local newspaper to ask people in the community for help. Other local businesses volunteered the use of their 3D printers. With support from other companies and $10,000 in donations, Burney True Value helped provide more than 1,200 masks to fire departments and other local agencies working with COVID-19 patients.

Sam Ransdell (left), manager of Burney True Value Hardware in Seven Lakes, North Carolina, helped provide 3D printed masks to Seven Lakes Fire Rescue and other local medical agencies.

When the need diminished and local groups were able to order masks again, Burney True Value stopped production and donated the 3D printers to a local school system. “We aren’t just essential because the governor or lawmakers say so. We are essential because we serve our community,” Ransdell says. “We are here or available at nearly all hours to help our customers, especially in times of emergency.”

Creative Stacks and Bins

Clinton Hardware in Clinton, Maryland, upgraded its merchandising by using wine barrels as dump bins.

Belinda Billman of Clinton Hardware in Clinton, Maryland, likes to keep the store’s merchandising looking fresh. One of her solutions for improving the look of dump bins was to stack wine barrels to make a creative display. Products, such as ice scrapers and bottles of windshield deicer, are sorted by type and arranged in the top barrels. Inspired by Billman’s artistry, other members of the staff at Clinton Hardware used wooden crates to build an endcap with individual display cubbies for hot sauces and spices. Working together to be creative boosts employee engagement, Billman says. “It gets them more involved and excited about selling new products,” she says.

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

HARDWARE RETAILING | December 2020

Custom for Customers Shoppers browsing the housewares sections at the Kabelin Ace Hardware stores in Granger, La Porte and Michigan City, Indiana, have the option to buy and customize cutting boards, plaques, picture frames and painted stainless steel drinkware. Kabelin Ace has offered laser engraving on gift items for nearly three years and the service is popular with customers, co-owner Betsy Parkison says. “Customers love it. It has drawn traffic and boosted sales,” she says. “They keep coming back for more items.” Individual shoppers add names, wedding dates and other custom concepts, while companies make large orders of cups with logos engraved on them.

Three Kabelin Ace Hardware locations in Indiana offer laser engraving on many of the housewares and gift items they sell.

A Socially Distant Centennial

Frager’s Hardware & Garden Center in Washington, D.C., celebrated its centennial throughout the month of September with giveaways, memory sharing, fundraisers and anniversary swag.

The COVID-19 pandemic derailed initial plans for celebrating the 100th anniversary of Frager’s Hardware & Garden Center, which is the longest continuously operating hardware store in Washington, D.C., and a member of the 13-store A Few Cool Hardware Stores’ group. To recognize the centennial, the operation organized a socially distant celebration, adapting its yearlong calendar of events, fundraisers and festivities into a monthlong celebration in September. “We couldn’t let the year pass by without finding a way to thank our customers and staff for a century of support and service,” says Courtney Belew, marketing manager for A Few Cool Hardware Stores. The store converted in-person parties into a virtual celebration, highlighting other local businesses and fundraising for area nonprofits through customers rounding up their change on purchases. In addition, the socially distant celebration included prize giveaways for customers, such as 10 gallons of paint and 50 prize packages.

Naming Rights McKeithen’s True Value Hardware in Statesboro, Georgia, found a fun way to grow customers’ social media interactions with the store. Tom McKeithen and his son Thomas McKeithen, who co-own the store, hosted naming contests for the operation’s tractor and forklift. Customers posted name suggestions on Facebook and the McKeithens chose the names they liked best. The people who submitted the winning names got gift certificates to the store. Courtesy of the contests, the restored 1951 tractor on display in front of the store got the name Hank and the operation’s new forklift won the name Guido. The contests drove extra Facebook traffic and brought some new customers into the store. “We live by a philosophy of having fun with what we do,” Tom McKeithen says. “The more fun we can have with the business, the better.”

McKeithen’s True Value Hardware in Statesboro, Georgia, has a restored 1951 tractor on display in front of the store. A customer named the tractor Hank in a naming contest the store hosted. December 2020 | HARDWARE RETAILING

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HARDWARE RETAILING | December 2020

Market Measure T H E IN D U STRY ’S A N N UA L R E P O RT

ears from now, when our children and grandchildren are studying history, there will almost certainly be a chapter in their virtual textbooks that focuses on 2020. One might easily argue that 2020 will be remembered among the most influential years of the past two decades. In this space, there is no need to revisit the myriad reasons 2020 has earned this dubious distinction. However, it is hard to separate the historical aspects of 2020 from the impact these events have had on the home improvement industry. Before we dive into our industry analysis, we want to drive home a simple point that bears repeating. It always seems a bit callous to focus on the business aspect of the past 11 months without at least recognizing the real, brutal toll that comes along with the financial impact. While the pandemic has brought a windfall in spending on home improvement, it has come at a cost that no one would want to diminish. We must at least acknowledge that, while it has been a recordsetting growth year for home improvement, much of it has been fueled by the ripples from COVID-19, the subsequent lockdowns and the related lack of competition for disposable income. It should also be noted that the sales increases experienced by home improvement retailers have been hard-fought during this period. Owners, managers and front-line employees, all considered essential to the economy, have worked long hours in indescribably difficult conditions to keep home improvement goods and services flowing to their communities. While history books might not record the details of how home improvement retailers were impacted during this time, and how their employees and teams rose to the occasion, it is certainly worth noting here.

What We’ll Cover 22

Industry Breakdown

23 Chain Results 24 Cost of Doing Business Study 26 Retail Store Performance 28 Financial Profiles 30 Housing Market 32 Economic Outlook 34 Canadian Retailer Report The information in this Market Measure report was gathered by Hardware Retailing staff from a variety of resources that are attributed throughout the feature.

December 2020 | HARDWARE RETAILING

Unprecedented

There is really no other word to represent what the home improvement retailing industry has seen during 2020 other than unprecedented. The growth the industry has experienced during this extremely short window is truly unlike anything we have seen in recent decades. The year started out its first quarter posting modest gains over 2019. In early to mid March it looked like we were on pace to hit the 4.5 percent growth that we had predicted in this same space last year. By the end of the second quarter however, it was a completely different story. Following the onset of the pandemic, subsequent lockdowns and the declaration that home improvement stores were essential to the economy, sales exploded. Sure, there were huge increases in home improvement spending during the 1990s as the housing market roared into uncharted territory. This growth was more gradual and occurred over a period of years. Throughout this more recent sudden increase in sales, NHPA kept in touch with retailers from across North America. Early on, the general sentiment was that we would see a three- or four-month increase in sales, a plateau and then a normalization around the end of Q3 and into the balance of the year. As we go to press, the rocket ship has not lost any fuel and sales momentum continue to soar. In fact, sales were increasing at such a pace that actually keeping tabs on how fast they were increasing became difficult. That being said, NHPA is estimating that overall sales for the industry in 2020 will increase by about 12.4 percent over 2019, bringing total sales in the industry to an estimated $457 billion. Just tracking the U.S. Census Bureau reporting of sales in the NAICS 444- (home improvement retail) category (non-seasonally adjusted) puts the estimate just slightly lower at about 12.5 percent year over year. Our friends at the Home Improvement Research Institute (HIRI) and IHS Global, as of the end of Q2, were predicting a more modest increase for the industry of about 8.7 percent (11 percent consumer and 3.5 percent pro). We understand that this is a relatively wide range of predictions, but there are several reasons for that. The main factor driving these disparities is uncertainty in future performance. Most predictive analysis relies on lagging sales data to make future predictions. So far this year, we have all anticipated (and not yet seen) a drop-off from record performance, which somewhat skews typical predictive models.

HARDWARE RETAILING | December 2020

When we are seeing large home improvement retailers such as Lowe’s post sales increases of 35 percent in one quarter, there is a wider margin for interpretation. (As of this writing, we did not have Q3 results from major industry retailers.) Secondly, the housing market and professional product sales also factor into the overall industry, and the housing market hasn’t exactly performed as predicted this year. Then, when you figure in other non-industry related events (the election, potential stimulus, a resurgence of the virus) and it may at least be a bit more understandable why this year’s predictions are a bit more “diverse.”

Moving Forward

Ever since home improvement sales started surging at the end of the first quarter, the industry has been asking, “How long will this last?” That question still persists. There are also less tangible factors that could impact home improvement sales in 2021, such as whether additional stimulus is offered or whether a vaccine opens up additional options for homeowners to spend their money on. Lastly, and possibly most importantly, is that there will come a time when homeowners have worked through their project lists and we see at least a temporary fatigue in home repair and remodeling. Considering all these factors, NHPA is predicting a slight decline in home improvement retail sales in 2021. We are anticipating a decline in industry sales of approximately -0.7 percent against 2020. We anticipate that Q1 should continue to see increases that will likely flatten out in Q2, and that while Q3 and Q4 will be robust when compared against 2019 or other average years, sales will dampen when compared to 2020 performance. The team at the HIRI/IHS Markit is predicting sales to slow by about -0.1 percent on the consumer side in 2021 but for that to be buoyed by more robust spending from professionals (5.3 percent) translating to a 1.5 percent increase for the industry overall next year. At NHPA, we also feel that consumer spending will soften before professional projects early in 2021, but a potential bright spot for home improvement overall could be if interest rates remain low going into the spring and summer months. Beyond that, both NHPA and HIRI/IHS see the industry returning to more consistent levels of growth. Through 2024, NHPA is predicting the industry to grow at a compound annual rate of approximately 3.9 percent, while HIRI/IHS has pegged that figure at 3.7 percent (at current prices).

U.S. Home Improvement Sales NHPA/Hardware Retailing Projections

LEGEND Sales

Compound Annual Growth 2019-2024 = 4.6%

600

YOY Growth

Sales in 2020 NHPA surveyed retailers about their sales early in the pandemic

I N BI L L I O N S

500 400 300

$406.6

$453.8

$471.1

$489.9

$510.0

$457.0

-0.7%

3.8%

4.0%

4.1%

12.4%

87%

2024

of surveyed independent retailers reported year-over-year same-store sales growth

3.9%

200 100 0 2019

2020 2021 2022 Source: NHPA/Hardware Retailing

2023

Home Improvement Product Sales Performance Home Improvement Research Institute/IHS Projections at Current Prices

Compound Annual Growth 2019-2024 = 4.7%

600

IN BILLIONS

500 400 300

$404.6 3.2%

$439.9

$446.4

8.7%

1.5%

2020

2021

$468.1

$487.4

4.9%

4.1%

$508.1 4.2%

19.4% Average sales increases across all independent retailers in 2021

200 100 0 2019

2022

2023

2024

Budgeting for 2021 Most retailers are expecting sales to be down or flat in 2021

Home Improvement Retail Sales U.S. Census Bureau Monthly Retail Sales Report NAICS 444/NSA 600

IN B ILL IONS

500 400 300

$318.4

$331.6

5.5%

4.1%

$349.4 5.4%

$365.7

$377.5

$384.5

4.7%

3.2%

1.9%

200

41.3% Down from 2021

100

39.7% Flat from 2021 19.0% Up from 2021

0 2014

2015

2016

2017

2018

2019 Source: NHPA 2021 Retailer Budget Survey

December 2020 | HARDWARE RETAILING

INDUSTRY BREAKDOWN

2020

2019-2024

Home Improvement Sales by Month

Sales by Store Type

Outlets

( i n bi l l i ons)

( i n b i llio n s)

Hardware Stores

$51.6

Hardware Stores

19,100

Home Centers

$253.3

Home Centers

9,730

Lumberyards

$101.7

Lumberyards

9,650

$33.1

TOTAL

$406.6

April

$36.8

Hardware Stores

$61.8

Hardware Stores

19,100

May

$43.3

Home Centers

$297.9

Home Centers

9,725

Lumberyards

$97.3

Lumberyards

9,640

June

$43.2

July

$40.5

August (p)

$37.8

January

$27.9

February

$27.2

March

YTD

2019

2020

TOTAL

2021

$328.0

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

Sales Growth 2019 vs. 2020 January

2022

1.1%

February

9.1%

March

7.1%

April

4.7%

May

12.8%

June

24.8%

July

16.6%

August (p)

13.0%

YTD

12.5%

2024

Compound Annual Growth Rate

2019-2024 Source: U.S. Department of Census/ Monthly Retail Sales Report NAICS 444/NSA (p) = preliminary estimate

2020

TOTAL

$457.0

38,480

38,465

$58.9

Hardware Stores

Home Centers

$288.6

Home Centers

9,720

Lumberyards

$106.3

Lumberyards

9,630

TOTAL

$453.8

2021

TOTAL

19,085

38,435

Hardware Stores

$60.3

Hardware Stores

19,065

Home Centers

$294.8

Home Centers

9,715

Lumberyards

$115.9

Lumberyards

9,615

TOTAL

$471.0

2022

TOTAL

38,395

$63.2

Hardware Stores

19,020

Home Centers

$304.2

Home Centers

9,690

Lumberyards

$122.5

Lumberyards

9,575

TOTAL

$489.9

2023

TOTAL

38,285

Hardware Stores

$64.8

Hardware Stores

18,800

Home Centers

$317.2

Home Centers

9,645

Lumberyards

$128.0

Lumberyards

9,535

TOTAL

$510.0

Hardware Stores

4.7%

Home Centers

4.6%

Lumberyards

4.7%

TOTAL

4.6%

Source: NHPA/Hardware Retailing

HARDWARE RETAILING | December 2020

TOTAL

Hardware Stores

2023

2019

2024

TOTAL

Percent Change 2019-2024

37,980

Hardware Stores

-1.6%

Home Centers

-0.9%

Lumberyards

-1.2%

TOTAL

-1.3%

Source: NHPA/Hardware Retailing

CHAIN RESULTS

Top Chains: Individual Performance 2019 Sales (in billions)

Home Depot Atlanta

Lowe’s Mooresville, North Carolina

Menards Inc. Eau Claire, Wisconsin

Tractor Supply Brentwood, Tennessee

84 Lumber Eighty Four, Pennsylvania

Northern Tool + Equipment Burnsville, Minnesota

Carter Lumber Kent, Ohio

Sutherland Lumber Kansas City, Missouri

Stores at End of 2019

Stores in 2020 (as of Nov. 1, 2020)

$110.2

2,291

2,293‡

$72.1

1,977

1,968‡

$10.0*

325

335

$8.4

1,814

1,904

$3.8

250

252

$1.6

114

119

$1.5

160

163

$0.9†

Sources: Company reports and Hardware Retailing surveys The above represent home improvement retail chain stores that carry at least two core categories and have sales of approximately $1 billion or more. ‡ Store counts include operations in the U.S., Canada, Mexico and all other locations. *Source: Forbes, as of Dec. 17, 2019 † Source: Hardware Retailing estimates

Market Share Profile Top Chains: Industry Share

Top Chains: Combined Performance Net Sales

Sales

No. of Stores

(as % of total industry)

2015

49.7%

16.4%

2015

$154.8

5,885

2016

51.3%

17.4%

2016

$159.4

6,308

2017

51.9%

17.7%

2017

$168.6

6,447

2018

52.5%

18.0%

2018

$183.6

6,846

2019

51.3%

15.4%

2019

$208.5

6,983

1.6%

-1.0%

Compound Annual Growth Rate

7.7%

4.4%

2015-2019 Percentage Point Change

(in billions)

2015-2019

No. of Stores

December 2020 | HARDWARE RETAILING

COST OF DOING BUSINESS STUDY

A Real-World Look at Retailers’ Financials

he 2020 Cost of Doing Business Study presents the North American Hardware and Paint Association’s (NHPA) annual financial and operational profile of independent hardware stores, home centers, lumber and building materials (LBM) outlets and paint and decorating outlets. The study is the industry’s only financial benchmarking tool and allows retailers to compare their operations to typical and high-profit independent home improvement businesses. The study assesses the financial performance of home improvement retailers for fiscal year 2019. It presents composite income statements and balance sheets plus averages for key financial performance ratios. The data is segmented for hardware stores, home centers, LBM outlets and paint and decorating outlets. In this year’s study, 1,051 independent home improvement stores participated, a 5.9 percent decrease over the prior year.

Methodology The annual Cost of Doing Business Study is made possible through the cooperation of owners and managers of independent home improvement operations who provide detailed financial and operational information on their individual companies. Questionnaires were mailed to a sampling of outlets in the U.S. to collect detailed financial and operational information for 2019. Individual company responses are confidential. NHPA then completes an analysis of the aggregate numbers in the final report after extensively reviewing retailers’ financial data. 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, NHPA 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. 24

HARDWARE RETAILING | December 2020

How to Use This Study To get the most out of these selected results from the 2020 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. 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. 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 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 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.

Hardware Stores

Profit Margin

Total Operating Expense

Sales Per Square Foot

Gross Margin Per Employee

Home Centers

Lumberyards

4.0%

2.1%

2.5%

Profit before taxes in 2019 was 4.0% for typical hardware stores, the third-highest net profit level since 2016.

Profit margins at home centers for 2019 were the lowest they have been since 2016, falling 0.6 points over that year.

Typical lumberyards saw a 0.5 percentage point drop in profit margins from 2018, resulting in the lowest metric in the last five years.

38.9%

32.4%

23.8%

Total operating expense was up just over 2 points from 2018, which was the lowest in the last five years of data collection.

Total operating expenses at home centers have stayed steady over the last five years, up only 0.2 points from 2018.

Total operating expenses decreased 1.3 percentage points from 2018, and this year’s metric is the median over the last five years.

$189

$203

$1,702

This metric was down almost 14% from 2018, but that year was the peak over the last five years at $219.

Sales per square foot fell over 35% from 2018, but total square footage was up more than 30%, which likely accounted for the shift.

This metric represents the highest sales per square foot for lumberyards over the last five years of data collection.

$67,596 $71,788

$91,866

Gross margin per employee was down just over 3% from 2018 and is the lowest its been over the last five years.

Despite sales per square feet growing significantly, gross margin per employee last year fell by 32% over 2018.

This metric increased 3.7% over 2018. The average number of employees dropped by four in 2019.

Source: 2020 Cost of Doing Business Study

December 2020 | HARDWARE RETAILING

RETAIL STORE PERFORMANCE

Overall 2019 Business Performance

he following data from the 2020 Cost of Doing Business Study is divided into three sections so retailers can compare their businesses’ performance with home improvement operations similar to their own. NHPA divides the numbers by three types of retail outlets—hardware stores, home centers and lumberyards. The complete study, which also includes a paint store segment, is available for purchase at YourNHPA.org/codb.

Hardware Stores Hardware stores saw numerous shifts in 2019. The data shows comparable stores saw sales increase by 4.1 percent in 2019 over 2018 figures, but customer count dropped 2.3 percent and sales per customer fell 0.6 percent. It’s important to note that the same stores that reported increased sales for 2018 and 2019 only constitute a fragment of the study’s overall respondents. At high-profit hardware stores, sales were about $263,000 higher than at typical stores. High-profit stores reported higher customer counts, but their sales per customer were about 75 basis points lower than typical hardware stores. This difference suggests high-profit stores made up ground with their sheer volume of transactions. While typical stores posted profits before taxes of 4.0 percent, high-profit stores saw this figure dip slightly in 2019 to reach 8.5 percent. Typical stores’ gross margin after rebate hit 42.1 percent, the highest figure since 2016, while high-profit stores saw gross margin after rebate hit 43.6 percent. Payroll as a percentage of sales hit one of its highest levels ever, coming in at 22.5 percent. High-profit stores managed to control payroll slightly better than the average operator; their rate was just 20.3 percent of total sales.

Home Centers In 2019, the differences between typical home centers and high performers were stark. High-profit home centers saw more than 12,000 extra customers in 2019. Sales per customer were $69 and just $37 at typical home centers. 26

HARDWARE RETAILING | December 2020

For high-profit stores, profit before taxes was 5.6 percent compared to 2.1 percent at typical home centers. The reason for this disparity can be seen when reviewing other factors like sales per square foot, where high-profit stores hit $433, up sharply from typical stores, which measured $203 in sales per square foot. In addition, gross margin per square foot at high-profit stores averaged $136, while typical home centers saw $68 for this metric, the lowest level recorded since 2013. High-profit home centers did a better job at inventory management in 2019, achieving an inventory turnover rate of 3.3x versus 2.7x for typical home centers, which was the lowest level recorded since 2015.

Lumberyards LBM outlets saw strong sales in 2018, so while sales fell slightly in 2019 for typical stores, average sales per location of $8.3 million represent the second-highest figure ever recorded in the study. LBM outlets were not immune from an industrywide trend of declining customer counts, with typical stores reporting 26,517 customers in 2019, the lowest in a decade. High-profit LBM outlets were able to drive more traffic through their doors, recording 40,419 average visits. High-profit stores also achieved better deals than typical LBM outlets, reporting the cost of goods sold around 70 percent as opposed to 74 percent at typical operations. Similarly, gross margin after rebate for high-profit LBM outlets registered at 30.4 percent in 2019, compared to just 26.7 percent at typical stores in 2019. It’s important to note typical LBM outlets did a good job of controlling labor costs in 2019. Respondents saw total payroll drop by 160 basis points in 2019 to 14.6 percent of overall sales. The typical LBM outlet recorded profits before taxes of 2.5 percent, while high-profit counterparts more than doubled this performance, posting an average of 6.0 percent.

Hardware Stores Median Sales Per Customer Typical

Key Business Indicators

High-Profit

50%

$30 $30

Typical

High-Profit

42.1% 43.6%

40% $25

30%

$20

$24

$23

$22

20%

$23

$21

22.5%

$24

$21

20.3% 8.5%

10%

4.0%

$15 2015

2016

2017

2018

Gross Margin After Rebate

2019

Total Payroll

Profit Before Taxes

Home Centers Key Business Indicators

Median Sales Per Customer Typical $120

High-Profit

33.5%

$105

40%

$100 $96

$68

$69

High-Profit

31.3%

30%

$91

$80 $60

Typical

50%

19.3% 16.3%

20%

$51

10%

$40

$43

$40

$36

$20 2015

2016

2017

2018

5.6% 2.1%

$37

0% Gross Margin After Rebate

2019

Total Payroll

Profit Before Taxes

Lumberyards Median Sales Per Customer $350

Typical

Key Business Indicators

High-Profit $311

$300

$219 $199

$206

26.7%

30.4%

$213 $191

20%

$165

$150

High-Profit

40% 30%

$250 $200

Typical

50%

14.6% 15.3%

10%

$157 $104

2.5%

$112

$100

6.0%

0% 2015

2016

2017

2018

2019

Gross Margin After Rebate

Total Payroll

Profit Before Taxes

December 2020 | HARDWARE RETAILING

FINANCIAL PROFILES

Financial Profiles of Leading Publicly Held DIY Chains 2019 Operating and Productivity Profile

Home Depot

Lowe’s Cos.

Number of Stores (at end of 2019)

2,291*

1,977*

Average Size of Selling Area (sq. ft.)

104,000

105,000

Total Sales

$110.2 billion

$72.1 billion

Total Asset Investment

$51.2 billion

$39.5 billion

Total Inventory

$14.5 billion

$13.2 billion

Sales Per Square Foot

$454.82

$346

Inventory Turnover

4.9x

3.7x

Net Sales to Inventory

7.6x

5.5x

Total Sales Per Employee

$329,743†

$225,313

Average Size of Transaction

$67.30

$78.36

Gross Margin Return on Inventory

258.6%

174.1%

Home Depot

Lowe’s Cos.

Net Sales

100.0%

Cost of Goods Sold

65.9%

68.2%

Gross Margin

34.1%

31.8%

Total Operating Expenses

19.7%

27.7%

Net Income (Before Taxes)

13.3%

7.8%

Home Depot

Lowe’s Cos.

Total Current Assets

38.7%

38.8%

Cash

4.2%

1.8%

Receivables

4.1%

0.4%

Inventory

28.4%

33.4%

Other

2.0%

3.2%

Fixed Assets

61.3%

61.2%

Total Assets

100.0%

Current Liabilities

35.9%

38.5%

Long-Term Liabilities

70.2%

56.5%

Net Worth

-6.1%

5.0%

Total Liabilities and Net Worth

100.0%

Income Statement

Balance Sheet

Source: Home Depot and Lowe’s annual reports *Figure represents companies’ total store count in the U.S. and other countries. † Hardware Retailing Estimates

HARDWARE RETAILING | December 2020

Profile of Top 4 Distributors Ace Hardware Corp.

Do it Best Corp.*

Orgill Inc.

True Value Co.‡

Number of Distribution Centers

Current Number of Members

≈2,700

3,800

11,000 stores

N/A

$6.1 billion

$3.6 billion

$2.5 billion

N/A

% Sales Out of Warehouse

80.0%

34.0%

N/A

% Sales Out of Pool/Relay

0.0%

N/A

% Sales Direct-Drop Ship

20.0%

66.0%

N/A

% Sales in LBM

0.0%

21.0%

N/A

Number of Employees

10,500

1,600

N/A

2,300

Avg. Number of SKUs in Warehouse

>80,000

67,000

N/A

80,000

Sales/Inventory Ratio for 2019

6.5

12.6

N/A

2019 Member Rebate Distributed

$182 million

$128 million

N/A

% Cash

39.0%

69.0%

N/A

% Stock

32.0%

31.0%

N/A

% Other

29.0%

0.0%

N/A

Dollar Volume Most Recent Fiscal Year

Sources: NHPA distributor surveys *FY 2020 data; ended on June 27, 2020; ‡True Value transitioned away from the co-op model in 2018 after it sold 70 percent of its ownership to a private investment firm. The company no longer shares certain data points.

Profile of Wholesaling Merchandising Groups PRO Group Inc.

Distribution America

Val-Test Group

Current Number of Wholesale Members

Number of Member-Operated Distribution Centers

150+

Dollar Volume for 2019 Fiscal Year

$6 billion

$1 billion

$650 million

Estimated Dollar Volume Calendar 2020

$6 billion

$1 billion

$650 million

Number of Retail Stores Served by Members

35,000

9,000

1,400

Number of Program Stores

800

N/A

Number of Employees

Sources: NHPA distributor surveys

December 2020 | HARDWARE RETAILING

HOUSING MARKET OUTLOOK

What Housing Holds A Q&A WITH ABBE WILL ABOUT THE HOUSING MARKET

Abbe Will is a research associate and associate project director of the Remodeling Futures Program for the Joint Center for Housing Studies of Harvard University. Hardware Retailing spoke to Will about what challenges and opportunities the housing market brought this year and what that could mean going into 2021.

Hardware Retailing (HR): What kinds of shifts were there in the housing market this year because of the pandemic? How significant of an effect did the pandemic have?

Abbe Will (AW): It’s really been a roller coaster. Back in March and April, when the economy shut down, the market took a hit, and sales were down at a phenomenal rate. Housing starts were also down significantly at that point.

HARDWARE RETAILING | December 2020

Then we saw a huge reversal in late spring and into the summer. I think part of that was households spending so much time at home in the spring and really not having a lot of other typical distractions. Because vacations and school events weren’t happening, people were spending that time at home, focusing on what was and wasn’t working for them in their homes. Especially given that people have been working from home, schooling from home, etc. They were figuring out how to live and do everything in one space. And part of that, too, was not just doing what they wanted to improve in their current home, but thinking about whether they wanted to stay at all or whether moving was a better option. People who were already thinking about moving in the coming year, the pandemic increased that urgency to make that happen sooner rather than later. Since then, home sales have rocketed back, and housing starts have rebounded, too. Homeowners are focused on home in a different way than they

have been in a long time. The pandemic brought forward sales and remodeling activity that may have been happening anyway in the coming quarters or year, but we think this elevated level of activity will sustain. HR: Where were people moving and what are the demographics of those populations?

AW: There is possibly a quickening of the trend of younger households moving from urban into more suburban locations because they wanted or needed to get out of denser urban areas at the onset of the pandemic. Part of it is the millennial generation, as they have aged into their early to mid 30s, that’s a prime homebuying age group. If they had been living in urban areas, starting families, that’s been a typical trajectory for all generations. Once you’re marrying and starting a family, you’re typically looking for more room and going more suburban. But ultimately, when you talk about the urban to suburban migration, it is a small scale compared to all households that are moving. We think there has also been a larger share of younger adults who, early in the pandemic, when their universities shut down or they lost their jobs, did the calculus of whether it would be safer to go home, where their parents or families are.

Remodeling and housing are a brighter spot in the broader economy that could be helping to lead the economy through recovery. HR: How much did the pandemic impact previous projections?

AW: We produce a quarterly short-term indicator of homeowner spending on home improvements and repairs, our Leading Indicator of Remodeling Activity (LIRA). Last year, we were projecting slowing growth for the remodeling industry, but growth nonetheless. After several years of what we would call strong year-over-year growth—6 to 7 percent growth— we were projecting growth to return to a more sustainable pace around 5 percent annually. Last year’s softness in new construction and existing home sales being the drivers in that expected spending slowdown. This year has proven to be difficult time for projecting, even short term. In April, we were projecting a modest decline in spending for 2020, less than 0.5 percent. Back in March and April, we were thinking the floor was really falling out from under us, that remodeling was going to take a severe hit. But then we started seeing change

in demand and the level of retail spending at building materials outlets. That adjusted our projections for the most recent LIRA release for remodeling activity. Now we have the market growing, not gangbusters, although we are projecting growth to increase over the coming two quarters. In our most recent projection from October, we project the home improvement and repair market to grow by 4.1 percent annually through Q1 of 2021 and then to slow again, and we’re projecting 1.7 percent annual growth in Q3 next year. Even though these projected annual growth rates are below the long-run historical acrage, remodeling and housing are a brighter spot in the broader economy that could be helping to lead the economy through recovery. HR: Are home sales related to trends and upticks in DIY renovations?

AW: Home sales are one of our key inputs into our LIRA that shows home sales correlate well with home improvement spending nationally, but with quite a bit of lead time. Our model shows sales correlate to spending about five quarters out, so home sales today will influence remodeling sales in about a year. Based on historical data, a lot of remodeling tends to happen around the time of sale. If a homeowner wants to get top dollar in normal market conditions, they will consider what improvements they need to do to their homes. You can often get bang for your buck with curb appeal, exterior projects like landscaping and doors and windows. Typically, recent homebuyers, people who purchased in the last three years spend about 30 percent more on renovations than owners who have been in their homes longer than three years. Controlling for income and age, recent buyers still bend toward more renovation. As home sales are a consistent driver for remodeling activity, the strong growth we’ve seen in home sales this summer and fall would suggest a pretty good boost in remodeling activity in the coming year or more. HR: How has the pandemic impacted home prices? Will that continue in 2021?

AW: We didn’t see a big shift in home prices this year until recently with price appreciation strengthening. They had been growing steadily about 5 to 6 percent over the last few years. In March and April, we were wondering if price appreciation would be impacted. With the steadying of the housing market and remodeling, we didn’t see a hit. In fact, I think it appreciated even more in the last quarter or so. Part of that ultimately is increased demand in households wanting to purchase and take advantage of historically low mortgage interest rates, but there being a lower supply of homes available for sales. A lot of markets continue, to see tight inventory, which was a trend even before the pandemic.

December 2020 | HARDWARE RETAILING

ECONOMIC OUTLOOK

Small Businesses Remain Optimistic A Q&A WITH HOLLY WADE ABOUT THE ECONOMY Holly Wade is the executive director of the NFIB Research Center, where she conducts original research and studies public policy effects on small businesses. She produces NFIB’s monthly Small Business Economic Trends survey and surveys on topics related to small business operations. Wade is also a member of the board of directors of the National Association for Business Economics. Hardware Retailing spoke to Wade about the state of the economy and what is ahead in 2021.

Hardware Retailing (HR): What impact has the pandemic had on the overall economy compared to the independent sector specifically?

Holly Wade (HW): The small firms we represent were impacted dramatically at the onset of the health crisis. The second quarter was decimated by COVID-19 due to shutdowns, and consumer

HARDWARE RETAILING | December 2020

spending slowed dramatically. Since then, we have had a sizable third quarter, GDP wise. The economy has started building back up again, as businesses were able to resume operations. However, it’s diverged between those businesses that are able to operate more or less normally from where they were pre-pandemic and those businesses that are not. Either because of dramatic shifts in consumer spending or continued restrictions on activity. While there has certainly been a strong recovery, there are still many businesses that are continuing to struggle. The Paycheck Protection Program that benefited most small employer businesses by providing financial assistance offered financial certainty through the first few months. Many businesses have largely recovered, but there is still a population of small businesses that continue and will continue to struggle until the crisis is resolved because they depend on more foot traffic of consumers coming into their stores, like bars or restaurants or travel and entertainment businesses.

HR: How does consumer confidence compare this year to other years?

HW: Consumer confidence plummeted in April, according to the University of Michigan consumer sentiment survey. Their measure was around 101 in February and plummeted to 71 in April. We’re still a long way from pre-pandemic consumer sentiment. Consumer confidence is still much lower than it was, but improving, and that’s certainly a good sign. I don’t know that we’ll see major improvements until there is far more control over the health crisis. Small business sentiment and consumer sentiment were incredibly high over the last few years, right up until March. The health crisis was entirely responsible for the crash of both.

Retailers should know that lead times and cycle times have lengthened, and that has to do with ongoing capacity constraints and logistic challenges. We have a monthly survey of a random sampling of NFIB members, which measures small business optimism. It has been at record level highs over the last four years as the economy kept building and growing stronger, and then it crashed in March and April. But the Paycheck Protection Program helped stabilize much of the small business sector, and the index started to improve. We are largely back to where we were before, but a lot of that is forwardlooking sentiment. More small business owners are anticipating better conditions and more sales. They continue to remain optimistic of what things will look like going forward even as sales aren’t where they want them to be. The fundamentals of a strong economy are there, just waiting for a vaccine or better therapies to get the virus under control. Small business owners are certainly optimistic. In the same survey, we also constructed an uncertainty index, and the most recent was the second highest it’s been in the survey’s 46-year history. While they are optimistic, there is still a lot of anxiety. Many small business owners aren’t able to determine whether things will get better or worse. HR: Are there specific factors that contribute to that uncertainty in addition to the pandemic?

HW: The trend for online sales has increased year over year, and this year has just pushed that trend much further and faster than anticipated. Many businesses are having to adapt very quickly in

creating an online presence to compete. Many small businesses have had a limited online presence or didn’t have one at all, and that has been one of the most important ways to find customers and allow customers to purchase and navigate products online. Those are some adjustments that will be permanent going forward. Consumer spending shifts will probably moderate and readjust to where they were before, but the retail sector and how consumers shop is going to be notably different. It is certainly a steep learning curve and very stressful to move up the timeline of adjusting to these trends more quickly than anticipated. HR: What are some possible effects retailers may see regarding consumer spending if the pandemic continues as it is right now? Do you think this boost in home improvement spending is sustainable?

HW: Even those businesses that are seeing increased consumer demand, they’re still having challenges in absorbing increased consumer spending in those areas. Budgeting is a huge challenge, navigating what it looks like six to 12 months from now. Businesses that sell durable goods are looking at uncertainty in the near future because those are largely products you buy once every five to 10 years. So those operators are asking, “What does that look like as far as trying to navigate large fluctuations in sales?” Because of the pandemic and the uncertainty of how it will be resolved, it’s one of the biggest challenges small business operators have, trying to figure out what sales look like and how to budget for their business. We’re still seeing low levels of capital spending. Business operators are still very hesitant about spending money, expanding their business or replacing equipment because of this enormous level of uncertainty going forward about how the pandemic will impact their business and shifts in consumer spending. HR: The pandemic obviously upset so many projections economists were making at this time last year about what 2020 would hold. Are there any projections you can make about what the economic recovery will look like over the next six to 12 months? How will this period in history impact how economists make projections moving forward?

HW: This has put economic projections into a tailspin. In the best of times, forecasting is difficult. In the current situation, it’s nearly impossible. There are so many variables coming up, the biggest one being weather related, how that impacts COVID-19 infection rates and decisions to further restrict business activities. I think this health crisis is hopefully a one-off event where we can return to normal ways of looking at the economy, what will impact it going forward without so much uncertainty attached to it. December 2020 | HARDWARE RETAILING

CANADIAN RETAIL REPORT

Canadian Retailers See Chaotic Rebound PROVIDED BY MICHAEL MCLARNEY, PRESIDENT, HARDLINES INC., MANAGING DIRECTOR, NHPA CANADA

he Canadian retail hardware industry has weathered similar conditions to its southern neighbors through much of 2020. But before the pandemic, sales by the industry overall were facing negative growth at the end of 2019 for the first time since 2009. However, impacts varied from region to region and by store format. Big-box retailers fared best during the uncertainty of 2019, growing in real terms and securing a larger portion of the entire market in Canada than ever before. Hardware stores showed great resilience, maintaining their role as an important part of the local communities they serve. All these conditions set the stage for the industry’s response to a world crisis in Q2. As people were forced to stay home, uncertainty was the overriding sentiment for retailers. Initial concerns about the health of the economy and the potential rise in unemployment gave way to a unique boom in home repairs and renovations. The result, much like in the rest of North America, was a huge surge in sales for retailers of all sizes. While pandemic conditions certainly added to operational challenges, they did not diminish the overall buoyancy of the sector. The DIY boom started with paint and decorating projects, with retailers enjoying record increases—and vendors reporting empty warehouses. When people moved outdoors, they turned their sights and spending money to outdoor living products. People trying to adapt their homes to include office spaces, home schooling and recreation meant sales of everything from furniture and kitchenwares to swing sets and pools.

Retail Success Stories Abound

In Quebec, Canac now has 30 outlets, with more on the way. Its low-cost business model has been immensely popular with customers and the company is set to exceed $1 billion in sales. Canac has been supporting its tremendous growth—averaging a new store every year for the past five years—with investments in distribution for both hardware and building materials. Peavey Industries, a chain of farm and ranch stores across Western Canada, has successfully absorbed its takeover of TSC Stores in Ontario, converting them all to the Peavey Mart banner. In addition, it took over the license in Canada for the Ace Hardware brand. About 90 stores in the country with the Ace banner will get their hardware supplied out of Peavey’s distribution centres in Red Deer and in London, Ontario. Home Hardware Stores Ltd., the country’s largest co-op retail group, has more than 1,000 retailers. Over the 34

HARDWARE RETAILING | December 2020

past two years, Home Hardware has been undergoing considerable changes internally under President and CEO Kevin Macnab, the first company outsider to helm the company. The initiatives under his direction have been reshaping the company as a retail-oriented organization rather than one that considers itself a wholesaler. The ensuing changes have affected every part of the business, from store presentation at the retailer level to how products are bought by the merchandising teams.

Continued Retail Consolidation

Along with Home Depot Canada, Lowe’s Canada, Home Hardware and Canadian Tire Retail comprise more than half of all sales by Canada’s home improvement retailers. Canadian Tire, a store format unique to Canada, sells hardware, sporting goods and automotive products. It is a key player in the retail home improvement industry, and with more than 500 stores coast to coast, it is a significant competitor for most traditional retailers. Canadian Tire has undergone a great deal of restructuring of its retail business and is focusing on acquisitions and brand expansion—especially of private labels. It is also focusing heavily on its online sales.

Surviving COVID-19

Big boxes have done exceptionally well in recent years, gaining a record amount of market share. But independents have managed to fare well during the pandemic. One reason for independents’ successes during the pandemic has been their ability to pivot. As many provinces ordered retailers to move to curbside pickup, smaller local stores were often in the best position to execute that turnaround quickly. On the other hand, forward-looking statements are a trickier proposition in the current climate. Retailers in every part of the country are concerned about just how long this boom can last. However, most retailers expected to come out of 2020 with positive sales gains, many of them in the double digits. There are key trends to watch for guidance, such as an increased push by some major banners to woo pro customers, but plenty of uncertainty will continue before the Canadian market sees a new normal. In the meantime, a much-anticipated recovery is not expected to happen quickly, as retailers and vendors in Canada prepare for several more months of disruption. As a result, the industry is forecast to enjoy growth of 4 to 6 percent in 2020 and more moderate growth in the year ahead.

Home Improvement Industry Sales Growth (IN $C D ; IN B ILLIONS ) 60

56.3 54.3 52.6 50

50.1

50.2

2018

2019

48.2

40 2017

2020*

2021*

2022*

*Forecasted numbers

Market Share by Store Format

7.5% Hardware Stores 45.9% Building Centers 25.6% Big Boxes

Top 10 Home Improvement Retailers Rank

Company

2018 Sales (in billions)

2019 Sales (in billions)

Percentage Change

Home Depot Canada

$8.5

$8.8

4.4%

Lowe’s Canada

$7.4

$7.1

-4.3%

Home Hardware Stores

$6.6

$6.59

-0.8%

Canadian Tire Retail

$6.1

$6.2

2.3%

ILDC

$4.0

$4.1

1.7%

TIMBER MART

$3.2

$3.1

-4.6%

Sexton Group

$2.4

$2.2

-7.8%

Castle Building Centres

$2.2

$2.1

-5.0%

BMR Group

$1.3

0.0%

Kent Building Materials

$0.93

$0.94

1.4%

12.4% Canadian Tire* 3.9% Mass Merchants* 4.7% Club Stores* *Related bulding materials sales only

Source: Hardlines 2020 Retail Report

December 2020 | HARDWARE RETAILING

C A T E G O R Y

S P O T L I G H T

Rent to Own (THE COMPETITION) How the Rental Category Keeps Retailers Agile TO D D TA B E R

T TA B E R @ N R H A . O RG

HARDWARE RETAILING | December 2020

December 2020 | HARDWARE RETAILING

RENTAL REIGNS Rental has proved to be a popular addition to T & M Hardware & Rental. By offering equipment for DIY projects and professional work, the business is a go-to stop for people across the community.

f 2020 has offered any concrete lesson, it’s that retail can shift in the blink of an eye. For the past nine months, retailers in every sector have had to find new ways to operate safely, meet new consumer trends and remain profitable. One consumer trend that was gaining momentum even before the pandemic is the sharing economy: ride-sharing service Uber and fashion rental company Rent the Runway have found success essentially renting their inventory to customers, many of whom are younger and more than willing to share key products to match their lifestyle. At T & M Hardware & Rental, connecting customers with valuable products has been a core concept for nearly a generation. Scott Post, sales and rental manager of the family-owned business, says the operation’s rental category has been a key part of its success for nearly 25 years. “When you take a look at it, I don’t know of any other home improvement category that will allow you to generate cash flow without trading dollars for product,” he says. Discover how the family business got its start in the lucrative rental category and how it’s learned to maintain category momentum for nearly a generation.

The Power of Rental

Scott’s parents, Tim and Mary, opened T & M Hardware & Rental in 1991. In the first three years, they were focused exclusively on home improvement retail. They’ve now established themselves in both hardware and rental through their affiliation with Do it Best.

HARDWARE RETAILING | December 2020

THE FULL STORY Many items available for rent sit directly on the show floor at T & M Hardware & Rental, just waiting to be discovered by customers. Each piece of equipment is tagged with the make and model of the machine, its latest safety reports and notes of any replaced parts. Post says those tags are an easy way to help customers discover rental products they weren’t necessarily shopping for.

RENTAL REIGNS Scott Post, sales and rental manager (right) of T & M Hardware & Rental, says common items for rent are kept at each location, and more specialized equipment is stored at the company’s main location.

LONG-TERM SUCCESS For nearly 25 years, the business’s reputation in the community has grown thanks to its inventory of well-maintained, specialized equipment for rent to pros and DIYers alike.

December 2020 | HARDWARE RETAILING

deeply in products and space, buying new equipment and expanding their store with a 3,000-square-foot storage facility for their new rental inventory. Watching his parents navigate the category over the years gave Scott a front-row education. He says his parents quickly saw the value of the category, which motivated him to preserve it throughout the years. But they also made a few mistakes that have given Scott clear insight into how to manage the category.

His parents initially invested $80,000 into equipment for their rental category. At the time, the business served many commercial and industrial customers. Tim advertised the new rental program to those customers, but they didn’t connect with the inventory. “The pieces my parents had bought were so common and so affordable, their customers opted to buy their own instead of renting them,” Scott says.

In response, the Posts invested deeper into the category with a clear goal of adding more high-end pieces to entice commercial and industrial customers. He learned a valuable lesson about anticipating customers’ needs. “It’s important to have those larger pieces,” Scott says. “They remind your customer base that you’re a full-service rental center. I can rent anything from a basic drain snake to helping customers clean their gutters 30 feet in the air.”

Making the Rent

Managing rental responsibly is crucial. Each of T & M Hardware & Rental’s six locations has a core inventory of about 25 of the most popular rental pieces for DIYers and professionals. Specialized equipment is stored at the company’s central location and delivered to each store as needed, creating a local hub-and-spoke fulfillment system for the business. Included in each location’s core rental inventory are common landscaping pieces, drain snakes and carpet-cleaning machines. Scott says those items are on full display directly on the showfloor next to other products with a ‘Ready to Rent!’ tag to entice shoppers. “The tag literally says it’s available for rent and lists all the recent upkeep and maintenance the machine has had recently,” Scott says. “The day it was cleaned, checked mechanically, a list of bad parts that were replaced—they’re all on a checklist attached to the tag.” Included in the company’s heavyduty rental pieces are trenchers, skid steers, excavators, aerial lifts, wood chippers and concrete buggies. Scott and his team decided to store larger pieces outside, which act as free promotion to passersby. “Nothing’s better than having an aerial lift hoisted up 30 ft. with a ‘Rent Me’ sign to draw somebody in,” he says.

Budgeting for Rent

Rental now accounts for 10 to 15 percent of the business’s sales in a strong year, but Scott says that might be the wrong way to frame the opportunities rental brings home improvement retailers. “We don’t really measure rental’s performance in terms of percentage 40

HARDWARE RETAILING | December 2020

What’s Powering Rental T & M Hardware & Rental saw record rental sales this year. Here are some of the business’s most popular rental items to consider adding to your inventory.

• JACKHAMMERS • TAMPERS • POST-HOLE DIGGERS • CARPET CLEANERS • CONCRETE SAWS • DRILLS • ROTOTILLERS • PRESSURE WASHERS

December 2020 | HARDWARE RETAILING

Renting vs. Owning

A breakdown of consumers who rent instead of buy

Analysts say the future of retail rentals looks bright, with younger shoppers especially embracing the opportunity to try instead of buy. Learn more about what motivates renters in all retail sectors with recent research from market research firm Lab42.

16% 50+

AGE

20% 39 - 49

64% 18 - 38

Why consumers rent Source: Lab42

Test things before purchasing

Need for a short time

More convenient

57%

Temporary solution

52%

Less expensive 55%

42%

Less maintenance/responsibility 43%

41%

The first 100 viewers get a signed copy of Hancock’s book for free. Kevin Hancock

Free Educational Webinar Series As part of NHPA’s free Disruption Series, Hancock Lumber president and CEO Kevin Hancock discusses the social and economic benefits of creating an employee-centric company. In this presentation, Hancock revisits and reclassifies several long-standing assumptions about business. Available now at YourNHPA.org/webinars. 42

HARDWARE RETAILING | December 2020

NHPA

North American Hardware and Paint Association

of total sales,” he says. “You should measure the cashflow and sales volume you get based completely on the dollar amount you have in inventory.” T & M Hardware & Rental generates about $1.2 million in total inventory dollars for their rental fleet currently. Scott says the business aims for an ROI north of 60 percent of the total value of their rental equipment each year. Together, retail and rental provide a steady cashflow for the business, keeping it agile. While rental is a unique category, Scott advises retailers to approach it like any other. “We really do treat it like any other category in the store,” he says. “We review our sales, we add new items and get rid of dead inventory.”

A Season to Rent

Scott says it’s important to anticipate how the change of seasons can affect your rental category. Even rototillers, one of the perennially popular staples of each location’s rental inventory, have a short two-month window after Pennsylvania lawns thaw before sales

begin to taper off. To make up ground, T &M offers halfprice sales every Wednesday from January to February. “Any piece of equipment we rent will be half price every Wednesday,” Scott says. “Those months are slow, but there’s always something going on: Someone’s painting the inside of a house, someone’s cleaning their carpet after the holidays.” He says the half-price Wednesday promotion is one small way to keep sales strong, even in off seasons.

Maintaining the Fleet

One of the most crucial aspects of managing a large rental category is ensuring each piece is up to the business’s rigorous safety standards for customers. “I’ve always said we are in the rental industry, not the repair industry. We give our best effort to keep our equipment as new as humanly possible; the majority of our inventory is less than three years old,” Scott says. Rental managers have a responsibility to replace broken rental

parts with OEM parts. His team includes two diesel mechanics who follow maintenance schedules issued by manufacturers to ensure pieces have new blades, new belts and can keep renters safe. “Preventative maintenance is more valuable than having the most skilled mechanic in the world,” Scott says. “Any time you can order fresh parts and keep your inventory in near-new condition, you save yourself the cost of replacing the item.” For nearly a quarter-century, rental has been a key component of the Posts’ family business. Scott says learning from his family’s successes and setbacks in the category have shaped how he and his team manage the category today. He encourages other retailers to consider how rental could benefit their business. “My guess is most retailers have reasons not to try something new,” he says. “But if you’re able to work through the challenges and stay consistent with the category, rental is a very valuable contribution to your business.”

December 2020 | HARDWARE RETAILING

RESOURCE REVIEW | BOOK

Building a StoryBrand By Donald Miller

his book review is the final installment in a series Hardware Retailing is publishing to highlight resources retailers recommend to other operators in the independent home improvement industry. David Strano is general manager and co-owner of Ambridge Do it Best Home Center in Ambridge, Pennsylvania.

STRANO’S TAKEAWAYS

Become a Brand The book shares how your business can get better with branding. We know who we are, but are we portraying that to the customer? If you don’t have clear messaging, people will not engage your brand.

Tell the Right Story

We need to share the story that we’re a family-run business and communicate it more efficiently. We need to clarify our branding message throughout the store and on social media.

Be the Story’s Hero

We have to be customers’ heroes by showing how we’re able to help them on a daily basis and gain their trust and respect. Employees don’t just have names and faces; they have experience and knowledge. They’re here to help. Most of them have been here a long time and have a lot of experience.

Listen to Customers

HARDWARE RETAILING | December 2020

How do you beat competitors? It’s not always on price. We’re listening to our customers. We show them we care and offer the right product selection. That’s why people continue to shop here and continue to talk about us in a good way.

RECOMMENDED

In multiple issues of Hardware Retailing magazine in 2020, retailers shared resources that have helped them grow as leaders and coach their employees to develop professionally. Read some highlights from those resource reviews here, then go to TheRedT.com/2020reviews to read them all.

Brian Kabat, Kabat’s Ace Hardware Stores, Arizona Book Review “The Servant” by James C. Hunter

Megan Menzer, Newton’s True Value, Kansas Book Review “The Hero Effect” by Kevin Brown

P. Brett Thorne, Thorne Lumber Co., Missouri Podcast Review “Behind Your Back Podcast” With Bradley Hartmann

“If you’re into leadership and management, this book is off the grid a little bit. It applies to more than business and is relevant to family life.”

“This book makes you take a step back and evaluate your business and your culture. Its examples and stories are reminders of the difference we each can make. You never know what someone is going through, but you can touch their life in a way that will have a lifelong impact.”

“Bradley Hartmann provides a lot of value. He goes in depth and he even has some tools, such as call structures and call sheets, he offers to listeners. He doesn’t take a bland topic and keep it bland. He finds great ways to keep things entertaining and colorful.”

“‘Building a StoryBrand’ offers a different perspective on how to think about branding. You might have the greatest product in the world, but if you don’t get that message out, what’s it going to do for you?”

David Strano Ambridge Do it Best Home Center

December 2020 | HARDWARE RETAILING

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TECHNOLOGY

A New Era of Connection

E-commerce sales grew

31.8%

The volatility of 2020 retail has shown the importance of investing in tech solutions to keep your home improvement business on the cutting edge and at the top of shoppers’ minds. Discover know Knudson Lumber, an 80-year-old family business in Washington, invested in technology just in time to serve customers safely and securely during the COVID-19 pandemic.

from Q1 to Q2 2020.

Source: U.S. Census Bureau

High Performance Retailing is a collaboration between the North American Hardware and Paint Association and The Farnsworth Group. Both organizations are committed to helping the home improvement industry prosper with relevant, informative and timely data. Executive Vice President and Executive Editor, NHPA Dan Tratensek, dant@nrha.org Senior Partner, The Farnsworth Group Jim Robisch, jrobisch@thefarnsworthgroup.com Market Research Analyst, The Farnsworth Group Amy Theophilus, atheophilus@thefarnsworthgroup.com

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Could Have, Should Have, But Didn’t It has always amazed me how shopping trends can shift in an instant. It also amazes me how most trends are telegraphed ahead of time. What is troubling is these advance signals—some subtle but some profound— are ignored by those who should know best how trends can benefit their business. They find any excuse they can to dispel the signals even though many of the experts are preaching that the trends are not only real but turn out to be true game changers. Again, high-performance retailers saw the signals in advance. Years ago, you could not read anything or go anywhere without hearing about Amazon, eBay and other online giants. Then we saw companies like Home Depot, Lowe’s and others investing billions to advance their e-commerce initiatives and better meet the customers’ digital shopping needs. Then along came the COVID-19 pandemic. The ways people shopped, ate and lived their lives overall changed in a flash. Alongside stay-at-home orders came new opportunities to improve their living space or make major improvements to accommodate working from home, learning at home and seeing their homes and offices in a new light of possibility. To avoid the risks of the virus, home improvement customers went online to live and to shop. It didn’t matter what products or what generation, e-commerce suddenly gained new relevance and utility. Customers transferred their online shopping skills across all product categories. Even people who had never before placed an e-commerce order found their mouse hovering above a Buy Now! icon.

But they wanted the same online experience from hardware and home improvement shopping options they had come to expect from online titans. I have always hated the “I told you so” line. However, in this case I’ll make an exception. Not only me, but hundreds of others, had been professing the power of this emerging digital transformation and the need to get on top of it. Again, high-performance retailers picked up the signals and took action. They talked to their customers and found out they wanted to shop for hardware and home improvement projects and have a seamless shopping experience. Those who took action were able to take immediate advantage of this unfortunate situation brought on by the pandemic. More importantly, they are also well positioned for capitalizing on how their customers will continue to shop going forward. What’s the difference? High-performance retailers saw what could be done—not just what had to be done. They knew that they should get it done and in doing so, found new levels of connection.

High-performance retailers saw what could be done, not just what had to be done.

Jim Robisch, Senior Partner, The Farnsworth Group

Winter 2020 High Performance Retailing

IN CONVERSATION

Darrin Stern is the director of new business development at Koelnmesse Inc., the organization that presents the International Hardware Fair every two years in Cologne, Germany. In his role, Stern connects product manufacturers with key retailers through global-facing home improvement events. For more information on the 2021 International Hardware Fair, visit eisenwarenmesse.com.

New Journeys in Retail Aim for New Market Opportunities in 2021

or nearly a year, home improvement shows have pivoted to online events. These opportunities have posed new ways for retailers to connect, but Darrin Stern of Koelnmesse Inc. says 2021 may be the right time for high-performance retailers to explore new products and opportunities abroad.

High Performance Retailing Winter 2020

What has the organization learned about trade shows in a year when none could be held? 2020 is a year for the history books and I think we’ll all be happy to close the chapter and move forward. The circumstances have pushed Koelnmesse to focus on what’s important at trade shows, and I think COVID-19 has made buyers and exhibitors the importance of face-to-face trade shows. Virtual trade shows have a place, but there’s still nothing like exchanging a handshake or feeling a physical product. It’s irreplaceable. It’s the same reason we go to

Key Facts of the 2021 International Hardware Fair

ONLINE

Hear It All To hear the complete interview with Stern on the Taking Care of Business podcast, visit HPRmag.com/pod.

“We’re doing all we can to make the 2021 International Hardware Fair safe and valuable.” —Darrin Stern, Koelnmesse Inc. brick-and-mortar retailers. We still have a very positive outlook as we come through this moment. Koelnmesse organizes two events: the International Hardware Fair and garden-focused spoga+gafa. Can you describe the two events? Koelnmesse is a constellation of exhibit fairgrounds in Cologne, Germany. It’s currently an 11-building complex, and the facility is about 2 times the size of the Las Vegas Convention Center. The International Hardware Fair is the leading international trade fair for the hardware and tool product category. Businesses from around the world come to Cologne to discover new products from well-known and completely new manufacturers. The 2020 International Hardware Fair was postponed and will now be held Feb. 21-24. spoga+gafa is an event focused on the lawn and garden category. It’s the world’s largest garden exhibition and will be held May 30-June 1. These events are truly what you make of them. If you’re looking to buy new products, you can do that and differentiate your inventory. You can ship less than a pallet back to your store from Europe easily. And most of these companies are not in the U.S., so you can truly find things to set yourself apart at everything from ultra-premium price points to budget options.

The 2021 International Hardware Fair is scheduled to take place Feb. 21-Feb. 24.

Koelnmesse is an internationally known event. What are you seeing in foreign home improvement markets? There’s been a renaissance in caring for our homes this year. We’re seeing the home improvement industry is incredibly resilient, and there’s high demand for new products. Koelnmesse recently held a press conference highlighting data about German DIY activity. What we’re seeing is that stores that have been able to stay current with available technologies have accelerated their sales. Stores that have e-commerce platforms, in-store pickup and live agents to support customers are doing well the world over. What measures is the International Hardware Fair taking to ensure visitors are safe? We’re doing everything we can to make the 2021 International Hardware Fair safe and valuable. We’ve developed guidelines called #B-Safe4Business which are posted on our website. Social distancing will be paramount, especially at vendor booths. As time has passed, we’ve seen many international trade shows take place safely. The German government has deemed trade shows and business travel as essential parts of the economy, so they are subject to separate regulations. There is no quarantine required for travelers with a negative COVID-19 test.

More than 2,000 home improvement product exhibitors will attend.

E-commerce solutions will take center stage, with programs to help retailers make the most of the powerful trend.

Winter 2020 High Performance Retailing

AUTHOR

Todd Taber Trends Editor

TECHNOLOGY

ttaber@nrha.org

Online and On Trend Timely Tech Investments Pay Off for Washington Lumberyard

High Performance Retailing Winter 2020

WEBINAR

Make the Most of E-Commerce Check out NHPA’s recent webinar on how to navigate e-commerce strategically during the COVID-19 by visiting HPRmag.com/online-sales.

n the early days of March, Cheryl Brown and the Knudson Lumber team in the Kittitas Valley of Washington were busy putting the final touches on a new addition to the 80-year-old family business: an e-commerce site. Since 1940, Knudson Lumber has found new ways to innovate and grow the company’s presence in the home improvement marketplace. As marketing and advertising manager for the company, Brown knew e-commerce was a crucial step in positioning Knudson Lumber for success in a new generation. No one on the team could have known that days after the e-commerce site went live on the company’s

website, the COVID-19 pandemic would swiftly upend almost every facet of retail and public life. Amid uncertainty, the team quickly learned their new investment provided a steady stream of sales. “The timing of the e-commerce site was very fortunate,” Brown says. “We were able to use it in the early days of COVID-19 and it was an enormous help.” Discover the steps the Knudson Lumber team took to bring thousands of their home improvement retail SKUs online into a clean, easy-to-navigate sales portal. Review key data to ensure high-performance retailers are making the most of e-commerce advantages for 2021 and the years to come.

Winter 2020 High Performance Retailing

“It’s easy to see everything is moving online these days.” Cheryl Brown, Knudson Lumber

First Steps Online

By the end of 2019, the Knudson Lumber team was thinking seriously about how they could rejuvenate their e-commerce offering and find a new way to connect with customers in a new era of retail. “It’s easy to see everything is moving online these days,” Brown says. “We knew we wanted to offer products online in a new way.” She says Knudson Lumber had previously used its co-op’s ship-to-store online sales program, but the team was looking for something they could manage independently and edit quickly to meet their customers’ specific needs. “Ship-to-store didn’t always reflect our current pricing, and we carry a lot of products from a lot of vendors, that weren’t necessarily available in that system,” Brown says. “I wanted to be able to catalog those products and get them online as well.” STRONG DEMAND In October, Tractor Supply Co. celebrated 33 consecutive quarters of double-digit e-commerce growth. Source: Q3 2020 financial report

That desire led the team to seek input from a third-party media company which had already created some video content to display on TVs throughout the store. The media company was already familiar with the Knudson brand and was in the process of developing an online

High Performance Retailing Winter 2020

sales platform and met with Knudson Lumber to discuss a potential collaboration. “Having your own e-commerce site helps you control what you’re delivering to customers,” Brown says. “Pricing was also a big consideration—when we have sales or special discounts, we have to have that pricing immediately correct.” Adding an e-commerce site also presented several other new marketing opportunities. Knudson Lumber’s e-commerce site is rich with information and inspiration; alongside thousands of SKUs separated by 13 categories are videos from manufacturers detailing key features of the product a shopper is considering. Customers can not only buy the products they need, they can learn to use them effectively from a single online, local source. Another element that reinforces the full online experience for customers is a blog and how-to project guide bundled alongside the products. From tips for low-budget kitchen renovations to articles about new pet products, each segment of the e-commerce site markets the others. In each DIY project article, the specific products mentioned in the task are listed for sale via Knudson’s e-commerce site, helping bring online shoppers one click closer to conversion.

The Benefits of E-Commerce

For three months, Brown worked with the media company to design and catalog thousands of SKUs category by category. As each product was uploaded to the Knudson Lumber e-commerce site, the company became better positioned to offer customers a new level of shopping customization. Brown and her team’s decision to pursue e-commerce and enter a new era of retail possibility was timely. In January, a man in Washington was the first in the U.S. to be diagnosed with COVID-19. In February, Gov. Jay Inslee issued a state of emergency in Washington. Soon after, millions of people across the U.S. were sheltering at home, limiting their outside travel and shopping trips.

A Timeline of Innovation This summer, Knudson Lumber celebrated its 80th year of serving the Kittitas County region of Washington. Take a look back at the company’s history and discover key moments of innovation.

STAKING THEIR CLAIM Carl Knudson began a small grocery store and gas station and eventually adds a lumberyard to meet community needs.

ENTERING THE INDUSTRY Carl Knudson adds a hardware store to the lumberyard as well as a mill. He also increases the production capacity of the mill to help construct new properties across the area, including a local high school.

FROM THE ASHES The business’s sawmill burns down, and Carl Knudson uses the opportunity to move his business to a new location, where it remains more than 60 years later. Carl Knudson buys another sawmill and converts it to operate on electricity.

TECH REVOLUTION Knudson Lumber brings computers into the business to help streamline operations, including accounting, inventory control and more.

NEW VISIONS Knudson Lumber is purchased by Bob and Cindy Knudson. The two decide to expand their showfloor to enhance their retail inventory.

IN-STORE RENOVATIONS

2017

The business completes a Do it Best Signature Store redesign to enrich the customer experience.

Winter 2020 High Performance Retailing

Mere days before COVID-19 changed retail, Knudson Lumber’s e-commerce portal launched.

“It really went from zero to 100,” Brown says. “People caught on really quickly that we had the e-commerce site because we had promoted it in newspaper, on radio, social media and email. People were all about it and glad it was available at just that time.” Brown says the site was a critical step in continuing to serve customers during the COVID-19 pandemic. Online sales spiked shortly after the website launched. “I’m so thankful we had this when everything was shut down,” Brown says. After being deemed an essential business, Knudson Lumber transitioned to curbside service only, deciding to keep customers outside the brick-and-mortar store as the world learned more about the coronavirus and followed social distancing guidelines. During that time, customers called the store to order products, and the staff would run items to customers outside. As people across Washington found themselves living and working from home, Knudson Lumber and home improvement stores across the continent were popular spots for DIYers. “The magnitude of people calling and driving up for curbside service was unreal,” Brown says. “We couldn’t sustain the amount of calls that were coming in—we were working hard, but still running around like crazy.” GOING UP In Q2 2020, e-commerce sales as a percentage of total retail sales grew nearly 50 percent from the same period in 2019. Source: Source: U.S. Census Bureau

E-commerce sales cut through the noise. Instead of fielding phone calls and helping connect shoppers with new products, e-commerce orders arrived instantly, in full.

H10 High Performance Retailing Winter 2020

NEW FRONTIER In Q2 2020, e-commerce sales totaled $212 billion, a 31% increase from Q1. Source: Source: U.S. Census Bureau

A huge portion of the team’s workload was removed from the start, which helped the company establish a reputation for fast transactions on the newly launched online sales platform. As the team became more familiar with fulfilling e-commerce orders and began to prefer it, Brown and her team began printing flyers with links to the online store to distribute to customers waiting in the long curbside pick-up line. It was a small measure that alleviated congestion and grew online sales simultaneously. “One of the biggest benefits is that after using the e-commerce site for the first time, customers would use it again,” Brown says. Brown says e-commerce sales have tapered off since the earliest days of the pandemic, but sales remain strong and new products are

Convert Your Clicks

The Knudson Lumber team knows its new e-commerce site helped them navigate the COVID-19 crisis.

Once customers visit your company’s e-commerce site, be sure you’re pushing them toward a conversion every way you can. Check out these simple tips from marketing company Hubspot for more inspiration.

1. Start Early

Take the opportunity to catch customers in the consideration stage of a purchase. Be sure your social media and blog posts include links to the products referenced. Those links will help net online impulse sales.

2. Incorporate SEM

“It’s another way to stay modern and to stay relevant.” Cheryl Brown, marketing and advertising manager, Knudson Lumber constantly being added to the platform. Beyond helping Knudson Lumber stay agile in an unprecedented moment for retail, the site will continue to pay dividends for the business in terms of search engine optimization. “For me, adding an e-commerce site wasn’t just about selling products online, it was more about getting all products online and cataloged, so when someone searches for a certain caulk or a certain ladder, their search results bring them to Knudson Lumber,” she says.

Aiming Even Higher

Brown is hard at work on developing a mobile app to accompany the new

e-commerce site. She’s working with the same company that built the e-commerce portal to develop a customer-facing way to interact with shoppers more closely than ever before. The app will be a central hub for customers, who will be able to browse all existing portions of Knudson Lumber’s website, including its e-commerce portal, blogs and contact information. “I feel like an app is a great way to push information out to our customers, and the app I’m building also has games where customers can win discounts at the store,” Brown says. “It’s really another way to stay modern and to stay relevant.”

Adding informative product descriptions to your online inventory will differentiate your store in search engines, helping your online visibility rise. Also consider paid search marketing to advertise popular products.

3. Be Persistent

Shopping cart abandonment occurs when shoppers place items in their online shopping cart, but never complete the sale. Be sure to research common motivations for shopping cart abandonment. When shopping carts go idle, use your email marketing system to send friendly reminders to customers.

Winter 2020 High Performance Retailing

H11

SPRINGBOARD

Wrapping Up 2020

Charting the Year’s Biggest Holiday Sales Trends Research firm CBRE recently issued its outlook for the 2020 holiday shopping season. Featuring insight on the U.S. economy, new shopper habits and global insights, the data is a clear guide to the trends home improvement

retailers should be on the lookout for throughout the remainder of the holiday shopping season. Explore the key trends below and learn more about CBRE’s breadth of research by visiting the firm online at cbre.com.

01 | Expect a longer shopping season.

Operators should set their sights on a longer selling season than the traditional five-day window between Thanksgiving in the U.S. and Cyber Monday. Many major retailers closed their stores on Thanksgiving and instituted social distancing, meaning retailers are unlikely to see a swell of shoppers in a concentrated timespan as in years past. Instead, prepare for a steady flow of shoppers through winter.

02 | Prepare for a second e-commerce surge.

This winter, retailers can be certain that more customers than ever will be shopping online. CBRE projects 2020 holiday e-commerce sales growth to more than double over 2019. Be sure to use digital advertising and social media outreach throughout the winter sales season to net as many online sales as possible.

03 | Balance safety and in-store experience. Retailers face a tall order this holiday season of keeping staff and shoppers safe while still fostering a memorable in-store experience. According to CBRE, some retailers are adopting an “in-and-out” shopping model where customers enter the store to search for products, but other transactions like payments and returns take place outside to reduce in-store traffic.

Source: 2020 U.S. Retail Holiday Trends Guide, CBRE

H12 High Performance Retailing Winter 2020

WEBINAR

Dive Into 2020 Retail Trends Explore how home improvement, hardware, lumberyards and paint stores fared throughout 2020 via a special webinar on Dec. 16. Register now at YourNHPA.org/webinars.

BETWEEN THE LINES

The Retail Roadmap

Analyzing the Twists and Turns of 2020 Sales Despite uncertainty early in the year, unemployment rates and rising retail sales have remained strong across savings for many Americans. sectors, including historic sales for home “All in all, these numbers and other improvement (NAICS 444) and nonstore economic data show the nation’s companies (NAICS 454) like Amazon. economy remains on its recovery path,” Referencing retail sales for September, Kleinhenz says. National Retail Federation president and “Although sales growth is strong, it CEO Matthew Shay says throughout will slow through the rest of this year the COVID-19 pandemic, retailers and and into next year,” says Gus Faucher, consumers alike have adapted to a chief economist at PNC Financial. “The shifting landscape by embracing new slowing will be even larger if Congress modes of customer contact. does not pass another stimulus bill. “While it’s been a challenging year Unemployment remains pervasive for everyone, there’s been an enormous throughout the U.S. economy.” amount of innovation within the retail As 2020 draws to a close, review how industry,” Shay says. retail sales for home improvement and Jack Kleinhenz, chief economist the economy overall shifted compared for NRF, says retail sales built on to 2019 levels and discover key insights summertime momentum and into strong and weak retail sectors were further improved by declining heading into 2021.

How Retail Rose in 2020

Home Improvement Sales U.S. Retail Sales Overall

Compare the percent of change of home improvement sales and U.S. retail sales overall month by month and discover key insights into other retail sectors.

20%

As of September 2020,

PERCENT OF CHANGE

15%

Sales at clothing and accessories stores are down roughly 33% from the first nine months of 2019

10% 5% 0%

Food and drinking establishments have seen sales erode 20%

-5%

compared to 2019 levels

-10%

Sales for nonstore retailers have grown more than 20%

-15%

compared to this point of 2019

-20% JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEPT

Source: U.S. Census Bureau

Spring 2020 High Performance Retailing

H13

Newsmakers

Canada Aims to Ban Plastic Bags Retailers Must Find Alternatives by End of 2021

he Canadian government has announced plans to ban an array of common plastic products by the end of 2021, including single-use shopping bags common in brick-and-mortar retail. It’s all in an effort to produce zero plastic waste by 2030. In addition to the forthcoming ban on single-use plastic bags, the proposal would also push Canadians to find alternatives for stir sticks, beverage six-pack rings, cutlery, straws and certain food packaging. Certain common items would be exempted from the measure, including garbage bags, beverage containers and certain medical items, including personal protective equipment. Data indicates Canadians throw away about 3 million tons of plastic waste each year, and only 9 percent is recycled. Those in favor of the ban say many Canadians have already shifted from plastic shopping bags and other single-use items, opting for renewable or reusable alternatives. Those who oppose the legislation say it doesn’t address the roots of pollution in Canada.

HARDWARE RETAILING | December 2020

“Canadian businesses recognize the significant benefits of alternatives to single-use plastics and the importance of bolstering Canada’s circular economy. However, Canada’s approach must go beyond surface issues like bans, to address the critical infrastructure required to deliver on the positive benefits for the environment,” Canadian Chamber of Commerce’s Aaron Henry says in a statement to CTV News. In October, Nova Scotia moved to ban single-use shopping bags. Data from the Retail Council of Canada (RCC) shows Victoria, British Columbia will ban single-use plastic bags by April, and RCC says this patchwork of municipal bylaws could divert efforts toward a single national pollution goal. “In some cases, the scope of municipal ban by-laws may go beyond the federally banned items. If these municipal bans remain in effect and others emerge, it will defeat the goal of working towards a national target, operational efficiencies and may well create confusion among Canadians,” the organization says in a statement.

In light of COVID-19, many industry events are either postponing or transitioning to online platforms. For the latest information on major upcoming home improvement events, head to TheRedT.com/calendar.

Canadian Headlines • ABSDA Cancels Spring 2021 Show The Atlantic Building Supply Dealers Association (ABSDA) has announced the cancelation of the in-person 2021 ABSDA Building Supply Expo. The association’s board made the decision at the end of October to safeguard attendees. The show has been running since 1955 and moved to Halifax, Nova Scotia, from Moncton, New Brunswick, two years ago. • Home Depot Canada Suffers Data Breach Home Depot Canada experienced a data breach at the end of October. The event exposed certain consumer

details, including credit card numbers, and was started when a Home Depot online account configuration email was inadvertently sent to customers. Human error, not hacking, is believed to have caused the breach. • Ace Canada and Sexton Group Form Alliance Ace Canada, a division of Peavey Industries, will form a strategic partnership with Manitoba-based Sexton Group. Ace dealers will now have access to LBM offerings from Sexton Group. In addition, Sexton Group retailers will now have access to Ace’s inventory of hardware retail products. The agreement is expected to begin Jan. 1.

START 2021 IN THE KNOW Subscribing to Hardware Retailing’s print and digital communications has never been easier. Visit TheRedT.com/subscribe to ensure you receive the latest industry news, research and profiles the moment they’re released.

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

December 2020 | HARDWARE RETAILING

Last Word

T H E H O L I DAY S A R E H E R E AG A I N ,

Differently COVID-19 Has Changed Consumer Buying Preferences

nxiety about COVID-19 has shifted where and how people will shop for the holidays. Research from professional services firm Deloitte shows that more than half of shoppers feel anxious about in-store shopping due to the pandemic. Independent home improvement retailers are positioned to continue serving shoppers throughout the pandemic and beyond as they meet consumers’ needs for efficiency and safety. Providing convenient store locations, adapting to change and responding quickly to customers’ needs have never mattered more. Due to COVID-19, Deloitte reports 69 percent of consumers prefer stores close to home to shop in-store, but 65 percent prefer shopping online to avoid crowds.

The data shows that 48 percent of consumers prefer shopping at a store located outside of a mall. Demand for curbside pickup more than doubled from 2019 to 2020, according to Deloitte. And more than one-third of shoppers say they use buy online, pickup in store (BOPIS) options because it’s safer than in-store shopping. About half of holiday shoppers say their shopping habits will return to their pre-pandemic norms when there is a vaccine, according to the research. In the meantime, when shopping over the holidays, most consumers plan to rely on product deliveries instead of spending as much time doing traditional in-store browsing.

NEARLY 70 PERCENT OF SHOPPERS PREFER STORES CLOSER TO HOM E

HARDWARE RETAILING | December 2020

THE SHOPPING

SITUATION

How COVID-19 has impacted holiday shopping

The percentage of people who prefer curbside pickup more than doubled year over year

73%

of holiday shoppers plan to have products delivered

BOPIS vs. In-Store Shopping and Delivery

Why customers use buy online, pickup in store (BOPIS) instead of shopping in stores

NEARLY ONE-THIRD

Safer

of holiday shoppers say their financial situations are worse than last year

Faster Less Stressful

ABOUT 50% of shoppers plan to buy home products, such as home improvement items and appliances, during the holiday season. Why customers use BOPIS instead of delivery Cheaper Faster Source for All Data Presented: 2020 Deloitte Holiday Retail Survey, October 2020

December 2020 | HARDWARE RETAILING

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