Hardware Retailing magazine spoke with three top executives from Ace Hardware Corp. to learn more about the co-op’s latest merchandising, logistics and marketing initiatives.
How Ace Pursues Differentiation Where It Counts
Executive Vice President, Chief Merchandising and Sales Officer
Surane oversees merchandising, sales and Ace Hardware’s wholesale division. He has worked toward enriching Ace’s selection of high-quality, differentiated products.
Hardware Retailing (HR): What is your merchandising strategy for Ace?
John Surane (JS): I think it’s important that we stick to what our core strategy has been for merchandising over the years. It really is about becoming famous for four big segments or categories in the store, which are paint, backyard and barbecue and home preservation, which would be the core plumbing, electrical, hardware products. The fourth key segment is holiday, where we really get into trim-a-tree and unique, innovative gifts. We have to be the best at sourcing those categories and finding the best brands and creating the most differentiation within those four big buckets of product categories.
HR: How will the co-op do that?
JS: It’s really all about focus. It’s knowing what we stand for and then trying to go after it. For example, our paint department has grown the number of merchants that we have in that department and resources we put toward it and grown significantly over the years. We heavily adjust resources to make sure we have enough people in that department so we can work closely with our manufacturers and sourcing agents to procure the best assortments. Again, best costs, best assortments and the most differentiation to make that department really work.
HR: How is your team making sure Ace Hardware is always differentiated?
JS: They have to understand what the trends are, what consumers are seeking. Then they have to work from there to establish relationships with brands and find the ones that aren’t sold on Amazon, which is very difficult. To the extent we can, they look for the stuff that is not sold online and not in the big boxes. We have the most success there. Our owners love those brands and we win with those.
HR: Is differentiation an ongoing process?
JS: It really is. This is why I believe in the co-op. I believe the power in the U.S. market, having 4,200 stores banding together as one co-op and supporting some of these key products and brands in big categories as one, allows us to have the scale we need to get manufacturers and brands to favor us and come to us and say, “I’m going to offer you these products or my brand exclusively. I’m not going to sell this brand to one of the big boxes or in the rest of the hardware channel.”
We are seeing more and more of that every day because of our growth and because of our great retailers banding together as one in this co-op to really make a mark in the marketplace to grow these categories. We’ll never stop trying to find more and more of those brands, but it’s very difficult.
For example, we work with a brand of power tools that has a very strict channel strategy. They sell to Home Depot and they sell in the industrial channels, but they’re not on Amazon and they’re not in Lowe’s or Menards. We’re putting together big strategies to grow their business, and they’re favoring Ace in many ways because of our growth and again because of our retailers sticking behind that brand.
HR: What does it look like for them to favor Ace?
JS: The level of support, be it in terms of the assortment they’re offering us, field support, programming, support of our shows, support of our retailers, advertising dollars. All of those things make up a program that enables us to grow. There’s a give and take. We support them as much as we can and they support us with all of the resources and funding that they can. We believe that’s a win-win. The growth that they’re enjoying makes it all worth it to them.
HR: How have you zeroed in on the categories that are key for Ace?
JS: When we look at our model, we say that our brand stands for helpful in service and convenience. When we think about that, what categories require engagement of an associate in the store? For example, paint. You can’t go into a hardware store, a home center or anywhere else and purchase paint without the help of an associate because you have to get the paint tinted. There’s engagement and a level of service that has to occur.
Categories like lawn and garden, outdoor power equipment, barbecue, paint, plumbing, electrical and hardware are high-engagement, high-touch categories with Ace store associates. Those are where we focus so retailers can really leverage helpful, best-in-class service.
We have about 75 percent of the U.S. population roughly within 15 minutes of an Ace store. We have those product solutions in close proximity to consumers so they can fix problems around the house quickly. We need to exploit that.
Supply Chain Moves
Ace Innovates to Help Retailers Stay Competitive
Executive Vice President, Chief Supply Chain Officer
Bossmann oversees supply chain operations, inventory replenishment, retail support, loss prevention and property administration. She has been with Ace for more than 30 years.
Hardware Retailing (HR): What are some major supply chain improvements that are underway?
Lori Bossmann (LB): Ace’s business is driven a lot by the weather. We have an opportunity, as an organization, to really shine when tragedies or big weather events—such as hurricanes, snow storms or flooding—happen. We are using a program that incorporates weather forecasting to predict how much sales will go up due to weather events, such as hurricanes. The significance of that is that we have a two-week lead time on orders by being ahead of the weather. We tested this in 2018 on 21 categories. Our forecasting accuracy improved 6 percent. We’re rolling out the program from 21 to 100 categories. We’ll leverage it in any categories we can, going forward.
What we’re calling the Logistics Revolution is a significant initiative. Our supply network can reach 70 percent of our stores within 250 miles of a distribution center. Our average Ace store has 25,000 SKUs. Our warehouses have 100,000 SKUs. The Logistics Revolution is giving stores access to those SKUs within one day. Our goal is to roll it out to 70 percent of Ace stores by the first quarter of 2019. This initiative is really enabling store associates to say “yes” more often to customers. If the store makes an order by 2 p.m., we can guarantee delivery for the next day.
HR: How does the Logistics Revolution work?
LB: In order to offset costs, we optimized our current replenishment routes with retailers. We used software that basically looks at service routes to optimize delivery routes.
We have 4,500 stores that are within local markets, in close proximity to the customer, and we can leverage the Logistics Revolution to get them the product within a day. That’s something that no other retailer out there has because they don’t have 4,500 physical store locations within the marketplace. The real value is that we have stores within all those markets that have 25,000 SKUs. Now, with Logistics Revolution, they really have access to 100,000 SKUs within a day.
HR: What spurred these changes?
LB: All these changes are always a response to our retailers and helping them be more competitive in the marketplace. However, we were the leaders to really push forward the Logistics Revolution because we thought that the retailers needed next-day delivery to be competitive. We were also getting a lot of feedback, as our retailers grew their B2B businesses, that they needed more frequent deliveries. The program is a driver to help them service their B2B customers much better and on a more timely basis. Now, they can get a one-day replenishment order and supplement it with the Logistics Revolution. There’s also no order minimum.
HR: What other supply chain projects is your team working on?
LB: Within the last several months, we’ve also rolled out an Uber-like app that allows our retailers to know exactly where their delivery vehicle is. The reason this is important is that when a normal replenishment order arrives at the store, they usually staff up and have to have extra help come in to receive the order. About 95 percent of the time, our delivery trucks arrive within 30 minutes of when we say they will. However, for the 5 percent of the time that they’re delayed, retailers want to know where their truck is so they can shift staff members to other tasks instead of having them wait and be unproductive.
The app is a way to use technology to really help communicate to our retailers. On a map, the retailers can see exactly where their delivery truck is. It’s immediate information that is especially helpful when you have storms or there’s a traffic accident.
A Marketing Balance
Ace’s Dual Focus on Both Local and National Initiatives
Senior Vice President, Chief Marketing Officer
Lefko leads Ace Hardware worldwide marketing and advertising efforts and digital initiatives. She was appointed to her position at Ace in 2018 after working for Weber-Stephen Product.
Hardware Retailing (HR): What are your current marketing initiatives?
Kim Lefko (KL): It’s really a blend. We have this philosophy that we test, learn, refine and scale. So, we’re always trying new things, but, ultimately, we need to balance national advertising with local, relevant advertising because of the nature of our business.Keeping a national brand presence is a major, important investment for us. That’s why TV advertising is still a major area of investment for us. We’re also investing in digital advertising on a national level.
Each individual region and each individual store is local. We balance the national advertising with very local, relevant advertising. Probably our two biggest levers at the local level are PR and social media. We provide tools and support so a local store can really make their presence felt using marketing.
Events are also very important. We have four national events that we advertise and promote nationally, but locally, retailerscan really activate and create a draw at the store level. Those events are geared around what we would call our famous categories, which are barbecue and grills, home maintenance and preservation and holiday and gift giving. And, new in 2019 is our 95th anniversary, and that event will be taking place in October. Those are nationally promoted through radio and TV, but locally activated at the store level.
HR: What will the 2019 events look like?
KL: First, we will be doing the spring start, which is home maintenance and repair. We’re calling that the backyard party. It will be taking place in the March-April timeframe, and that will be very much focused on featuring a premier brand for us. Our May event will be a barbecue fest that will be focused on our top-tier brands. October is our birthday month, so that’ll be our 95th birthday celebration, and we have some fun things planned. And then December will be holiday gifts and lighting.
We’ll nationally promote the events through our preprint circular that we send out. We’ll also piggyback our TV promotion the week prior to each of these events. And then, of course, we’re big on creating the necessary tools that we can hand off to the local store to market on their own. If you were to walk from one Ace to another, each store chooses how they want to do the event, but at the corporate level, we give them a standard sign kit and tools to execute a unified feel.
HR: What are some other important initiatives you’re working on?
KL: Probably the biggest one is digital. When we talk about digital marketing, it really comes down to a few key areas. The first is AceHardware.com. Through AceHardware.com, if you’re a local Ace retailer, you can show your pricing. You can show your promotions and offers and events happening. And that’s an incredible marketing opportunity for an individual hardware store located across the country. That digital investment at the corporate level is a major one that we’re making.
The second major investment in digital is our app. We’re in the process right now of redeveloping our app and we will be relaunching that in the back half of 2019. As we think about the app, it really is geared toward commerce and Ace Rewards members. We have several million members in our Ace Rewards loyalty club. How we connect and engage with them on a very personal level is a key marketing initiative. It’sa major value-add to the brand on the national level, but also on the local level because we can segment out the shoppers for an individual store and put together programs specific to that region or that individual store.
HR: What are the benefits of the different approaches you’re taking?
KL: The biggest benefit for the local retailer is that you have the best of both worlds. You have this beautiful balance of nationally building a very well trusted and loved brand, and that’s Ace. That’s important to a local retailer because it’s the name on the front of their store. We also have to give the local store all the tools necessary to be able to market at an individual local level. As you consider these local stores, they become such a heartbeat of their community. Being able to personalize their marketing and be locally relevant is so important to the heart and soul of Ace. We would never want to take away that entrepreneurial spirit and locally owned feel from a neighborhood or from a store owner. As a marketer, we have to give retailers tools to empower them while we also build the loved and iconic Ace brand.