Today, Ace Hardware Corp. announced the launch of a new distributor to serve independent non-Ace retailers and expand the co-op’s wholesale business across the U.S.
Hoyoung Pak, president of Ace Wholesale Holdings, answers questions about the new company, Emery Jensen Distribution, below.
Hardware Retailing: How does Emery Jensen Distribution (EJD) fit under Ace Wholesale Holdings?
Hoyoung Pak: Ace Wholesale Holdings is a subsidiary of Ace. EJD is one of three operating companies under Ace Wholesale Holdings; the two others are Emery-Waterhouse in the Northeast and Jensen Distribution Services in the West.
Will your team push independent dealers to join the Ace co-op?
No. In fact, the Ace Wholesale division has not pushed a single independent to join the Ace co-op since our acquisition of Emery-Waterhouse a year and a half ago. EJD territory managers operate completely independently of the Ace co-op structure and have no incentive to convert independents to Ace dealers. Our customers are fiercely independent and EJD is helping them stay that way.
What are the greatest benefits EJD offers retailers?
We offer independent retailers numerous benefits over competitors: lowest cost, largest selection, the most distribution outlets, the most inventory depth, the best service.
Plus, our retailers will get a transparent, easy-to-understand program and pricing. We offer competitive prices that are tiered based on spend levels and delivery rates based on the actual freight cost. That’s it. There are no startup fees or annual dues of any sort. Of course, the product cost savings as result of increased buying power is a powerful motivator to switch to EJD.
Overall, how have Ace member retailers reacted to this move? How will EJD handle competitive issues where there are current Ace member stores in markets for non-branded stores?
To answer this question, let me take a step back and share my experience working with Ace as an outsider. In 2007, I was at a consulting firm, McKinsey, working with John Venhuizen and team [on an unrelated topic]. What I learned was that the Ace leadership team is very thoughtful and deliberate when it comes to making important strategic decisions. And once they decide, they go all in to make it reality. The decision to serve independents wasn’t taken lightly and was several years in the making in close collaboration with the board. Ultimately, the decision was based on an attractive growth opportunity and the fact that independent retailers, supplied by competitive distributors, were already competing with Ace dealers.
Now to answer your question, Ace dealers have generally been very positive about the move. As a result of the acquisitions, Ace dealers have already seen a reduction in product cost. As EJD continues to expand, both Ace dealers and independents will see incremental cost savings as result of increased buying power, which is ultimately the main goal of a co-op. The truth of the matter is this – scale matters. And as the largest, fastest growing hardlines distributor, we believe it is our job to continuously deliver cost savings to our customers – both Ace retailers and independent retail customers.
Will EJD service any mass merchants?
Not today. We’re focused on serving independents, grocery, drug and e-commerce. However, we will continue investigating new channels as we move forward.
Do you leverage Ace’s back office functions, such as merchandising and supply chain?
For critical functions that are a bit more behind the scenes, like the functions you mentioned, we absolutely leverage Ace’s capability. This helps us scale faster and, over the long run, drive efficiencies in both organizations. There’s no reason for us to replicate the 17 distribution centers throughout the country or create another team of merchants. Ace has a world-class supply chain and merchandising teams, so partnering – not replicating – is the way to go as it ultimately lowers costs for our independent customers.
What will EJD’s approach to serving e-commerce businesses look like?
Our Jensen team has done a fantastic job serving e-commerce retailers for several years now. Our primary initiative for 2016 will be leveraging Ace distribution centers to serve our existing and new e-commerce retailers. This will allow us to open up significantly more products and improve service levels with closer distribution to e-retailers and their consumers. This will also be a nice win for our vendors who will now have additional access to a rapidly growing channel.
Will EJD vendors and non-Ace customers have access to Ace conventions as Ace member retailers currently have?
Yes, EJD customers will have access to the conventions. In fact, we invited EJD prospects to the Ace Fall Convention in Chicago and it went over extremely well. We plan to expand the invitation at future shows. In addition, we plan to invite select Emery-Waterhouse and Jensen Distribution Services vendors to future Ace shows to expand the offering for Ace dealers.
What are the greatest benefits EJD offers vendors?
Based on our discussions with vendors, we’re hearing three major benefits of partnering with EJD: 1), increased revenue 2), streamlined operations, and 3), reduced risk.
Revenue growth comes from our access to additional retail channels beyond traditional independents hardware retailers, such as grocery, e-commerce, nursery, farm and ranch, just to name a few.
Streamlined operations is a result of vendors getting access to a national independent distributor and the Ace co-op in one shot. This means there’s no need for duplicate vendor agreements, ordering, billing, collections, transportation, etc. In addition, we have 17 distribution centers throughout the country, which is significantly more than our competitors. This translates to reduced transportation cost and improved service levels.
Vendors have also mentioned reduced risk as a major benefit. Over the past several years and decades, there has been significant consolidation and many distributors have gone out of business as a result. As I mentioned earlier, Ace Wholesale Holdings consists of companies that have stood the test of time with over a hundred-year track record and a strong balance sheet. With the additional backing of Ace, there’s very low risk of default when purchasing from EJD.