A Custom Approach
True Value Rolls Out New Marketing Plan in 2019
Senior Vice President, Marketing
Dave Elliott joined True Value in 2017 from Mitre 10, a New Zealand-based home improvement co-op. He has over 25 years of global marketing experience. In his career, he has developed growth strategies for independent retailers.
Hardware Retailing (HR): Can you talk about some of the company’s upcoming marketing initiatives?
Dave Elliott (DE): Independent hardware retailing is in a really great spot by being able to supply different needs under one roof. Generally consumers need advice, or they have new and ongoing projects. Therefore, independent hardware retailers are in a great position to be the go-to resource to continue to meet consumers’ shifting needs.
For wholesalers and independent retailers, it’s a matter of staying relevant for everyone. We stopped charging a national advertising fee so retailers could use that money to advertise locally, in both print and digital formats. Digital advertising may be new to a lot of our customers, but once they can see it will be profitable, they’re willing to include this new marketing approach in their mix.
HR: Do retailers set individualized budgets through this customized marketing program?
DE: Through the marketing process, True Value helps retailers determine the budget that works best for their needs and goals. As a wholesaler, the company also invests in marketing programs. A good example of that investment occurred last spring when the weather delivered snow on the ground through much of the country. To offset that slower sales period, we directly bought and paid for geo-targeted digital advertising with relevant messaging to support our retailers and drive store visits, even with a late spring.
We also offer a la carte localized marketing programs. Digital marketing allows you to adjust and change content more quickly to adapt to the current environment. Print is still important, but it needs to be targeted to specific audiences because it is so expensive. Stores that combined digital and print marketing methods realized the highest incremental sales currently, but their print expense contributes to a lower return on ad spend, due to its higher cost.
HR: How can a retailer determine the marketing program that works best for them?
DE: In 2019, each store will have its own individual marketing program, and they will be able to adjust it as the dollars go up and down, right on the screen. We’re putting that power in their hands, because True Value marketing is about customization so we are relevant locally.
Being able to customize locally is a smart thing to do, and our store owners understand this.
We are also launching artificial intelligence devices to push localization further. One example of this technology is a new app. Retailers will be able to stand in the aisle and scan a barcode to see all the information they need, like how many units they have on hand, as well as advertising information or a video that shows the product in use. This technology can even help them look up companion products or print a sign to show if an item is on sale.
In the next year, artificial intelligence will do more for stores, which is where I believe the future of technology is heading. We’ll start to increase advertising spending and decrease advertising expenses.
In addition to the app, we’re introducing a new marketing technology suite, which will allow retailers to produce their own advertising materials and customize their printed circulars.
We’ve also begun targeting Over-the-Top (OTT) advertising on televisions, apps and programs. This is the delivery of video and TV content via the internet without requiring traditional cable services. It is a more targeted type of advertising that goes to streaming services in a certain radius. That means retailers will have ads streamed within three miles of a store. We plan on doing more of that moving forward.
An Efficient Supplier
Supply Chain to Improve With New Investments
Senior Vice President and COO
Abhinav Shukla is responsible for all aspects of supply chain management, global sourcing and strategic procurement. He has led strategic initiatives at several Fortune 500 companies, improving financial and operational performance.
Hardware Retailing (HR): Can you give readers an update on True Value’s supply chain as we enter 2019?
Abhinav Shukla (AS): We’re in year three of five of our Supply Chain Network Optimization program, which is a central piece of a wider strategic plan. At the end of it, we’ll have significantly reduced operation costs and improved productivity by 25 percent. In the next year, we’ll have almost completely transitioned to a hub-and-spoke model.
We are focused heavily on this, especially following our announcement of $100 million in investments into the program. In early December, we launched the first iteration of our hub-and-spoke distribution model in the midwest to address capacity issues and enhance our customers’ product fulfillment and delivery experience. This strategy delivers many benefits, such as improved efficiency, streamlined deliveries and greater in-stock probability for low-volume SKUs. This system also allows us to provide increased distribution center capacity to support their future growth.
Leading up to the switch to hub-and-spoke, we looked at our stocking strategy and optimized it across our central facility and regional centers.
In the last three years, separate from this five-year plan, we’ve invested in voice-pick technology, which frees up operators’ eyes and hands, leading to greater efficiency without requiring more employees and improving operations.
HR: From a retailer’s perspective, what are the efficiencies that have been delivered so far?
AS: We pride ourselves on having competitive prices. For example, in 2016, despite increasing cost headwinds that have worsened since, we lowered our base freight rates and kept them at reduced levels. Consolidated receipts have allowed efficiencies at stores, and we want to make it easier to adopt these programs.
We have industry-leading fill rates. The more you trust your primary distributor, the easier it is to do business with us.
HR: What are you seeing in terms of inbound efficiency moving forward?
AS: The broader supply industry is facing serious challenges from record low levels of unemployment, trade-related increases and commodity inflation, as well as persistent shortages in warehouse and driver labor pools.
Distributors have struggled with inbound service levels, and we have adopted a multitude of strategies to insulate our customer fill rates from these challenges.
On the pricing side, with the tremendous volatility around trade agreements and an inflationary raw material environment, we are protecting our customers by negotiating timing and level of price changes from our vendors.
We’re supporting our retailers by helping them with pricing strategies that preserve and grow margins in this volatile and rising price environment, and we guaranteed our Fall Reunion pricing, regardless of tariff activity, and plan to do the same for our Spring Reunion.
HR: What are some operational challenges moving forward?
AS: Our central objective is to support retailer growth and profitability by recognizing the reality of the world we live in. Consumers are seeking flexibility and choice through an omnichannel offering. That requires constant focus on in-stock accuracy, quality and cost to serve, and a strong focus on order to delivery, or lead times. New digital programs, such as customized circulars and retailer-specific e-commerce programs, will help us be more responsive and cost-effective.
One of our differentiators on the e-commerce side is that 80 percent of our retailers participate in the ship-to-store program. Ship-to-store drives consumers into the store, so regardless of where they begin or end their journey, there is an interaction with a brick-and-mortar True Value, which builds the value and success for the customer with our retailers.
For special orders, if a consumer walks into a store and a particular item is not in stock, they can place a direct-to-consumer order. It’s providing retailers an extended capability supported by True Value.
A Growing Opportunity
How True Value Plans to Serve More Retailers
Senior Vice President, Growth
Tim Mills joined True Value in 2013 from industrial distributor HD Supply. He has held executive roles in operations, sales, mergers and acquisitions and was most recently vice president for the company.
Hardware Retailing (HR): How has True Value been looking at growth through the strategic plan?
Tim Mills (TM): We’ve had almost 200 new stores join the organization since April, which has set a new record for
True Value growth. Most of these are still in the core hardware space, but we’re also seeing farm, ranch and lumber retailers, such as Carter Lumber, that are joining, and realizing True Value can add value to their business model.
Many of the new stores that have joined have come from major wholesalers. All have called out our value proposition and focus on independence. Many have joined because they see the value of not having to invest.
True Value has experienced its best year of conversions, which tells me the market was ready to accept a new model.
We see secondary supplier relationships as an additional growth opportunity. In those instances, our field team will work with the retailer to develop a category assortment plan such as paint, lawn and garden or farm, ranch, auto and pet, which are areas True Value leads in the industry.
HR: How is True Value helping retailers grow their operations?
TM: We came out with the Roadmap to Retail Excellence several years ago, and that is still our primary focus. This tool helps diagnose and guide what actions retailers can take to achieve their goals.
The concept here is really all about relevance—we recognize that to compete today, a store must be relevant. Whether it’s the physical plan of the store, new marketing techniques or product assortments, we have programs in place today that are focused on ensuring relevance at the retail level. If we do those things well, it always translates to higher sales.
HR: What are some of the current challenges retailers are facing?
TM: One of the biggest challenges for some retailers is the fear of change. I see many retailers being comfortable with the routines and approach they’ve taken to run their businesses. Yet society has changed and, therefore, we have to as well.
Success in retail is not only about knowing what the customers want and need, but staying one step ahead and adapting to the world around us. It used to be about big beating small, but now I think it’s about fast and nimble beating slow and inflexible.
HR: What are the specific programs built around growth from True Value?
TM: Aside from our leading growth programs, like Destination True Value, and our Customized True Blue assortment program, our retail pricing efforts are important relative to growth. First, they create an appropriate price perception in the store, and second, they maximize profitability.
HR: How does True Value help with concepts like e-commerce and store promotions?
TM: Our omnichannel strategy is of vital importance. One of the biggest improvements for us is that we’re able to display local store inventory and soon, local pricing, on TrueValue.com so consumers can see price points and local inventory availability. Additionally, our field and marketing teams are available to help retailers best utilize True Value Rewards and digital marketing. These programs allow retailers to customize communications to their consumers.
The most distinguishing factors of True Value are that we are flexible, respecting the independence of each of our retailers, yet we are always available to help them succeed. We have built strong relationships, and these relationships set us apart. We are looking to grow our team and amp up our engagement even further in the new year.