Hardware Retailing December 2018

Serving Hardware, Home Center & Building Material Retailers

Caution: Sales Zone Florida Retailer Promotes Safety Among B2B Customers 52

Market Measure: Review the Industry’s Annual Report 24 Create Your Retail Trade Show Game Plan 44 VOLUME 215 • ISSUE 6 • DECEMBER 2018 • HARDWARERETAILING.COM

WEBSITE

JOIN MAILING LIST

FACEB

Find Out What An Orgill Dealer Market Is All About The industry event that has everything you need to increase your profitability.

Join us February 21-23 for our Spring Dealer Market in Orlando! Register online or give us a call today!

• Fantastic buying opportunities • Deep discounts from thousands of vendors • Fully merchandised concept stores • Special product showcases

Watch the video to learn more about Orgill Dealer Markets!

1-800-347-2860 ext. 5373 • information@orgill.com • www.orgill.com Digital_Dealer Market_Single.indd 1

11/1/18 1:29 PM

“I found that the class has been the single most valuable thing I have done in my career, both for me personally and for our business.”

Caution: Sales Zon Florida Retailer Promotes Safety Among B2B Customers 52

Market Measure: Review the Industry’s Annual Report 24 Create Your Retail Trade Show Game Plan 44

Christian Herrick | Randy’s Do it Best Hardware | Timberville, Virginia

Give the Gift of Training Choosing to enroll your middle- and senior-level managers in the Retail Management Certification Program can be a gift that changes the course of their careers. From now until Jan. 1, you can save more than 20 percent on program tuition, making it easier than ever to empower your next-in-line managers with retail-specific training, including lessons in accounting, human resources management, marketing and more.

VOLUME 215 • ISSUE 6 • DECEMBER 2018 • HARDWARERETAILING.CO

TO SEE THE CURRICULUM AND MORE, GO TO NRHARMCP.COM

RMCP_House Ads.indd 992

11/13/18 9:47 AM

Cover_1218.indd 1

BOOK

ADVERTISE

CONTACT US

Serving Hardware, Home Center & Building Material Retailers

Embrace your industry peers.

NRHA represents all independent home improvement retailers, regardless of wholesale affiliation. Through your association, you can connect with other business owners who experience the same challenges and opportunities you do.

Grow Your Network Get involved today!

NRHA offers themed roundtables, educational conferences, events and retail-specific leadership development programs. Connect with NRHA to learn what options are best for your business needs.

“NRHA is made up of people of who have the same values and are looking for the same things you are. The programs are geared toward our core values.”

Adriane Naillon | Wilco JOIN US TODAY AT NRHA.ORG/MEMBERSHIP

NRHA-Membership_House Ad.indd 1

ne

11/14/18 8:29 AM

Are you offering health insurance to employees?

In today’s competitive market, providing health benefits can make a big difference to potential employees and could determine whether they accept your job offer or a competitor’s offer.

Stay Competitive

AD #4

We’re here to help.

We know health insurance can be expensive, so we designed the NRHA Health Insurance Plan specifically for independent home improvement retailers. The plan offers great benefits and numerous perks at a reasonable price. Get in touch to learn more today.

“We’ve helped so many independent home improvement business owners save money on health insurance with the NRHA plan.

The first step is getting a quote. What do you have to lose?”

OM

Bob Chiesa | President & CEO | Custom Benefits Insurance Group Inc. FOR MORE INFORMATION, GO TO CBIGI.COM/NRHA-PROGRAM

Health Insurance_HouseAd.indd 59

11/21/18 11:38 AM

11/13/18 8:37 AM

DECEMBER SPONSOR

“Young Retailer of the Year honorees make a huge impact.

They truly represent the future of the independent industry.”

Scott Wright | North American Retail Hardware Association

Start Your Journey Today Nominations are now open for the 2018 Young Retailer of the Year awards. Since 1996, this program has showcased hardware retail leaders who are bringing new ideas and new success to the independent home improvement industry. Submit a nomination today to showcase how you have moved your business—and the industry—forward.

LEARN MORE OR SUBMIT A NOMINATION TODAY AT NRHA.ORG/YROTY

Sponsored by:

Young Retailer Year of the

Serving Hardware, Home Center & Building Material Retailers

Caution: Sales Zone Florida Retailer Promotes Safety Among B2B Customers 52

Market Measure: Review the Industry’s Annual Report 24 Create Your Retail Trade Show Game Plan 44 VOLUME 215 • ISSUE 6 • DECEMBER 2018 • HARDWARERETAILING.COM

“I found that the class has been the single most valuable thing I have done in my career, both for me personally and for our business.”

Christian Herrick | Randy’s Do it Best Hardware | Timberville, Virginia

Give the Gift of Training Choosing to enroll your middle- and senior-level managers in the Retail Management Certification Program can be a gift that changes the course of their careers. From now until Jan. 1, you can save more than 20 percent on program tuition, making it easier than ever to empower your next-in-line managers with retail-specific training, including lessons in accounting, human resources management, marketing and more.

TO SEE THE CURRICULUM AND MORE, GO TO NRHARMCP.COM

The International Home + Housewares Show features hundreds of exhibitors offering the latest cleaning & organizational solutions, closet & clothes care, bath accessories and unique pet-care items.

March 2 - 5 • Chicago Free Badge Registration at

www.housewares.org

Headquarters Staff

COMING IN JANUARY

PUBLISHING EXECUTIVE VICE PRESIDENT AND PUBLISHER Dan Tratensek

COMMUNICATIONS DIRECTOR OF COMMUNICATIONS Whitney Daulton SPECIAL PROJECTS EDITOR Liz Lichtenberger

136 N. Delaware St. #200 Indianapolis, Indiana 46204 Phone: 317-275-9400 Fax: 317-275-9403 Email: nrha@nrha.org Website: nrha.org SOCIAL MEDIA LINKS

@NorthAmericanRetailHardwareAssociation @nrha_official North American Retail Hardware Association @nrha_official HEADQUARTERS STAFF

FEATURES EDITOR Melanie Moul PROFILES EDITOR Renee Changnon ASSISTANT EDITORS Kate Klein Chad Husted Todd Taber SENIOR DESIGNER Lynnea Chom GRAPHIC DESIGNER Kelsey Truex WEB DEVELOPER Kevin Trehan

PRODUCTION SERVICES PRODUCTION MANAGER Nancy A. Vondersaar

CIRCULATION

VICE PRESIDENT OF FINANCE AND BUSINESS SERVICES David Gowan

CIRCULATION DIRECTOR Richard Jarrett

MEMBER SERVICES

CIRCULATION/SUBSCRIPTION/ LIST RENTAL INQUIRIES

MEMBER GROWTH AND DEVELOPMENT MANAGER Marci Taschler, 317-275-9421, mtaschler@nrha.org EVENT MANAGER AND RETAIL SUPPORT Katie McHone-Jones, 317-275-9426, kmchone-jones@nrha.org

RETAIL LEADERSHIP INSTITUTE EXECUTIVE DIRECTOR Scott Wright, 317-275-9417, swright@nrha.org DIRECTOR OF RECRUITMENT Tom Marcum, 317-275-9430, tmarcum@nrha.org

NRHA CANADA NRHA CANADA Michael McLarney, 528 Queen St. E., Toronto, Ontario, Canada M5A 1V2; +1 416-489-3396, mike@hardlines.ca

STATE AND REGIONAL ASSOCIATIONS MIDWEST HARDWARE ASSOCIATION John Haka, 5000 Woodward Drive, Suite A, P.O. Box 8033, Stevens Point, WI 54481-8033; 715-341-7100; 800-888-1817; Fax: 715-341-4080 PACIFIC NORTHWEST REGION Ronald F. Moore, 3857 Wolverine NE, Suite 20, Salem, OR 97305 (UPS, FedEx); P.O. Box 17819, Salem, OR 97305 (U.S. Mail); 503-375-9024; Fax: 503-375-7980; AK, ID, OR, WA SOUTHWESTERN REGION Jeff Flora, 638 W. 39th St., Kansas City, MO 64111; P.O. Box 419264, Kansas City, MO 64141; 816-561-5323; Fax: 816-561-1249; AR, KS, LA, MO, NE, NM, TX

New Year, New Path In the January issue, Hardware Retailing starts its year-long series profiling each distributor in the independent home improvement industry.

First up, hear what’s next for True Value after a pivotal year.

SALES AND PRODUCTION ASSISTANT Freda Creech

PRESIDENT AND CEO Bob Cutter

TRAINING MANAGER AND EDITOR Jesse Carleton, 317-275-9418, jcarleton@nrha.org

True Value

®

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

SALES/NRHA VENDOR PARTNER DIRECTOR OF SALES Lowell Huffman MIDWEST REGION MANAGER Chris Miller, 506 Citadel Circle, Westmont, IL 60559; 630-234-3272, Fax: 317-275-9403, chris@millermediainc.net WEST REGION MANAGER Jon Dawson, 136 N. Delaware St. #200, Indianapolis, IN 46204; 317-275-9420, Fax: 317-275-9403, jdawson@nrha.org NORTHEAST REGION MANAGER Jason Harper, 136 N. Delaware St. #200, Indianapolis, IN 46204; 317-275-9414, Fax: 317-275-9403, jharper@nrha.org GREAT LAKES REGION MANAGER Lowell Huffman, 136 N. Delaware St. #200, Indianapolis, IN 46204; 317-275-9443, Fax: 317-275-9403, lhuffman@nrha.org SOUTHEAST REGION MANAGER Nick O’Connor, 136 N. Delaware St. #200, Indianapolis, IN 46204; 317-275-9409, Fax: 317-275-9403, noconnor@nrha.org BUSINESS DEVELOPMENT MANAGER Brad Lyons, 136 N. Delaware St. #200, Indianapolis, IN 46204; 317-275-9424, Fax: 317-275-9403, blyons@nrha.org CANADA John Magner, 500 Queens Quay W., #101 W. Toronto, Ontario M5V 3K8; 416-598-0101 x220, Fax: 416-598-9191, jmagner@yorkmedia.net

NRHA MISSION

The North American Retail Hardware Association’s (NRHA) mission is to help independent hardware stores, home centers and lumberyards, regardless of wholesale affiliation, become better and more profitable retailers.

NRHA BOARD OF DIRECTORS CHAIRMAN OF THE BOARD TJ Comstock, Northwest Hardware LLC, Billings, Montana EXECUTIVE VICE CHAIRMAN Greg Schlecht, Greg’s True Value, St. Francis, Wisconsin DIRECTORS Daniel Harris, Palos Ace Hardware, Palos Heights, Illinois; Lemont Ace Hardware, Lemont, Illinois Will Aubuchon, Aubuchon Hardware, Westminster, Massachusetts Jared Smith, Jared’s Ace Hardware, Bishopville, South Carolina David Dishke, Grand River Home Hardware, Caledonia, Ontario

Hardware Retailing (ISSN0889-2989) is published monthly by the North American Retail Hardware Association, 136 N. Delaware St. #200, Indianapolis, IN 46204. Subscription rates: Hardware Retailing (Payable in advance): U.S. & possessions $50.00 year. Canada $75.00 year. All other countries $100.00 year.

(Air Mail $60.00 year additional). Single copy $7.00. The Annual Report issue can be purchased for $30.00.

Periodical postage paid at Indianapolis, Indiana, and additional mailing offices.

POSTMASTER: Send address changes to Hardware Retailing, P.O. Box 16709, St. Louis, MO 63105-1209.

All editorial contents copyrighted 2018 by the North American Retail Hardware Association.

No editorial may be reproduced without prior permission of the publisher.

REPRINTS: Contact the Editorial Department at 317-275-9400 for price quotations. Printed in the USA.

2

HARDWARE RETAILING | December 2018

Steve Fusek, Fusek’s True Value, Indianapolis SECRETARY-TREASURER Bob Cutter, NRHA President and CEO IMMEDIATE PAST CHAIRMAN Megan Menzer, Newton’s True Value, Cherryvale, Kansas

FIRST CHOICE. BEST CHOICE.

TAKING YOUR STORE TO THE TOP OF THEIR LIST. Truly effective merchandising and marketing require streamlined integration that only a national co-op with substantial buying power and retail expertise can deliver. From comprehensive, warehouse-supported manufacturer programs, to our innovative Digital Dashboard marketing platform, Do it Best helps you to engage your customers with the right products, at the right price, in the right way—right when they need them most.

Let our Merchandising and Marketing teams show you how a well-tuned program can translate to immediate and sustainable sales growth for your business.

Together, we’ll make your store the first and best choice for every customer you serve.

“Our goal is to support you with effective marketing at the right time, with the right items at the right prices— all delivered in the right way.”

— Rich Lynch, Vice President of Marketing Dent Johnson, Vice President of Merchandising

Call us today at 888-DO IT BEST (364-8237). independentsdoitbest.com

Contents DECEMBER 2018 | VOLUME 215 | ISSUE 6

24

MARKET MEASURE

The Industry’s Annual Overview

As the calendar turns to a new year, it’s time to reflect on how the independent home improvement industry fared in 2018. Hardware Retailing’s annual Market Measure report gives readers insight into a year of changes, challenges and triumphs. Plus, benefit from expert housing and economic outlooks to guide your business in the year ahead. Review the past year to start 2019 on the right note.

52 CATEGORY Safety First and Foremost Stocking a wide array of safety equipment at your business can satisfy and safeguard customers.

Learn how Ace Hardware Titusville finds products to keep home improvement pros—and even astronauts—safe and sound.

Departments

44 INDUSTRY EVENTS New Products, New Possibilities Visiting a specialty market could be worth its weight in gold, giving retailers the chance to find great products outside their regular winventory. Get information on niche markets that could bring a new wave of customers to your business.

50 MARKETING Small Screen, Big Potential Brownsboro Hardware & Paint owner Jim Lehrer has more than 20 years of experience appearing on television with his local news crew. Learn how the mutually beneficial relationship started and how you can replicate its success in your own community.

4

HARDWARE RETAILING | December 2018

06 . . . . . . . . . . . . . . . . . On the Web 08 . . . . . . . . . Independent Thinking 10 . . . . . . . .Taking Care of Business 12 . . . . . . . . . . . . . . . . NRHA News 16 . . . . . . . . . . . . . . . . . . . . . Trends 18 . . . . . . . . . . . . . . . . . . Checkouts 58 . . . . . . . . .Newsmakers/Calendar 62 . . . . . . . . . . . . . . . . . . Last Word

On the Cover Titusville Ace Hardware store manager Michael Martin knows safety is a teamwide priority for every industry. Learn how his business promotes and sells safety products.

NRHA photo by Kelsey Truex

INTRODUCING

18 NEW TOUCHSCREEN WORK GLOVES

UTILITY

HI-VIZ

GRIP

THE ALL NEW TOUCHSCREEN COMMAND SERIES. DEMAND THE BEST. DEMAND IRONCLAD.

LEATHER

COLD

On the Web

MARKETING

Get the Word Out Hosting a big event at your business?

Ready to announce an expansion? Get your message out with a customized press release. Find a template online at TheRedT.com/press-release to ensure you deliver valuable information.

INDUSTRY EVENTS

Find Your New Niche Exploring unique niche markets across the country can be a great way for business owners to enrich their inventory and satisfy customers. Read about valuable niche markets now by visiting TheRedT.com/niche-shows.

RESEARCH

Market in Motion This year’s Market Measure feature includes several important takeaways retailers can use to benchmark their businesses and prepare for 2019.

Hear from Dan Tratensek, publisher of Hardware Retailing, as he breaks down the economic trends and industry events that affected independent home improvement retailers in 2018. To watch the video and gain insight for your business, visit TheRedT.com/market-video.

This series of quick lessons on topics such as selling skills, merchandising, product knowledge and operations is made for all employees. Visit nrha.org/training to download this month’s lessons, listed below.

Home Weatherization FAQ Remind shoppers to protect their properties from winter weather.

Get tips to help your staff sell winterizing products.

MARKETING

Propel Your Marketing In 2018, Hardware Retailing explored ways independent retailers could boost their marketing and connect with their communities. Now, you can review all four articles to amplify your business’s reach. Read the marketing tips at TheRedT.com/marketing-series.

6

HARDWARE RETAILING | December 2018

CATEGORY SPOTLIGHT

Safe and Sound For a deeper understanding of the importance of safety equipment, visit TheRedT.com/meidl-safety to learn about Cliff Meidl, a safety advocate and a former construction worker whose life was impacted by an accident on the job.

Selling Caulks and Sealants Learn the differences between the different types of caulks and sealants.

SOCIAL MEDIA LINKS

@HardwareRetailing @hardwareretail

Great gi ideas at...

ColesWildBird.com

1-877-426-8882 • coleswildbird.com

Independent Thinking

Are You Ready for Your Future? s we put a bow on 2018, I can’t help but wonder what new developments will continue to define and re-shape the world of retail in the coming year.

I recently read an article by Matthew Shay, president and CEO of the National Retail Federation (NRF), that talks about the forces that will shape the future of retail. During a recent roundtable, the NRF had brought together a group of Wall Street analysts, leading economists, journalists and retail executives to discuss what retail’s new future will look like.

The group decided retail’s ongoing transformation will continue to be “more diverse and fast-moving than ever before”—not to sound too cliché. They recommended developing “next-gen metrics” that measure more of a holistic (meaning online and in-store) shopping experience. There was also talk of omnichannel and digital capabilities starting to pay off for retailers who had invested in this technology as far back as a decade ago. And yes, there was even mention of using artificial intelligence to gain a better understanding of the customer and how to deliver the experiences they want when shopping.

Armed with this information, I was eager to moderate NRHA’s Information Technology (IT) Roundtable, which took place last month. We hosted a group that included some of the leading independent retailers in our industry. The agenda included discussions of omnichannel capabilities, data security and even PCI compliance. I admit I had a perception going in that it would be two days of techno-jargon that might require an interpreter for me, and that was partially true. And make no mistake, we did discuss these subjects in depth, as well as what the future might look like from a technological standpoint. But some of the most lively discussion was on the topic of employees, their roles, and how to train and retain them. I realized that whether I’m moderating a roundtable of IT techs, CFOs or even marketing and merchandising pros, the conversation ALWAYS turns to employees, and how to develop them.

Of course, we need to continue contemplating where retail technology is headed and what’s on the horizon for the next five or 10 years (as if we could predict that far out).

But even Shay stated that “no one had definitive answers,” and that all we can do is “work to advance our shared understanding with conversations between those in the industry and those who cover it.” I completely agree. But I also think so much of it seems out of our control, at least to some degree.

So what can we all do today, and in 2019, that will move us forward as an industry?

While it’s important to embrace technology and learn more about how customers shop, you must also remain focused on the needs of your people. You must develop them, and teach them to be good leaders and managers. You must create a culture in your stores that fosters employee engagement and retention. You must show them a career path that is exciting and rewarding. These are the things you have control over, and these are the things that will move the needle quickly for independent retailers.

While there are too many unknowns that we can prognosticate about as it pertains to the future and the role technology will play, what we need to remember and embrace is that independent home improvement retailing will always be about employing people who can serve customers’ needs.

The NRHA’s Retail Leadership Institute offers programs on leadership and retail management development that will help you take control of your future today. If you want to learn more, please call me at 317-275-9417 or visit nrha.org. We can help, and we’re here to serve. Happy holidays!

A

“What we need to remember and embrace is that independent home improvement retailing will always be about employing people who can serve customers’ needs.

”

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

8

HARDWARE RETAILING | December 2018

BIG BRANDS=

BIG MONEY.

ARE YOU LOSING OUT? Does your supplier offer these brands? With True Value®, you get access to the brands, categories and products your current supplier probably can’t get. You can buy 500 product assortments in 91 categories— including popular brands like these. It’s time to break up with your current supplier and build a better future with True Value.

ARIENS BIG GREEN EGG® BLUE BUFFALO®

CALIFORNIA AIR EASYCARE® PAINT FIRMAN GENERAL ELECTRIC

DON'T LOSE OUT.

GREEN THUMB® HILLMAN™ LEGRAND LINCOLN WELDING

CALL 1-888-291-7229 OR VISIT TRUEVALUECOMPANY.COM/TRUTH. ©2018 True Value Company LLC. TVRG-14528

MASTER MECHANIC SCOTTS® TASTE OF THE WILD® TRUGUARD®

Taking Care of Business

Let’s Put Away the Spreadsheets ith the publication of this year’s Market Measure report, beginning on Page 24, you will undoubtedly find a variety of ways to see how your business measures up to the competition.

Usually, in this month’s column, I encourage you to browse all these numbers and start the new year with a renewed commitment to tracking your own performance.

I usually say how important it is to use NRHA’s Cost of Doing Business Study as a guideline for your operation. And I have no doubt used numerous references to drive the point home about how important it is that you closely examine the numbers found within your own income statements and balance sheets.

Well, not this year.

Nope. I’m not going to say a thing about how the only way you can grow your operation is by taking a cold, hard look at your numbers and making a commitment to incrementally improve those key profit variables.

Instead, I’m going to focus on how important it is to look at the things within your business that just can’t be measured. I want to talk about things that can’t be evaluated by gleaning data from a spreadsheet or off a calculator.

The truth is, the majority of all the independent home improvement retail operations in this industry are family businesses. Sometimes, we put way too much emphasis on the second word in that description and forget about the first.

That’s right. Unlike a corporation with anonymous shareholders and interests around the globe, chances are, your business is made up of family. That’s not to say that every family business has aunts, uncles, brothers and sisters working inside the operation.

The real definition of a family business is that the owners (at least one of them) works daily in the operation.

But as you likely know, a real family business extends beyond bloodlines. I talk to so many independent retailers who tell me that their employees and their communities are “just like one big family.”

As we enter into this holiday season, in an era when everything seems to be pitting us against each other and it is far too common to measure our worth in dollars and cents rather than goodwill and charity, let’s not forget why this industry is so different.

Each and every one of your operations is different because it is a family business and, like it or not, families take care of each other, look out for each other’s best interests and even tolerate each other’s idiosyncrasies.

That’s why, this year, I’m not going to encourage you to spend the next few weeks poring over your financial statements. Instead, I am going to encourage you to spend the next few weeks truly enjoying that other part of your enterprise: the family part of your business.

I want you to shake your customers’ hands a little more firmly, buy a round of hot chocolate for your staff, and make a vow to not talk about business at the dinner table for at least a few nights. After a few weeks of that, feel free to dive back into the bean-counting, but try, at least for a while, to remember how important the family part of your business can be and why it makes you, your company and our industry so different from the corporate world. Happy holidays!

W

“Remember how important the family part of your business can be and why it makes you, your company and our industry so different from the corporate world.

”

Dan M. Tratensek, Publisher

dant@nrha.org

10

HARDWARE RETAILING | December 2018

TRUTH : THERE ARE ONLY TWO WAYS TO GROW A BUSINESS.

One, find more customers to sell to and two, sell more to the ones you’ve got.

That’s why we plan to grow our business by doing just two things: have new customers join us and make sure our existing True Value® family thrives.

The plan is simple. First, as a True Value customer, you don’t make capital investments. Second, you can access a nationally recognized brand plus over 500 top assortments. You won’t pay advertising fees, and the advertising you sign up for will be targeted only to your trade areas. Unlike our competitors, with True Value, you get all the value you’re paying for.

That’s how we’ll grow our business—and that’s how you’ll grow yours. You’ve got a bright future. And it’s ready and waiting.

IF YOU’RE READY FOR A TRANSFORMATION, VISIT TRUEVALUECOMPANY.COM/TRUTH OR CALL 1.888.291.7229. ©2018 True Value Company LLC. All rights reserved. TVRG-14275

NRHA News

A Look Back at a Year of Growth and Opportunity his was a year of action for the North American Retail Hardware Association (NRHA). From organizing research to championing retailers and developing new training programs, your association worked to strengthen the

T

The Next Generation Before the NRHA All-Industry Conference, the association celebrated Young Retailer of the Year honorees. From California to Nova Scotia, these retailers are finding new ways to succeed in the independent channel.

12

industry and the people who power it. Take a look back at the year with a few of 2018’s major milestones.

Stay tuned to learn new ways NRHA is powering the independent channel by visiting nrha.org.

NRHA All-Industry Conference In May, NRHA hosted the All-Industry Conference in conjunction with the National Hardware Show®.

Attendees networked and learned about industry research.

New Inventory Management Course

Cost of Doing Business Study

The new course, which debuted in October, provides a high-level overview of strategies and best practices to help retailers and employees effectively manage their inventory.

This fall, NRHA unveiled the 2018 Cost of Doing Business Study. Compiled with information from nearly 1,000 retailers, the study can help operators make sound business decisions.

HARDWARE RETAILING | December 2018

A New Home Online In July, NRHA completely redesigned its website, giving retailers easier access to all of the association’s products and services, including training, business services, research, events and more.

A New Chairman Montana retailer TJ Comstock became the new chairman of NRHA, replacing outgoing chairman Megan Menzer.

As chairman, he hopes to continue NRHA’s training initiatives and find new ways to strengthen the channel.

Using the 2019 NRHA Member Guide ou’ve probably noticed this month’s issue of Hardware Retailing came with a little something extra. The 2019 NRHA Member Guide is packed with the information you need to make the most of your association’s programs, research and events.

NRHA’s goal is to educate independent home improvement retailers, advocate for their success and help members associate to benefit from one another’s insights. The guide highlights your association’s two levels of membership

Y

and its individual offerings, giving an up-close look at the options available to retailers across the U.S. and Canada.

You can review the separate membership offerings NRHA provides to help your business grow. For more information on membership benefits, consult the enclosed Member Guide.

To learn more about membership levels and the programs available to retailers, contact Member Services at nrha@nrha.org, or call 1-800-772-4424 to discover how NRHA can help your business and employees grow.

Basic Membership

Training Membership

Individual Offerings

It’s important to remember that every independent home improvement retailer across the country has a Basic Membership to NRHA.

Retailers who start with an NRHA Training Membership have access to all of the benefits of the Basic Membership, in addition to a wealth of research and training resources that can put their business on the path to success.

NRHA has something for every retailer. Individual offerings from the association can be a great investment to strengthen employees’ skills and profit from illuminating industry research.

Basic members have free, unlimited access to a variety of online educational resources and monthly issues of Hardware Retailing. This membership level is a perfect fit for many retailers who want to use industry research and insight to streamline their business.

At this level, retailers can learn more about the programs, events and services NRHA offers to help retailers succeed. Basic Membership is also a perfect solution for retailers operating on a budget.

Perhaps you’ve thought of instituting a training program at your business, but weren’t quite sure where to start or how to track its success.

Maybe you’ve considered getting more involved in the developing the industry. If these traits apply to you, an NRHA Basic Membership is the perfect place to start.

Training Members have access to nine in-depth, online training programs they can use to inspire and inform staff members to perform to the highest standard. These online training programs provide valuable information on product knowledge, advanced selling skills, basic accounting and loss prevention.

An NRHA Training Membership is perfect for retailers who want to sell more, connect with customers and capitalize on exclusive industry research to better achieve their goals.

With an NRHA Training Membership, retailers can enrich their training programs, work to reduce turnover and boost employee confidence. It’s a great solution for retailers who have a small to midsize budget.

The Cost of Doing Business Study helps retailers benchmark their businesses by comparing their financial data to typical and high-profit operations.

Retailers should explore the ways the Retail Leadership Institute can inspire employees to excel.

NRHA’s Business Services offer health insurance solutions, human resources management and payment processing. They save retailers time and money and help operations run smoother than ever before.

Choosing individual offerings from the association is a great option for retailers who are looking for advanced leadership or operational training for key employees. These offerings are also a great way to build a network of highly motivated peers.

December 2018 | HARDWARE RETAILING

13

Nominations Open for 2019 Young Retailer of the Year

NRHA News

o you or one of your employees have what it takes to be named a 2019 Young Retailer of the Year honoree?

Now in its 23rd year, the Young Retailer of the Year program highlights the accomplishments of the newest class of hardware and home improvement leaders.

From increasing sales and improving their communities to continuing their hardware and retail education, Young Retailer of the Year honorees represent the channel’s potential and promise.

D

STRAP, BUNDLE, ORGANIZE

Judging Criteria

One-Tie®, the reusable tie strap built for everyone from the contractor to the crafter.

Young Retailer of the Year nominees should be younger than 35 years old on Feb. 28, 2019.

They must work at an independent hardware or home improvement center in the U.S., its territories or in Canada. Past entrants who have not been chosen as previous honorees are strongly encouraged to apply again to the program.

Judges will evaluate all entrants on four main criteria.

• Judges will consider the high points of a nominee’s career, specifically evaluating how a nominee has contributed to the overall success of their business.

One-Tie is available in six lengths up to 32”, seven colors, and multi-count packs. For more on pricing and display options, contact Jerry Burstein at jburstein@tmadeproducts.com or call 262.563.6133.

• Nominees should explain how they continue their industry education.

• The efforts a nominee has made to improve their community will also be a criteria the judges consider.

• Finally, judges will evaluate other activities and initiatives a nominee has undertaken to improve their business and mark themselves as a stellar young retailer.

See our video and more at

ONE-TIE.COM 262.563.6133

14

HARDWARE RETAILING | December 2018

Young Retailer of the Year honorees will be chosen in three categories: stores with less than $2 million in sales; stores with more than $2 million in sales; and multiple-store operations.

All judges’ decisions are final.

The 2018 Young Retailer of the Year honorees gather in Las Vegas for NRHA’s All-Industry Conference.

Act now: Nominations for the 2019 Young Retailer of the Year program will close Feb. 28, 2019.

Submit a Video This year, judges are encouraging applicants to submit videos.

Nominees can film a short video for the judging panel that briefly introduces them and the business they represent. This is a chance to tell the judges about themselves and their industry contributions.

Nominees should address each of the four main judging criteria and give details on their involvement in the independent home improvement channel.

They can share their thoughts on the future of the independent channel and how being named a Young Retailer of the Year would impact their career.

Program Benefits Being named a Young Retailer of the Year can open doors throughout the industry. Honorees gain exposure for themselves and the businesses they represent.

They benefit by participating in roundtables and by receiving scholarships to attend NRHA’s Retail Management Certification Program.

Act now: Nominations for the 2019 Young Retailer of the Year program will close Feb. 28, 2019.

For more information on the program and official rules, be sure to visit nrha.org/yroty.

December 2018 | HARDWARE RETAILING

15

Trends Sponsored by HIRI | HIRI.org

Emphasize the Priorities of Remodelers Attracting or keeping pro remodelers’ business requires focusing on what matters most to them.

Many of the home remodelers who participated in a contractor study from the Home Improvement Research Institute (HIRI) use big-box home centers as their primary sources of supplies.

However, contractors who made a recent switch in suppliers left big-box home centers and took their business to other types of operations, such as hardware stores.

The top reasons contractors changed loyalties were that the new source offers a wider selection of products, better prices, higher quality service, higher quality products and their preferred brands—all motivators related to why they chose their primary suppliers in the first place.

Applied to Retail Don’t assume your operation is excelling in the areas that your home remodeler customers value, even if you currently have their loyalty.

You need to keep pro contractors’ priorities constantly in mind and regularly reassess how well you’re offering what they need.

Keep your retail outlet well stocked and competitive on price. Stay in tune with how quickly your customers need deliveries, and revisit your product mix regularly.

Communicate often with your pro customers so you can adapt to keep them happy. Then, work to stay ahead of them by setting new delivery speed goals and developing plans for regularly comparing prices with competitors.

Motivators for Loyalty to Primary Suppliers The top 5 most important factors remodelers consider when choosing where to buy supplies:

66%

Products in stock

60%

Competitive prices

58%

On-time delivery

55%

Convenient location

53%

Wide selection of brands, sizes, colors, etc.

0%

10%

20%

30%

40%

50%

% of Contractors Percentages do not total 100% because respondents could select more than one answer.

Source: 2017 Contractor Study, HIRI

16

HARDWARE RETAILING | December 2018

60%

70%

Style & Security Shipped Same-Day

Kwikset offers homeowners door hardware designs that feature sleek, contemporary styling, touchscreen convenience and dependable security that provides peace of mind.

HSI offers retailers the entire Kwikset line with same-day shipping from six locations, expert tech support and hassle-free service.

Call HSI for the Special Order Kwikset hardware that your customers demand.

HSI Hassle Free Service

Kwikset Obsidian Touchscreen Lock shown with San Clemente Handleset in Venetian Bronze (11P) Finish

10 Warehouses Nationwide

Same-Day Shipping

hardwaresuppliers.com | 800-334-5625

In-House Keying

Checkouts COMMUNITY RELATIONS

Special Delivery From the North Pole ecember is a busy time for Santa Claus, but the staff at Crown Ace Hardware are giving him some help. They’re answering some of the many letters he’s sure to get every year. Crown Ace has 14 stores in coastal southern California, two in Lake Havasu, Arizona, and one store on the north shore of Kauai, Hawaii.

For the past seven years, in the weeks before Christmas, staff decorate a mailbox in the store and invite their younger visitors to write a letter directly to Saint Nicholas himself.

Each child who puts a letter in the mailbox, along with a stamped, self-addressed return envelope, gets a letter in return before Christmas, postmarked from the North Pole, along with some good memories of their local hardware store.

The Crown Ace team oversees the magic behind the mailbox. They open each letter addressed to Santa, write a personalized response and dress up the envelope with colorful stickers. All letters are then mailed in bulk to a post office in Anchorage, Alaska, where they are given a North Pole postmark and returned individually to each child.

“Some of the letters the kids send are cute, some are sad and some are really funny,” says Skip Snead, marketing coordinator. “We have a great time writing back to each and

D

every child as if we were Santa Claus ourselves! Every year the program gets bigger and bigger.”

Snead says they replied to more than 1,000 letters this past year between the 16 participating Crown Ace stores. In past years, he’s used store staff to reply to the letters. This year, he’s getting help from local senior living residences in the area, finding a way to draw even more members of the community into the program.

“This is a magical time of year for the children,” he says.

“We hope this gives them a reason to remember us.”

Children visiting Crown Ace Hardware can use a specially marked mailbox to send letters directly to Santa Claus and get a personalized response.

Looking for creative ways to engage customers? Whether it’s promotions, merchandising or special events, we cover it here.

Have an idea? Contact Melanie Moul at mmoul@nrha.org to have your story considered for publication.

18

HARDWARE RETAILING | December 2018

NOLIMITS HARDWARE SAVINGS MARKET January 10-12, 2019 Opryland Convention Center Nashville, TN Here’s Why Our Customers Love Attending the Markets H A R DW A R E C O M P A NY

Buying Right “Going to the dealer markets is the best way to buy right, so we can keep our margins strong. HouseHasson treats us like family and it’s always a fun time” -Rob Walker, New Palestine Hardware

Rob Walker

Product Availability “Markets are a good size. There’s plenty to see but they’re not too large. We find wonderful deals and end up buying a lot there. I like the fact that they have three shows, which allows us to keep up with new items and buy a lot at a discount.”

-Josh Kilgore, Collins Building Materials Josh Kilgore

Building Relationships “We go to all the dealer markets, because we find it pays off for us. It’s always a fun time, but mainly we want to take advantage of all the great deals on products we sell regularly in our store. It’s also nice to get a chance to talk with the people at House-Hasson and the vendors we’ve gotten to know through the years” -Todd Eads, Eads Hardware

Todd Eads

We invite you to join us to see what we have to offer: • • • •

Hot deals at Bonus Buy Breakfasts Unbeatable Prices Great Payment Terms Electronic Ordering

• • • •

Educational Seminars Marketing & Store Service Solutions Travel Rewards Program Great Food and Entertainment

For more information about our Market, contact us today!

1-800-333-0520 ext. 212 • www.househasson.com • House-Hasson Hardware Co., 3125 Water Plant Road, Knoxville, TN 37914

Checkouts

EVENTS

Bringing Santa Claus to Town n the Friday after Thanksgiving, the store truck at Parker Ace Hardware has an important delivery to make. It is pulling a float in the Parker Ace Hardware Parade of Lights, the float that carries Santa Claus into town.

The parade is run by the Downtown Development Authority in Sault Ste. Marie, Michigan, and is one of the town’s beloved holiday traditions.

O

“We’ve been involved in the parade for about 40 years.

This has been a good way to tie us closer to the community and a chance to give back.

”

—Scott Parker, Parker Ace Hardware

It’s become a tradition for Parker Ace Hardware, too.

The parade starts on the street behind Parker Ace Hardware and ends at the Sault Ste. Marie City Hall for the lighting of the Christmas tree.

In the days leading up to the parade, employees at the store are preparing the float that will carry Santa Claus into town. Parker Ace Hardware owner Scott Parker stores the float in his warehouse. Then, on parade day, parade entrants use the store parking lot and surrounding streets as a staging ground as they wait their place in line.

Being the title sponsor for the annual event means Parker makes a sizable donation to the parade, and he says he feels there’s a good return on that investment.

“We have a lot of people thanking us for sponsoring the parade, and it gets us a lot of publicity,” he says.

“We’ve been involved in the parade for about 40 years.

This has been a good way to tie us closer to the community and a chance to give back.”

The truck from Parker Ace Hardware pulls a float that carries Santa Claus into town in the annual Parker Ace Hardware Parade of Lights.

20

HARDWARE RETAILING | December 2018

OPERATIONS

Lighting the Way uch like other decor items, holiday lights can be a gamble for customers. Oftentimes a customer will purchase a string of lights based on nothing but the description and a picture on the box. No one knows how the lights will look when strung along the roof or around a tree until the moment they’re plugged in.

To give customers a bit more knowledge and security in their purchasing, Woydziak Do it Best Hardware in Lyons, Kansas, has built an interior lighting display area each year since 2013.

Owner Jason Huddleston and his team started the Christmas Cave as an enclosed area on the salesfloor with black bags to block the store’s lighting and show the holiday lights in a night-like setting.

The Woydziak Do it Best team is always looking for new products to display, as well as different ways to merchandise the light selection.

One year’s theme featured characters from the classic 1964 animated TV special “Rudolph the Red-Nosed Reindeer,” including the abominable snowman, while another year focused on “A Christmas Story,” including the famous leg lamp from the movie.

“There are so many options with these lights. Blue lights can be light or dark blue; you can get different intensity levels in lights; icicle lights come in a wide variety of arrangements and colors now,” Huddleston says. “We even display the laser lights that are projected on the sides of a house. We really want to be known as a destination for the holidays.”

M

The Christmas Cave at Woydziak Do it Best Hardware allows customers to see how different lights will look out of the box.

CUSTOMERS ARE LINING UP TO TRY IT. RESCUE!® Child-Resistant Ant Baits.

With a spill-proof design that’s safer for kids, these stations feature both carbohydrate and protein baits. So they attract ants faster while also eliminating the larvae and queen – wiping out the entire colony. It’s a package that’s as attractive to your customers as it is to ants.

Learn about the science behind all of our products at Rescue.com.

December 2018 | HARDWARE RETAILING

21

Checkouts

OPERATIONS

12 Days of Discounts ustomers at Lewisburg Builders Supply in Lewisburg, Pennsylvania, can enjoy Black Friday-style bargains for most of December.

The store’s 12 Days of Tools sale offers deep savings on 12 different tools. It has become one of the most anticipated sales of the year.

On Black Friday, marketing director Rebekah Flanick and her team wrap 12 tools and place them under the Christmas tree in the store. Then, at the beginning of December, and continuing for 12 consecutive business days, they unwrap one gift on each day of the sale, revealing the tool on sale for that day.

Discounts are deep, often as much as 60 percent. The store will continue to offer the discount on the tool until Christmas or until the current inventory on the item runs out. Flanick posts the sale of the day on Facebook and runs a radio advertisement that helps build excitement for the sale. Facebook posts, in particular, drive traffic to the page as, each day, customers anticipate the next item to be revealed. She believes the posts also play an important role in getting people in the store to buy the discounted items.

The sale has been a hit with customers. “We’re looking for products that are easy to wrap and put under a tree,” Flanick says.

“They are items that can be useful for either a DIYer or a contractor, so they have a wide audience.

“These are also items that people are going to be excited about and see the value in,” she says. “The sale helps our price image and gets people in the door. We look for sales that are irresistible, and the hope is that when shoppers come in the door to get the discount, they’ll continue shopping and we can build a larger transaction.”

C

The 12 Days of Tools sale at Lewisburg Builders Supply promotes tools at steep discounts that appeal to a wide audience.

American Made & Profitable For Over 80 Years

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

Ask for our Product Catalog which provides product descriptions and size specifications.

Toll Free: 855-966-AJAX (2529) www.ajaxwire.com ajaxwire@aol.com 119 Bloomingdale Road, Hicksville, NY 11801 22

HARDWARE RETAILING | December 2018

COMMUNITY RELATIONS

Singing Praises for Unsung Heroes enerous people make their mark on the world every day. They might not draw attention to their good deeds, but Scott Campbell, owner of M&M Hardware in Steubenville, Ohio, wants to make sure the actions of those unsung heroes don’t go unnoticed.

For the past eight years, his business, along with the local hospital and newspaper, have sponsored the Community Star Awards. The program recognizes members of the community who go out of their way to help others without regard for any recognition they may receive.

Members of the community can nominate people whom they feel deserve the award. There’s no age restriction to nominees— the youngest recipient they’ve had was 8 years old—and the awards program has honored as few as six one year and as many as 12 another year. A panel of judges from the newspaper reviews each entry to come up with a final list. Honorees are recognized at a special dinner and awards ceremony.

In addition to a commemorative medallion, honorees get a gift card to M&M Hardware. Sometimes honorees are already established loyal shoppers; sometimes they see the store for the first time when they come in with their gift cards. Campbell helps get the word out about the program through the store’s social media platforms.

“While our store has always supported the community, such as through youth sports teams and churches,

G

we know there are many individuals who do a lot of good, too,” he says. “This is our opportunity to recognize the many people who are doing good just out of a sense of goodwill. In today’s world, there is so much bad news, and this is a chance for us to tell about the good things that people are doing.”

The Class of 2018 was honored at a special dinner in September.

Photo courtesy of the Herald-Star/The Weirton Daily Times.

ALL HOUSEHOLD LUBRICANTS ARE

NOT ALIKE. FiendOil™ works from -65˚ to 400˚F. So wherever metal meets metal - bikes, guns, doors, hinges, garage, latches, handles and more – FiendOil performs. Now offering distribution to independent retailers at an MSRP of $7.99.

For information, visit Fiendoil.com/wholesale | MADE IN THE U.S.A. ©2018 FIENDOIL, LLC

24

HARDWARE RETAILING | December 2018

2018 Market Measure The Industry’s Annual Report

W

hile 2018 has shaped up to be another relatively strong year for sales in the home improvement industry, we may be facing a perception problem that could temper growth in the months to come.

Let’s talk about some of the positive forces that have allowed the home improvement retailing industry to once again outpace overall retailing this year.

The driving force behind home improvement retail sales for the first half of 2018 has been the economy.

Unemployment figures remain low, wages have risen and housing prices are up. Though interest rates have risen, they are still low by historical standards.

This good economic news translates to more consumers buying and selling homes and renovating.

The positive housing momentum has resulted in strong performance. Every source we use to monitor the home improvement market reports strong sales in 2018.

The North American Retail Hardware Association (NRHA) estimates predict that industry sales for 2018 should come in at approximately $394 billion, an increase of about 5.5 percent over 2017.

This number is slightly higher than we predicted last year, partly as a result of interest rates holding steady and also because of the way product sales were driven by record storm preparation and damage experienced in various parts of the country. It is also important to consider that we have seen, and should continue to see, some upward pricing pressures on many home improvement-related products.

What We’ll Cover 28 Industry Breakdown 29 Chain Results 30 Cost of Doing Business Study 32 Retail Store Performance 34 Financial Profiles 36 Industry Year in Review 38 Housing Market Outlook 40 Economic Outlook 42 Canadian Retail 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 2018 | HARDWARE RETAILING

25

By all accounts, the industry is shaping up to have another strong year this year, remaining a slight step ahead of overall retail sales.

Looking solely at government statistics for the industry, the projected figure for the year is relatively similar to NRHA’s, with total sales estimated around $394.6 billion for 2018— a 4.4 percent increase from the U.S. Census Bureau figures from last year.

Lastly, estimates from the Home Improvement Research Institute (HIRI) show industry sales for 2018 totaling approximately $398.2 billion, a 6.3 percent increase over last year’s performance.

By all accounts, the industry is shaping up to have another strong year this year, remaining a slight step ahead of overall retail sales.

For industry retailers, there are a few important points to note. Overall, it appears professional purchases are growing at a much faster clip than consumer purchases. In fact, according to HIRI, industry sales to pros will grow at about 9.9 percent in 2018, compared to just 4.7 percent for consumers.

This data shouldn’t be surprising as homebuilding and larger remodeling projects taking place during a healthy economic cycle are tied to pro purchases.

At the retail level, we see a greater percentage of home improvement sales going online. In fact, Home Depot grew its online sales by 23.1 percent during the first six months of fiscal 2018, according to a company report. Both Home Depot and Lowe’s have made ongoing efforts to grow their online presence, offering services such as buy online, pick up in store.

Even as online sales capture more of the retail home improvement market, it’s important to note that the two largest online sellers of home improvement products, Home Depot and Lowe’s, are still anchored in the brick-and-mortar world.

While Amazon has seen its sales of tools and home improvement items increase in recent years,

26

HARDWARE RETAILING | December 2018

its total 2017 sales of $6.1 billion are still dwarfed by online sales through brick-and-mortar-based retailers like Home Depot, which recorded online sales of $24.9 billion in the first quarter alone, according to GlobalData Retail.

On the Horizon The return of the housing market, solid employment numbers and still-steady interest rates have helped home improvement retailing remain strong.

However, one thing we have learned over the last few decades is that all good things must come to an end.

The billion-dollar question is, will the end of the expansion period for the industry appear suddenly or will we see a gradual erosion in growth?

Our analysis suggests that we might be in store for the latter. We might start to enter a more subdued growth cycle as early as late 2019 or 2020.

So, what are some of the factors we will need to watch for?

How the Federal Reserve deals with interest rates will be a major concern in the months ahead. According to The Conference Board, a global research group, “growth will encounter more headwinds in 2019, especially with the Federal Reserve set to raise interest rates four more times by the end of next year.”

And while the impact of rising interest rates might start to blunt momentum found within the housing market as early as 2019, there is another less-tangible headwind facing the industry: the wait-and-see consumer.

Wait-and-see consumers are people who, even with affordable housing, interest rates at a manageable level and a strong economic outlook, are still waiting to invest in the housing market in earnest.

According to the National Association of Realtors, “in the third quarter of 2018, 63 percent of people believe that now is a good time to buy a home, which is the lowest percent recorded” since 2015.

Reluctance to buy is even more evident in consumers under the age of 34, the National Association of Realtors reports.

NRHA is predicting softer growth for the industry over the next two or three years because of looming interest rate hikes, consumers already hedging on whether to buy a home and another election cycle getting ready to ramp up in late 2019. By 2022, we expect the home improvement retail market could be seeing growth in the high 3 percent range.

U.S. Home Improvement Sales (in billions)

71%

Compound Annual Growth 2017-2022 = 4.5%

500

4.4%

5.5%

400 300

$373.5

4.9%

4.1%

4.0%

3.8%

$413.3

$430.3

$447.5

$464.50

$394.0

200

of independent industry retailers expect their sales to increase moderately from 2018 to 2021.

100 Source: NRHA 2017 State of Independents Conference Research

0 2017 2018 Source: NRHA/Hardware Retailing

2019

2020

2021

2022

Home Improvement Product Sales Performance (in billions)

7.2%

Compound Annual Growth 2017-2022 = 4.6%

7.3%

6.3%

5.8%

4.1%

3.5%

3.4%

$438.8

$454.3

$469.7

$421.4

500 400

was Home Depot’s overall sales growth projection for 2018, as of November.

$398.2 $374.8 300 200 100

Source: Home Depot Third-Quarter 2018 Financial Report

0 2017

2018

2019

2020

2021

2022

Source: Home Improvement Research Institute/IHS/Current Prices

Home Improvement Retail Sales (% change year over year) 7.1%

5.3%

4.3%

5.4%

8.2%

$349.1

$377.6

4.5%

4.5%

400

$394.6

350 300

$301.6

$317.6

$331.3

was Lowe’s overall sales growth projection for 2018 at midyear.

250 200 150 100 50

Source: Lowe’s Second-Quarter 2018 Financial Report

0 2013

2014

2015

2016

2017

2018

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

December 2018 | HARDWARE RETAILING

27

Industry Breakdown

2018

2017-2022

2017-2022

Home Improvement Sales by Month

Sales by Type of Store

Outlets

(in billions)

(in billions)

Hardware Stores

$47.9

Hardware Stores

19,850

Home Centers

$232.9

Home Centers

9,790

Lumberyards

9,760

January

$32.0

February

$32.4

March

$32.0

TOTAL

April

$31.8

Hardware Stores

$50.8

Hardware Stores

19,250

May

$32.5

Home Centers

$245.5

Home Centers

9,785

Lumberyards

$97.7

Lumberyards

9,760

June

$32.5

July

$32.6

August (p)

$32.9

YTD

$258.8

2017

2018

Lumberyards

TOTAL

2019

$92.7

2017

TOTAL

$373.5

2018

TOTAL

$394.0

39,400

38,795

Hardware Stores

$50.4

Hardware Stores

19,150

Home Centers

$257.9

Home Centers

9,730

Lumberyards

$105.0

Lumberyards

9,700

TOTAL

$413.3

2019

TOTAL

38,580

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

Home Improvement Sales Growth 2017 vs. 2016 January

4.6%

February

4.9%

March

3.9%

April

1.9%

May

8.0%

June

4.5%

July

3.8%

August

4.8%

YTD

Compound Annual Growth Rate

4.5%

2017-2022

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

28

2020

2021

2022

Hardware Stores

$52.1

Hardware Stores

19,100

Home Centers

$268.9

Home Centers

9,720

Lumberyards

$109.3

Lumberyards

9,650

TOTAL

$430.3

TOTAL

38,470

Hardware Stores

$54.6

Hardware Stores

19,000

Home Centers

$279.2

Home Centers

9,680

Lumberyards

9,640

Lumberyards

$113.7

TOTAL

$447.5

2021

TOTAL

38,320

Hardware Stores

$58.1

Hardware Stores

18,900

Home Centers

$288.9

Home Centers

9,710

Lumberyards

$117.5

Lumberyards

9,620

TOTAL

$464.5

Hardware Stores

3.9%

Home Centers

4.4%

Lumberyards

4.9%

TOTAL

4.5%

Source: NRHA/Hardware Retailing

HARDWARE RETAILING | December 2018

2020

2022

TOTAL

Percent Change 2017-2022

38,230

Hardware Stores

-4.8%

Home Centers

-0.8%

Lumberyards

-1.4%

TOTAL

-3.0%

Source: NRHA/Hardware Retailing

Chain Results

Market Share Profile Top Chains: Industry Share

Top Chains: Combined Performance Net Sales

Sales

No. of Stores

(as % of total industry)

(as % of total industry)

2013

50.2%

15.0%

2013

$154.8

5,885

2014*

49.4%

16.1%

2014*

$159.4

6,308

2015

49.7%

16.4%

2015

$168.6

6,447

2016

51.3%

17.4%

2016

$183.6

6,846

2017

51.9%

17.7%

2017

$193.9

6,988

1.7%

2.7%

Compound Annual Growth Rate

5.8%

4.4%

2013-2017 Percentage Point Change

No. of Stores

(in billions)

2013-2017

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

Top Chains: Individual Performance 2017 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 2017

Stores in 2018 (as of fall 2018)

$100.9

2,284

2,286***

$68.6

2,152

2,155***

$10.0*

306

316

$7.3

1,685

1,725

$3.3

268

266

$1.5**

97

100

$1.4

147

150

$0.9**

49

48

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. *Source: America’s Largest Public Companies 2018, Forbes **Source: Hardware Retailing estimates ***Store counts include operations in the U.S., Canada, Mexico and all other locations.

December 2018 | HARDWARE RETAILING

29

Cost of Doing Business Study

A Real-World Look at Retailers’ Financials

T

he annual Cost of Doing Business Study, compiled by the North American Retail Hardware Association (NRHA), collates data from hardware stores, home centers and lumberyards.

Retailers have contributed their financial information for about 100 years, allowing NRHA to present an industry-specific report for independent operators to benchmark their businesses.

The 2018 study provides composite income statements, balance sheets and averages for key performance ratios. The data comes from the 2017 fiscal year. Highlights from the 2018 study are presented in the following pages, showing mostly positive results for independents.

Retailers throughout the industry use the Cost of Doing Business Study to gauge the health of their stores compared to similar operations.

They also use the data to set goals for improvement and develop plans for future growth.

The financial reports that study participants contribute give an accurate look at how home improvement retailers of all sizes and store types are performing. Retailers representing 1,033 independent home improvement stores participated in the 2018 Cost of Doing Business Study.

The information is segmented by store type and by typical and high-profit store performance.

Companies are further broken out by sales volume, single-store businesses and multistore operations.

Methodology Every year, NRHA gathers the data by mailing questionnaires to hardware stores, home centers and lumberyards in the U.S. NRHA provides an analysis of aggregate numbers in the final report after extensively reviewing the data. Individual company responses are confidential. Most of the figures in this report are medians. The median represents the typical company’s results, without extremely high or low outliers skewing the data. To identify high-profit stores, NRHA ranks all participating companies in their segments based on net profit before taxes. The high-profit companies are in the top 25 percent of their store types.

30

HARDWARE RETAILING | December 2018

How to Use This Study Here are some pointers for using the 2018 Cost of Doing Business Study effectively.

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

• Don’t look at percentages alone.

Take time to compare your real-dollar expenditures as well.

• Compare your numbers to stores of similar size. Don’t limit your comparison to one type of store. Defining hardware stores, home centers and lumber outlets is practical for statistical purposes, but your store may have attributes of more than one type.

• When your business’s performance differs significantly from the study data, determine the cause and develop a plan to bring your numbers in line with high-profit stores.

• Although high profits have little to do with store size, sales growth is one of the keys to profitability.

• When reviewing the numbers on the following pages, note that this report contains figures from a different sample group of stores each year. Overall figures can vary widely from year to year based on the group of stores participating. Year-to-year comparisons are helpful for illustrating general trends over time.

Profit Margin

Total Operating Expense

Sales Per Square Feet

Sales Per Employee

Hardware Stores

Home Centers

Lumberyards

3.6%

3.1%

3.7%

Despite sales per customer staying even at $22 from the prior year, profit margin dipped from 4.2% to 3.6%.

Profit margin increased at typical home centers, up from 2.7 percent in the prior fiscal year.

Typical lumberyards, on average, saw their profit margin drop from 4.2% to 3.7%.

38.4%

29.8%

18.9%

Total operating expenses dropped some, potentially reflecting a slight decrease in payroll costs, occupancy and other operating costs.

Total operating expenses at typical stores grew year over year, rising from 27.9% to 29.8%.

Total operating expenses at typical lumberyards decreased from 19.8% to 18.9%.

$193

$299

$872

Sales per square foot hit an all-time high, reflecting high inventory turnover in the independent home improvement sector.

Sales per square foot fell, likely because 2017’s study had an unusually high number of large home center participants.

At typical lumberyards, sales per square foot increased $120, representing an all-time high metric for this group.

$174,357

$260,489

$327,138

Sales per employee at typical stores decreased about 1 percent year over year.

Sales per employee decreased by about $8,000 compared to the prior year at high-profit home centers.

Sales per employee fell by nearly $60,000 from the year prior. Average staff counts increased from 15 to 18 people.

Source: 2018 Cost of Doing Business Study

December 2018 | HARDWARE RETAILING

31

Retail Store Performance

Overall 2017 Business Performance

T

he following data from the 2018 Cost of Doing Business Study is divided into three sections so retailers can compare their businesses’ performance with home improvement operations that are similar to theirs. NRHA segments the numbers by three types of retail outlets— hardware stores, home centers and lumberyards.

The complete 28-page study, with a more detailed breakdown of the data, is available to buy at nrha.org and is free to NRHA training members.

Hardware Stores Hardware stores reported somewhat mixed results, experiencing a slight dip in profit before taxes and no year-over-year change in average sales per customer, which stayed at $22.

Typical stores’ average operating profit was 3.6 percent. Top-performing stores also experienced lower profit before taxes, though an average of 9.1 percent was still healthy.

An increase of 240 basis points in the cost of goods sold appears to have contributed to bottom-line decreases for both typical and high-profit operations.

In addition, typical stores’ cash on hand slipped from 7.5 percent to 4.6 percent, and high-profit stores fell from 11.9 percent to 9.7 percent.

Inventory productivity improved at typical stores. Inventory turns averaged 2.4 times, generating overall sales per square foot of $193— a record high for hardware store study participants.

Top-performing hardware stores did a better job of controlling expenses than typical stores.

High-profit operations’ payroll expenses were 18.7 percent of sales, while typical stores’ payroll costs were 21.7 percent.

Home Centers Home centers reported a solid year overall, with growth in sales and gross margin.

For typical stores, gross margin after rebate grew by 230 basis points, and sales were 7.4 percent higher than in the prior year. Profit before taxes was up for typical stores and top performers, at 3.1 percent and 6.3 percent, respectively.

32

HARDWARE RETAILING | December 2018

Home centers’ better management of expenses contributed to a solid year overall. Typical home centers’ payroll was 16.7 percent of profits and high-performing operations’ payroll was 17.4 percent, showing year-over-year cost decreases. Typical stores had a record low accounts payable of 6.7 percent.

In addition, home centers’ cost of goods sold went down 140 basis points and rebates were up 90 basis points, contributing to bottom-line improvements from the previous fiscal year.

High-profit stores also controlled other operating expenses better than typical stores, with a decrease from 9 percent in the year prior to 6.7 percent.

Typical home centers’ other operating expenses increased from 6.7 percent to 8.7 percent.

Lumberyards Lumber and building material sellers, like home centers, experienced sales growth in the most recent fiscal year, but had positive and negative results in other areas.

Sales increased by 7.4 percent, and sales per customer also got a boost, growing 3.5 percent to $206. Average sales per square foot were $872 and inventory per square foot was $166, hitting record highs for lumberyard participants in the study.

However, employee productivity and gross margin after rebate were down from the prior year. Typical stores reported average gross margins of 23.2 percent, for a 25-year low.

Typical lumberyards’ profit before taxes was 3.7 percent, a dip from 4.2 percent. Top-performing operations fared better, with profit increasing from 7 percent in 2016 to 7.7 percent in 2017.

High-profit stores had higher payroll percentages, occupancy costs and other operating costs than their typical counterparts, suggesting that lower-performing operations had trimmed expenses to the point of costing productivity.

Customer counts at typical stores were flat year over year at just over 29,000 people, while high-profit stores made impressive strides. The top performers saw a nearly 50 percent increase in customer counts, averaging 43,000 customers for the fiscal year.

Hardware Stores Median Sales Per Customer Typical

$30

High-Profit

Key Business Indicators Typical

50%

$30

High-Profit

41.1% 41.8% 40% $25 30%

$23 $21

$22 $22

$20

$20

21.7%

$23 20%

$22

18.7%

$21

$20

9.1%

10%

3.6% $15

0% 2013

2014

2015

2016

Gross Margin After Rebate

2017

Total Payroll

Profit Before Taxes

Home Centers Median Sales Per Customer Typical

$120

Key Business Indicators

High-Profit

Typical

50%

High-Profit

$105 40%

$100

32.3% $96

$80 $60 $40

$45

$49

$41

$42

$91

30.8%

30% 20%

$51

16.7% 17.4%

10%

$43

3.1%

$36 $20

6.3%

0% 2013

2014

2015

2016

Gross Margin After Rebate

2017

Total Payroll

Profit Before Taxes

Lumberyards Median Sales Per Customer Typical

$250

Key Business Indicators

High-Profit

Typical

50%

High-Profit

$219 $199

$200

$206

$167

28.0%

30%

$165 $150

40%

23.2%

$157 20%

$100

$87

11.5% 12.1%

$105

$104

10%

7.7% 3.7%

$50

$76 2013

0% 2014

2015

2016

2017

Gross Margin After Rebate

Total Payroll

Profit Before Taxes

Source: 2018 Cost of Doing Business Study

December 2018 | HARDWARE RETAILING

33

Financial Profiles

Financial Profile of Leading Publicly Held DIY Chains 2017 Operating and Productivity Profile

Home Depot

Lowe’s Cos.

Number of Stores (at end of 2017)

2,284*

2,152*

Average Size of Selling Area (sq. ft.)

104,000

112,000

Total Sales

$100.9 billion

$68.6 billion

Total Asset Investment

$44.5 billion

$35.3 billion

Total Inventory

$12.7 billion

$11.4 billion

Sales Per Square Foot

$417.02

$319.07

Inventory Turnover

5.1x

4.0x

Net Sales to Inventory

7.9x

6.0x

Total Sales Per Employee

$244,320

$269,094

Average Size of Transaction

$63.06

$72.00

Gross Margin Return on Inventory

269.7%

205.5%

Home Depot

Lowe’s Cos.

Net Sales

100.0%

100.0%

Cost of Goods Sold

66.0%

65.9%

Gross Margin

34.0%

34.1%

Total Operating Expenses

19.5%

22.4%

Net Income (Before Taxes)

13.6%

8.0%

Home Depot

Lowe’s Cos.

Total Current Assets

42.5%

36.2%

Cash

8.1%

1.7%

Receivables

4.4%

0.3%

Inventory

28.6%

32.3%

Other

1.4%

2.0%

Fixed Assets

57.5%

63.8%

Total Assets

100.0%

100.0%

Current Liabilities

36.4%

34.3%

Long-Term Liabilities

60.4%

49.1%

Net Worth

3.2%

16.6%

Total Liabilities and Net Worth

100.0%

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.

34

HARDWARE RETAILING | December 2018

Profile of Top 4 Distributors Ace Hardware Corp.

Do it Best Corp.

Orgill Inc.

True Value Co.

Number of Distribution Centers

21

8

7

12

Current Number of Members

5,100

3,800

N/A

4,300

$5.4 billion

$3.7 billion

$2.6 billion

$2.06 billion

% Sales Out of Warehouse

80.0%

30.0%

N/A

70.0%

% Sales Out of Pool/Relay

N/A

0.0%

N/A

N/A

% Sales Direct-Drop Ship

20.0%

70.0%

N/A

30.0%

% Sales in LBM

N/A

27.0%

N/A

15.0%

Number of Employees

7,800

1,507

N/A

2,380

Avg. Number of SKUs in Warehouse

110,000

67,000

N/A

83,000

Sales/Inventory Ratio for 2017

6.9

13.1*

N/A

5.6

2017 Member Rebate Distributed

$150.6 million

$108.5 million*

N/A

$20.6 million

% Cash

41.0%

72.0%

N/A

100%

% Stock

32.4%

28.0%

N/A

N/A

% Other

26.8%

0.0%

N/A

N/A

Dollar Volume Most Recent Fiscal Year

Sources: NRHA distributor surveys *Fiscal year ended June 30, 2018.

Profile of Wholesaling Merchandising Groups PRO Group Inc.

Distribution America

Val-Test Group

Current Number of Wholesale Members

79

7

60

Number of Member-Operated Distribution Centers

150+

10

60

Dollar Volume for 2017 Fiscal Year

$6 billion

$1 billion

$700 million

Estimated Dollar Volume Calendar 2018

$6 billion

$1 billion

$650 million

Number of Retail Stores Served by Members

35,000

9,000

2,000

Number of Program Stores

800

1,500

150

Number of Employees

17

10

5

Sources: NRHA distributor surveys

December 2018 | HARDWARE RETAILING

35

Industry Year in Review

December (2017)

February

O Lowe’s named Vikram Singh senior vice president and chief digital officer.

The goal of the brand new chief digital officer position is to “accelerate Lowe’s digital evolution and drive a holistic integrated strategy to make shopping more flexible, convenient and intuitive” in stores and online.

O Home Depot announced it would sell Tesla solar panels and batteries in dedicated spaces in 800 retail locations.

Tesla employees would staff the areas and demonstrate the company’s solar panels and batteries, called Powerwalls.

O The Home Depot acquired bedding and bath business The Company Store, which operates five brick-and-mortar locations in Wisconsin, Maine and North Carolina, and an online store.

O Target purchased delivery startup Shipt Inc. to complete same-day deliveries from about half of its stores by summer 2018.

January O Westlake Ace Hardware has made plans to purchase The Dennis Co., a five-store home improvement chain based in Washington state.

O House-Hasson Hardware is using mobile computers and headsets in its corporate headquarters warehouse and upgraded electronic scanners to speed up ordering and deliveries for the independent hardware stores and lumberyards the company serves.

O Lowe’s presence in Canada has evolved, with business acquisitions and branding changes included in the company’s growth strategy. One of its newest changes is the rebranding of 17 home improvement stores in Quebec.

March O PRO Group and VAL-TEST Group partnered “to leverage both groups’ strengths to deliver superior value to member wholesale distributors, suppliers and the retailers they serve,” PRO Group says.

O Orgill Inc. announced the death of former president and chairman Joseph “Joe” Orgill III. O The True Value Co. announced a plan to sell 70 percent ownership in the organization to private investment firm ACON Investments, subject to member approval. The deal would transition the company away from the co-op model.

O The Home Depot had to pay $27 million to settle claims that it improperly disposed of hazardous waste in California.

April O Westlake Ace Hardware named Joe Jeffries its new CEO. Jeffries replaced Tom Knox in the role. Westlake is a chain that operates in 10 states and is corporately owned by the Ace Hardware co-op.

O The majority of True Value’s retailer shareholders approved the sale of 70 percent of the company’s stock to private-equity firm ACON Investments.

36

HARDWARE RETAILING | December 2018

August O Orchard Supply Hardware, a home improvement chain with 99 locations in California, Oregon and Florida, will close nationwide by the end of fiscal 2018, parent company Lowe’s confirmed.

O Orgill Inc. announced that the company will be expanding its distribution center in Kilgore, Texas. The company will nearly double the size of the existing facility.

May

September

O Lowe’s named Marvin Ellison, former chairman and CEO of J.C. Penney Co., as president and CEO.

O The Central Network Retail Group (CNRG) will acquire 14 Mac’s Hardware locations throughout the Midwest.

O Orgill Inc. was one of 43 U.S. companies recognized with a presidential export award.

Orgill received its first “E” Award in 2014 and was this year honored with the “E” Star Award, which recognizes previous winners of the “E” Award for expanding U.S. exports.

O Kevin Macnab has been named president and CEO of Home Hardware Stores Ltd. Macnab previously served as vice president of finance, real estate and information technology for Toys R Us, and later became the president of Toys R Us Canada.

O Do it Best Corp. has formed a partnership with Paint Sundries Solutions to provide Do it Best members opportunities for growth.

October

June O Home Depot committed to investing about $11 billion in “internal improvements,” including more distribution centers.

Rather than focusing on expanding with new stores, the company will open approximately 170 warehouse and distribution facilities throughout the U.S. O The U.S. Supreme Court ruled that states have the power to require online retailers to pay sales tax on purchases made online.

July O Ace Hardware Corp. announced plans to expand its retail support center in West Jefferson, Ohio.

O Home Hardware Stores Limited’s president and CEO, Terry Davis, has announced his plans for retirement. Davis will be helping transition the company to a new leader.

O PRO Group Inc. has promoted controller Heidi Wodark to chief financial officer.

Wodark joined PRO Group in 2007, and has served in the controller position since then.

O Sears Holdings Corp. filed for bankruptcy protection and confirmed plans to close another 142 stores.

November O Orgill Inc. announced Ron Beal will continue to serve as chairman and CEO, and Boyden Moore will serve as president.

Brett Hammers will become the company’s executive vice president of worldwide sales and supply chain, and Eric Divelbiss will serve as CFO and executive vice president of finance and administration.

O Do it Best Corp. promoted Steve Markley, who will serve executive vice president of operations. William “Dent” Johnson will now serve as the company’s vice president of merchandising.

December 2018 | HARDWARE RETAILING

37

Housing Market Outlook

Taking a Look at Housing A Q&A With Kermit Baker To learn more about the ways housing affects the overall economy, Hardware Retailing spoke to Kermit Baker. He is a senior research fellow at Joint Center for Housing Studies of Harvard University, and is the project director of the Remodeling Futures Program.

He also serves as the chief economist for the American Institute of Architects.

Hardware Retailing (HR): What trends are you seeing in the current housing market?

Kermit Baker (KB): The housing market continues to be quite strong on the construction side. Single-family housing starts were slow in getting underway coming out of the recession, but they’re growing and have grown at a solid 7 or 8 percent pace for the last few years. It looks like there’s enough demand and enough new households that the number of housing starts is going to continue to go up for a while.

Existing-home sales are still pretty weak. There isn’t a lot of inventory out there, and we’re not seeing the turnover of homes that we’ve historically gotten. The single-family market was very slow to recover from the recession. Now, we’re starting to see that pull back more toward normal conditions.

Millennials are a big part of the story. They’re getting married and having children later. I think the economy has recovered for millennials, and we’ll see homeownership numbers begin to pick up.

Given how tight the labor market is now, we’re seeing wages pick up throughout the economy.

That is also helpful for establishing a more balanced housing market.

HR: What does the health of home construction say about the U.S. economy?

KB: Everything seems to be percolating along pretty well for the economy, but next summer will be the 10th anniversary of this economic expansion. That will make it the longest economic expansion in post-World War II history. I think there’s a bit of concern that the music will stop sometime in the not-too-distant future and slow down the potential of the construction market.

Some signs of concern we’re seeing are inflation starting to pick up again and interest rates moving up, indicating that the Federal Reserve wants to slow things down.

We’ve got a very tight labor market. We’re running some reasonably serious federal budget deficits. All those things play together. We might have a mild recession in the broader economy.

If that happens, construction would slow as a result of the economic downturn, not because markets are overbuilt or overpriced.

HR: What are the impacts of tariffs on home construction and remodeling?

KB: Construction material costs have grown almost 10 percent over the last year. Some of that is because of tariffs or threatened tariffs on products that are used in construction, such as steel and aluminum. We’re also seeing cost increases in wood products and in gypsum board, concrete, diesel fuel and metals besides steel and aluminum.

38

HARDWARE RETAILING | December 2018

We’re seeing solid remodeling numbers.

Rather than trading up to a new home, people are more likely to be fixing up their homes.

Construction is more vulnerable to price changes due to tariffs than other industries because there’s such a lead time. A contractor may bid on a project, but they won’t be buying materials for three to nine months. They’re exposed to volatility to materials costs as they’re occurring. That makes them cautious.

If you’re buying materials and making the product immediately, then when prices go up, you can pass the cost directly to consumers. In construction, you have to hedge more because of the time lags between when you’re making decisions and when you’re actually going to purchase products.

HR: How is the remodeling market doing?

KB: We’re seeing solid remodeling numbers. Rather than trading up to a new home, people are more likely to be fixing up their homes. Hurricanes, fires and other natural disasters add to spending in that market, too. An undersupplied construction market, strong house prices and more natural disasters than usual are generating pretty healthy growth.

We produce a leading indicator for remodeling activity that suggests market activity is going to continue to grow in the 7 or 8 percent range for the remainder of 2018 and into 2019. Those are very healthy numbers.

HR: What can we expect to see in the housing market in 2019?

KB: I think we will see more of the same. Singlefamily construction has been moving up at a high single-digit pace for several years now, but we’re still well below the long-term trend. I think we’re going to have about 900,000 single-family starts this year. That number historically would be well over a million.

HR: Is it surprising things haven’t picked up more?

KB: Yes. Typically, when you get strong house price gains, which we have seen recently, that encourages builders to build more. The problem is that land prices are rising, the cost of government regulation is driving up prices of homes, there’s a construction labor shortage and there’s inflation in building material costs.

It’s hard to build affordable or entry-level homes at prices a moderate-income family or household can afford. Just getting folks into the market is a problem, but that’s essential for a well-functioning housing market. The strength has to start at the bottom.

In addition, house prices have been growing more rapidly than household incomes. That creates an affordability problem. We’re seeing that regionally across the country. It’s not a huge issue nationally, but it is a very significant problem in most of the coastal markets across the country.

December 2018 | HARDWARE RETAILING

39

Economic Outlook

Looking Forward to 2019’s Economy A Q&A With Anthony Nieves Anticipating the economic ripples new and proposed tariffs would have was a major concern for manufacturers and retailers alike in 2018. To give more information on the subject and other economic matters that could affect retailers, Hardware Retailing spoke with Anthony Nieves, a certified professional in supply management. He serves as the chairman of the Non-Manufacturing Business Survey Committee for Institute for Supply Management®, which measures the Purchasing Managers’ Index® (PMI) as well as the Non-Manufacturing Index® (NMI).

HR: Have these steel tariffs affected consumer confidence?

Hardware Retailing (HR): How have tariffs on steel and other raw materials affected manufacturers in 2017?

AN: On the nonmanufacturing side, we had 104 consecutive months of growth. After the recession ended, we saw slow and steady incremental industry growth. All indications from the New Orders Index, which shows upcoming purchases, predict good rates of growth for the remainder of the year. When we take the NMI, it indicates a 4.6 percent increase on real gross domestic product.

Anthony Nieves (AN): Many of our respondents are indicating that they’re concerned about the tariffs, but there remains a lot of uncertainty about how those effects are going to move through the supply chain. It’s possible those effects will increase costs on products but, at this juncture, it has not.

40

HARDWARE RETAILING | December 2018

AN: Not at this point. All other reports outside our own indicate consumer confidence is at an all-time high and it isn’t significantly impacting the confidence level of the respondents and their companies or industries. In fact, we’re seeing a more robust scenario, where activity is increasing in anticipation of tariffs. We’ve also seen municipalities accelerating their purchasing, as they’re under the wire before the end of the fiscal period.

HR: In November, NMI stood at 61.6 percent, which was a 3.1 percent increase over the month before. What does this rising figure say about the U.S. economy?

Retailers should know that lead times and cycle times have lengthened, and that has to do with ongoing capacity constraints and logistic challenges.

HR: What do other nonmanufacturing industry indicators say about the overall economy, especially as we head into 2019?

AN: One key indicator is the Bureau of Labor Statistics’ Jobs Report. The employment index is currently 62.4 percent, which is the highest reading since 1997.

In our current economy, employment is reflective of how the overall economy will go, especially in the nonmanufacturing sector. That employment index indicates to me that this is a really strong economy overall.

The downside to that is that we’ve had labor shortages as was reported on both the manufacturing and nonmanufacturing side.

HR: Is there any solution to the skilled labor shortage and logistics obstacles in the short term?

AN: It looks like these are long-term issues. I think part of it is that we just don’t have enough people in certain skilled labor segments.

HR: How do you predict the economy will affect manufacturers who work with small businesses in 2019?

AN: Right now, with discretionary spending where it is and unemployment as low as it is, and the fact that the construction industry is really going gangbusters and residential and commercial renovations are up, there doesn’t seem to be any potential economic slowdown at this point and into the start of 2019.

HR: What issues should manufacturers who work with small business owners keep an eye on in 2019?

AN: Retailers should know that lead times and cycle times have lengthened, and that has to do with ongoing capacity constraints and logistic challenges.

There’s a countrywide trucking shortage in wholesale distribution. Wholesale trade is very much an intermediary for the retail industry and many others.

With capacity constraints happening, our respondents are telling us suppliers are having difficulty delivering orders in a timely fashion.

For big companies and small operators, cash liquidity will be important. It’s a matter of looking at small businesses and their net receivables and then going in and transposing that into payables. The cycle time between receivables and payables will become increasingly important.

Retail foot traffic and online traffic are both up, so businesses that weren’t as competitive or as strong in those areas have been flushed out.

What we’re seeing now is high demand from consumers. Discretionary spending is high, and that could benefit home improvement retailers in the year ahead.

December 2018 | HARDWARE RETAILING

41

Canadian Retail Report

Canadian Retailers Will See Modest Growth Provided by Michael McLarney, managing director of NRHA Canada

C

anada’s retail home improvement industry grew at a healthier rate than anticipated in 2017, but conditions affecting the industry point to a slowdown through the end of 2018. That moderation is expected to continue into 2019, as well, according to the Hardlines 2018 Retail Report.

Sales by hardware stores, building centers and big boxes; Canadian Tire; and related sales by Walmart and Costco; were up 5.1 percent year over year in 2017. But retailers’ sales are forecast to slow down to below 4.5 percent annually to the end of 2019.

All Retail Formats Experiencing Growth Retail formats aren’t faring uniformly. Larger organizations, such as Home Hardware and Lowe’s through its RONA division, have been supporting their operators by helping them expand services with lumber and building material divisions. This has led to expectations of higher growth levels for those companies compared to smaller independents.

The smaller hardware store format remains viable, however, even though sales overall are slipping as store numbers stay pretty flat.

Though their net sales slipped by 1.4 percent in 2016, home centers and building centers rebounded with 8 percent growth in 2017.

Retailers across the country saw business increase dramatically.

The home centers and building centers are most widely represented in Canada by the lumber and building materials buying groups, which support independent retailers with group purchases, mainly in key commodities such as lumber, plywood, roofing and insulation.

Sales through the big boxes in Canada are holding steady and continue to account for about one-quarter of all sales in the retail home improvement market.

This sector continues to grow despite no new stores from Home Depot. Lowe’s Canada continues to invest in its RONA and Reno-Depot

42

HARDWARE RETAILING | December 2018

big-box stores. However, big boxes still have far less market share in Canada than their counterparts in the U.S.

Top Retail Groups Continue to Make Gains Consolidation continues in Canada, with four retail groups composing far more than half of all sales in the Canadian industry. The retail groups are Home Depot Canada, Lowe’s Canada, Home Hardware Stores and Canadian Tire.

Lowe’s takeover of RONA in 2016 has accelerated consolidation. The four retail groups’ market share accounts for almost 60 percent of the market.

On a regional basis, the greatest growth is forecast to come from the west, particularly in Alberta, as the economy there continues to gain steam. That province’s retail home improvement sales are expected to grow by more than 5 percent annually. British Columbia is close behind, with anticipated annualized sales growth of 4.8 percent through this year and 2019. Saskatchewan will also perform well to the end of 2019.

Modest Growth Forecast Retailers have faced headwinds, despite some positive developments, including a favorable start to 2018.

Extreme weather conditions turned out to be one more challenge for retailers. The summer was too hot in most parts of the country to favor outdoor projects, while forest fires, especially in western Canada, had a further negative effect on the industry. That was followed by a cold autumn, furthering discouraging outdoor activities and projects.

A weak housing market, rising interest rates and mixed consumer confidence heading into 2019 mean retailers should prepare for moderate growth in the coming year.

The Hardlines 2018 Retail Report forecasts growth of about 4.2 percent in 2018, a dip from 2017’s level, and stability in 2019 and 2020.

Home Improvement Industry Sales Growth (in billions) 50

$49.1 $47.5 $45.9 $44.6 $43.8 $42.2

$40.01

$40.4

40 2011

2012

2013

2014

2015

2016

2017

2018*

*Forecasted numbers

Market Share

by Store Format

46.3% Building Centers 25.4% Big Boxes

Top 10 Home Improvement Retailers Rank

Company

2016 Sales (in billions)

2017 Sales (in billions)

Percentage Change

1

Home Depot Canada

$7.7

$8.2

5.8%

2

Lowe’s Canada

$6.9

$7.2

4.9%

3

Home Hardware Stores

$6.1

$6.4

4.7%

4

Canadian Tire Retail

$5.7

$5.9

3.4%

5

ILDC

$3.8

$3.9

3.4%

6

TIMBER MART

$2.8

$2.9

4.8%

7

Castle Building Centres

$2.0

$2.1

6.3%

8

Sexton Group

$1.8

$2.1

15.0%

9

Groupe BMR

$1.2

$1.2

3.3%

10

Kent Building Materials

$0.8

$0.9

15.9%

12.2% Canadian Tire* 7.3% Hardware Stores 4.7% Club Stores* 4.0% Mass Merchants *Hardware and home improvement stores only

Source: Hardlines 2018 Retail Report

December 2018 | HARDWARE RETAILING

43

W

alking the aisles of a trade show or buying market can be both an exhilarating and daunting prospect. What products represent the next big trend for your store and customer base? How much can you afford to spend?

How do you pack an entire show’s floor into a few hours of your visit, and, now that you’re thinking about it, has your manager checked in with you today while you’re away from the business?

44

HARDWARE RETAILING | December 2018

While shows conducted by hardware wholesalers and co-ops are important to attend, trade shows that go deep into specific categories offer a new look at what your business can become and what kinds of products it can offer.

Hardware Retailing explored niche markets that can help retailers expand their product offerings. More information about these trade shows and buying markets, as well as even more markets retailers might want to consider, are available at TheRedT.com/niche-shows.

Embrace your industry peers.

NRHA represents all independent home improvement retailers, regardless of wholesale affiliation. Through your association, you can connect with other business owners who experience the same challenges and opportunities you do.

Grow Your Network Get involved today!

NRHA offers themed roundtables, educational conferences, events and retail-specific leadership development programs. Connect with NRHA to learn what options are best for your business needs.

“NRHA is made up of people of who have the same values and are looking for the same things you are. The programs are geared toward our core values.”

Adriane Naillon | Wilco JOIN US TODAY AT NRHA.ORG/MEMBERSHIP

Atlanta International Gift and Home Furnishings Market® The Atlanta International Gift & Home Furnishings Market® and The Atlanta International Area Rug Market® offer products in the home, rug, gift and apparel categories. Specialty categories include garden gifts, furniture, outdoor living, birding, holiday, gourmet foods, housewares and more. A partner show, the Las Vegas Market, is a furniture, gift and home decor market catering to West Coast style.

Highlights • The Atlanta market has a team on hand to assist with orientation and planning for retailers new to the show.

• The Las Vegas Market holds a show in summer and winter and specializes in furniture, bedding, home decor and gifts.

Upcoming Dates • Jan. 8-15, 2019 AmericasMart, Atlanta • Jan. 27-31, 2019 World Market Center Las Vegas, Las Vegas

Contact Information • 800-285-6278 or americasmart.com • 800-748-5065 or lasvegasmarket.com

The ARA Show™ The ARA Show™ is the American Rental Association’s (ARA) annual convention and trade show for the equipment and event rental industry. It features equipment for the construction/industrial, general tool/light construction and party/special event rental segments. The ARA Show is a closed show, meaning only those involved in the equipment and event rental industry are eligible to register and attend.

Hardware stores that offer tool rental would be eligible to attend and take advantage of an ARA membership.

Highlights • This show allows retailers with equipment and event rental to see the newest products and trends entering the rental industry.

• Buyers can make purchases for rental equipment and products at the show, and many exhibitors offer exclusive deals.

Upcoming Dates Feb. 17-20, 2019 Anaheim Convention Center, Anaheim, California

Contact Information 800-334-2177 or arashow.org

46

HARDWARE RETAILING | December 2018

Global Pet Expo Global Pet Expo offers attendees the chance to learn about the opportunities available in the pet industry. There are numerous educational seminars and networking events for attendees.

The event is presented by the American Pet Products Association (APPA) and Pet Industry Distributors Association (PIDA).

The 15th annual show will feature more than 350,000 square feet of exhibit space, more than 3,000 new product launches and the pet industry’s largest new products showcase.

Highlights • The new products showcase stands on 45,000 square feet on the show floor and is set aside to display the newest products launching in 2019. Products are organized by category, with nearly 1,000 product entries each year.

• For those seeking educational opportunities, Global Pet Expo offers free seminars for retailers. The 2019 lineup features 20 speakers and 35 hours of education.

Upcoming Dates March 20-22, 2019 Orange County Convention Center, Orlando, Florida

Contact Information 203-532-0000, ext. 525 or globalpetexpo.org

HPBExpo The Hearth, Patio & Barbecue Expo offers a showcase for indoor-outdoor living products. Hundreds of leading hearth, patio and barbecue manufacturers and suppliers demonstrate their latest solutions; indoor and outdoor fireplaces and hearthrelated products; grills, grilling accessories and fully equipped outdoor kitchens; casual patio furniture and outdoor accents; water and landscape features; all-weather entertainment products and more. It’s also a one-stop-shop for retailers worldwide to find not only the latest products for their showrooms, but also the latest services and technologies for their companies.

Highlights • The New Product Pavilion is where attendees have the chance to see the latest and greatest products from the current year’s exhibitors.

• The Outdoor Burn Area exhibitors will be cooking and handing out samples at the HPBExpo Tailgate. HPBA affiliate teams also face off for top honors in a Cook-off Competition.

Upcoming Dates March 13-16, 2019 Kay Bailey Hutchison Convention Center, Dallas

Contact Information 703-522-0086 or hpbexpo.com

December 2018 | HARDWARE RETAILING

47

IGC Show The Independent Garden Center Show (IGC) is where independent retailers gather to discover the products and trends that will dominate the coming lawn and garden season. Attendees can meet face-to-face with 550-plus exhibitors to see, touch and compare what’s new in gardening now and next season. Retailers save with exclusive specials on orders placed at the IGC Show, including discounts, lower minimums, free shipping and special dating.

Highlights • The show will include three free morning keynote speakers, educational seminars and a free party and concert.

• The IGC Show is an order-writing opportunity—retailers can take advantage of the specials at the show and plan out their coming season in one visit.

Upcoming Dates Aug. 13-15, 2019 Lakeside | McCormick, Chicago

Contact Information 203-286-8772 or igcshow.com

International Sportsmen’s Expos International Sportsmen’s Expositions (ISE) produces expos in four states spotlighting thousands of products and services from 1,300 companies and hosting more than 100,000 attendees. Each show includes free seminars, contests and hands-on show features to educate and inspire outdoor enthusiasts.

Highlights • Retailers can meet with hundreds of the best local outdoor experts to learn skills, discover hot new sporting destinations and find the best gear for successful adventures.

• The International Sportsmen’s Expos hosts vendors that specialize in outdoor gear, often featuring unique products hard to find in more general markets.

Upcoming Dates • Jan. 10-13, 2019 Colorado Convention Center, Denver • For more dates and locations, visit sportsexpos.com.

Contact Information 800-545-6100 or sportsexpos.com

48

HARDWARE RETAILING | December 2018

NAHB International Builders’ Show® The NAHB International Builders’ Show (IBS) focuses on the light construction industry, hosting more than 60,000 attendees and 1,500-plus manufacturers and suppliers from around the globe. IBS features more than 130 IBS educational sessions, with topics ranging from sales and marketing to custom building and remodeling. The Kitchen & Bath Industry Show (KBIS) is held at the same time and location, allowing for an expanded look at these categories.

Highlights • Discover the best practices for improving efficiency in all areas of the home, and watch how-to demonstrations to learn more about various products on display.

• Tour a newly transformed two-story home equipped with remodeling products new to the housing industry.

Upcoming Dates Feb. 19-21, 2019 Las Vegas Convention Center, Las Vegas

Contact Information 800-368-5242, ext. 8610 or buildersshow.com

SuperZoo SuperZoo attendees can find tools to grow their businesses and connect with pet industry professionals. With over 850 products debuting from more than 1,100 local and global suppliers, SuperZoo offers the opportunity to scout cutting-edge accessories, nutrition products and pet gadgets hitting store shelves in the second half of 2019. The annual trade show brings 21,000 members of the pet retail community together, offering more than 70 seminars spanning four main content areas: trends, innovation, service industry and animal wellness.

Highlights • Attendees have access to the Pet Tech Showcase, which highlights technology products, including fitness trackers, pet GPS devices, feeders, interactive toys and Bluetooth-equipped gadgets.

• SuperZoo features vendors that design and manufacture products in the U.S. while also bringing in many international manufacturers to offer a diverse array of products.

Upcoming Dates Aug. 20-22, 2019 Mandalay Bay, Las Vegas

Contact Information info@superzoo.org or superzoo.org

December 2018 | HARDWARE RETAILING

49

Marketing: Local Media

By Todd Taber, ttaber@nrha.org

As Seen on TV

How Strong Ties to Local Media Can Boost Business

F

or many people, tuning in to the local news on TV is a reliable way to start their day or wind down for the night. In 30 minutes or less, viewers can get blasts of local and international news and benefit from up-to-date information on events happening around their community.

Many local news programs feature live or pretaped segments with local business owners, and for the professionals featured in these spots, appearing on TV can be a powerful way to market their business, display their product knowledge and connect with people who have never visited their store before.

50

HARDWARE RETAILING | December 2018

Jim Lehrer, owner of Brownsboro Hardware & Paint in Louisville, Kentucky, has more than 20 years of experience appearing in televised segments with his local Fox affiliate, WDRB-TV. What started as a simple spot on how homeowners can keep their properties free of ice and snow during a particularly bad snowstorm has developed into a beneficial working relationship for the news team and Lehrer.

In this article, learn how Lehrer became involved with WDRB, how it benefits his business and how other independent operators can establish their own relationships with local media.

Getting Started After moving to Kentucky from Wisconsin, Lehrer and his wife Marilyn became owners of Brownsboro Hardware & Paint in 2008. Lehrer says Kentucky winters are milder than the Wisconsin wrath he had known, but he was still surprised to see local big boxes run out of winter weather essentials.

“I drew a line in the sand and said we’ll never run out of the ‘three S’s:’ salt, shovels and sleds. We’ve held true to that promise for 20 years, and it’s been a great niche for us,” he says.

It was that reliable inventory management that caught the attention of a local news producer 20 years ago. Winter weather was forecast in the area, and WDRB decided to do a live segment from Brownsboro Hardware & Paint. Lehrer was more than willing to welcome the news crew to his store, knowing the live spot would give his business valuable exposure.

As he proved himself to be a reliable on-air source and developed a strong working relationship with reporters and the producers behind the scenes, Lehrer was later invited to do regular in-studio segments on the channel.

Lehrer says airing commercials for your business can be expensive, but these TV spots offer visibility in the community.

He stresses the news teams he’s worked with have made it clear the paid advertising side of the business is separate from the news segments. Still, the TV spots offer a valuable opportunity to reach potential new customers.

Home improvement business owners offer valuable information on a variety of seasonal topics, Lehrer says.

As time passed, he appeared in spots for lawn and garden care as well as in features concerning home safety and the importance of installing fire and carbon monoxide detectors.

Independent operators are in a great position to actively market their business to local media, Lehrer says.

“The local media is hungry for content. If they go to a big box, the manager has to get corporate approval and advice on what he can and can’t say,” he says. “On the other hand, we don’t have any restrictions like that.”

“When producers were looking for content, I was on their contact list. Retailers should try to make their life easier; there’s a payoff in it for your business,” Lehrer says.

He also suggests business owners think about who should represent their business on camera. At the time, his business had a small staff, so it made sense for Lehrer to be featured.

“You want someone who’s credible and professional.

I probably don’t look good on camera, but at least I tell a good story,” he says.

For owners who might be a bundle of nerves before appearing on TV, Lehrer says that’s natural.

“I’ve been doing this a long time, and I’m always nervous,” he says. “You want to present your business well, and the key to that is understanding the angle the reporter is trying to achieve so you give them the right information.”

Lehrer says he and the reporter usually have a brief meeting before the cameras roll to ensure they’re on the same page.

Lehrer says it’s difficult to measure the direct effect these spots have on sales, but he does notice an uptick in foot traffic after they air. Maybe more importantly, customers often greet him by name when they tell him they saw him on TV. These spots create a more personal connection that wouldn’t have been possible without a strong relationship with local media.

Above all, Lehrer says growing relationships with local media is an investment that can give businesses of all industries valuable visibility.

“Building relationships is key. You want to be that person on their cellphone they call,” he says. “When a TV crew comes, we do anything we can to help them, because there are so many rewards for our store.”

On-Air Tips WDRB reporter Keith Kaiser has worked with Lehrer on several spots over the years. He says Lehrer is a great source because he’s an informative retailer who knows what reporters and the audience need from a TV segment.

Kaiser says retailers on TV need to not just introduce products, but demonstrate knowledge simultaneously.

“TV is a visual medium, so just talking about something without holding it in your hand and showing the audience isn’t going to work,” he says. “We always think of viewer benefit, so demonstrating something on air is always important.”

Kaiser says he looks forward to working with Lehrer because he knows he is eager to participate in the segments.

“Presentation is key, and he’s very confident,” he says.

He’s no-nonsense and energetic, and people notice that.”

Being Proactive For home improvement retailers who want to collaborate with local media, Lehrer recommends proactively contacting producers and reporters.

Jim Lehrer, owner of Brownsboro Hardware & Paint, has more than 20 years of experience appearing on local TV segments.

December 2018 | HARDWARE RETAILING

51

By Renee Changnon, rchangnon@nrha.org

Safety First How Ace Hardware Titusville Helps Protect Professional Customers

F

or the residents of Titusville, Florida, space exploration is more than a passing interest— it’s a way of life. Located in the heart of what’s known as the Space Coast, Titusville residents still stop what they’re doing and look up at the sky to watch rockets launch into outer space.

And while NASA’s Kennedy Space Center may seem like a impenetrable operation, it relies upon many local businesses to provide products and services to support the scientists, astronauts and employees whose job it is to help us better understand the universe.

In fact, one business that has worked for more than 50 years to support the various Space Coast industries is Ace Hardware Titusville, says store manager Michael Martin.

“Living in Titusville and within the Space Coast has been an important part of my life and our community members’ lives,” Martin says. “It makes me very proud that our company is a local supplier for NASA and other companies in the space industry. Knowing our services and the products we sell travel out of this state and possibly off of this planet is really cool.”

Whether Ace Hardware Titusville is supplying materials to astronauts from NASA or safety equipment to local manufacturers, the operation has earned its reputation as a store all businesses can turn to for the products they need. By monitoring prices and providing prompt delivery and exceptional

52

HARDWARE RETAILING | December 2018

customer service, Ace Hardware Titusville continues to cement its importance in the community.

While the products the store sells to B2B customers includes everything from military-grade hardware to army cots, safety equipment is one category that frequently shows up on commercial customers’ orders.

Hardware Retailing spoke to both Martin and the store’s commercial and industrial sales manager, Candy Mattingly, to learn how the company sells safety equipment and gear to its loyal B2B clients.

For a greater appreciation for the necessity of safety practices and equipment, we also spoke to Cliff Meidl, a safety advocate and a former construction worker who was directly impacted by an accident on a job site.

Visit TheRedT.com/meidl-safety to learn more about Meidl and use his insights to impart the importance of education and training with your customers.

Products That Protect As a product supplier for a wide variety of companies, Mattingly strives to meet the needs of her B2B customers.

In addition to the Kennedy Space Center, the store’s current accounts include major names like the Cape Canaveral Air Force Station, as well as construction and manufacturing companies.

Mattingly says she sources products through her co-op, and she does research and places orders for less common products directly from suppliers.

December 2018 | HARDWARE RETAILING

53

Ace Hardware Titusville offers a wide selection of safety equipment. The safety equipment aisle is mainly shopped by walk-in shoppers who need to pick up safety items, but it also reminds B2B customers of the safety equipment they need to restock for their businesses.

“The items our customers request from us can often be challenging to find,” Mattingly says.

“If they request specific items my co-op doesn’t stock, we have a variety of other sources to get the products from, like other vendors, which also may allow us to buy in bulk.”

“Safety equipment is important and often required for just about any of our commercial and industrial accounts. These items save lives and protect people from injuries.

”

—Michael Martin, Ace Hardware Titusville 54

HARDWARE RETAILING | December 2018

The most frequently ordered products for government facilities and related companies are military-grade nuts and bolts, Mattingly says.

All orders are delivered to the store first and are inspected before being delivered to the customer. This ensures that the products a customer receives are not damaged or incomplete, saving them time and guaranteeing a high level of customer service.

Many B2B customers need standard inventory items, but some may have a special focus on safety equipment, Mattingly says.

Common safety items, or personal protective equipment (PPE), that the store sells includes hard hats, vests, gloves, goggles and glasses.

These items are regulated by the Occupational Safety and Health Administration (OSHA), which is a part of the U.S. Department of Labor.

OSHA ensures safe and healthy job site conditions for workers by setting and enforcing

workplace standards and providing training, outreach, education and assistance.

“The majority of safety equipment we sell is regulated by OSHA, which the manufacturers producing the safety equipment are required by law to stay up-to-date on,” Mattingly says.

“For example, items like respirator cartridges have an expiration date, so I make sure the products we give our customers aren’t out of date. I can look this information up online, but I also rely on the manufacturer to provide us with that information.”

To find success selling safety equipment to their B2B accounts, Martin says it’s just as important to sell the items to walk-in customers.

“We have an aisle in the store that has all of the items you would need in a variety of industries to stay safe on the job,” Martin says.

“Having this area stocked and visible to our walk-in customers is a great way to make them aware of our safety equipment. Plus, this may lead to creating an account with us if they plan on placing a bulk order.”

In addition to carrying safety products in the store, Martin says it’s also important to promote the various B2B services your store offers, whether it’s through a website, word-of-mouth or store events that are specifically tailored to pros and commercial accounts.

“Safety equipment is important and often required for just about any of our commercial and industrial accounts,” Martin says. “These items save lives and protect people from injuries.”

Generating Big Business To succeed in B2B sales, Martin says it’s key to have at least one person focused on generating and maintaining business accounts. He says B2B accounts have been a part of Ace Hardware Titusville nearly as long as the company has been in operation.

“Any retailer interested in starting or expanding upon an existing B2B business should have someone leading this aspect of their business if they want it to be profitable,” Martin says.

Keeping Track of Information For retailers investing in the safety equipment category, staying knowledgeable on the PPE in stock and how long you have before it must be sold or replaced is very important, Mattingly says. And for major organizations like NASA, the equipment has to meet strict regulations in order to ensure their employees are safe on the job.

Because these products protect employees from potential injury on the job, OSHA puts an expiration date on products. This ensures an item that has been in stock for multiple years doesn’t get sent out. A product that has reached its expiration date could have developed imperfections or issues, Martin says.

“If the item a customer requests from us has an expiration date of the following week, I can’t sell it to them,” Mattingly says. “The good thing about this is that our manufacturers will usually replace these items once they are outdated.”

If you decide to start selling safety equipment, it will be important to double-check the dates on these products online and with the manufacturer to ensure you don’t sell outdated products.

Most safety equipment on the market is regulated by OSHA. This inventory has strict shelf life dates to ensure workers are using up-to-date safety equipment.

December 2018 | HARDWARE RETAILING

55

In the past, Ace Hardware Titusville has been successful by hiring commercial and industrial sales managers who have prior experience in sales and are self-starters who work well in an independent environment. Hiring someone who can step in with plans to attract new accounts as well as another employee who is able to devote their time to working closely with commercial and industrial customers every day is key.

If you’re looking to hire an outside sales manager to help grow your B2B business, Martin suggests finding an individual who is outgoing, self-motivated and a go-getter.

To market these products, list all of the safety equipment you sell on your website. This will show B2B customers you are a reliable source for all of the products they need.

To keep your B2B business strong, he emphasizes the importance of having a commercial and industrial sales manager like Mattingly.

This employee will strengthen the relationship with the client, help place orders and answer questions day-to-day. Even if you have a B2B account that hasn’t purchased safety equipment in the past, this sales manager can make it a point to ask if any safety equipment is needed or talk in more detail about the topic if a customer is interested in learning more.

To market these products, list all of the safety equipment you sell on your website. This will show B2B customers you are a reliable source for all of the products they need. The company even has a landing page devoted to its B2B business.

The operation provides a list of accounts they have, contact information to get in touch with Mattingly and a list of the products available.

To thank their customers, the team has also hosted targeted events at Ace Hardware Titusville, like contractor-themed gatherings.

“During our previous contractor events, we have invited B2B contractors to come to the store and had tents set up in our parking lot

To create a strong commercial and industrial sales business, Ace Hardware Titusville store manager Michael Martin emphasizes the importance of bringing on individuals devoted to both growing new B2B accounts and helping current B2B customers on a day-to-day basis.

56

HARDWARE RETAILING | December 2018

with demos and product giveaways from manufacturers,” Martin says. “This has been a great way to show appreciation to these customers and encourage them to continue working with us.”

If you are holding a special contractor event, Martin says including safety vendors can help drive conversation on the category and potentially encourage sales. This invitation gives contractors face time with vendors and arms them with current information on safety products, a category in which understanding current regulations can often be complicated and change frequently.

By hosting the event, you position yourself as the safety expert and the source customers rely on. Attendees will view your team and your product selection as reliable sources of safety equipment.

Top 8 Most-Cited OSHA Violations OSHA releases its most-cited violations for the previous year on an annual basis. This list gives employers a chance to see the most common mistakes made across all industries. Check out this list from 2017 to help your B2B customers focus on ways to prevent accidents.

Fall Protection Falls are among the most common causes of serious work-related injuries and deaths. OSHA provides strict regulations to prevent falls and injuries, like using guardrails and safety harnesses.

Hazard Communication Standard All employers handling hazardous chemicals in the workplace must have labels and safety data sheets visible to all workers who are exposed to hazardous chemicals.

Educate to Stay Safe

Scaffolding

As is the case with any industrial or commercial company doing business with you, it’s important to ask questions and deliver the safety items a customer needs.

Since 1970, American workers have been protected by OSHA. Although adhering to OSHA’s regulations may seem daunting at first, they are necessary to keep employees across all industries safe on the job. In addition to selling safety equipment, OSHA spokesperson Kimberly Darby recommends retailers encourage their B2B accounts to utilize the educational resources OSHA provides.

“OSHA can provide compliance assistance through a variety of programs, including technical assistance about effective safety and health programs, on-site workplace consultations, training and education,” Darby says.

OSHA’s On-Site Consultation Program offers free, confidential occupational safety and health services to small and medium-size businesses in all states and several territories across the country, with priority given to high-hazard work sites, according to Darby.

Explain to your customers that utilizing this free training resource is not the same as an enforcement visit, so it won’t result in penalties or violations at their job site.

As a supplier of safety equipment in your community, you have the opportunity to gain loyalty with small-scale contractors in this category. Since many contractors are navigating safety regulations on their own, your retail business can help facilitate the free consultations OSHA offers to commercial and industrial customers at their places of work. These resources are just another way to help you build stronger relationships with your B2B customers.

An estimated 2.3 million construction workers work on scaffolding, according to OSHA. Using OSHA-compliant equipment may prevent injuries and deaths from scaffolding accidents.

Respiratory Protection Respirators protect workers against insufficient oxygen, harmful dusts, fogs, smokes, mists, gases, vapors and sprays, which may cause lung impairment, cancer or death.

Control of Hazardous Energy Energy sources, including electrical, mechanical, hydraulic, pneumatic, chemicals and others, can be hazardous to workers. Workers can be seriously injured or killed if energy is not properly controlled.

Ladders Ladders are a major source of injuries and fatalities among construction workers. OSHA has a list of regulations specifically related to the use of ladders employers should be aware of.

Powered Industrial Trucks Powered industrial trucks, or forklifts, are used in many industries to move or lift materials. Each type of truck poses different operating hazards, so employers should consult OSHA standards.

Machinery and Machine Guarding Moving machine parts have the potential to cause severe workplace injuries, such as crushed fingers or hands, amputations, burns or blindness.

Safeguards are essential to protect workers.

December 2018 | HARDWARE RETAILING

57

Newsmakers

Federal Changes to Housing Affordability

Upcoming Events December 6 North American Retail Hardware Association (NRHA) State of Independents Conference Chicago

January 10-12 House-Hasson Spring Market Nashville, Tennessee

11-13 United Hardware Buying Market Minneapolis

omeownership benefits home improvement retailers for clear reasons, including the fact that homeowners maintain and upgrade their houses with products retailers sell.

Buying, though, is more difficult than it used to be, due to high prices and a limited number of houses on the market for sale. A recently passed law could make affordability an even greater challenge.

Paul Bishop, vice president of research for the National Association of Realtors, offers some insights on how federal legislation could impact the rate of homeownership and reduce the amount of money homeowners have to spend on remodels and maintenance.

Housing affordability is a problem lingering from the economic downturn in 2007 because homebuilders have not caught up enough from the lack of home construction during the recession years, Bishop says. Issues such as mortgage rates and tax policy also impact affordability.

Home mortgage rates are on the rise, reflecting Treasury rates set by the federal government, Bishop says.

“The financial markets and global influences on the financial markets determine what the 10-year Treasury rate is, and that’s closely linked to mortgage rates,” he says.

“The economy is growing at a pretty solid pace. Interest rates are probably going to be up for the foreseeable future, and all of that filters through to mortgage rates.”

Real estate accounts for just under 20 percent of gross domestic product, or approximately $1 out of every $5, in the U.S., Bishop says. Continued growth in the sector impacts the economy overall, which is on an upswing. Prospects of further economic expansion will push mortgage rates up even more, he says.

The National Association of Realtors is monitoring the recently passed federal tax overhaul to see how it will impact the housing market.

The law reduces the deductibility of mortgage interest from a mortgage size of no more than $1 million down to $750,000 and will affect the affordability of homes in high-cost housing markets, Bishop says.

But tax changes that limit state and local income and property tax deductions will impact more people, he says. The deductions from federal income taxes are going to be limited to $10,000 per year.

“Being able to deduct less from one’s federal income tax means the cost of owning a home will increase,” Bishop says. “That will particularly impact high-cost areas or those areas that tend to have higher property taxes and income taxes.”

H

58

HARDWARE RETAILING | December 2018

February 7-9 HDW Inc. Spring Market New Orleans

8-10 Florida Hardware Spring Market Orlando, Florida

15-17 Monroe Hardware Spring Market Myrtle Beach, South Carolina

19-21 Kitchen & Bath Industry Show Las Vegas

19-21 NAHB International Builders’ Show Las Vegas

21-23 Orgill Spring Dealer Market Orlando, Florida

22-24 True Value Spring Reunion Dallas

Find more events online at TheRedT.com/calendar.

To have your event added, contact Kate Klein at kklein@nrha.org.

Are you offering health insurance to employees?

In today’s competitive market, providing health benefits can make a big difference to potential employees and could determine whether they accept your job offer or a competitor’s offer.

Stay Competitive We’re here to help.

We know health insurance can be expensive, so we designed the NRHA Health Insurance Plan specifically for independent home improvement retailers. The plan offers great benefits and numerous perks at a reasonable price. Get in touch to learn more today.

“We’ve helped so many independent home improvement business owners save money on health insurance with the NRHA plan.

The first step is getting a quote. What do you have to lose?”

Bob Chiesa | President & CEO | Custom Benefits Insurance Group Inc. FOR MORE INFORMATION, GO TO CBIGI.COM/NRHA-PROGRAM

Newsmakers

Amazon Invests in Prefabricated Homes Amazon recently invested in Plant Prefab, a California-based company that utilizes sustainable construction methods and materials “to build prefabricated custom single- and multifamily houses.”

TheRedT.com/amazon-prefab

PRO Group Promotes Wodark to CFO PRO Group Inc. has promoted controller Heidi Wodark to chief financial officer.

Wodark joined PRO Group in 2007, and has served in the controller position since then.

TheRedT.com/pro-group-cfo

send four headsets to each Walmart Supercenter and two headsets to every Neighborhood Market and discount store it operates in the U.S. TheRedT.com/walmart-vr

Sears Files for Bankruptcy Protection, Plans to Close Stores Sears Holdings Corp. filed for bankruptcy protection and plans to close an additional 142 stores.

The company’s CEO, Edward Lampert, vacated his position immediately.

Three executives will fulfill his duties as CEO. TheRedT.com/sears-bankruptcy

2018 Do it Best Fall Market Emphasizes Category Growth Walmart Launches Virtual Reality Training Programs Walmart will deploy 17,000 Oculus Go virtual reality headsets to train more than 1 million employees across the country. The company will

Independent retailers flooding the floor of the 2018 Do it Best Fall Market found the programs and retail solutions that are critical for helping them develop specific categories.

TheRedT.com/dib-fall-2018

Orgill Announces New Executive Roles Orgill Inc., the world’s largest independent hardlines distributor, has announced that members of its veteran executive team will have new responsibilities beginning in January. Ron Beal, Orgill’s longtime chairman, president and CEO, will drop the president title, but remains the company’s chairman and chief executive officer.

TheRedT.com/orgill-executives-2018

Do it Best Adds 2 Executives Do it Best Corp. announced the promotion of two of the company’s employees. Steve Markley, formerly the vice president of merchandising, will now serve as the company’s new executive vice president of operations.

William “Dent” Johnson, previously a divisional merchandise manager for the company, will now serve as its vice president of merchandising.

TheRedT.com/dib-executives

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

NRHA Membership ...........................................................................45 www.nrha.org/membership

Cole’s Wild Bird...................................................................................7 www.coleswildbird.com; 877-426-8882

NRHA Retail Management Certification Program ........................... IFC www.nrharmcp.com

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

NRHA Young Retailer or the Year ....................................................63 www.nrha.org/yroty

FiendOil .............................................................................................23 www.fiendoil.com; 651-748-1750

Old Masters.......................................................................................61 www.myoldmasters.com; 800-747-3436

House-Hasson Hardware Co. ............................................................19 www.househasson.com; 800-333-0520

Orgill Inc. ....................................................................................64-IBC www.orgill.com; 800-347-2860

HSI.....................................................................................................17 www.hardwaresuppliers.com; 800-334-5625

Rescue Sterling International Inc. ..................................................21 www.rescue.com; 800-666-6766

International Home + Housewares Show 2019..................................1 www.housewares.org

TailorMade Products Inc....................................................................14 www.one-tie.com; 262-563-6133

Ironclad Performance Wear Corp........................................................5 www.ironclad.com; 844-200-5664

True Value Company .....................................................................9, 11 www.truevaluecompany.com; 888-291-7229

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

Woodland ..........................................................................................15 www.pinecar.com; 573-346-5555

NRHA Health Insurance Plan ............................................................59 www.CBIGI.com/NRHA-PROGRAM

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

60

HARDWARE RETAILING | December 2018

Walmart Adds Mobile Checkout for Holiday Shopping

Home Hardware Dealer Market Emphasizes Contractors

Walmart is adding mobile checkout options to its Supercenter locations ahead of the busy holiday shopping season. The program, which is called Check Out With Me, equips Walmart employees with cellular tablets and Bluetooth printers to help customers check out quickly and bypass congested registers.

TheRedT.com/walmart-mobile-checkout

Home Hardware Stores continues to hone its program for contractor customers. As retailers have been growing the size of their stores over the past decade, more of them have the broad assortments to cater effectively to contractors. To support those dealers, Home Hardware is creating programs and services to help pros do their jobs better, including a series of regional pro shows, held each spring in a number of communities across the country.

CANADA TIMBER MART Expands LBM Distribution Network TIMBER MART is expanding its lumber and building materials distribution network into Ontario with the addition of a 5-acre property in Mount Forest.

The new facility will be conveniently located within a six-hour radius of a large number of TIMBER MART member locations and is slated to open in January.

Addition of Co-Op Stores Increases BMR’s Presence Groupe BMR has announced the addition of 17 new stores to its network.

The stores, which will remain under their current Co-op Country Store banner unless or until they choose otherwise, are former members of Co-op Atlantic.

Specializing in the sale of agricultural products along with hardware products,

the stores are spread across the Atlantic region, with nine locations in Nova Scotia, four in New Brunswick, three in Prince Edward Island and one in Newfoundland and Labrador.

Federated Co-Op Celebrates 90 Years With Conference As Federated Co-operatives Ltd. (FCL) enters its 10th decade, its CEO attributes the business’s longevity to the perennial appeal of its model.

The company traces its origins to the Saskatchewan Co-operative Wholesale Society, which started when co-ops in the province banded together in 1928.

During its Fall Buymart, FCL hosted a conference for its senior managers.

Calling it the Connected Conference, the co-op brought together some leading retail and trends speakers.

For the full version of these news briefs, visit hardlines.ca/hardwareretailing.

December 2018 | HARDWARE RETAILING

61

Last Word

Making the Most of Markets s a retailer, you don’t stand at the entrance of a crowded convention center show floor and look to hit every booth at a market or trade show. Instead, you weave your way through the aisles, stopping at the booths that might hold the most promising products or services.

Treat your preparation for a trade show the same way you treat the show floor. A proper plan allows you to cover all of your business’s needs, whether a trade show is a buying market or designed for networking and learning about new products and trends. Make sure to visit each of these tips before your next show, and to find a niche market that could boost your business in the future, turn to Page 44.

A

62

1. What’s the Market?

2. Set a Budget

A twice-yearly distributor market is designed to show off new products while also presenting sales and pricing deals. Other shows, like the National Hardware Show®, are focused on networking, educational seminars and new products. Whether buying, learning or connecting, you should prioritize your goals for a show before you arrive.

If the market in question has buying opportunities, know how much of your budget you’re willing to spend at any given time. If it’s a niche trade show, have a breakdown of your category commitment.

Have your previous market purchase history ready and use it to help determine what worked and what didn’t in the past.

4. Pick Your Team

3. Narrow It Down

Pulling key employees out of the store can be a difficult decision, but having a group with you at a show can offer great benefits. Bringing managers and employees to a show adds new perspectives and opinions that can aid you as you make buying decisions. Educational seminars can also be great resources for employees at every level of a business.

Wholesaler markets and trade shows are bursting with activity, drawing your eyes and your attention in several directions. Break down your key needs and interests before the trip and identify vendors or categories that are the main draw for you at a given market. Then rank those priorities to ensure you’re hitting the most important ones.

5. Get the Tech

6. Get Out of the Show

Smartphone apps and other resources provided by markets are great for both the planning stages of your trip as well as at the market itself.

Research vendor locations and seminar schedules online beforehand. Once you’re at the trade show, use the app and other resources to update your plan and stay on course for your goals.

While your visit is a business trip with real priorities, having some fun in a new city with your family or coworkers is also part of the experience.

Some shows coordinate with events like block parties, fundraisers and philanthropic organizations.

Let your hair down and see what a new city and some time away from your business can show you.

HARDWARE RETAILING | December 2018

“Young Retailer of the Year honorees make a huge impact.

They truly represent the future of the independent industry.”

Scott Wright | North American Retail Hardware Association

Start Your Journey Today Nominations are now open for the 2018 Young Retailer of the Year awards. Since 1996, this program has showcased hardware retail leaders who are bringing new ideas and new success to the independent home improvement industry. Submit a nomination today to showcase how you have moved your business—and the industry—forward.

LEARN MORE OR SUBMIT A NOMINATION TODAY AT NRHA.ORG/YROTY

Sponsored by:

Young Retailer Year of the

Join us February 21-23 for our Spring Dealer Market in Orlando! Register online or give us a call today!

Find Out What An Orgill Dealer Market Is All About The industry event that has everything you need to increase your profitability.

• Fantastic buying opportunities • Deep discounts from thousands of vendors • Fully merchandised concept stores • Special product showcases

Scan the QR code to watch a video about Orgill Dealer Markets!

1-800-347-2860 ext. 5373 • information@orgill.com • www.orgill.com

Complete selection of woodworking and structural fasteners: • Star Drive No stripping • Hardened Steel No breaking • Type 17 Point No pre-drilling • Serrated Thread Secure fastenng • Industry’s Best Coating 1500+ hrs salt spray

800.444.7313 fastenerconnection.com

HARDWARE

+

2019 RETAILER MEMBER GUIDE 1-800-772-4424 | phone

Sponsored by

nrha.org | 1

Don’t get ready.

Get started.

HARDWARE

The North American Retail Hardware Association’s (NRHA) mission is to help independent hardware stores, home centers and lumberyards, regardless of wholesale affiliation, become better and more profitable retailers.

This not-for-profit organization serves the channel by providing retailers with educational resources, networking events, industry research and by acting as a collective voice for the 35,000 independent retailers working across the U.S. and Canada.

This guide will provide you with an overview of the resources you can use to strengthen and streamline your business.

What membership level is right for you?

Basic Membership

Training Membership

Individual Offerings

Everyone is a member.

Any retailer who owns and operates an independent home improvement business is considered a member of the association. Basic members have free access to a variety of online educational resources, Hardware Retailing magazine and more.

See the list on page 3.

In addition to the free resources that come with basic membership, NRHA Training Members have access to nine in-depth, online training programs ranging from product knowledge and selling skills to loss prevention and basic accounting.

See the list on page 5.

NRHA also offers a variety of resources and programs that retailers can take advantage of regardless of membership status and on an individual basis.

See the list on page 6.

Ideal for retailers: • who aren’t sure how to start a training program • who want to learn more about programs NRHA offers • who have no training budget • who are looking for ways to get more involved in the industry

Ideal for retailers: • who want to start or build a more robust training program • who are hoping to reduce turnover and boost employee confidence • who have a small to midsize training budget

2 | nrha.org

Ideal for retailers: • who are looking for advanced leadership or operations training for themselves or their key employees • who want to meet other retailers to share challenges and best practices • who are looking for business service providers like health insurance

email | nrha@nrha.org

Basic Membership These free resources are available to all retailers on nrha.org.

Train the Trainer Guide

Trainers’ Toolbox

Tools, Guides and More

This quick-start guide gives trainers the knowledge they need to start a formal training program or to make their existing programs stronger. With easy-to-read, step-by-step instructions, the Train the Trainer guide is full of practical tips and instructions for creating an effective training program.

Download the guide and get started at nrha.org/train-the-trainer.

The Trainers’ Toolbox provides everything you need to lead a short training session during an employee meeting. It provides retailers with lessons under 5 minutes, complete with visual elements and trainer notes.

They cover selling skills, merchandising, operations, category-specific knowledge and product trends. View all lessons at nrha.org/trainers-toolbox.

Retailers also have access to a growing library of additional tools and guides on several subjects, including human resources, marketing, operations and product categories. Discover resources like a termination checklist, a social media toolkit, a store critique worksheet, selling guides and more. View all categories and resources now at nrha.org/tools-and-guides.

Hardware Retailing

Live Events

Retailer Forum

Hardware Retailing, the No. 1 home improvement industry publication, gives readers in-depth information on how-to management, new products and category trends. In addition to the magazine, Hardware Retailing also produces a weekly newsletter, updates its website daily, sends a monthly digital publication and more. Check it out now at hardwareretailing.com.

NRHA gives business owners from all wholesale affiliations the chance to come together and share new ideas and best practices while discussing their own challenges and opportunities. NRHA hosts several free events annually, including the NRHA All-Industry Conference, State of Independents Conference and more.

Discover events at nrha.org/events.

Build connections, share experiences and ask questions. While NRHA hosts several live events, we also understand that you need a place to instantly connect throughout the year when you have a challenge or a question. Join an online community of your peers to share ideas regardless of wholesale affiliation. Learn more about the forum at nrha.org/forum.

1-800-772-4424 | phone

nrha.org | 3

Training Membership Train your employees with nine in-depth, online courses with 247 modules.

Why is training important?

Investing in a training program enables your team to perform to their highest standard in all they do. Poorly trained employees will either mislead customers with incorrect information or not engage them at all. Even if they do manage to close a sale with a customer, they’ve likely only sold the bare minimum, without suggesting add-on sales to increase transaction size. When deciding how much time and effort to spend on training, consider the cost of training compared to the cost of not training at all.

The High Costs of NOT Training

The Benefits of Training

• Low customer service

• Higher transaction sizes

• Increased shrinkage

• Better customer service

• Lost sales

• Higher job satisfaction

• Increased turnover

• Higher productivity

How can I start a training program?

NRHA makes training easy. Each of our nine online training courses give employees the freedom to take courses whenever or wherever they want.

Here is a quick overview of how it works: • Sign up for a training membership at nrha.org/membership.

• Receive a welcome email with the next steps to register your store in NRHA’s learning management system (LMS).

• Each employee uses their own username and password to log on and take courses.

• You set the curriculum and get a report when each employee finishes a course.

• You can even reward employees who complete milestones in their training with a pay increase or bonus. Courses include study guides you can print out to use as a quick reference.

Are you already a member?

Retailers affiliated with True Value, Home Hardware and Federated Co-Ops already have access to all NRHA training on their LMS. Retailers who are affiliated with Ace Hardware can find basic training and accounting courses on their LMS, but also have access to all NRHA training on nrha.org.

®

Upgrading is easy. Get started today! online nrha.org/membership | email nrha@nrha.org | phone 1-800-772-4424 4 | nrha.org

email | nrha@nrha.org

Basic Training Course in Hardware Retailing

Basic Training Course in Building Materials Retailing

Basic Training Course in Merchandising

The Basic Training Course in Hardware Retailing equips employees with the basic product knowledge they need to start selling the eight core hardlines departments successfully.

The Basic Training Course in Building Materials Retailing covers the basic product knowledge employees need to be successful selling the eight core building materials departments.

Proper merchandising can improve sales. This course helps employees understand merchandising fundamentals and what they can do to maximize the impact of every display.

Basic Training Course in Inventory Management

Basic Training Course in Selling Skills

Basic Retail Accounting

Topics covered in this course include ordering, receiving, stocking, reporting, maintaining inventory accuracy and managing slow-moving and discontinued merchandise.

This course teaches employees the basic selling skills needed for delivering top-notch customer service, such as making a good first impression and dealing with customer complaints.

Business owners and employees involved in financial management will benefit from this course, which explains common terms and financial statements used in accounting to ensure businesses are operating smoothly.

Project Pro

Loss Prevention

“Our Three Pennies of Profit”

Employees taking this course will review common DIY projects and learn how to sell an entire project to customers, and understand how that makes a big impact on a store’s sales.

This course includes three modules covering internal theft prevention, external theft prevention and store safety. It will help retailers develop a safe and secure retail environment.

This video gives employees a basic understanding of retail profit and loss.

It helps them realize how their actions on the salesfloor directly affect their own success in the business.

1-800-772-4424 | phone

nrha.org | 5

Individual Offerings Discover several options for growing or improving your business.

NRHA Retail Leadership Institute NRHA’s Retail Leadership Institute is designed to keep the industry moving forward. The institute exists to offer advanced educational opportunities to help future industry leaders gain skills and confidence to grow within their organizations toward a successful future. For more information on any of these programs, visit nrha.org/rli.

NRHA Foundations of Leadership Program This online course introduces new and up-and-coming retail employees to key concepts of leadership and personal development. Course materials cover communication, problem-solving and best practices for building and developing teams. Participants engage in insightful assessments to determine their personality type and unique leadership style and how to develop their management skills accordingly.

NRHA Retail Management Certification Program This college-level course is designed to teach key employees, future owners and new owners effective business practices in all areas of operating a retail hardware, lumber or home improvement business.

This advanced leadership course is ideal for experienced independent home improvement business leaders who are looking to improve their skills in strategic planning, decision-making and leadership.

Roundtables NRHA provides independent retailers from all wholesale affiliations opportunities to connect with one another at networking roundtable events. With agendas set by the retailers in attendance, roundtable themes include financial affairs, human resources, information technology, marketing and merchandising, small business and government, women’s leadership, young retailers in the industry and much more.

NRHA STIHL Foundations of Leadership Conference This conference is held annually for students and mentors who are current or past participants in the Foundations of Leadership Program and the Retail Management Certification Program. This event provides an opportunity for participants to meet course instructors and connect with other members of their cohort, in addition to participating in leadership-themed seminars and workshops.

6 | nrha.org

email | nrha@nrha.org

Business Services and Resources NRHA partners with expert organizations in an effort to save you money on things like insurance and payment processing.

Learn more about these services at nrha.org/business-services.

+ Health Insurance & Prescription Savings

Credit Card Processing & Payment Services

Workers’ Compensation & Liability Insurance

Human Resources Management

The NRHA Health Insurance Program and RxCut Prescription Savings Card program are both designed to save U.S. business owners money on health care without sacrificing benefits.

Clearent can offer retailers low payment processing fees and provides customers with the most up-to-date technology. Business owners can tap into several cuttingedge payment technologies.

Member Insurance provides risk management services and affordable insurance solutions specifically designed for independent home improvement businesses.

Group Management Services takes on human resources tasks that many small and midsize businesses don’t have the time or expertise to effectively manage, such as payroll and risk management.

Cost of Doing Business Study Median Sales Per Customer

$30

Typical

High-Profit

Key Business Indicators

$30 50%

Typical

High-Profit

Stay Connected

41.4% 41.8% 40%

$25

$23

$23

30%

$22

21.7%

$21

$22

$22

2016

2017

18.7%

20%

$21

$20

$20

$20

2013

2014

9.1%

HARDWARE STORES

10%

3.6% $15

0%

2015

Key Performance Differences at a Glance • Sales per customer at hardware stores, a metric which had been climbing in recent years, softened a bit in 2017, where the average store recorded sales per customer of just $22, with high-performance stores registering only slightly higher at $23.

• Profit before taxes was down slightly from last year at both average stores (3.6%) and high-profit stores (9.1%).

Hardware Stores Hardware stores carry core lines of home repair, renovation and maintenance products, including fasteners, tools, plumbing and electrical supplies. They carry little or no lumber and building materials.

4

2018 Cost of Doing Business Study

• Inventory turns averaging 2.4x were the highest posted by the overall group since 2001.

• More productive inventory has translated to the highest ever sales per square foot for the overall group at $193.

It was a bit of a mixed year for the hardware stores responding to our survey. On one hand, the group saw an average sales increase of 4.9% and posted record sales per square foot and GMROI results. On the other hand however, these record metrics didn’t seem to translate into a stronger bottom line, which dipped from an all-time high of 4.2% last year to just 3.6% this year.

Even the operating profits at the highest quartile of performers in our study fell off year over year. That being said, the high-performance

Gross Margin After Rebate

Total Payroll

Profit Before Taxes

stores in our group saw a still-healthy average operating profit of 9.1% in this year’s study.

One reason for the slip in bottom-line performance across all respondents seems to be an increase in the Cost of Goods Sold.

COGS were up 240 basis points from last year and the highest we have seen since 2013.

When it comes to controlling expenses, high-performance stores are still doing a better job than their average counterparts.

Payroll expense as a percent of sales at the average store came in at 21.7%, where high-profit stores held this number to 18.7%.

Occupancy expenses were also better controlled by the top performers who held this number to about 6.6% of sales versus the average of 7.2%.

A couple metrics that emerged during this year’s study that you may want to keep an eye on are cash on hand, accounts payable and inventory per square foot. Cash on hand for the average hardware store came in at just 4.6%, which is the lowest it has been since 2006, while accounts payable, at 10.6%, are the highest they have been since 2005. Combine these numbers with the fact that the average inventory per square foot recorded by this year’s respondents was just $47, the lowest it has been since 2006, and there could be concerns about the impact this could have on growth over the short term.

North American Retail Hardware Association

Stay up to date on trends, news and more with NRHA and Hardware Retailing by following along on social media.

5

This annual study provides detailed financial information from hardware stores, home centers and lumber/building material outlets in the U.S. Retailers use this resource to compare their operations to average and high-profit businesses. It can also be used as a tool to determine new ways to increase profits. To learn more about the study, visit nrha.org/codb.

@NorthAmericanRetail HardwareAssociation

Participation is completely free and confidential. All retailers who participate in the study will receive:

@HardwareRetailing

@nrha_official @nrha_official

@hardwareretail

• a free copy of the completed study ($499 for non participants) • a Personalized Financial Analysis with composite financial statements • their business’s ratios, strategic profit model and what-if scenario generator

1-800-772-4424 | phone

nrha.org | 7

Your business insurance is personal to us.

Since 1972, we have committed ourselves to what we know best - YOU. Your industry is our speciality. It’s all we do.

We offer a personalized and consultative approach to your insurance needs.

Our insurance products and services are designed for hardware, lumber and building material dealers, rental operations, garden centers, and commercial industrial distributors.

Programs may include the opportunity to receive an annual dividend.

When you join Member Insurance, it’s personal.

We are 100% committed to being available to you, whenever you need us.

Go to memberinsurance.com/personalservice to learn more.

855.MIA.TOOL