Hardware Connection Summer 2011

WE DON’T NEED BADGES

Based in Memphis, Tenn., Orgill has five distribution centers throughout the country with locations in Tifton, Ga.; Inwood, W.Va.; Sikeston, Mo.; Hurricane, Utah; and Kilgore, Texas. From these distribution centers, Orgill serves independent hardware stores, home centers and lumber and building materials dealers of all shapes and sizes.

It’s All About You

We don’t spend ANY time at Orgill making sure our customers comply with any sort of rules or mandates. We think it is more important that we spend our time working on ways to be the best distributor we can be.

You Won’t Miss Out

While Orgill offers its customers worldclass store design services, assortment planning options, signage, advertising and a whole host of retail programs, none of them are mandatory. Customers only use what they feel is right for their business. And better yet, they only pay for what they use.

Keep Your Independence

We feel that your local brand is far more important than any national image. That’s why we will help you develop your brand and tailor your store to better serve your own, unique market.

We’re Here to Serve You

When you do business with Orgill, you are a customer, not a member. That means we have to earn your business every day. That also means you have no stock requirements or membership fees, so you can keep all your money where it will do the most good, growing your business.

The Tide is Turning for Independents

By Chris Jensen

Those independent hardware retailers that survived the first 30-plus years of the big-box invasion as well as the recent recession and housing slowdown will be pleased to learn the future is looking brighter. Small stores are back in vogue, and that’s not the only trend that bodes well for the growth prospects of independents.

Aging baby boomers will be seeking smaller, easier-to-navigate stores, one of many signs the big-box boom is over, according to retail futurist Doug Stephens of Retail Prophet Consulting. For more of Stephens’ insights into retail trends, see our Hardware Show report on page 53.

The social media craze is sweeping over society, and social media is inherently designed to benefit local, independent retailers. Dealers are discovering they can launch a Facebook page to form a closer bond with their local customers at no cost, while big boxes are forced to watch on the sidelines.

The Home Depot manager is too busy looking at spreadsheets to post on Facebook, and that stuff is handled by corporate on a national basis anyway.

The big boxes are just about out of locations to stick their mega-stores, which means Wall Street will increasingly take a dim view of future profit potential. Home Depot has already tried several small-market formats and flopped, which is why we shouldn’t be too worried about

Walmart’s new 15,000-squarefoot format.

If independents continue to bang the drum preaching the gospel of social media and buying local, then the chances of passing on a healthy business to the next generation is looking more promising. Now if only the housing market could rebound with a little more gusto.

Speaking of social media, you can follow us on Facebook at http://www.facebook.com/pages/ TheHardwareConnection/ 181190805244805. We promise we won’t waste your time with irrelevant posts on frivolous matters, but the type of retail-focused content you have come to rely on from our seasoned staff.

The Hardware Connection is now accepting nominations for the 2011 Buyer of the Year Award. Any independent hardware retailer can nominate a buyer from any wholesaler from whom they purchase products. To make your nominations, simply e-mail your nominee’s name and the wholesaler they work for to tom@thehardwareconnection.com.

Our next issue will focus on employee issues, so tell me what bugs you most about your employees by emailing chris@thehardwareconnection.com. I’m not a trained therapist, but I promise to lend a sympathetic ear.

THEWAYISEEIT

Do You Have Any Obnoxiously Successful Services?

Every once in a while you’ll hear something that really catches your attention. It may be a phase, a picture, a product or an idea that creates an “aha” moment in which something just clicks and you immediately “get it.”

I had one of those moments when we recently had dinner with Meredith Wharton of Retailer Edge, when she referred to those retail programs or services that are borderline profitable as “obnoxiously successful.” I immediately “got it.” I knew exactly what she was referring to even though she didn’t even know where my store was much less what kind of hardware store we owned. I simply looked at her with a smile that said “I know exactly what you’re talking about.” It got me to start thinking of those services in our store that were “obnoxiously successful.”

As each of us has tried to weigh the value of our various costs of doing business during this challenging economic business environment, how many of us have also evaluated our store services?

This little phrase that Meredith had shared could potentially have a dramatic impact on our family hardware business. As each of us has tried to weigh the

By Tom Chasteen

value of our various costs of doing business during this challenging economic business environment, how many of us have also evaluated our store services? What about the value of some of your in-house charge customers? What about those niche product categories that seemed like a great idea at the time but simply didn’t pan out?

What I decided to try to do was to list all of our retail hardware services or niches and try to evaluate what they were bringing to the bottom line in dollars on a scale of 1 to 10, 10 being the highest. Then I evaluated the perceived value these services or niches bring to the overall perceived value of our hardware store to our customers. This is a much tougher process than how to put a dollar value on taking an hour to fix Mrs. Jones’ flashlight because the batteries were so old they leaked on the contact spring or switch.

My objective was to re-evaluate our business, how we do business and try to evaluate those “obnoxiously successful” services that we can either enhance to make them a viable part of our business and the bottom line or possibly eliminate them altogether. I wanted to challenge the logic of doing something because that’s the way we’ve always done it.

Next we moved on to our in-house charge customers. This process was easy as we took the 20 percent of our in-house

charge customers who were responsible for the 80 percent of our charge sales and that paid their monthly billing promptly and immediately removed them from the evaluation process. Then we looked at all of the in-house charge customers who still had accounts that hadn’t charged anything for the previous six months and those from that list who hadn’t charged anything for the previous 12 months were put on the list to be dropped.

Next we looked at the 20 percent of those in-house charge customers who spent the least amount with us the previous 24 months. Those that warranted it were also added to the list to be dropped. Some, though, we simply couldn’t drop — like the churches in town.

Finally, we looked at all the accounts that were habitually delinquent and those that were always a problem or refused to pay finance charges on past due balances or were chronic complainers. We happily added them to the list to be dropped.

What we found is the customers we ended up dropping were not “obnoxiously profitable” — they weren’t profitable at all! So we dropped them completely. For those marginal accounts that we kept we tried to figure out what we could do to encourage them to purchase more merchandise from us or make it more convenient to do business with us. We determined that we cannot be all things to all people, not all business is good business and not all services were profitable. When you own or manage a small family-owned hardware store in a small community, where you know people by their first names, it is hard to evaluate

each customer or aspect of your business on a profit-and-loss basis. How do you tell your next-door neighbor for 20 years who remodeled their kitchen two years ago that you set them up with an in-house charge account to make it more convenient for them to buy merchandise, but that you are now closing that account for lack of activity? Or how do you tell Mrs. Jones, whom you’ve know since the second grade, that you don’t have time to look at her flashlight?

Well, the short answer is you can’t. This is still a service business that is built on helping people solve their problems so they can get on with their lives. Our customers are our friends, our neighbors and fellow business owners who trust our judgment and advice. That is what makes us unique and brings customers into our stores.

In the case of the neighbor who doesn’t use his in-house charge account any longer, I didn’t say anything. We closed it and deleted the file. If he comes back in and wants to charge again, I can always tell him “our system must have purged your account due to inactivity. But I’ll be happy to open it back up for you if you would like.”

As for Mrs. Jones, well, I’m sorry that is one of those “obnoxiously successful” services that I simply refuse to give up. Besides, I had the biggest crush on Mrs. Jones in the second grade. How could I ever possibly say I can’t help her?

Please feel free to contact me at 305-852-2511 or tom@thehardwareconnection.com if you would like. I always enjoy speaking with another dealer, retailer to retailer.

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Amazing but TRUE Hardware Stories

Keep sending us your funny stories, because we all could use a good laugh. Sometimes you probably don’t know whether to laugh, cry or spit out your coffee, but that’s what makes it fun to be a hardware retailer. For our next issue we’re especially interested in amusing stories related to employees, so send your best stuff to chris@thehardwareconnection.com.

We had a customer buy extra heavyduty bags to fill with snow. His intention was to put the filled bags in the back seat and trunk of his car to add weight to improve traction. As he said, snow is cheaper than sand. I suspect he will be surprised when the snow melts.

Alan Talman

Karp’s Hardware East Northport, N.Y.

A customer came in looking for an end for a garden hose. When I asked male or female, there was a pause…then they asked, “How do you tell the difference?”

Kurt Stringham

Stringham’s True Value

Santaquin, Utah

I'm at the store while a blizzard is raging, and it's been ten minutes without a customer. It has me thinking of closing early to get home, when a lone customer comes in. "Can I help you find anything?" I ask. “No thanks,” he replies. “I'm just here to look at the golf discs.” And he bought one.

Dave Verhagen

Foxland Hardware Green Bay, Wis.

We had a customer call and ask if we had one of those magnets that will pick up wood. I guess it takes all kinds.

Leila Crockett

Orofino Builders Supply Orofino, Idaho

How’sBusiness?

Midwest

How are tool sales? Since we installed our Craftsman set in our little store in March, our tool sales are up 25% YTD and our power tools are up over 250% not to mention our automotive sales increase due to all the automotive tools like OBDII inspectors, jack stands and impact wrenches/compressors, etc. When we were first putting the tools on the shelves I was surprised when a customer picked up and purchased a couple hundred dollars worth of Craftsman wrench sets — he didn't even know the price when he picked them up. Now, I'm surprised when there's a day when we don't sell a few high-dollar items. We are now selling the hell out of our tool department, and it was otherwise a very sleepy department. Compare this to our other store 15 miles away that has not installed the Craftsman set yet, and their tool sales are down 12%.

How are tool margins? Our margin dollars are only up 15% so the Craftsman program is not a huge margin center, but it looks like it has made our storea

destination for tools and we certainly enjoy having a dominant tool department. Once enough Ace stores get up and running with Craftsman, it will have an impact at the big boxes and at Sears.

Dan O'Haver

Hackney Ace Hardware Stores

Dexter and Milan, Mich.

■

How has the weather affected business? In the 55 years we’ve been at Kidron, our store has never flooded. In fact, the tiny North Fork Creek (that runs under part of our store) barely ever even left its banks. The 18" to 36" of water that swept through our store on February 28 left a huge mess in its wake. Merchandise of every description floated around the store. That includes giant pickle crocks (that must weigh more than 20 lbs) and full-size refrigerators. Mud, corn stalks and other farm runoff covered every flat surface less than two feet from the floor with up to ½" of slime. For the next month, we cleaned, squeegeed and

Lehman’s Hardware founder Jay Lehman cleans up the store after the flood.

How’s Business?

sorted. At one point, we had two large rooms — as big as an average sized home — full of merchandise, all marked 50% off. The water came through the store with such speed and force that it picked up an 18 cu. ft. refrigerator and carried it from one end of the store to the other. Thousands of smaller items washed into the downhill end of the store, where they piled up so deeply that they completely blocked the aisles.

How did you recover? We had about 6070 people at the store until after 10 p.m. that first day. This included employees, temporary workers and volunteers. By the time we left that night, most of the center entrance was clean. All the merchandise that had been knocked onto the floor in the flood was picked up. A lot of the mud had been scrapped from the floor. Within 30 hours of the flood, we had the front doors open, although only the lobby was open. By Friday, we had nearly the whole store open. The entire tragedy unfolded in less than three hours. That much is true. The cleanup was not tragedy, but a miracle…a miracle of giving, of unity, of caring and of hard work.

How has tha community reacted? A week after the flood I was in the store, and it was almost normal there. Lots of customers, most of whom already knew about the flood. Many were eager to snap up bargains from our 50% off, flood-damaged sale rooms. Others were eager just to stand around and give emotional support. Both were equally welcome and just what I needed after what started as one of the worst weeks I’ve been through and ended as possibly one of the best. Without flood insurance, there are financial challenges to

overcome. For right now, though, I just want to thank everyone with every ounce of my heart for their sacrificial work. I have never seen a group of people come together in such an amazing way.

Galen Lehman Lehman’s Hardware Kidron, Ohio ■

How’s spring business been? We’ve been able to maintain sales in Gauley Bridge despite the down economy. We’ve been very pleased with the response we’re getting to our new store in Montgomery, which opened in November.

New initiatives? We’re only using half of our building in Montgomery. We hope to grow into the other side eventually, because right now we’re out of room. We’d like to expand into pool chemicals and lumber. What items are selling well? Sporting goods and bait are big sellers at Gauley Bridge, and we hope to develop them into strong categories at the new store. Plumbing and electrical are the topselling categories in the new store.

Johnny and Candi Graves

Jarvis Hardware

Gauley Bridge and Montgomery, W. Va.

Steve & Susan Tonnies, Tonnies Hardware & Rentals

How’s Business?

South

How was spring business? It was nip and tuck same as last year. It’s been colder than normal and not a lot of days with sunshine. We hope to see business pick up when the weather gets nicer.

New initiatives this year: We’re doing a store remodel with the Destination True Value format. We’re redoing the inside and outside, with fixtures, signage and a whole new look. That should all be completed by late September. We expect this store remodel will have a positive effect on our business. Gail Lanier Lanier’s True Value Lexington, N.C.

West

is showing the first sign of sales increases in several years. The market is still depressed. I understand the big boxes are doing very poorly and they are all in our circle of 1-5 miles.

Trend for margins? I personally take care of pricing. Margins are holding steady. Last year I took one store up 4% to a front-door Activant of 50% and it did not seem to hurt sales, nor did we get a lot of complaints. What items are selling well? Clip strips and impulse items have been doing very well, but it takes a lot of effort top down to make it happen. We know we can raise our average transaction through creative merchandising.

Bill Wygal Bill’s Ace Hardware Martinez, Concord and Pleasant Hill, Calif.

How’s Business?

pretty slow. It’s all related to the weather. It rained two-thirds of the days in April.

What items are selling well? We’re selling a lot more metal roofing, particularly for residential.

The weather has been taking a toll on shingle roofs and customers are looking for an alternative. Plumbing remains our best-selling category.

Dave Moore

Wiley Brothers PRO Hardware & Lumber

Schaghticoke, N.Y.

From Tom’s Shop Hardware Products Review

By Tom Chasteen

As a tool “geek” and a hardware retailer I really enjoy writing this review column. I should point out that we do not write a review of every product we evaluate. In fact, we “fail” more products by an almost three-toone ratio. You just wouldn’t believe some of the products manufacturers send us, or actually you would, because you go to the same hardware shows I attend. What we try to do here is highlight products that you may not have seen yet or for which there is not extensive distribution yet. The only criteria for a product to make it into our review column is that it must be well made, do the job and have sales potential in a retail hardware store.

PRODUCT #1: EC 330 Mini Saw

Exakt Precision Tools

Exakt Precision Tools has developed a new hand power saw that I found to be very unique. It has the one-handed convenience of a multitool and the versatility of a small circular saw. Exakt has developed a unique feature of color coding their different products. The EC 330 Mini Saw, which is the product we tested,

comes in a mustard color. The earlier model, EC 310N, which we did not test, is one step below and comes in green.

We found the EC 330 to do everything and more than was touted by the manufacturer. It comes in a plastic molded case, which I find is always nice and is a nice selling feature for

Tom Chasteen will be reviewing 3-4 hardware products from “Tom’s Shop” in each issue of the magazine.

the serious DIY customer. While the case seems tight, once you remember how everything goes back in the case, it’s perfect. The saw itself is light

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From Tom’s Shop

Hardware Products Review

and easy to use with one hand and is well-balanced. While in operation it seems loud but, in reality, it’s not any louder than any other handheld power tool. It has more than enough power to cut through various materials. I tested it on wood, plastic and ceramic tile. I did not have the blade for cutting steel, but I watched a demo at

the National Hardware Show ® and it will do that as well with the right blade. The EC 330 will cut up to ½" depth and the depth is controlled by a knob on the top of the wheel that actually shows the depth you are setting it to. This is a very cool feature when “plunge” cutting and depth of cut is an issue. It also comes with a hose adapter that will attach to almost any vacuum. In my case I tested it using a Shop Vac and it worked fine.

I don’t believe the EC 330 is an everyday tool, but for those jobs that require a precision cut or where you need to make a plunge cut in various materials, it is exactly what the doctor ordered. If your store has a large commercial/industrial customer base or has a large number of serious DIYers, you should definitely take a look at adding it to your inventory. The EC 330 retails for about $139.99, so it is definitely not cheap, but it’s not a “cheap” tool either. For more information, go to www.newexaktsaw.com.

PRODUCT #2:

The NeverMiss Mouse Trap Liphatech Inc.

The NeverMiss Mouse Trap by Liphatech Inc. is anything but your average mouse trap. Someone put a lot of thought into this product. It also comes in a larger size for rats. Over the years we’ve all seen various products to help us control rodent issues, from the conventional mouse and rat traps that have snapped down on many a finger or thumb to the glue

tapes that can end up in a big ball of mess trying to get it set. All of those products still require the customer to actually handle the rodent, which most customers absolutely don’t want to do, hence the reason for purchasing the trap to begin with.

The NeverMiss traps pretty much eliminate the need to ever touch or handle the rodent at all and they are reusable. The NeverMiss trap uses a bait like most traps do (my preference is peanut butter) and as the mouse or rat crawls into the trap to

eat the bait it trips the trigger and the trap releases a strong rubber band much like a thick “o” ring around the rodent’s neck and suffocates it. When the customer checks the trap the next morning and

From Tom’s Shop

Hardware Products Review

finds the dead rodent inside they simply pick up the trap from the end the rodent never got near and dump the rodent into the trash, never having to touch the rodent at all.

While nothing is ever 100 percent it is hard to see where this trap would not work at least 99.9 percent of the time. Each trap comes with enough rubber bands or “o” rings to take care of most customer needs. If you sell a lot of the conventional mouse and rat traps this would definitely be something you should consider adding to your inventory selection. The packaging and graphics are extremely well done and are tailored to retail customer sales. More importantly, you don’t have to worry about children or pets tripping the trap and getting hurt or eating poison baits. For more information go to www.nevermisstrap.com.

PRODUCT #3:

LED Lighting

LunaSea Lighting

LunaSea Lighting manufactures LED replacement bulbs and LED light fixtures. Bill Wygal, an Ace Hardware retailer in California, referred this company to me several months ago. I contacted LunaSea and they sent me several sample to test out. Located in the Florida Keys, we obviously have a

huge demand for marine-type products, particularly LED lights.

I tested three different products, two different-sized replacement bulbs that replace the standard G4 base halogen bulb that are typical in older “hockey puck” undercounter light fixtures and most recessed marine light fixtures. I also tested a double-pin, double-contact bulb that is common in most auto and marine applications.

All three bulb types were brighter than other LED bulbs I had looked at. All three remained very cool and, more importantly, all three maintained a standard color. None of them had that green cast to the light or were so dim it

was actually hard to see. I have been running the bulbs in several different settings — home, boat and truck — and not one of them has failed. If the LED lives up to its reputation for lifespan, then I won’t see a failure for quite some time. To see their complete product offering go to www.lunasealighting.com.

If there is a neat product you think I should review, contact me at tom@thehardwareconnection.com. I’ll give just about anything a try, and I’m always looking for innovative products that might turn into big sellers in my store. Let’s sell some hardware!

Keeping Uncle Sam Out of Your Business

By Chris Jensen

Most retailers would agree that the nine most terrifying words in the English language are “I’m from the government and I’m here to help.”

They worry about the IRS at tax time, keep their fingers crossed that no accidents occur to trigger an OSHA inspection and lament the latest silly regulation to add to their paperwork burden.

Bill Wygal, who operates four Bill’s Ace Hardware stores in California, seems to sum up most retailers’ attitudes about the government when he says, “I hate the government so much I cannot bear to open another store.”

A lot of ire is directed at Washington, but state and local governments are not immune from the disdain. The city of Chicago has banned the sale of spray paint since 1995, which has done little to stop graffiti but sure has put a damper on retailers’ sales.

The consensus is that politicians propose new laws and regulations without investigating the impact these new regulations will have on

family businesses. They seem to overlook that small businesses employ over half of the private-sector employees and have created 64 percent of net new jobs over the past 15 years.

When Scott Thoele decided to close his hardware store in Irvine, Calif., last year, one of the contributing factors was dealing with costly new government regulations. California’s new Lead Free Law changed what he could carry in his plumbing department, while stringent standards for indoor air quality affected the paint he sold. The environmentally friendly alternatives he had to sell were deemed too expensive by his customers. The state agriculture department kept popping in to make sure harmful insects were not invading his garden center. Now 15 employees are out of a job.

Rick Schwartz of Schwartz Hardware in Fall River, Mass., is mystified by the fact that the city measures the size of his store’s roof so it can tax him for rain water drainage. “Then the politicians cannot figure out why businesses are running away from the city,” he says.

The Environmental Protection Agency’s lead-paint rule, which took effect last April, requires contractors performing renovation projects that disturb lead-based paint in homes, child-care facilities, and schools built before 1978 to be certified and follow specific practices to prevent lead contamination. Retailers are supposed to be educating their contractor customers about this regulation. Although the fines for noncompliance are stiff, enforcement is lax so many paint contractors choose to ignore the rule. Law-abiding contractors say that complying with the rule means they cannot be competitive with their job

quotes. Call it the law of unintended consequences.

Some retailers have decided to take matters into their own hands. Bill Dieruf, owner of Dieruf Do it Best Hardware in Louisville, had served five terms as a city councilman and was chairman of the planning and zoning committee. Although he had a platform to make a difference in his community, he still didn’t like the way things were going. Dieruf decided to run for mayor of Jeffersontown, Ky. — and he won. He has pledged to support economic development and bring back fiscal responsibility to better ensure the business founded by his father in 1946 can continue to prosper.

One Small Victory

Don’t even get retailers started on President Obama’s health-care legislation, which does little to address the affordability issue for small businesses. However, it did add an onerous new 1099 reporting requirement that had independent retailers shuddering with horror.

Seth Arluck, president of New Hampton Lumber Company in New Hampton, N.Y., wrote his congressman to complain about the 1099 requirement.

Here’s an excerpt of that letter:

This requirement, to issue a 1099 for each business-to-business expenditure over $600, would place a disproportionate burden on my very small business. Last year we wrote 600 checks for purchases other than payroll.We have about 150 vendors in our accounts payable.Although many of our purchases are with recurring vendors, there are many onetime purchases which exceed $600.I do not need an additional and unnecessary expense that serves no apparent purpose. Another aspect of this requirement is the need to obtain each vendor’s Federal I.D.or Social Security number in order to legally comply with 1099 reporting. In these times of rampant identity theft, there will be many refusals to furnish these ID numbers. Failure to correctly report a 1099 results in fines.As if that was not daunting enough, the previous Congress passed HR 5297 last September, The Small Business Jobs Act, which increased the penalty for 1099 non-compliance from $50 to $250 per violation.The increase in fines was to help fund small business lending.How clever, fine the heck out of me, and loan me the money to pay fines.And what justifies this new layer of regulation?The apparent belief that business is inherently untrustworthy and cheating the U.S. Government of its rightful tax revenues? Please repeal the 1099 provision now.

Chalk one up to the little guys, because Congress eventually repealed the 1099 reporting requirement after being flooded with complaints similar to that of Arluck. Of course this just means the government needs to discover other sources of revenue.

It’s been estimated that as many as 16,500 additional IRS agents will be needed to collect and audit tax information related to the new health-care legislation. The extra personnel will also be needed for increased audits of small businesses, which is a stated goal of the Obama administration. The sidebar on page 36 includes some tips to reduce your chances of being audited by the IRS.

Keeping OSHA Away

Lumberyards are dangerous places, which is why many lumber dealers find themselves in the crosshairs of the Occupational Safety and Health Administration (OSHA). Last September OSHA fined Phenix Lumber Co. in Phenix City, Ala., $439,400 for 53 safety and health violations following the death of one worker and the critical injury of a second.

"Phenix Lumber failed to protect its workers from death and serious injury," said Assistant Secretary of Labor for OSHA Dr. David Michaels. "Employers are legally bound to provide a safe work environment for their employees. This company has repeatedly failed to do so, costing one worker his life and grievously injuring another. This must stop."

OSHA inspectors were already reviewing the business for failing to remedy previous safety violations, when the latest incidents happened. One worker was killed when his head was crushed between a motor being hoisted with a forklift and other equipment. Another worker was seriously injured after he fell approximately 10 feet, breaking his neck, while doing daily maintenance on a debarker in the saw mill.

Not all accidents are preventable and when they happen, the men with clipboards show up. Here are some steps

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to take to ensure your business avoids unnecessary visits from OSHA inspectors.

■ Conduct store safety audit

Walk around your store and check doors, windows, emergency exits, aisles, fixtures, roofs, fencing, bathrooms and storage areas. You’re looking for anything that could injure an employee or a customer such as a chipped floor tile, frayed extension cord, spilled chemicals or protruding metal. Make sure emergency exits are clearly marked and are free of obstacles. Test smoke alarms and check sprinkler system valves. Maintain a wash station that meets OSHA requirements. It makes a lot of sense to have an outside expert do the safety audit, because they will look at your store with fresh eyes.

■ Identify and remove hazards

If your parking lot has potholes, make sure they are filled. If your fire extinguishers don’t have updated certification, take care of that. Check to see that all propane cylinders are stored properly. Replace burned out bulbs inside and outside. Ensure combustible materials are kept in the proper place. Screening employees for drugs and alcohol is another good precautionary step.

Ask employees for suggestions on how to make the store work environment safer.

■ Do regular safety training

Stress the importance of safety for every task completed in store. That means making sure guards are in place for saws, protective goggles are near the glass cutter and everyone knows where the first aid kit is stored. All forklift operators should undergo the necessary forklift safety training. Use video training programs that demonstrate proper safety techniques for operating saws and

key-cutting machines and provide instruction on preventing back injuries. Have employees sign a checklist to verify that they have completed the necessary safety training.

■ Adopt a formal safety program

If you ever get a visit from OSHA, one of the first things they will ask to see is your injury/illness prevention plan. Be sure to document every accident or injury that takes place at your business and keep those records organized. Put your safety policies and procedures in writing and include them in your employee handbook.

If you discover your business is going to be visited by OSHA, then take proactive steps to make it as painless as possible. To make the visit go as smoothly as possible, designate one key person as the company representative and make sure they have all relevant paperwork to turn over. Find out whether it is a routine inspection, follow-up on a specific complaint or an investigation into a worker accident or injury. Let the investigating agent know that you are eager to assist them for the stated purpose of their visit, but keep them focused on that task so it doesn’t turn into a fishing expedition.

It can be a frustrating experience to deal with the bureaucratic maze of an organization such as OSHA, but most retailers understand the importance of keeping employees and customers safe in retail stores. But when it comes to the periodic visits they get from the state Weights and Measures inspector or the health inspector who materializes when they start selling ice cream bars, let’s just say most retailers could do without the experience.

Marilyn Weisman, who operates Absecon Do it Best Hardware in New Jersey, has to look forward to regular visits from the state seed inspectors. “We had one guy who, although our seed suppliers are

on the ‘approved list,’ wanted to cut or tear open packages and ascertain that seed was actually what was in there,” she notes.

Bill Round of Round's Do it Best Hardware in Stoneham, Mass., recently had a landscaper customer come in looking to buy the old non-safety gas cans. Round filled him in on the safety can regulations, the sell-through for the old product in every channel and the unlikelihood of his finding old gas cans outside of yard sales. “He told me about how safety gas cans of the three or four current designs seemed to fail and cause his crews to spill fuel all over everything. He was sure that he spilled more fuel and had greater exposure to risk using the compliant gas cans versus the old cans,” Round recalls.

Round doesn’t have to fuel outdoor power equipment dozens of times a

week, but he shares the frustration of theexperience with his customer. “This is the compact fluorescent ‘mercury’ issue in

How much time do you spend each year dealing with federal taxes?

Source: National Small Business Association 2011 Small Business Taxation Survey

the gas can business. The solution mandated by the government presents another hazard equal to or greater than the original targeted hazard,” he says.

Larry Perry of Woodstock Home & Hardware in Woodstock, Vt., is hoping to make retailers aware of another issue, related to the rising cost to process debit and credit card transactions. He points out that last year Congress passed reforms to the swipe fee charged by Visa and MasterCard, which are scheduled to take effect on July 21, 2011. Some in Congress want to stop these reforms, calling for a two-year delay and authorizing further study of the issue while businesses continue to pay an estimated $16 billion annually in card swipe fees, Perry points out.

The Senate may vote soon to kill these reforms, according to Perry, who urges his fellow retailers to act now by writing and calling their Senators and urging them to

Chuck and Sherry Tubbs of Your Old Tyme Hardware in Canton, Ohio, think the government plays too intrusive a role in their business.

oppose S. 575, the Debit Interchange Fee Study Act of 2011.

“For years I have tried to negotiate debit card fee rates and terms of acceptance to no avail. These are one of the fast growing costs I face in my business. This is not just because the volume is rising, but, rather, because the rates are rising, too, despite improvements in technology and economies of scale,” Perry says. “The current level of unpredictability and uncertainty in the debit swipe fee market puts a real strain on my ability to budget, plan for my business, and hire new workers.”

Chuck and Sherry Tubbs, who own Your Old Tyme Hardware in Canton, Ohio, say the government seems to be working against them, not for them. As Sherry puts it, “The government’s getting too big. They keep wanting to tax the small businesses more — that’s nuts. Where’s it all going to end? The government has taken so much away from us.” Adds her husband, “Some people don’t understand what it’s like to run a business and try to get people to buy something. It’s not going in the right direction, that’s for sure.”

How to Reduce Your Chances of Being Audited

Most retailers would rather see Home Depot open three nearby stores than endure an audit from the Internal Revenue Service (IRS). At least they would have a fighting chance against the big boxes.

In addition to worrying about federal taxes and withholding, retailers have to make sure they remain in good standing with their state and local taxing authorities. Every year there are cases where retailers are caught for failure to remit withholding taxes for their employees or for irregularities with their sales tax reporting.

Bruce Phillips, whose family operates two Crowder Brothers Ace Hardware stores in Lakeland, Fla., says they have had two sales tax audits over a 10-year period — one at each store. His advice is to use a reputable accounting firm that has a good relationship with the local Department of Revenue and to make sure the audit takes place at your accountant’s office and not in your store.

A Federal IRS audit is not pleasant, no matter the circumstances, but retailers can take steps to decrease their chances of being audited. Here are some guidelines that tax experts have provided, but be advised that these tips should not be considered legal advice and you should still consult with your tax accountant and tax attorney for all tax planning purposes.

1. Failing to file a return

This seems so obvious it shouldn’t even be mentioned, but you’d be surprised. Some new business owners believe they don’t have to file a return if their business loses money for the year. Or perhaps the retailer is going through a cash crunch and knows he doesn’t have the money to pay the tax, so he doesn’t bother filing a return. It’s certainly better to file and owe back taxes than going to jail for failing to file.

2. Unreported income

If the IRS receives a record of income you receive and you do not report it on your tax return, then this will probably trigger an IRS red flag. Just imagine how many red flags would have been popping up if the 1099 reporting requirement was enacted.

3. Big change in revenue

A big increase or decrease in revenue from one year to another could trigger an audit. If your income for the current year is much higher than previous years, the IRS will be curious. It could be that you operate a fairly new business and your customer count has finally taken off. Maybe you opened a second store or launched a lucrative online business. The IRS will expect your return to show additional expenses (more inventory or more payroll) to meet increased demand.

Continued on page 39

How to Reduce Your Chances of Being Audited

Continued from page 36

4. Mixing personal and business expenses

Mixing personal and business expenses can give the illusion that you are attempting to claim deductions that are not allowed. Cell phones are a good example. You may have to document that the majority of your calls are business-related, so keep good records.

5. Not paying payroll taxes

If you have people working for you regularly and attempt to classify them as independent contractors this could trigger an IRS red flag. If the worker has a business of his own and offers his services to other businesses, then the contractor designation is more likely to hold up.

6. Overpaying family members

If you have family members working for the business, then be sure that you pay them according to their actual responsibilities and at a rate that is comparable to the local job market. For example, if you pay your cashiers $9/hour while your daughter the cashier is earning a salary of $75,000, then that will not be viewed favorably by the IRS.

7. Lack of consistency

Be sure the numbers reported on your state tax return match those reported on your federal tax return and that income and expenses match exactly. If there are even slight differences, the IRS computers will spit out your return. If you have an itemized

expense on your tax return that doesn’t quite match up with your income, the IRS will probably catch it. It could be an honest mistake, but a mistake that leads to lots of unpleasant follow-up to rectify.

8. Using the wrong accountant

The IRS keeps tabs on accountants and tax preparers. If a preparer is doing something wrong, whether it’s an honest mistake or an attempt to mislead, not only will they get audited but so will all of their clients. That could mean you. So thoroughly screen your accountant’s references before hiring him or her.

9. Improper write-offs

Improper write-offs are one of the most common triggers for an audit. If what you’re writing off doesn’t match what is generally expected for your type of business, then the IRS will probably demand an explanation.

In the event you are audited, don’t panic. Take steps to make sure you are thoroughly prepared for the audit. Go to this link on the IRS web site (http://tinyurl.com/6ffdeqd), which provides the Retail Industry Audit Technique Guide. This outlines the type of information the auditors will be looking for from retail operations such as how inventories are valued and how cash is handled and paid out.

As the saying goes, an ounce of prevention is worth a pound of cure.

10 Ways to Target Female Shoppers

As retailers look for ways to grow sales and profits in a sluggish economy, many come to the conclusion they should do more to attract female shoppers.That’s smart thinking, since women initiate many of the household projects and single women comprise one of the fastestgrowing demographics.

What follows are 10 tried and true methods for targeting female customers.The nice thing about these suggestions is that they will help you attract and retain male customers as well, especially when it’s time to shop for birthdays and Mother’s Day.

Add the right niches

Schwalbach Ace Hardware in Worthington, Minn., recently expanded its line of gift and home decor items after a local gift store closed. It now offers mosaic glassware, gazing balls, beaded garland, picture frames, candles, memory stones, wind chimes and much more.

Seward Hometown Hardware, an Orgill retailer in Seward, Neb., expanded into kitchen gadgets and small appliances and greatly increased the amount of space devoted to paint. Essex Home Hardware in

Essex, Ontario, has established niches in scrapbooking supplies and a floral shop, while Backlin Hardware in Mokena, Ill., targets women with yarn and needlecraft supplies.

Focus on lawn & garden and paint

When Ron and Randy Horne opened Carolina Hardware in Marshville, N.C., last year they made sure to give the paint department a prominent location in the front of the store. Their merchandise mix also emphasized green goods as a traffic builder. “We want to keep catering to the ladies, because they buy plants, paint, flags and other stuff,” says Randy.

Give store a fresh look

If your store is dark and dimly lit and features narrow aisles, women will do their best to avoid it. Look at your store from a female perspective and take steps to improve the shopping experience.

East Sacramento Hardware in Sacramento, Calif., underwent an extensive interior and exterior remodeling project, going with a 1950s retro look so the store would better appeal to women. Co-owner Sheree Johnston now offers high-end collectibles and free gift wrapping and found space to add a garden center.

Female customers learned about electrical products and projects during a workshop at Landers Do it Best Hardware in Bangor, Mich.

Hold DIY clinics

Wolverine Hardware, a Do it Best retailer in South Haven, Mich., recently launched a series of DIY workshops for women at the suggestion of long-time employee Pat Provost, whose friends pointed out she knew more about DIY than most men. Owner Doug Landers and Provost put on a Plumbing 101 workshop that attracted 23 women in February. It was designed to show female customers how to fix faucets, toilets and shower heads while giving them the confidence to tackle DIY projects on their own.

In March a similar workshop on electrical was held at Landers’ other store, Landers Do it Best Hardware in Bangor, Mich. It’s a logical next step for a service-oriented business that promotes the fact “we take the HARD out of hardware.”

Host Ladies Night

Women like to feel special, and there’s nothing more effective than hosting an event just for them. Stanford Home Centers in Plum Boro and Leechburg, Pa., has introduced a Ladies Day promotion that produces substantial business. They provide wine and refreshments and vendor demos, and every woman that comes in the store that day receives a free gift plus a mystery discount between 10 and 50 percent off their purchase. The event is advertised via newspaper, direct mail, Facebook, in-store TV loops and roadside signs and banners.

Ambridge Do it Best Home Center in Ambridge, Pa., has also found success with a Ladies Night promotion, which is a three-hour event on a Saturday night in late November or early December. Owner Frank Strano provides snacks, drinks and wine, and offers 20 percent off everything in the store and 25 percent off Christmas items.

Keim Lumber in Charm, Ohio, attracted more than 500 women to its second annual Ladies’ Night Out in September, which had the theme

Keim Lumber attracted over 500 women to its Ladies’ Night Out in September, which generated about $6,000 in sales that night.

“Unclutter Your Space.” Attendees were provided a catered dinner and had a chance to learn from 25 do-it-yourself sessions such as installing a faucet or how to use cordless tools. They could listen to a motivational speaker share tips on how to create balance in your life, or watch TV personality Lee Ann Miller give cooking demonstrations.

Keep store neat and clean

Women don’t like shopping in stores that are dirty and cluttered. Put someone in charge of keeping the salesfloor neat and clean. Also, don’t overlook your store bathroom. Consider remodeling it and at the very least keep it spotless.

Use social media

Bell Building Supply in Starkville, Miss., is a full-service hardware and building supply store, but the Bell family also operates a stand-alone specialty kitchen shop called Thyme and an interior design shop called Simply Home. Separate Facebook pages have been set up to promote the three businesses. “We can highlight new items such as patio furniture, promote upcoming events or give ideas for bridal showers. Facebook is a big part of our marketing strategy going forward,” says Foley Bell Holditch, who has also developed a bridal registry that incorporates all three businesses.

Bell Building Supply was showcasing a new line of cast-iron cookware, Thyme was promoting an upcoming vendor demo with wine and cheese, while Simply Home was highlighting a new line of bedding.

Find ways to entertain kids

Carve out some space in your paint department for a small table and place coloring books and toys there. Moms will spend more time looking at paint chips if they know their little tots are entertained. Offering free cookies or popcorn is another good way to make your store a destination for women with children.

Hire more female employees

Bell Building Supply promotes a bridal registry across its three businesses.

Crescent Springs Hardware in Crescent Springs, Ky., is run largely by five women, from matriarch Rose Wilson on down to two daughters, a granddaughter and a long-time female employee. Not only do they know hardware, they make female customers feel comfortable asking questions about DIY projects and products. “Some of our customers are impressed that five women work upfront,” says Wilson’s granddaughter, Liz Hall. “As women we aren’t afraid to get our hands dirty.”

Offer gift registry

A quick check of Facebook shows

Bering’s in Houston offers a wide array of hardware items for the home including upscale gifts such as china, crystal, chocolates, gourmet foods and stationery as well as everything for the kitchen and the yard. It was a natural progression to offer a gift registry, which helps customers (mainly female) find the right gift for special occasions such as weddings, showers, graduation and Mother’s Day. The store even offers etiquette classes for girls (and boys), hoping to train the next generation of customers.

Attracting Females with Space-Saving Products

By Bob Vereen

With more and more households headed by females today, hardware and home center retailers realize they must once again find ways to attract women into their stores.

In the years immediately following World War II, many hardware stores contained impressive housewares departments, offering upgraded product lines from what women could find in their local variety store. But for the last two decades, retailers concentrated more on male-oriented merchandise, diminishing and in some cases eliminating female-oriented merchandise.

What to stock now to once again attract female customers? Mass merchants like Walmart and Target and specialty chains like Bed, Bath & Beyond are fierce competition in the U. S., and similar kinds of retailers undoubtedly provide equal competition elsewhere.

That's why the International Home & Housewares Show, held annually in Chicago, attracts thousands of retailers seeking to learn “what's hot.” This year's show seemed to offer an ever-increasing range of space-saving and organizational products and perhaps foretold an emerging category that will become more dominant in the future.

It wasn't just that manufacturers were exhibiting a wide range of products that saved or made better use of space, but what was striking was that so many of these products folded for even better space-saving storage.

To succeed in attracting more females, it seems one strategy for hardlines retailers would be to get recognized as a “specialist.” And one area in which to specialize is to help customers make better use of their own space.

Space-saving products should be merchandised as a category, featured in advertising and emphasized on websites, not scattered around in various departments. Women recognize the need for maximum space utilization.

At the Housewares Show, manufacturers featured folding space-savers of all kinds and introduced a wide variety of storage products for basements, garages and virtually every room in the home. Retailers need to recognize this trend as well.

What makes this category appealing at the retail level is that products can be shown folded and unfolded to emphasize their organizational and space-saving features in minimum space.

Retailers need to inform customers and website visitors about new spacesaving items being added to their inventory, especially after visiting wholesaler buying markets or national trade shows like the Housewares Show or National Hardware Show®.

Be the “space expert” in your trading area.

A trend spotted at the Housewares Show was space-saving products, which appeal to female shoppers.

PROFILE Dealer

Bill Wygal

Bill’s Ace Hardware Martinez, Concord and Pleasant Hill, Calif.

An Anchor in the Community

In the 1940s, Martinez, Calif., was predominately open space and agricultural fields, with neighborhoods just starting to fill land in the area. A local resident, Bill Wygal, began building houses in the hours he wasn't welding at a local oil refinery. He couldn't find a main resource for all the

materials he needed for his projects. He and his wife, Elva, met that challenge by deciding to bring a complete hardware store to Martinez.

In May of 1948, they opened Vine Hill Hardware on Pacheco Boulevard. Soon Bill and Elva had a four-store chain serving

Bill Wygal is the third generation of his family to operate Bill’s Ace.

PROFILE Dealer

Number of employees: 105. Two years ago we had 210.

Sales breakdown: 80% DIY and 20% pro.

After the original hardware store moved to a new larger location in 1981, they opened Ace Truckbox Center in its place, which sells everything from jobsite boxes and truck racks to truck and van accessories. The hardware stores were renamed Bill's Ace Hardware after Bill passed away in 2002. Now in its third generation, Bill's Ace continues to thrive under the leadership of Bill Wygal, grandson of the founders.

What do you plan to do differently this year? For 2011 and 2012 we are focused on being in-stock, maintaining margin with inflation and paying down

debt so we can survive another slow winter. I am not expecting sales to rise much in our area. There will be a lot more government layoffs and fallout.

Key to your success with Ace Truckbox Center? Selection. We are the competition. There is no one in the USA that has a bigger display, selection or stock levels.

How did you develop the party rental niche? We purchased the business 2.5 years ago from a tenant that is in a building across from the Truckbox and in front of our corporate office. The most difficult part is scheduling. We go from three employees on Tuesday to 20 on Martinez, Pleasant Hill, Concord and North Concord. In 1967 Bill and Elva retired, passing their business on to their three sons.

# Stores: 4 hardware stores, 1 Truckbox center and 1 party rental store.

Wholesaler: Ace Hardware Corp.

Salesfloor square footage: Concord is 25,000 sq. ft., Martinez is 16,000 sq. ft., Pleasant Hill is 13,000 sq. ft. and North Concord is 12,000 sq. ft. Truckbox store has 12,000 sq. ft. building with 8,000 sq. ft. outdoor yard storage. Party Rental is 5,000 sq. ft. showroom with 6,000 sq. ft. storage.

Bill Wygal and his two brothers opened Ace Truckbox Center in 1981, selling jobsite boxes, truck and van accessories, truck boxes, hitches and truck racks.

The Pleasant Hill store opened in 2003.

Saturdays. We knew we could manage this by utilizing our other employees in the company. Many of them work one or two days a week at the Party Rental. This keeps us with people that understand customer service and a steady trained work force. Our showroom and sales staff is second to none. When a customer walks in we very rarely lose the job over price. We have the best staff and best equipment.

How does the truckbox business differ from hardware sales? Truckbox runs 10-30 customers a day and the average sale is in the hundreds of dollars. We have to do installs and that makes a profit.

What off-beat products sell well? BBQ sauce and all those crazy lighters. We do over $50,000 a year in BBQ sauce.

Any success marketing and promoting green products? We have been a certified green business for 11 years and have won many awards, but green sales are not very good. It is a very narrow segment. I think they will only buy green if it is the same price.

The Martinez store is the industrial supplier of the sixstore chain.

How do you encourage environmental activity?

We work closely with Contra Costa Sanitary district to educate the public while they are shopping with information about proper disposal of pesticides, paint products, light bulbs, etc. Bill’s Ace acts as a convenient collection place for CFLs and batteries by special arrangements with the household hazardous waste facility, where we deliver about 20 gallons of spent household batteries per week. We’ll set up a booth at farmers markets and chamber events, like Pleasant Hill’s wine festival, to hand out information and CFLs and answer questions regarding our part in protecting the environment.

How do you ensure your customer service stands out? You have to be a crazy idiot all the time about service. You cannot sit back for one moment.

We have a contest that is ongoing for more than five years now about wowing the customer. We have given cars, crusies and trips to Hawaii to employees that have gone above and beyond. The contest runs for six-month periods. Are there formal ways of developing a customer service mentality? Walk the talk is the only way I know. Even though we have six stores the employees know Bill will do it if that is what it takes. I even delivered a grill on Christmas this year. We screw up some of the time, but usually we are the heroes. If we are out, we will go to Depot and deliver to the customer’s job.

What new initiatives are you focusing on this year? We have been struggling with having a customer coordinator at the front door in the hardware stores. This has to do with

PROFILE Dealer

reducing our staff by 50%. I think this is one of the most valuable things we can do, especially if you have an AAA employee running the front and doing the greeting. They can anticipate cash register demand before it happens. What ways have you found to cut costs? Only sign percentage of sales leases.

How do you get customers to buy local? The entire business community needs to shout this — one business cannot have an impact. We give $50,000 a year in donations and services to the community. In what ways does the business get involved in the community? Bill's Ace acknowledges its responsibility to the

community where we are located as well as our environment. By our leadership and active participation in community affairs, as well as our economic vitality and quality of our products and services, we can greatly contribute to enhancing the community in which we live and work.

In our last fiscal year we donated Bill’s Ace gift cards to every organization that requested something. The amount donated at face value was about triple the $14,322 that was actually spent on merchandise in the store last year. Direct merchandise donations to charitable organizations ranging fromstudents building homecoming floats to rotary raffles totaled $4,545

for 35 organizations. We sponsored 37 people and organizations for such things as cancer runs, CMN and Little Leagues with direct funds. We have offered our employees’ services in the past by paying them to lend their expertise to building projects such as Mateo’s Dream (a playground for children of all abilities), Bay Area Crisis nursery renovation and Extreme Home Makeover build.

The newest location of Bill’s Ace is in North Concord.

The Concord store is the largest with 25,000 square feet.

Bottom Line

Do You Have the RIGHT STUFF?

It is easy to know when you have the wrong product — it sits on the shelf for a few years gathering dust. On the other hand, it is not so easy to locate and add new items to increase your store’s percentage of right product. This is because quietly, over time, inventories naturally tend to become stagnant and less productive. The only way to keep your inventory fresh and vibrant is by continually adding new items.

Without a crystal ball to tell you what to do, where do you start? To locate items that will probably sell quickly, start by making comparisons with your inventory and other local retail sources as well as your wholesaler’s distribution center.

If you have multiple stores, both the top 500 unit and $ sales reports are

By John Franklin

There is nothing more important in your store than having the right stuff or the right product. The more right stuff you have the more you will sell.

very useful data for locating potential additions to other branches. Run these reports every quarter to locate the highest-traffic items as well as the highest-dollar producers. At the same time, filter as well for the lowest producers to create your list of candidates for possible elimination to make room for the new items you intend to add.

The A&B item listing from your wholesaler will locate numerous items that do not appear in any branch. Some distributors provide this A&B listing as well as a New Item listing. New items involve more guesswork than proven sellers, but some of them will be winners as well.

Compare all new items carefully. A potential new item may be almost

identical to something in your current inventory,just a different brand. Compare the quality, cost and availability and pick the best one for your store. Don’t give a customer two separate choices of the same item; you are better off with two different items. Where space allows, it makes sense to have a good-better-best choice as opposed to a good-good-good selection, which just confuses the customer and diminishes your GMROI.

Ask your wholesaler for help adding new items. Some have programs for selecting desirable new items. Available for many years, the Ace Discovery planograms helped speed up the new item selection process and enabled us to add larger quantities more quickly. Just watch out for duplications with products that you already have and eliminate one of the two. Monitor all new items over time and weed out the failures to make room for more successful items.

Another effective way to increase sales is to check your competitors. Walk through their stores and see what they sell in volume. While you are at it, check their pricing. Your sales may be low on an item you stock, not because it is the wrong item, but because it is the wrong price. Getting the retail to the right point is often the best thing you can do to increase sales.

Seek Customer Feedback

All of these comparison methods are based on increasing the probability of selling. In truth they are still just guesses, but educated guesses make for better

Bottom Line

guesses. There is a way to eliminate all the guesswork and hit a home run every time: just ask your customers. Whenever I worked on the salesfloor and saw customers, I asked them the following question: “What are you currently buying from some other location that you would buy here if we stocked it at a competitive price?” There is no more powerful piece of information to increase your business than the answer to this question. These items are not probable sellers; these are home runs, almost guaranteed sales. It is interesting that almost every time I asked this question I always got a useful answer, and sometimes several items were suggested. I listened carefully and wrote down everything they said. If it was a reasonable item, I ordered, priced and put the new item in stock. I then called the customer and said, “I have your new item in stock and you can get it here. Do you have any more great ideas?” The fact that I called the customer and told them I now had their item in stock almost obligated them to buy it at our store.

I stole a lot of solid business from our competitors by stocking what they sold to our customers. Some of these new suggestions from our customers produced very large sales. If one customer is leaving your store to shop in another, then it is a high probability that others are doing the same.

Where do you get customer information? Take some time off several

mornings and make a few visits to your competitors. Get a cup of coffee and sit in the parking lot of your competitor’s store. Make a list of the contractor or business names printed on the pick-up trucks and vans in their parking lot. It is a good bet that many or all of these customers also shop in your store.

The next time you see these customers in your store, just ask them why they need to go there. Sometimes they will tell you it is just the price, and sometimes it is an item that you don’t currently stock. Either way, you can easily win back this customer. What I like best about this method is that it is the least disruptive. Just find it, order it and make some room. With a little display adjustment you can usually find the space for these new “home runs.”

So how do you add new items? You add them slowly but continually. It is not an easy task to add 1,000 new items all at the same time unless you just did a major revamp or put on an addition to the building to add salesfloor space. Don’t let a lack of space stop you from adding new items.

This brings me to one of the worst sins of retailing: Never eliminate any slow-selling product from your salesfloor before you have a plan to fill the space created by its removal. Why? It is simple math. The only thing worse than an item on display that creates no sales is an empty space. Even if the item has little or no sales it is better to leave it there until you replace it. First, it still could be sold, and second, it makes your store look complete. The moment you leave an empty bin it looks like you don’t know what you are doing.

I have seen countless incidents where stores discontinued large quantities of product and left the space completely empty.I remember one store where I counted 80 empty bins in the electrical department for months after a mass extinction of slow sellers. This retailer did half the job right, but he never followed up to fill this newly available sales space with new product. Ask yourself how much business will be generated by these 80 empty bins. The answer is none. In some cases, it may have been better to just expand the adjacent bins to hold more stock of what was left to sell.

Find out what new items to add by asking customers.

If you have some items on display that have not sold in a year you may want to consider dropping them. Just be careful not to eliminate a slow-selling key item that may cause customers to abandon an entire project. The solution is simple: just order the new product first and then make room for it. Then take a slow or non-seller off the display, lower the price and move it to a high-traffic endcap marked “clearance.” Another big sin of retailing: failing to lower the retail price on dropped or discontinued items. If an item has been sitting on the shelf for one or two years and has not sold at the current price,

what difference have you made in now marking the item dropped or discontinued? Absolutely none! Your customers have already “marked” this item as discontinued by their refusal to buy it. The system will not reorder it unless someone makes a purchase. The reason the item did not sell is either becausethe price was too high or it is a worthless piece of junk. You must set up a programmed markdown on dropped or discontinued items to continually drop the price each month until the item finds a sale price that is acceptable to the customer. If you don’t, it will sit for a few more years tying up space.

When you add new items pay careful attention to all pre-printed vendor planograms. The vendor has a purpose in creating wider assortments of product so it can do more business. They do not have your best interest in mind and almost always have one or more “x” items embedded in the display that will sell poorly or have items on it that must be replaced by drop ship rather than from your normal distribution center. Be careful with these planograms as they sometimes create a lot of work with little or no gain.

How do you set order points on new items with no history? Set a reasonable starting point and monitor the item every week. If the item sells out within a week, double the order point. If it sells out again, double it again. Keep doing this each week until you don’t sell out. In this way you will quickly find the correct order point. An order point of 1 may get you 52 sales a year, but a higher order point may lead to 200 sales. You won’t know what

sales are possible unless you give it a chance to find the real order point. How do you know if you are at the right price? Price is a local thing and your customers only compare you to your immediate market, not to a store 500 miles away. Ever since the big boxes rolled out variablepricing you can no longer take a national price list and just run with it. You will be embarrassed by the high ones and lose the whole sale and your store reputation will suffer. You will be cheated by the low-priced items and lose your necessary gross profit. The most important price information you can get is also from your customers. Constantly ask them if they see lower prices in other local stores. They will love the attention and almost always help you out. Remember, even the right product may be right only for a certain period of time, like last season, and then must be removed from the floor to make room for other items that will sell in the current season. If you have the right product but have the wrong price you still will not sell as much as you should. And you can even have the right product at the right price and still not sell any if you don’t have the right quantity. Right?

John Franklin has nearly 40 years experience in hardware retailing, most recently as merchandise manager at Williams Lumber & Home Centers in upstate New York. He is available for retail consulting or you can contact him with questions or feedback at john@thehardwareconnection.com.

National Hardware Show Report

Industry Regains Momentum at Hardware Show

The 2011 National Hardware Show® served as a coming-out party of sorts for a home improvement industry that has seen more bust than boom in recent years. Vendors and retail attendees expressed optimism that the industry business climate has improved, which generated strong buying activity on the show floor.

The three-day event opened May 10 at the Las Vegas Convention Center with a marching band, canon blast of confetti and a welcome to attendees. “We said last year that when the economy began to pick up we’d send in the band and we did not want to disappoint you,” said Ed Several, senior vice president and general manager of the National Hardware Show.

“With the recently released April jobs report showing an increase in hiring, and the long awaited start to those delayed home renovation and repair projects driving more homeowners to our stores, we thought that nothing could be more appropriate than to celebrate in style and to help us kick off the 66th annual National Hardware Show.”

The highlight of the seminar program was “Boom, Box, Echo: The End of Big-Box Retail as We Know It,” presented by Doug Stephens of Retail Prophet Consulting. Stephen’s thought-provoking presentation examined whether the big-box business model can survive in the face of massive and rapid social and economic change.

The sold-out National Hardware Show® in Las Vegas attracted 600 new exhibitors and produced strong buying activity on the show floor.

Most businesses are only looking short term and company leaders don’t have time to sit down and think about what will happen in 10 years, Stephens pointed out. “They see signs of change but don’t know how to react. For example, is the mobile trend good or bad for me?”

Not only is society changing, the pace of change continues to accelerate. To reach 50 million users it took radio 38 years and the Internet just four years. By comparison, Facebook reached 100 million users in nine months and Apple sold 1 billion apps in nine months, according to Stephens.

Certain conditions had to exist for big boxes to emerge, and Stephens outlined how seismic shifts in society make the big-box format less appealing. The biggest is the aging of the population, as baby boomers will continue to have a profound effect on the economy.

Baby boomers are going to live longer, but people buy less stuff when they turn 50, although they do need more services. By 2031, Stephens noted that one in four people will be over 65. “No other force will have a more dramatic impact on the economy, public finances and policy making as the irreversible force at which the population is aging,” he said.

The United States has gone through historic change in the population makeup, and retailers profited as the baby boom generation moved through the economy. “If nothing changes, you’ve got 11 percent fewer consumers,” Stephens said. “We had more producers, more consumers and more college grads in the economy than ever before. We’ve been depending on the nuclear family to be the

workhorse of the economy for 30 years, but there’s no new influx in the U.S.”

With their customer base aging, retailers need to think about shelf height, navigation, weight of products, lighting, sound, type size on signs and store size. “That stuff also works for younger shoppers and is not just an accommodation for aging boomers,” Stephens pointed out.

He questioned the size of big-box stores and noted there is no one path to buy. Walmart’s average store is 180,000 square feet but the retail giant is now opening 15,000-square-foot Walmart Express stores. Walmart has had seven consecutive quarters of negative compstore growth and is opening its first store on a college campus. Home Depot is selling off parking lot space and Target is opening smaller stores. “There has been a recalibration and redesign of formats,” he said. “Do we really need all the inventory that’s in a Home Depot or Lowe’s store when people can order online and pick up in the store?”

Shopping center per capita is 23.5 in U.S., 17 in Canada and 6 for Sweden. “We have 25 to 30 percent more retail square footage than the economy needs and there was 300 million vacant square feet as of May 2010. It will likely take many years to backfill these sites,” according to Stephens.

As the economy’s focus shifts from goods to services, opportunity arises for retailers who can provide home services in demand. Stephens notes PetSmart is going to homes to clean up pet waste and walk dogs, while Walmart is joining Home Depot and Lowe’s in moving more into services.

Consumers are demonstrating a save and splurge pattern, with 93 percent planning to spend cautiously when things improve and 84 percent becoming more precise in how they buy, according to research shared by Stephens. “The customer is in control and there is a relationship between social and business. Facebook Market and Deal of the Day sites are going to be huge.”

The population may be aging, but retailers will find the next generation of shoppers a tougher nut to crack. Gen Y consumers don’t care where they buy, which is partly why online sales are growing three times faster than bricks and mortar. Gen Y’ers have less predictable tastes and they are very connected to what’s happening in the marketplace, said Stephens.

He believes future big-box growth will be outside the U.S., with Africa a hot spot. “Conditions for bigbox retail are not good. The boom is over and demand is less predictable going forward. Markets are increasingly diverse and difficult to calculate,” he said. “It’s a new playing field. Lowe’s and Home Depot could be turned into nothing but educational centers and brand builders, where they sell nothing but the Kool-Aid.”

The following pages contain details on 10 innovative products found at the National Hardware Show that offer sales potential. Click on the links to the vendors’ web sites and discover if these new items are the right fit for your business.

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T50 Elite™ Staple Gun

•One of the first manual tackers capable of firing up to a 1" brad nail. Elevates the chrome look of the classic T50 to a new level with patented drive technology, more power, easier squeeze and more versatility.

•Features a high and low power switch that allows users to adjust when working with hard or soft surfaces.

•Pros will like the quick load magazine, which allows them to efficiently re-load in the middle of a job.

•Jam-resistant mechanism means less down time and an ergonomic soft rubber grip delivers high level of comfort.

ARROW FASTENER ■ www.arrowfastener.com ■ 800-776-2228

PL Premium® ADVANCED Polyurethane Construction Adhesive

•Advanced formula offers the superior strength of Loctite® PL Premium® but has four times the initial strength of regular PL Premium, which minimizes, and can eliminate, the need for bracing while the bond sets.

•It can also be repositioned for up to 30 minutes. The additional time allows for more leeway on the job, preventing unnecessary pressure to align things perfectly the first time.

•Like the original formula, PL Premium ADVANCED produces minimal shrinkage, but it requires even less adhesive for maximum coverage.

•It offers all-weather performance and can be applied directly to wet, frozen or treated lumber, making it ideal for exterior job sites. It does not give off a strong odor, making it excellent for indoor use.

LOCTITE ■ www.loctiteproducts.com ■ 800-624-7767

Woodeater™ Hole Saw

•Combines high speed and great performance in a value-priced tool. The Woodeater™ cuts wood up to 7/8" and plastic.

•Exclusive design differentiates the Woodeater™ range from standard carbon hole saws while enhancing performance.

•The Woodeater™ lineup offers five times the cutting speed through a unique six-tooth design and three times the life as extra large gullets clear chips and prevent heat buildup.

•Additional features include: one-piece design that conveniently includes the mandrel and pilot bit for ease of operation, full product range; ¾" to 2-1/2" and award-winning packaging for easy self-selection.

14-in-1 Multi-tool

•Includes 4 different screwdriver bits that are securely stored in a pull-out drawer in the handle and can be inserted into the handle end for quick, easy use.

•Tool can also scrape paint, spread compound, clean rollers, remove putty, open cracks, set nails, scrape contours, scrape convex surfaces, open cans and pull nails.

•The 14-in-1 has a lightweight design just like the 30 multi-tools in the Hyde Tools lineup.

HYDE TOOLS ■ www.hydetools.com ■ 800-872-4933

Heated Outdoor Walkway Mat

•Electrically heated mat is designed to prevent snow and ice accumulation on walkways around the home.

•Mat is portable and plugs into standard 120V outlet generating heat to melt snow at a rate of 2" per hour.

•Designed with watertight connector cables enabling it to connect to additional Walkway Mats or Safety Treads on steps.

•Up to 5 mats can be connected on a single outlet. Size is 20" x 60". HEATTRAK ■ www.heattrak.com ■ 866-766-9628

HydroRight™ Dual Flush Converter

•Turns standard toilets into water-saving, two-button toilets.

•Features a Quick Flush setting that uses significantly lower water volumes for liquids and paper — the setting needed 4 out of 5 times. The second Full Flush button uses the normal amount of water for solids.

•In independent tests, installation of the HydroRight has reduced water usage by 30% in 1.6gpf toilets. It also eliminates the most common problems and reasons for leakage in toilets — the flapper, chain and handle.

•The HydroRight™ is distinguished from its competitors by its patent-pending drop-in feature that allows it to be installed in 10 minutes without tools. All other converters on the market require the toilet tank be removed.

MJSI INC ■ www.goMJSI.com ■ 888-466-5741

Power Painter® Line

•Features revolutionary design with a new easy-lock paint cup and multi-directional paint siphon tube, allowing the user to easily load and refill paint.

•All models are built with tungsten carbide components, from the cylinder to the spray tip. These models can handle everything from stains and sealers to un-thinned exterior latex paint, allowing users to complete any type of project in less time, with professional results.

•The Power Painter® line is the only airless high-pressure paint sprayer equipped with speed and paint stain selections, which allows the user to quickly complete multiple projects with just one tool.

•Each model — Power Painter® Plus, Power Painter® Max and Power Painter® Pro — features a set-up time of less than five minutes and a clean-up time of less than 10 minutes.

WAGNER SPRAYTECH CORP. ■ www.wagnerspraytech.com ■ 763-553-7000

iX Series Inverter Generators

•Takes the raw power produced by the generator and passes it through a special electronic microprocessor to provide 800 watts of clean and stable power, safe for computers and other sensitive electronic devices.

•Electronic circuit breakers protect against overloads.

•Low oil shutdown protection prevents engine from damage.

•Features FlexPower™ to save fuel and reduce noise. Run time at 50% load for 3.6 hours.

DewStop Fan Switch

•Can be used with a new or existing fan to monitor and control condensation in any space where humidity could be a concern.

•The DewStop fan switch is constantly checking the air for condensation. At the right time, DewStop will automatically turn on the fan and run it long enough to clear the room. Users can manually turn the fan on or off when needed or rely on the sensor to do the job.

•Installation is quick and easy and can be done by most homeowners.

•Comes in two models, one with the fan control (FS-100), and one with an added lighting control feature (FS-200).

GTR TECHNOLOGIES ■ www.dewstop.com ■ 360-876-2974

Decorative Garage Door Accents

•Simulated window overlays and hinge and handle sets are affordable, durable, easy to install and made in the U.S.A.

•They are virtually maintenance-free because of the finishes and high-quality composite materials used. Can withstand all weather conditions, which is why they are backed with a 15-year warranty.

•Simulated windows available in 3 colors: white, sandstone and almond. Come in sets of two for each 8-foot section of a garage door. Easy to install in less than 20 minutes.

•Separate handle and hinge sets available in 2 styles: the “Traditional Series” in black and the “Signature Series” in deep bronze and heritage black. Each set includes 4 hinges and 2 handles.

COACH HOUSE ACCENTS ■ www.coachhouseaccents.com ■ 616-481-7470

Where Relationships Are Formed Hardware Conference Combines Fun and Business

The 2011 Hardware Conference is set for September 9-11 at the Marco Island Marriott in Marco Island, Fla., and it is the industry’s largest gathering of independent retailers. Start making plans to attend an uplifting event that can have a positive impact on your business. It’s the perfect opportunity to bring your whole family to a five-star resort right on the Gulf of Mexico with three miles of pristine white beaches.

Tom and Dale Chasteen, who operate Tavernier Hardware in the Florida Keys, have been putting on the Conference since 1988. They have developed a family-friendly, affordable event that brings independent dealers together,

Two cocktail party receptions are held to give dealers plenty of time to socialize with fellow attendees.

regardless of wholesaler affiliation. “It’s so important to get out of your store and talk with other dealers and find out what’s going on in the industry,” Tom says. “You might as well do that in a beautiful place and have fun at the same time.”

Leading vendors participate in the Conference with tabletop booths showcasing their latest new products. Dealers also have the opportunity to engage in informal conversations with manufacturers without the pressure of buying. Another popular feature of the event is the open dialogue sessions, where dealers join vendors and wholesaler representatives in a frank discussion of industry topics of concern to all.

Succession Planning

The dealer seminar at last year’s conference focused on the need to develop a formal succession plan. As Chasteen pointed out, the average age of hardware store owners is 57, but few have a

Leading vendors have tabletop booths displaying their latest products, but it is a relaxed environment because it is not a buying show.

formal succession plan.

He advised dealers to look at three things when deciding whether a potential buyer is right for their store:

1. Will they have enough cash flow to invest in the business? Banks want to see 36 months of cash flow or 10-15% of the purchase price for working capital.

2. Absentee owner vs. owner/operator. A hands-on owner who buys an existing business has 95% success rate.

3. Why are they getting into the business? It’s not a get-rich scheme but requires passion and a commitment to a certain lifestyle.

With many older store owners getting ready to retire or others just wanting to sell their store, what are some of the factors one should review when evaluating a possible store purchase? Here are some of the key factors retailers suggested: location, store’s

profitability, competition, median income of the area, market potential, traffic counts, store’s reputation, general economic conditions, financing (lease or own?), population (% owners and renters), inventory levels and three years of profit statements.

If you are looking to sell, make sure your financials are in order so it makes sense for the buyer, Chasteen said, and be sure to charge rent that’s indicative of profitability. It will probably take three years to show the valuation you want, so you need to start planning five years out.

If you’re looking to buy, evaluate whether you are willing to hold paper. Can you get a better deal by holding paper? At 7 percent interest every seven years your money doubles. You have to worry about getting paid if you hold a note, so make sure you’re the first seat. Then you will really need to

keep a handle on the inventory. Make sure the old owner has current insurance with you named on the policy and you’ll want key man insurance, Chasteen advised, adding that prospective buyers need to see the financials regularly with a CPA report if it’s audited.

Make Plans Now

The Conference includes two breakfasts, two cocktail party receptions and two sit-down dinners, giving dealers plenty of chances to interact casually with other dealers. Ace, True Value and Do it Best all hold luncheons for their members, and Orgill also participates in the event. It is designed for the whole family, with plenty of free time for fun activities such as tennis, golf, sailing and shelling.

The Activant-Eagle Users Group Conference is again slated to be a two-day session preceding the 2011 Hardware Conference, beginning at 1 p.m. on September 7.

For more information, call Tom or Dale at (305) 853-0049 or go to www.thehardwareconference.com.

The Open Dialogue sessions address real issues of concern to independent retailers.

The Hardware Conference schedule includes plenty of time to enjoy water sports, beach activities and golfing.

Technology TRENDS

The ‘Smart’ Consumer: Friend or Foe?

By Matt Mullen

Today’s smart, Internet-enabled consumers are one of the biggest threats to your business. At the same time, they represent a tremendous opportunity.

I know you have seen them. They come into your store looking for some highpriced item, locate the item, nonchalantly pull out their iPhone®, scan the barcode of the item and then analyze the results.What kind of information are they getting?

Today’s consumers are smarter and more connected. They are leveraging the Internet and network-enabled handheld devices to research the products they buy. When they look to purchase expensive items, they research them thoroughly beforehand on the Internet. They can find product information, specifications, recommendations, reviews, ratings, prices and sellers. By the time they walk into your store, they have a good idea of what they want to buy. In fact, they may know more about the item than your salesperson.

There is also an enormous amount of information a customer can obtain while in your store. Using the latest smartphone technology, these customers can scan QR codes and bar codes and get product

information instantly. You can try to stem the tide by making your bar codes more difficult to read, but you will just be delaying the inevitable. The age of the smart consumer is here. Retailers just need to accept that and work with customers to provide them the information they need to make their purchases. How is an independent hardware store going to compete in this Information Age? Independent hardware stores can compete if they effectively communicate their core value offering to these “smart” consumers — namely their geographic proximity to the customer and superior customer service. Consumers are not the only ones that are becoming “smarter” and more connected. There are numerous high-tech tools available to small to medium-sized retailers to help them leverage these advantages.

LOCATION, LOCATION, LOCATION

Almost every retailer needs some sort of Web presence. More retailers are taking their inventory and making it available for purchase online. While

many of these retailers did this to open up another sales channel, they are finding that local customers often check their website to confirm that a particular product is in stock before coming to the store to purchase the product in person.

In the past year, Google and eBay have extended their shopping search options to include products available at local brick-and-mortar retail stores. When mobile users perform a product search, they now receive a listing of online merchants and a list of the closest local brick-and-mortar retail stores that have the item in stock. Consumers that need a product immediately can now identify local stores that carry that item. Many of the same technologies used to create an online Web storefront can be used to populate eBay’s and Google’s popular local-shopping search engines.

INSPIRE LOYALTY

Getting customers in the store is only part of the overall equation. It is also important to have programs and systems in place to keep these customers coming back to your store. Thankfully, there is an app for that as well.

Loyalty card programs appeal to today’s smart shoppers with compelling deals and are an important and accepted method for getting them to come back again and again. According to ACI Worldwide, approximately three out of four Americans belong to a retail loyalty card program.

Loyalty programs track the buying patterns of the biggest and most frequent spenders, and allow retailers to market directly to these shoppers based on the products they buy. Retailers give these

shoppers significant discounts in return for their loyalty. Loyalty is very valuable in today’s competitive retail market. According to AlixPartners, 15 percent of a retailer’smost loyal customers can account for as much as half of its sales.

Today’s smart consumers know that they can go online and search until they find the lowest price on a particular item. However, if they are participating in a local loyalty program, they know that the accumulated benefit that they are going to get from that program far outweighs the value they are getting on that single lower-cost item. The key is to properly manage the loyalty program to provide those customers with significant accumulated rewards.

SMART SHOPPERS NEED SMART RETAILERS

In the same way that today’s smart consumers are supplementing their home-based research with in-store searches on their handheld devices, today’s smart retailers are outfitting their managers and key employees with handheld devices for mobile administration and mobile management. The mobile revolution not only benefits the consumer, it also serves savvy retailers who want to maximize their time and improve customer service.

Store managers need to have their fingers on the pulse of the business regardless of their location. They need the key data for running the business — the vital signs of the store — sent to them in real time. Gone are the days where managers can sit in their office all day while clerks and other employees handle all the transactions and customer interaction. In the past, store managers would be chained to their desks, running reports and managing stock levels, because that was the only place where they could get this information. Today, managers can analyze stock levels from a store aisle, the warehouse and even their homes.

The smart consumer requires a higher level of service. If a customer wants a discounted price, the store manager needs to have immediate access to margins, stock

levels, competitive prices, etc., before making a decision. If store managers have access to immediate and accurate information, it will improve their ability to make good decisions.

Changes in consumer technology and sophistication are affecting how retailers are able to sell their products. Consumer websites and handheld technologies are only going to become more powerful and more prevalent. Keeping up with these changes in the market can seem intimidating at first, but, with the right technologies and technology partner, even the smallest hardware store can stay ahead of this technology curve.

Matt Mullen is director of market development for Activant Solutions Inc.

What’s the Latest Buzz on Hardlines Digest?

By John Fix III

Spring has been slow to arrive for many of us, so that has provided time to once again browse through recent postings to the Hardlines Digest and present you with some of the more popular topics being discussed by dealers.

Bag and Bucket Sales

John Horsman of Westmoreland True Value in Portland, Ore., posted questions about running a bag sale. “Running a 20% off bag sale this weekend and wondering how other people do it. It's through True Value so we put out a circular saying 20% off everything that

Industry ISSUES

can fit into a green reusable bag. Limit 200 customers, Friday and Saturday only. Do you give every person that comes in a bag and advertise it throughout the store? Do you set restrictions on items or just let everything go? Wondering how to handle the customer that's getting one key or 50 cents in fasteners — will they get a bag and get 20% off? That seems like a waste of a bag. Any help would be much appreciated,” Horsman posted.

Terrill Bartlett of Bartlett’s Lumber & Hardware in Texas outlined the procedure they use. “We do it with a 5-gallon plastic bucket that we co-op through

Dealers shared tips on how to conduct a bucket or bag sale.

Valspar with their name on one side and ours on the other. We put no restrictions on it. If a customer feels that chop saw will fit in that bucket, it's fine with us. We let customers grab a bucket as often as they want. We run it for three days and even with the abuse it is the most profitable and by far the largest sales event we do even with giving the bucket away. We have customers asking about it months in advance.

Our stores love it because there is no prep time or circular merchandise to buy and it generates tremendous foot traffic. We send out a direct mail flier about three days in advance of the sale. Everyone has a bucket thrown in the back of a pickup, shop, garage, etc., and use them for all kinds of storage. It's free advertising that's constantly in front of the customer.”

Jeff Koenen at Reineman’s True Value in Salem, Wis., runs bag sales and tries to be flexible. “No matter how you do it, you will have customers who try to get

away with more than what is reasonable. We put very few limitations on this sale — firearms, candy and soda, live animals and a couple of other items. We have signs posted on our doors with the limitations such as an item must be at least 3/4 of the way into the bag to qualify. We will give the bags to those who ask for the promo or have the flier in their hands. We try to be customer friendly with the ad, but also will be sticking tightly to the end date. The best thing to remember is that customers will try to get away with anything, and if you just let the bad stuff roll off it will be a good promo.”

Nick Kaplanis of Frager’s Hardware in Washington, D.C. provided his perspective. “A few keys to success: Keep it simple and make it fun! If a customer sets an item on the bag, in most cases that's fine, but make them suggest it, hem and haw and then say OK. The object is to encourage your customers to spend money, not give away margin to those that do not wish to participate. Hand out the bag when they come through the door, explain the sale and tell them to fill it up. If they come to the register without a bag, don't let your cashiers give them a bag and tell your customer they'll get 20% off. That defeats the purpose.”

Stocking New Products

A lively debate started in March when Lex Stevens of Back Bay Hardware in Boston posted the following comment: “I had another customer in yesterday saying that a manufacturer's website said that they could purchase their product at my store. Experience has taught me to ask if the website said it was ‘available through True Value Stores’ or if it said that

Retailers debated the methods some vendors use to build interest in new items

I was a dealer. The customer said it stated quite clearly that it was available at my store. I checked the website, and she was quite right in thinking I sold the product. I hate being put in a false position when I meet a new customer for the first time. I explained the situation, and also pointed out that the manufacturer has misled her and inconvenienced her once already, and that she might have the same experience if she buys the manufacturer's products.”

Rick Schwartz of Schwartz Hardware in Fall River, Mass., shared his take on the topic: “I agree 100% with some of the arm-twisting tactics by some manufactures. However, I was also put in the same situation with (one manufacturer) and brought the product in. We have been selling it.”

Gary at Home Ace Hardware had mixed feelings. “I think sometimes the manufacturers use the website as a pullthrough for their products. That is they sell the item to the distributor, advertise it and then give an address so the consumer will ask for the product on a local level. I don’t like it either. But if they are in your store — it worked.”

Bill Dewitt was pretty definitive in his opinion of the practice. “Wow, Lex, in all due respect, I don't think I could disagree any more! If my co-op has deemed a product worthy of stocking, I want customers to be directed to my store to purchase that product, whether or not I carry it. It's a great opportunity to win a new customer by happily special ordering it for them. It is also a terrific way to grow your business/inventory based on what customers are looking for online. I wish every search sent people to my store.”

Ken Nelson of Rural Supply Ace Hardware in Los Gatos, Calif., pointed out that some of this falls on the wholesalers. “If all it takes for you to stock a product is a listing on a website and one customer call then you have abdicated your position as buyer for your organization. Just think of the shady folks we have discussed on this forum from time to time. But they listed me on their site so I'm obligated to carry their crap? I realize that sometimes a product line is so well advertised and promoted that I must carry it and price with margins in the teens. But I really try to keep that to a minimum. We instead offer a private label or alternative product and build a following at a margin we can live with,” he posted.

Nelson added, “So while I'm saying we shouldn't make buying decisions

based on a web listing I do see the importance of having that listing once the decision is made to stock the line. The listing can easily be tailored to the stores that stock. The co-op’s role should be in making sure this is done properly and accurately and putting pressure on vendors that don't oblige.”

Carrying Unique Items

A few dealers described unique items or decor at their stores that helped differentiate their business in the minds of the consumer.

Jeff Moss said, “My boss has a great collection of license plates from Ohio, the U.S., and around the world. We have lost count but it's over 800 and there are more that he just doesn't have room to put up. People are always remarking about the plates on display and it's a great conversation starter. Every time I come in the store there is a new plate, and an interesting story to go with it. I'm sure we are not alone — there are stores that are in old buildings with old fixtures in use and old tools on display, which is another great way of getting people to spread the word about the store.”

Bob Brame of Cadiz Hardware in Kentucky talked about building endcaps in his store. “I have large rough-cut boards from endcap to endcap on the power aisle and put up old pictures of the community. I can put up 150-300 easily and change them 3 or 4 times a year. They create a draw and get people to slow down and look at pictures and hopefully pick up something from the endcaps. We also sell historical books and that brings people in.”

Ed Tisdale from Family Hardware Do it Express in Cape Coral, Fla., has quite a collection of unique items in his store. “We have an old antique Case knife floor display cabinet completely filled with items I've found while metal detecting. We have another smaller display case as well. It is truly a ‘mini museum’ of Roman and medieval coins, relics, artifacts and jewelry I found in England, plus Civil War buttons, buckles, bullets and rifle/gun parts. Also displayed are old U.S. coins, and over 100 gold and silver rings, bracelets, pendants, necklaces, ear and toe rings, pocket knives and wrist watches,” he posted.

Tisdale added, “Folks love seeing and hearing about the historical items on display. Quite a few parents and grandparents bring in their kids or grandkids to see the ‘neat old stuff.’ We sell metal detectors and this display certainly helps our detector sales. Every couple of years the newspaper or one of the local TV stations does a feature about our display and our specialty niche metal detecting department.”

This is just a small sample of topics discussed during the past few months on Hardlines Digest. To read more or subscribe head to www.hardlinesdigest.com. Hope to see you on the list!

John Fix started the Hardlines Digest in January 1996 and continues to run the servers out of his hardware store in Eastchester, N.Y. There are currently over 2,400 subscribers to Hardlines Digest.

Electrical & Lighting Trends

Unit Sales Breakdown in Light Fixtures

Lighting Fixtures Share of Sales by Type

Electrical & Lighting Buying Update

■ Beginning in January 2012, U.S. legislation will go into effect to begin replacing energy-wasting incandescent light bulbs with options that are at least 30 percent more efficient such as CFLs, LEDs and halogen bulbs.

■ These changes are expected to save U.S. consumers $40 billion in energy costs from 2012-2030, according to the American Council for an EnergyEfficient Economy.

■ The 100-watt bulb will be phased out as of 2012, the 75-watt incandescent bulb will be phased out as of January 2013 and the 60-watt and 40-watt bulbs will be banned as of January 2014. The 100-watt bulb will also be unavailable in Canada beginning in 2012.

■ Although these popular bulbs will no longer be available, only one in four Americans is aware of this.

■ That’s why retailers such as Lex Stevens of Back Bay Hardware in Boston are taking the time to start converting their customers to the new bulbs now. “Hopefully this will reduce surprise and aggravation this time next year,” he says.

Cole’s Home Solutions in Millington,Tenn.,usesan endcap display to point out the energy savings provided by CFL bulbs.

■ Compact fluorescent lights (CFLs) now account for 25 percent of sockets in American households, and that number will continue to rise as this new legislation takes hold.

■ Consumers will be wondering whether they need to buy and install new fixtures or rewire their homes, and will also be concerned about paying more for replacement bulbs. Retailers should become informed so they can reassure their customers with accurate information about the replacement bulbs, including a future emphasis on lumens as opposed to watts.

■ There are exceptions to the ban. Specialty bulbs such as refrigerator bulbs, reflector bulbs, candelabra bulbs, globes, shatter-resistant bulbs, vibrations and rough service bulbs, colored bulbs, bug lights and plant lights will still be available.

Retailers should start educating their customers about new legislation that will phase out popular incandescent bulbs.

■ GE Lighting has produced a video to educate consumers and retailers about the changes that are transforming the lighting industry: http://tinyurl.com/3on6r43.

New Stores:

● Tony Tanzi and two partners opened Kings Park Do it Best Hardware in Kings Park, N.Y., in mid-May.

● Costello Ace Hardware opened its 16th and 17th stores in Smithtown and East Islip, N.Y.

● Ashby Gregg opened Quinby Hardware in Quinby, S.C.

● Matt Kukuk has acquired Seacat Do it Best Hardware in Marion, Kan., and changed the name to Flint Hills Building Supply

● Thompson Lumber Co. in Marysville, Kan., has been renamed Crome Lumber by new owners Kevin and Haley Crome.

● Elliott’s Ace Hardware has moved to a new, larger location in Muskego, Wis.

● Ace Hardware in Pontiac, Ill., has been sold to George Preckwinkle of Bishop Hardware and Supply, who plans to remodel and expand the store.

● Tom and Grif Glenn have opened their 17th Ace Hardware store in Chickamauga, Ga.

In the News...

● Marvin’s is opening its 27th store in Monroeville, Ala.

● James and Karen Thew acquired Caswell True Value in Waddington, N.Y.

● Johnny and Candi Graves opened Jarvis Hardware in Montgomery, W. Va.

● Rankin’s True Value recently moved to a new, larger location in King George, Va.

● Brownsboro Hardware & Paint has opened a second store in Prospect, Ky.

● Jeff and Craig Smith (who are twins) have opened Twins Ace Hardware in Fairfax, Va.

● RONA has opened a new Réno Dépôt stores in Sainte-Foy and VaudreuilDorion, Quebec.

● TOTEM Building Supplies has opened a new store in Edmonton Ellerslie, Alberta.

● Doug Brown opened Ardmore Ace Hardware in Ardmore, N.C.

● Rodney Hoffer is opening Santa Cruz Hardware in Santa Cruz, Calif.

● Mike Meixsell and Barbara Werkheiser have opened Nazareth Hometown Hardware in Nazareth, Pa.

● Richard McCoy purchased Main Hardware in Cambridge, Ohio, and changed the name to Cambridge-Orme Do it Best Hardware.

● Nuts and Bolts True Value Hardware opened its fourth store in Bonner City, Kan.

In the News...

● Greg Fehr opened Channel Islands Do it Best Hardware in Carpinteria, Calif.

● Allerdice Ace Hardware opened its third store in Malta, N.Y.

● Jerry and Phyllis Nelson have opened True Value Hardware in Nampa, Idaho.

● Arlington Heights True Value has opened in Arlington Heights, Ill.

● Mitchell Hardware is opening its fifth store in Spokane, Wash.

● DIY Home Center has opened in Big Bear Lake, Calif.

People on the Move:

● Ace Hardware Corp. hired Jeff Gooding as director of consumer marketing.

● True Value Co. hired Rosalee Hermens as vice president and chief information officer.

● Orchard Supply Hardware has named Mark Baker president and CEO, hired Steve Mahurin as

executive vice president and chief merchandising officer and promoted Steve Olsen to senior vice president and chief strategy officer.

● Do it Best Corp. named three new merchandise managers to replace Randy Kipfer, Dick Wise and John Augsburger, who are retiring. Gary Loosle is merchandise manager for lawn & garden-green goods; Josh Meyer for paint & sundries; and Chris Steinlicht for rental and store supplies.

Kudos to:

● Schauer Hardware in Chicago, owned by Wayne Schauer and family, is celebrating its 60th anniversary.

● Dan Gust, who operates Ace Hardware Longmont in Longmont, Colo., has been inducted into the Boulder County Business Hall of Fame.

● Richard Trujillo is celebrating the 25th anniversary of RTD Hardware in Las Cruces, N.M.

● Medford Cooperative Do it Best in Medford, Wis., is celebrating its 100th anniversary.

● Ace Sauk Prairie (Wis.) is marking its 60th anniversary.

● Owner Howard Smith is celebrating the 75th anniversary of Handy Ace Hardware in Tucker, Ga.

● Dan Martin of Peoples Complete Building Center in Watseka, Ill., was named 2010 Lumberman of the Year by the Illinois Lumber and Material Dealers Association.

● Kraus Department Store andPRO Hardware in Erie, Pa., owned by Tom, Joe and Lou Ann Nowosielski, is celebrating its 125th anniversary.

● Craig Ohlmann of Ohlmann Building Center in Valentine, Neb., was

Loosle

Meyer

Steinlicht

named Dealer of the Year by the Nebraska Lumber Dealers Association.

● Building Materials Do it Center in Providenciales, Turks and Caicos, held a grand reopening in March. The 90,000-square-foot store now features the country’s first drive-through lumberyard with the addition of the 35,000-square-foot Do it Center Drive-Thru Depot.

Building Materials Do it Center

● Melvin Faircloth, owner of City Lumber in Abilene, Texas, was honored as Lumber Dealer of the Year by the Lumbermen's Association of Texas and Louisiana.

● Keim Lumber of Charm, Ohio, recently wrapped up a year-long celebration of its 100th anniversary.

● Mohler Lumber True Value, owned by Jed

Rohrer and Jennifer Hamilton in North Canton, Ohio, is marking its 100th anniversary.

● Fortuna Ace Hardware in Fortuna, Calif., was named “Business of the Year” by the Fortuna Chamber of Commerce.

● Cameron’s Hardware in Oxford, Pa., was named 2010 “Business of the Year” by the Oxford Area Chamber of Commerce.

● Dykeman’s Hardware Store in Saint John, New Brunswick, owned by Bob and Don Shaw, recently celebrated its 100th anniversary.

● Hurst Stores, with five Ace Hardware stores in southern Utah, is marking its 65th anniversary.

● Campbell Hardware & Sporting Goods in Robertsville, Ala., is celebrating its 65th anniversary.

Wholesalers in the News:

● Ace Hardware Corp. reported sales increased 7.4% in the fourth quarter of 2010, ending the year with a 2.1% increase to

$3.53 billion. Revenues were up 2.8% in the first quarter of 2011, but net income declined 42.4% to $6.8 million.

● TruServ Canada, now owned by RONA, launched new banners: TRU Hardware, TRU Building Centres and TRU Farm & Garden to better fit different retail formats for independent dealers.

● Do it Best Corp. has signed an agreement with Paulus Ong, former director of operations for ACE Indonesia, giving Ong exclusive rights to the Do it Best brand in Indonesia. In August Ong plans to open four Pongs Do it Best Hardware stores in Jakarta encompassing more than 100,000 square feet of retail space. He plans to open a total of 40 Do it Best stores over the next five years.

● House-Hasson Hardware announced the appointment of Don Phillips as warehouse operations manager to replace the retiring Tim Lawson, as well as the appointment of Dennis Quilliams as information systems director to replace the retiring Larry Fennell. The company also

recently picked up a 10member sales team to serve paint dealers and completed a $2 million expansion of its Prichard, W.Va., warehouse.

● True Value Co. reported first quarter net revenue of $447.8 million, a 4.5% increase. Net margin was flat.

Other News:

● ProBuild has acquired Harbert Lumber of Grand Junction, Colo.

● TOTEM Building Supplies has launched a multi-year initiative to plant one million trees in Alberta’s forests.

● The Merit Group, which operates as Lancaster and Five Star Group, filed for Chapter 11 bankruptcy relief on May 17. The company has said it will explore the sale of all or part of the business as well as a plan of reorganization.

● Private equity firm Apax Partners has completed the acquisition of Activant Solutions Inc. and Epicor Software Corp. The combined company will be called

Epicor Software Corp. and have more than 33,000 customers in 150 countries and over $800 million in annual revenues.

Get the Full Story:

● Walmart announces plans to build smaller stores. Go to http://tinyurl.com/4prazae.

● Oscar Gonzalez has launched a paint company on wheels. His Internetbased San Antonio business, ThePaintDrop.com, goes directly to customers’ homes to custom mix paint from the back of a delivery truck. Learn more at http://tinyurl.com/64e99tv.

● Find out how Christy Miller, manager of Alachua Ace Hardware in Alachua, Fla., stepped up to help out victims of the devastating tornadoes in Alabama. Go to http://tinyurl.com/63xpnev.

● Ward’s Do it Center in Hamburg, Mich., reopened less than a week after fire destroyed its garden center. Read more at http://tinyurl.com/5r46dvg.

● The surveillance cameras at Alexander Hardware & Small Engine in Theodore, Ala., captured the destructive path of a tornado that decimated the store. Luckily no one was hurt. See the amazing video at http://tinyurl.com/65kqq6j.

Alexander Hardware hit by tornado in Alabama.

● Gene Pedrotti, owner of Pedrotti Ace Hardware in Benicia, Calif., matched donations to raise $67,922 to help the victims of Japan’s earthquake and tsunami. Read more at http://tinyurl.com/3fabtyy.

● Share gardening tips with your customers by linking on your Facebook page to “Ground Breaking Tips” from gardening expert Fran Sorin. Her popular blog, which is presented by Garden Weasel, can be found at http://groundbreakingtips.com/.

Upcoming Events

JUNE

House-Hasson Hardware Summer Dealer Market ■ June 23-25, Cobb Galleria Centre, Atlanta

National Lawn and Garden Show ■ June 14-16, Crowne Plaza Hotel and Conference Center, Chicago

United Hardware Fall & Christmas Buying Market ■ June 16-19, Minneapolis Convention Center, Minneapolis

JULY

Southern Building Material Association Summer Conference ■ July 28-31, Wyndham Resort, Virginia Beach, Va.

AUGUST

Bostwick-Braun Fall Dealer Market ■ Aug. 5-6, Monroeville Convention Center, Monroeville, Pa.

Handy Hardware Wholesale Fall Market ■ Aug. 18-20, Henry B. Gonzalez Convention Center, San Antonio

Orgill Inc. Fall Dealer Market ■ Aug. 18-20, Boston Convention & Exhibition Center, Boston

SEPTEMBER

Blish-Mize Fall Dealer Market ■ Sept. 16-17, Overland Park Convention Center, Overland Park, Kan.

HDW Fall Dealer Market ■ Sept. 10-11, Shreveport Convention Center, Shreveport, La.

Home Hardware Fall Dealer Market ■ Sept. 18-20, National Trade Centre, St. Jacobs, Ont.

Horizon Distribution Annual Dealer Market ■ Sept. 9-11, Convention Center, Yakima, Wash.

House-Hasson Fall Dealer Market ■ Sept. 30-Oct. 1, Sevierville Convention Center, Sevierville, Tenn.

Jensen Distribution Services Marketplace 2011 ■ Sept. 14-16, Spokane Convention Center, Spokane, Wash.

The Hardware Conference ■ Sept. 9-11, Marco Island Marriott, Marco Island, Fla.

True Value Buying Market ■ Sept. 23-25, Pennsylvania Convention Center, Philadelphia

The Hardware Conference in Marco Island is the industry’s largest event for independent retailers.

RETAIL IDEAS

Putting a Dent in Shoplifting

No retailer is immune from shrinkage due to customer theft. More than 600,000 shoplifting incidents take place every day in North America and 80 percent of consumers have stolen at least once in their lives, according to a new documentary recently aired on CNBC titled “The Truth About Shoplifting.” The documentary examines the rise in retail crime and illustrates how the consumers’ quest for the lowest discount price fuels the market for stolen merchandise.

Retailers are fighting back with innovative measures. R&J Building

R&J Building Supply in Lovely, Ky., uses a locking pegboard hook kit.

Supply in Lovely, Ky., uses a locking pegboard hook kit that must be unlocked with a key. All salesfloor employees carry a key that can unlock the blister packed or plastic carded products. “We wish we didn’t have to do this, but it’s better to be safe than sorry,” says Manager David Fletcher.

The locking pegboard hook works well for products such as programmable thermostats, which are fairly small even in their clamshell packaging and have a reasonably high retail price that translates into a decent return for the thief on the black market.

Providing Incentives for Employees

Every employee of Miller Industrial in Elk Grove Village, Ill., is eligible for a quarterly bonus based on the company’s gross profit goals. “It's called the Great Game of Business and basically we take our annual goal of what our gross margin dollars are forecasted to be and break that number

down so every team member is aware of what number needs to be hit each day in order to stay on pace,” says Jim Bell, director-purchasing and operations.

The company shares each day's gross margin numbers with the team and keeps a spreadsheet that has the year-to-date goal versus the year-to-date actual. “If we hit our numbers at the end of each quarter we pay a bonus to each team member. The more our actual numbers exceed our plan numbers the higher the bonus,” says Bell, who adds that they pay bonuses in terms of extra hours of pay.

This gives every team member the incentive to do all they can to increase sales, such as new customer sales, add-on sales, promoting promo items, upselling, special orders and providing great customer service.

“The program works well and we are at the point when any employee is asked what kind of day we had each person knows that the answer is based on meeting or not meeting our daily numbers,” Bell says.

“It's a good program, because everyone can have an effect on meeting goal by doing all the things we ask them to do, which is to ultimately increase sales.”

Maximizing Your Selling Space

High-performance retailers tend to share common traits and one is the ability to use strong merchandising techniques to drive impulse and add-on sales. The end result is a higher average transaction and higher sales per square foot.

Crown Ace Hardware, with 17 locations in Southern California, excels at the use of clip strips, as the picture below illustrates. Not only does the retailer place clip strips up and down aisles, it does a good job of selecting items that will grab people’s attention

for an impulse sale. The following are good items to use on clip strips:

• Air freshener (automotive)

• WD-40 3 oz. (automotive)

•4-pack AA batteries (electrical)

•Pen light (electrical)

•Electrical tape (electrical)

•Pack of 8" cable ties (electrical)

•Utility knife (hand tools)

•Dust mask (hand tools)

•Ear plugs (hand tools)

•12' tape measure (hand tools)

•Jersey gloves (lawn and garden)

•Hose nozzle (lawn and garden)

•Plumbers putty (plumbing)

•Teflon tape (plumbing)

•Bag clips (housewares)

•Rubber gloves (housewares)

•Razor scraper (paint)

•Trim edger (paint)

•5 oz. caulk tube (paint)

Crescent Springs Hardware sells and repairs snowplows and salt spreaders.

A Unique Niche for Winter Sales

Our cover story in the last issue touched on unique niches that retailers have developed to drive traffic and sales, and since then we’ve learned of some other good ones.

Crescent Springs Hardware in Crescent Springs, Ky., has established a niche selling, installing and repairing snowplows and salt spreaders. It dovetails nicely with another niche the store has selling and servicing outdoor power equipment.

“It’s opened another world for us,” says Cathy Croley, one of three generations of family members active in the business. “We don’t have to worry about competing with the big boxes on snowplows and salt spreaders, and it gives us a way to keep our employees busy in the winter,” she adds.

92%

BEHIND THE NUMBERS

Percentage of consumers who review products online prior to purchase, according to a study conducted by BIGresearch.

$115.2 billion

Estimated amount of home improvement spending for the fourth quarter of 2011, according to the Joint Center for Housing Studies of Harvard University, a drop from $130.2 billion in the second quarter due to continued softness in the housing market.

Percentage of small businesses who reported all their credit needs were met or that they were not interested in borrowing, according to the National Federation of Independent Business. 93%

21,000

Number of buyers in attendance at the sold-out International Home + Housewares Show, held March 6-8 in Chicago.

10,000

Estimated attendance for Hartville Hardware’s semiannual tool sale in Hartville, Ohio.

14,400

Square footage of the first Walmart Express store, which is being built in Gentry, Ark.