For True Value, new tools and destinations

“The best thing we can do for our retailers is to help them invest in their business.”
Lyle Heidemann
CEO, True Value

True Value CEO Lyle Heidemann offered some friendly advice to a reporter recently. “Bring your camera to Philadelphia this year,” he said. 

Philadelphia is the site of the Chicago-based co-op’s Fall Market, Sept. 23 to 25. Here, True Value will be displaying its Destination True Value store design and format for smaller stores. In the Philadelphia and nearby East Coast markets, the co-op is expecting strong attendance from dealers with smaller-than-average footprints. 

“What we’re trying to get across to the retailer is that the principles of Destination True Value can be applied to any size store,” Heidemann said. 

Last year, the co-op added about 800,000 sq. ft. of the DTV format across the country. The goal this year is to grow that expansion by another 1.25 million sq. ft., and True Value is about halfway to achieving that goal. The push for the new design, and the increased inventory of DTV, is a strategy that headquarters believes will help the dealer and will help the co-op.

“The best thing we can do for our retailers is to help them invest in their business,” Heidemann told Home Channel News. 

Destination True Value has been a major initiative for Heidemann and the co-op since its unveiling in Atlanta in 2007. But it’s not the only one. The company also has a powerful new tool in its e-commerce site. Only 10 months old, it’s working hard to drive traffic to stores. 

The company has had almost 2,000 stores join its e-commerce program — that means they took training and can participate in the buy-online, ship-to-store program that converts Web browsers into store shoppers. Retailers don’t pay for the program; all that is required is basic training in order fulfillment. 

Lisa Fortuna, True Value Co. director of e-commerce, has been busy analyzing the data ever since the launch 10 months ago. “We’re consistently seeing about 40% of our customers who report that their next action after they leave the site is to either visit a True Value store or call a True Value store,” she said. “And we love seeing what our customers are searching for.” (See article on page 24.)

The company has signed a deal with Master Nurseries, a West Coast lawn, garden and plant co-op, presenting a big opportunity for each co-op to leverage the experience and distribution capabilities of the other. 

In Philadelphia, True Value will also show increased sophistication in the farm and agriculture sphere — good news for the 370 True Value stores in that business, and others that want to get in. “We’re already buying categories of goods that are not core hardware, so we can add value to our retailers,” Heidemann said.

Blowing against these and other initiatives are economic concerns, high unemployment, and — at least in April and May — uncooperative weather. The situation calls for extra-cautious optimism from the CEO. Here’s how he described his outlook to Home Channel News: “Unless something catastrophic happens either here in our four walls — which certainly could happen — or in Europe or the Mideast that could impact our economy and give us a level playing field for mother nature, I would say the rest of the year can be a positive sales forecast.” That boils down to a forecast of a 0% to 2.5% sales increase. 

In the second quarter, sales showed a 0.4% gain, despite some of the headwinds. “I am pleased with our revenue increase for the year, particularly given the poor spring season in April and May, as well as softening consumer confidence,” Heidemann said in the official True Value press release.

Over the first six months, things were a little better — sales were up 2.2% to $977.3 million. But the company said its net margins declined 16.8% to $21.8 million, as fuel costs increased and employee medical costs increased by about $1.3 million. Total debt rose by $34.8 million to $179.8 million, an increase explained by patronage dividend, increased capital spending and additional loans to members for store remodels, expansions and relocations.

Heidemann is a believer in the idea of controlling what you can control. And for retailers, that includes product assortment, product pricing and consumer atmosphere. Which brings the discussion back to Destination True Value.

“In spite of the economy, our retailers are continuing to invest in their stores,” Heidemann said.

The neighborhood store

The former Sears, Roebuck executive has long maintained that he wouldn’t have come out of retirement in 2005 to take the CEO spot at True Value if he didn’t believe in the strong future of the neighborhood hardware store. 

Is he still optimistic? Short answer: Yes. And here’s how he explained it. 

“The neighborhood hardware store has the ability to connect with the consumer by providing the merchandise and services that the immediate neighborhood requires along with friendly, expert advice,” he said. 

That’s not to say a strong future won’t require effort. Heidemann also believes that current store owners realize they must keep up with retail trends by, for instance, updating their assortments and making their stores female-friendly.

On the competitive front, some big boxes represent big challenges — especially in assortment and price perception. “The good local hardware store can compete on convenience, friendly expert advice, a broad enough assortment core hardware, paint, and lawn and garden to serve the consumer, but needs to be price competitive on the highly identifiable and frequently shopped items, and willing to have store hours that compete with the big boxes.” 

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