True Value: Something New in Store

SPACE SAVER Alex Ogle, divisional vp-merchandise/supply chain for True Value, explains to reporters how the co-op has worked with vendors to create vertical displays.

ATLANTA —A new store concept has been percolating these last two years at True Value, and in October the company served up its first market walk-throughs of the neat, polished racetrack package tentatively dubbed “Destination True Value.”

The 13,225-square-foot model store features a neutral color palette, brighter lights, up-front seasonal merchandise and a prominent paint section—some might call it “female-friendly.” Several product categories were expanded and highlighted in the design, while new and up-and-coming categories premiered. Blueprints of other store models in other square footages also were on display.

“We’re known for being a convenient hardware store, and we don’t want to lose that,” True Value CEO Lyle Heidemann told Home Channel News.

“But clearly what we want to build on is that 50 percent of our customers now are females. She’s in our store. She’s buying all those products, and she’s the person that makes the decision on all those products. We’re trying to convey to her that this is the store where she can do it.”

CO-OP NEWS: True Value hurt by later market


True Value reported revenue of $478.5 million for the third quarter ending Sept. 29, a decrease of 3.9 percent—or $19.4 million—from $497.9 million in the same period in 2006.

The Chicago-based co-op posted a quarterly net margin of $12.0 million, a decrease of 34.4 percent compared to $18.3 million a year ago. At the same time, third-quarter results also showed 1.6 percent growth in wholesale warehouse shipments to True Value retailers.

“New product assortments and more robust offerings helped drive strong growth in our seasonal and lawn and garden departments this quarter,” said president and CEO Lyle Heidemann.

The company blamed sales declines in part on the timing of its annual fall market, held in late October and within the fourth fiscal quarter. Revenue and profit from market activities benefited the third quarter in 2006, but will benefit the fourth quarter in 2007.

Third-quarter profit levels were in line with the company’s plan, True Value reported.

True Value
Q3 revenue$478.5 millionDown 3.9 percent

For the nine months ending Sept. 29, True Value also reported revenue of $1,561.4 million, a decrease of 1.9 percent from $1,591.5 million for the same period a year ago. The 2007 year-to-date net margin was $47.7 million, down 13.6 percent from $55.2 million a year ago.

The prior year’s net margin included a $6.3 million one-time benefit from partial reversals of previously established reserves for two legal matters. Excluding last year’s nonrecurring gain, year-to-date net margin was down 2.5 percent, entirely driven by the timing of the fall market, the company said.

The True Value co-op, with sales of $2 billion in 2006, includes approximately 5,500 independent retailer locations worldwide operating under the store identities of True Value, Grand Rental Station, Taylor Rental, Party Central, Home & Garden Showplace and Induserve Supply.

The beta test store first was built in Cary, Ill., near the company’s Chicago headquarters. The store was disassembled, moved from Cary temporarily and erected in Atlanta, to be presented to co-op members and journalists at True Value’s fall market, held in late October. Like early “beta testers” in Cary, members took an audio tour of the store and listened to how each new product category had been expanded.

The stores are intended for rural and “second city” markets, said True Value chief merchandising officer Steve Mahurin. “Some time here in ’08 we’ll be doing an urban-suburban store,” he said.

True Value pulled from some unlikely places for its new design—Brookstone, Pottery Barn and Williams-Sonoma all provided influences, Mahurin said. Those influences speak to a demographic and highlight a product assortment that caters to consumers who “aren’t looking for an opening price point,” he added.

The model store broke down into a few notably “different” concepts—from paint to pet care, the running theme was a tidy, warm and bright shopping environment with impulse and convenience items seemingly at every turn.

The paint section of the new True Value store was moved front-and-center, given softer lighting and a tiled floor break-out meant to make shoppers feel more at home.

“It gets visual presence,” said Carol Wentworth, True Value’s vp-marketing, “So people actually see that we’re viable in the paint department. If you tuck it away in the back of the store, in too many cases, they come into the store for an item and they don’t see the paint section and what we offer.”

Keeping a paint section prominent is not a new concept, but highlighting that category has taken on a new significance in the most recent downturn in new home building.

“Even if they’re not moving into a new home, paint is probably the single least expensive way to freshen up a room,” Wentworth said. “Even though there’s a downturn in general in the industry, because of construction stalling out, for the DIY consumer painting continues to be strong.”

Alex Ogle, divisional supply chain vp for True Value, said hardware store shoppers now have an “elevated expectation” of what an in-store shopping experience should be—whether they’re male or female.

Ogle emphasized the importance of streamlining displays—particularly in a small hardware store that wants to carry big items, like generators, chainsaws and heavy equipment. Ogle said True Value has been working with vendors to create displays that could carry heavy-duty items but that better fit the mold of a small hardware store.

“We challenged Coleman to come up with something where we could go vertical,” Ogle said, while showing journalists one new display. “Anytime we can get the vendor involved and go vertical, it’s a big plus, and it saves space.”

The hardlines category also was not ignored. In the tools section, the most notable change in Destination True Value is a large placard showing all of the different kinds and styles of fasteners the store offers.

A number of categories got big upgrades in the new True Value store, particularly in up-and-coming and specialty product assortments.

“Garage storage is kind of the ‘patio’ of five years ago,” Heidemann said. “Where everybody was then getting the stainless steel gas grills (and) all of a sudden making their inside kitchen outside—the next project is the garage. It’s a growing category.”

The garage storage area includes heavy-duty garage storage items alongside interior storage items.

Facing the storage section is a broad cleaning products display. Cleaning products were brought out of a regular aisle and placed in an area where they could stand on their own as impulse items, Mahurin said.

The aforementioned “patio” category is not ignored—outdoor products were featured prominently at the front of the store in a revamped “seasonal merchandise” section. Patio furniture, grills, pruning shears, gloves, hats and other seasonal items were featured prominently to the right of the store entrance.

True Value expanded its selection of decorative hardware, another important, low-cost “weekend warrior” project, Heidemann said. Additionally, the co-op launched a new “Greener Options” program, with special signs to promote CFL bulbs, environmentally friendly gardening products, tankless water heaters and other eco-minded items.

“Destination True Value” also highlighted “plug and play” sections for each store, which can be swapped out to meet a store’s specific needs. Of those “plug and play,” one of the most notable expansions was in the pet-care section. Other “plug and play” sections included heavy-duty clothing, automotive items, housewares and pre-fab furniture.

In the end, Heidemann said the co-op is hoping its members view the new store concept as a modernization effort that banks on several years of research and a close study of each detail, two-by-two.

“This is a hardware store that has been built two-foot by two-foot with the ultimate customer in mind, for the 21st century,” Heidemann said.

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