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Ace Hardware store finds shoes for the needy

BY HBSDEALER Staff

Ace Hardware in Oak Creek, Wis., has teamed with a local elementary school and a national charity to find shoes for the needy, according to an article in the Milwaukee Journal Sentinel.

Since 2005, Soles4Souls has distributed more than 12 million pairs of shoes. The hardware store is collecting gently used shoes, as is the nearby school.

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Ace incites optimism

BY By Ken Clark

Whether it’s their geographic market, operating strategy or support from lenders and co-ops, there are plenty of variables that distinguish between a retail company that thrives and a retail company that merely survives.


Meet Costello’s Ace Hardware, where a thriving mind-set and aggressive growth are a function of all three variables, and even a few more. 


Every retail location has its particular challenges to growth. For Costello’s Ace Hardware on densely populated Long Island, N.Y., those include intense retail competition, high property costs and scarcity of available land to develop from the ground up.


But as a high-performing retailer — and former Home Channel News Golden Hammer award winner — Costello’s Ace Hardware adapts to its market, while turning weaknesses into strengths. For one, it understands the Long Island population that feeds the company’s 15 stores. 


“We feel that we have a market that can support independent stores, and as we find the right locations, we just keep going for it,” said Michael Costello, president of the family business founded by his father, Vinnie Costello. Two more stores are expected to open this spring — one in Smithtown, N.Y., and one in East Islip.


The company has maintained an aggressive growth strategy even throughout the long economic slowdown, opening a minimum of one store per year. One reason for the growth mind-set, he said, were programs and funding opportunities arranged through the Oak Brook, Ill.-based Ace Hardware co-op. “I think one of the biggest programs that helped our expansion and still does is the Branching Out Program. Vendor-funded, it helps offset some costs of inventory. It’s huge. Without it, we’re not able to be as aggressive as we have been,” he noted.


He also described the ability to get funding in exchange for future stock, to help update inventory and retrofit interiors. Costello will take advantage of that option in at least one store this year. 


According to Ace Hardware Corp.’s executive VP and CFO Dorvin Lively, whose duties include business development, Costello’s Ace is not alone. In 2010, the Ace board approved programs making loans available to stores willing to branch out — loans that would be paid back over time out of member dividends.


“We have some businesses that are well established, and they are looking at this as a good time to go ahead and grow and take some market share,” Lively said.


The co-op as a whole opened up 101 stores in the United States in 2010, just slightly ahead of its open-store pace in 2009.


“Frankly, one of the problems for investors who want to open up a new store is being able to get financing,” Lively said. “It always comes down to finding the right person for the right place and if they’ve got the money, or are able to get financing.”


In today’s environment, Ace’s Branching Out program takes on added importance, Lively said. And back on Long Island, Costello seconded the motion. 


“One of the things we are hostage to is the available real estate,” Costello said. “It’s very costly to go and buy a piece of property, or lease a piece of property, and build your perfect box in every place. So what we have is an assortment of different-sized stores, which brings a lot of challenges to the business.”


The company’s original store opened in 1973 at 2,500 sq. ft. — that’s one-twelfth the size of Costello’s largest store. The company’s two new stores will measure 10,000 sq. ft. and 8,000 sq. ft. when they open. Both are located in strip malls. 


On a recent Thursday afternoon at Costello’s Ace’s Garden City Park store, also located in a strip mall, Home Channel News saw a customer base that ranged from senior citizens to a group of teenage girls. A sunny open entrance area led the shoppers into a main aisle of bin specials (a lot of cleaning supplies) and branched into its core departments with packed shelves. 


“We don’t want to lose our hardware store identity,” said Costello, who described the big categories as paint, tools, plumbing, electrical, hardware, and lawn and garden. 


The go-to-market strategy has to be sharp on Long Island, which has seen intense big-box competition, especially with the expansion of Lowe’s about four years ago. “We really have to be more on the offensive against the big boxes, and that’s the key to what we want to stress in some of our marketing.”


One way for Costello’s Ace to get the message out is to aggressively use in-store signage to promote independent exclusive items — in other words, things you can’t get at the warehouse home centers. Scotts has a new line in this area, and Benjamin Moore paint will also help in the effort to differentiate the stores’ products. In a similar way, the stores will identify products that are Made in the USA, he said. 


When asked about the challenges of an expanding retail footprint, Costello focused on the positives. “When we were four, five or six stores, we weren’t thinking about buying a container-load of anything,” Costello said. “It was out of the question.”


Not anymore. By sharing products across 15 or so stores, it becomes much easier to take chances with merchandise. “When we ask ourselves, ‘Can we sell this? Can we afford to invest in this?’ — it becomes much easier to say, ‘yes.’ ”


The economy is one of the variables out of the control of any hardware store retailer. And for that reason, macroeconomic data are not an obsession. 


Still, Costello expects the overall economy to begin turning around. The company was up slightly in 2010, despite a stall in the fall and the fourth quarter. But this year, intense winter storms have led to lines out the door at times. 


“Our January 2011 is off the charts,” he said. “I think it’s going to make for a very strong spring.” e

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Ace’s “Crown of the Sea”

BY By Brae Canlen

Jeff Schulein of Crown Ace Hardware has accomplished what few dealers can lay claim to: 17 stores, a solid succession plan and, since the economic downturn, no store closures or major employee layoffs. In fact, Schulein and his son, Mark, are in negotiations to open an 18th store, this one in San Diego. 


“I’m an entrepreneur who does things by the seat of his pants,” Jeff said. “Mark is a good manager. He’s highly organized. So together we make a good team.” 


Although Jeff is officially in charge of business development, while Mark runs the day-to-day operations of the stores, one gets the feeling that the father and son make a lot of joint decisions, and despite their different styles, influence one another. For example, Crown Ace is much more choosy about where it opens stores now, Jeff said, and will walk away from deals if the lease is too high or other conditions don’t seem right. “It has to be pretty low on the risk scale,” Jeff explained.


Schulein purchased his first hardware store in Corona del Mar — “Crown of the Sea” in Spanish — in 1974. Over the next three decades, he added 11 more units, all of them in various Orange County cities. In January 2007 the chain purchased a four-unit Ace chain with locations in Riverside and Yucaipa, Calif., two inland communities, and Lake Havasu City, Ariz. In 2008 they crossed the San Diego County line with a store in a decommissioned and redeveloped military base called Liberty Station. Their newest location is a unit in the northern coastal town of Encinitas.


Crown Ace is on the lookout for potential sites, mostly in San Diego County. “We see a lot of expansion opportunities there, and we now have the infrastructure to support growth in this region,” said Mark, who entered the business post-college (University of San Diego) when the chain had eight locations. Staying relevant in the mind of the consumers is something many dealers don’t even worry about, but the 41-year-old father of three names “strong [people] teams” as the glue that holds the chain together.


Crown Ace is retooling its marketing campaign to make it more viable. And it’s not just the bosses who are thinking about this issue. 


At the Crown Ace Hardware in Liberty Station, store manager Angela Sharrett noticed the large number of dog walkers who came by her store on their way to a nearby park. She started giving out free dog biscuits, and it wasn’t long before the dogs began dragging their owners into the store for their daily treats. “We’ve had six dogs in here so far today,” said Sharrett during an interview on Feb. 17. 


At 20,000 sq. ft., Liberty Station is Crown’s largest store — big enough to have two full-sized gazebos in the 5,000-sq.-ft. garden center. Crown’s ideal model is 10,000 sq. ft. to 11,000 sq. ft., but the business has a store that’s 16,000 sq. ft. and one that measures 6,000 sq. ft. 


Unlike other independents, Schulein also doesn’t ignore competition from big boxes. “We’re in the repair business and the service business, and the boxes handle things differently,” Jeff said. “But they’re in our market, and our customers shop in both places. So we have to be well aware of their prices and who they are.”


If he were just starting out, Jeff said he would take a serious look at the urban store market. “It doesn’t fit who we are today, but I think there’s a lot of opportunity there,” he said. 


Perhaps the one rule that has held the business together more than any other is one laid down by Mark: “No shop talk on weekends.” (The Schulein family also includes two other grown sons who work in other professions.) 


“That was a tough transition for me,” Jeff admitted. “It hasn’t been easy. It’s taken a long while, but I think we’re in a pretty good place now.” e

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