Ace paint store pops up in Chicago
In an effort to promote its Clark+Kensington line of premium paint, Ace Hardware opened a one-day-only pop-up store earlier this week in downtown Chicago.
Signs outside the State Street store — the site of a former Borders store — read "Today only, free paint inside." According to the spokesman, the goal of the Clark+Kensington pop-up store was to unveil the brand in a public forum.
Ace gave away 1,200 quarts of the designer white paint+primer in one.
During the Monday event, Ace offered free quarts of the new paint, described as paint and primer in one, and also offered entertainment in the form of a local artist who created paintings in the store. Ace Hardware’s home-improvement expert Lou Manfredini offered demonstrations of the paint to customers.
Orchard’s “super hardware” strategy
Orchard Supply Hardware has gone through a lot of changes in its 80-year history, but the California chain — now numbering 89 units with $660.7 million in annual sales — has weathered them all. Changes in ownership, leadership, store design, color scheme and signage have come and gone. But the stores’ customers — known for their exceptional loyalty — have generally stuck with the chain.
In March 2011, Orchard’s majority owner, Sears Holdings, announced that Orchard had hired Mark Baker as its new chief executive. Baker’s curriculum vitae — former head merchant for Home Depot and, more recently, president and COO of Scotts Miracle-Gro — has observers expecting big-league initiatives from the California company. Baker had only been on the job for a few weeks when he hired Steve Mahurin, the former chief merchandising officer at True Value and another former Home Depot executive, as his head merchant.
Home Channel News caught up with Baker on Sept. 15, several days before Orchard (which has dropped the name “OSH”) opened its 89th store in south San Jose.
Home Channel News: You’ve been on the job for six months now. What have you done so far, and what are your plans for the Orchard chain?
Mark Baker: We’ve raised comps for the first time in several years. We’ve opened up three stores with the new Orchard [design]. I look forward to the opportunity to revitalize this brand and weigh the prospects for growth for California, which could easily support 30 to 40 more stores. [But] you work on a couple stores at a time, to bring the energy back to the business. We’ll be going back and redoing several other stores over the next few months.
HCN: Have you picked which locations?
Baker: The Bay Area, the LA area, and one local to San Jose.
HCN: Orchard is not a big box, nor is it a small neighborhood hardware store. Where does it fit into the whole competitive landscape?
Baker: The big-box guys are saturated in North America. The neighborhood guys, the ones who belong to the cooperatives, there are some very good operators there, some I really admire, but on the whole they’re not growing. It’s a difficult [time] for a sole entrepreneur. Orchard is the only model that exists that’s a super hardware store.
HCN: How is that an advantage? Are you offering a wider assortment?
Baker: Yes, although our [newer] stores are being merchandised with fewer SKUs. We’ll eliminate some categories, like screen doors and pet. We’ll significantly reduce our automotive section. But for the most part, it’s inventory [rationalization]. Instead of 50 hammers, we’ll have 22.
HCN: You mean that hypothetically?
Baker: No, we actually did have 50 hammers.
HCN: What are you bringing in instead?
Baker: We’re the local guy. We do very well within a three-mile radius, whether we’re close to a big box or not. We can adapt to the California consumer better than anyone else, whether they’re a mature neighborhood that wants bigger [replacement] trees or a relatively new suburb. We can adjust our merchandise very easily through our store managers. Take furnace filters. There are 80 different sets of furnace filters in our stores, depending on who built that neighborhood. We’ve recently made [that] change in our business, and [sales] have been terrific.
HCN: Is your merchandising staff set up in a traditional structure?
Baker: In a lot of regards it is. Steve Mahurin has recently joined me. He’s in the process of teaching the corporate line review process here at Orchard and starting to form line reviews. The idea is that we’re looking for better value from our suppliers and to consolidate suppliers — stronger, bigger, better — but also to learn about the California customer. Remember that the California customer is 20% of the whole U.S. population. Many of our suppliers are East Coast-based, our competitors are East Coast-based, so we’re really working hard on understanding the California timing, North and South, and getting the products to me in this market. It’s about marketing to the consumers in a different way. It’s not just about price.
HCN: Is everything undergoing a line review?
Baker: We have a calendar established for the first quarter of next year of which lines we’re going to be reviewing. In many cases there won’t be any changes; we’ll just cut the line. In some cases we’re consolidating suppliers, so we’ll work with the buyer on economies of scale, and the [better supplier] will win the business. In many cases we’ll be producing some assortments.
HCN: How big is Mahurin’s buying staff?
Baker: He has four merchandise managers, and they each have about four or five people who report to them. He’s just putting in place a global sourcing team.
HCN: Are we talking about private-label goods?
Baker: We already do some, but we’re really looking to work directly now with the sources and not a bunch of middlemen. We want to start building our relationships with those sources.
HCN: Have you made any operational changes?
Baker: We’ve always received high marks from consumers for good service. In the last couple of weeks, we’ve converted all the stores into “zoned service.” Everybody is wearing a headset in the store, so we can deploy our resources to where the customers need help, whether it’s loading in the parking lot or more information on products.
HCN: You’ve been through recessions before.
Baker: Yes, too many.
HCN: Once this one is over, I understand that Orchard has some expansion plans for other states.
Baker: Yes, but there’s so much opportunity in California. We’re not in San Diego or the south side of Los Angeles yet. There’s still some areas of the [San Francisco] Bay that we’re interested in. So that is the next 36 months. Then, after that, I want to be in markets that are strong garden markets. The Pacific Northwest comes to mind. But we don’t have any near-term plans for that.
Small towns, big ideas
Orme Hardware owner Richard McCoy describes his company’s claim to fame with a simple description: “We still run an old-time hardware store.”
Of course, there’s a lot more to it than that. Certainly, the Do it Best Corp. member with business roots that reach back to 1869 has an old-school flavor — one of the locations still operates with rolling ladders and wooden drawers, but McCoy is not only a recognized “Extreme Retailer,” he’s an innovator and a growth-oriented operator even in today’s contracting times.
One of Orme’s most interesting features lives behind the scenes — a corporate incentive plan that includes every full-time employee, from the sales team to the back-office accountants. Based in Cambridge, Ohio, Orme operates in towns throughout the state and markets that vary from 300 people to about 50,000.
Every store is different in the Orme empire, where stores range from about 5,000 sq. ft. to 10,000 sq. ft. But they all operate under McCoy’s retailing principles:
“We still sell nails by the pound, rope by the foot, and those old-fashioned values that have been with us a long time. We do not operate a cookie-cutter store. We have wine-making and brewing supplies in one store, beekeeping is another one. One of our newest categories is gold panning, and that creates some interesting discussions in the store. We’re not afraid to test things and see what happens.”
On growth through acquisition
“We’re actively looking for new locations. We bought a store two weeks ago. It hadn’t been changed, cleaned or dusted in 30 years. We always clean and dust because we’re proud of our merchandise.
“Most of the stores that we have purchased have been underperforming, undervalued, run down, no inventory. I’ve bought things that nobody else would touch. We’ve gone in and cleaned them up, revitalized the staff, energized the community, fully stocked the stores and have turned these poor performing stores into profitable hardware stores.
“What do I look for? I look for potential. If we see potential in the community and the business, then we go after it. In most cases, I firmly believe every small town needs a good fully servicing hardware store. I just really look for potential.”
On his first acquisition
“It was 4:30 in the afternoon. I stopped by a store, and I talked with the owner for a while. I said, ‘Here’s my card. If you ever think about selling, let me know.’
“ ‘He said, I’m not interested in selling.’ I said, ‘I didn’t think you would be. When the day comes, just call me.’
“At 7:30 a.m. the next morning I got the call.
“I think he went home and talked to his wife. And she said ‘Honey, I think you need to sell this.’ And that was our first acquisition.”
On the all-inclusive incentive plan
“Every year I pick a percentage of profit that we have to make for each store. I don’t pick a number, I pick a percentage of profit. If they hit the goal, nothing happens (but that’s never happened.) If we go above the goal, we split the extra — 50% goes to the employees, 50% stays with the company. Last year we finished in December and had excess of $90,000. So we sat down and wrote a check for $45,000 and passed it out at the Christmas party. And that’s a real incentive.”
On why the incentive works
“The best thing about the whole program is that it incentivizes everybody. From accounts receiving to cashiers. We go through this with all the employees so they know what the profits are. With our new store, one of the employees came up to me and said, ‘How can we help you make the new store profitable?’ Now how many people get asked that question? That’s a wonderful thing to have happen.
“Another thing, we don’t do the stores individually. This is a corporate profit-sharing incentive plan, because I want every store to feel that they are part of the Orme hardware community. And if we need to move merchandise around from store to store, which we know might not be profitable for an individual store to move it, but it satisfies the customers needs and that’s what the company wants.
“For me, it’s as important that the office staff understands profits as well as the person who makes calls on accounts. Maybe they don’t really need a new adding machine. Maybe what we have is fine. The point is, it involves everyone in the company.
On the economy
“It has been a challenge. We have gone through a lot of items and lowered margins to be more competitive in our markets. With gas prices, people are shopping close to home, and that’s been good for our local business. One of the issues in a small town is the perception that the prices are better if you go out to the city. Well, we’re out to prove that that’s not the case.”