Made in America is right at home in Hartville
In Hartville, Ohio, sits America’s largest independent home center at 305,000 sq. ft. In the middle of Hartville Hardware sits a house constructed entirely of U.S.-made products — from the foundation to the sheet rock, paint and appliances.
"There’s definitely been an increase in people wanting to buy U.S.-made products," says Howard Miller, president of Hartville Hardware, a member of the Do it Best co-op. "General Electric makes washers and dryers in the U.S. and people love that. They’re asking for U.S.-made all the time."
But that wasn’t always the case. Three years ago, when Hartville brought in some Made-in-USA Carhartt apparel that retailed about 10% higher than similar imported product, people wouldn’t pay the extra money. "Now the sentiment has turned," Miller said. "They’re aware of the value of buying American-made product."
The folks back at Do it Best headquarters in Fort Wayne, Ind., agree that Made-in-USA has become more important to consumers in the last few years. "We have seen a renewed interest in these products and have addressed it in several ways," said Steve Markley, Do it Best’s VP merchandising.
First, the co-op has made it easier for consumers to identify American-made product by calling them out in the catalog and in advertising, giving Do it Best stores the option to use Made-in-USA-focused circulars that tie into Memorial Day, the Fourth of July and Labor Day. Within departments, Do it Best stores can use special Made-in-USA endcaps, signage kits, shelf danglers, bin label and stickers.
Do it Best members also have access to an increasing number of U.S.-made products. In fact, Markley said: "When making a decision on a product, country of origin is a consideration, and we’ve added products because they’re U.S.-made. I think the awareness of the average consumer is higher on this issue, and retailers are responding."
Regarding Hartville Hardware’s 1,850-sq.-ft. American house, Markley said he’s glad to see a retailer out there that’s so much in tune with its customer base, adding: "There’s an appetite from the consumer for product made in America, and they’ve recognized that and used it as a vast selling tool in their store."
The only product the store with in the store couldn’t showcase was reasonably priced U.S.-made lock sets. That explains the use of "assembled-in-USA" in that category.
Ace’s Venhuizen takes over the reins
On March 31, John Venhuizen will step from behind the scenes into one of the most front-and-center posts in the hardware business — that of CEO of Ace Hardware Corp. After standing and delivering a motivational presentation to thousands of dealers at the co-op’s Spring Convention & Exhibits in New Orleans, he sat down with HCN.
HCN: What worries you as you step into the CEO role?
Venhuizen: I think the theme of the day here is momentum and continuity. Change in leadership doesn’t necessarily mean change in direction. We feel like we have momentum. That’s not to say everything is rosy. We’ve got challenges.
HCN: You have stated that the industry’s declining transactions and store count are two of them.
Venhuizen: Our challenges and the retailer’s challenges are the same thing. There is pressure on our industry. It’s consolidating. There’s pressure on transactions and profit, and operating expenses, health care. But when has our business not had some sort of challenge? We need to focus on what we think we’re great at. We’re optimistic about our future despite all those challenges.
HCN: You also emphasized the idea of keeping score with money. Can you explain that?
Venhuizen: In business, we keep score with money. And we encourage our stores that they shouldn’t feel bad about that. But business is not about money. It’s about people. And people are why we keep score. Because in the end, for a lot of our owners, what they’re most proud of is what they can give back to the community. And they have the ability to give back because they run a successful hardware store.
HCN: A big buzz at your show is the introduction of Valspar.
Venhuizen: Without doing anything, because of our partner, you get 10% more gross profit on the No. 1-rated paint in America (according to Consumer Reports), Clark & Kensington. That’s a big win. They get a year and a half to sell Valspar before they have to pay for it. Third, they’re going to get the whole department for free — tinters, racks, decor signage and a free reset. And our dealers believe we are going to do what we say we are going to: drive footsteps into the store with the paint lineup.
HCN: Why are some on the fence about bringing it in?
Venhuizen: The issue is whether the brand they also have already will allow them to bring in Valspar. And that’s causing some consternation, understandably. That’s really the only tension. Outside of that, I’d say reaction is wildly enthusiastic.
HCN: Would you agree the No. 1 story today is the battle with the big boxes?
Venhuizen: The growth of Home Depot, Lowe’s and Menards has made it more difficult in our industry. But their days of large new store growth are largely behind them. In the $300 billion pie in home improvement in the U.S., we are going after the $40 billion that is the convenience hardware segment. Our stores get about $10.5 billion of that in the U.S. We’re going after the rest.
HCN: What’s your current home improvement story in your house?
Venhuizen: I just told the story [during the general session.} While I was traveling, I had my wife go painting with the No. 1-rated Clark & Kensington.
HCN: I didn’t know if that was a real story or just an entertaining story.
Venhuizen: It’s real. And it’s a project that is going on right now. Do you think I make that stuff up?
HCN: You look like you have fun up there speaking to the members. Is that a prerequisite for the job?
Venhuizen: No, but it helps. When you get a great team together and they love what they do, the energy comes through and that’s what you see.
Humbled but hopeful, Handy hits road to reorganization
Houston-based hardlines co-op Handy Hardware Wholesale submitted papers for their much-anticipated plan of reorganization March 6.
The 1,300-member regional co-op filed for Chapter 11 bankruptcy in January. Whether Handy can return to its place as a meaningful and profitable player in the hardware business remains to be seen. This much is certain: What was once $27 million in member equity in Class A and Class B shares has vanished.
"The fact that the dealers lost that investment is really bad — a disappointing situation," said Morrie Aaron, president of MCA Financial Group, Handy’s hired-gun financial advisory firm that specializes in restructuring. "But the mission of Handy will continue. And that is to be a low-cost no-frills supplier focused on a high level of customer service for its members."
According to Aaron, the judge will review the plan for about 30 days. The plan will be presented to creditors and members around April. At that point, current members will have a 30- to 45-day window to purchase shares — at a price of $3,000. Aaron said he expects the plan to be approved and confirmed by the court in late June.
Meanwhile, there is no shortage of competing distributors that see opportunity in Handy land. Handy member Virgil Cox, of Cox Hardware in Houston and currently a member of Handy’s board, said he has been approached by reps of numerous distributors since Handy’s financial woes struck.
"They wouldn’t be doing their job if they didn’t come out here," said Cox, who is currently a member of Handy’s board. "Nobody has come in talking trash. In my experience, they come in and say, ‘We just want you to know we’re here.’ "
Cox remains loyal, and others remain loyal, too. Handy’s VP merchandising Mickey Schulte said the co-op has lost about 40 members as a result of the bankruptcy-related problems. Membership dipped from 1,350 to 1,310. "We’re very pleased that they have stuck with us."
However, some of those members have shifted their purchases to other distributors. "We have had many members move SKUs to the competition," said Aaron. "But we will expect and hope that a lot of that will come back to Handy over time."
According to Handy’s stats, fill rates have risen from the low 80% range in early March to the high 80% range in late March. Schulte said the co-op is working toward a return to its traditional mid-90% level of fulfillment.
Cox said fill rates have been getting better. "They have a valuable mission that they perform. That is getting bread-and-butter items to us at a very low-landed cost."
Several Handy members, who asked for anonymity, told HCN they too would support the co-op, as long as it can continue to deliver.
"We’re still waiting the situation out," said an executive of a multi-unit dealer. "Depending on what they present to the dealers, that will determine the strength of the group as it goes forward."
One Texas dealer said his company felt a "moral obligation" to stay with Handy. "If they can continue to supply, we will continue to buy from them," the dealer said. "Why wouldn’t we?"
Some Handy members say they have reasons to stay, as long as the co-op can deliver low prices and good service. Handy says a new board will be constituted as part of the reorganization. A new CEO is being recruited. And in February, Handy Hardware hired J.R. Ferguson, a former senior distribution manager for Office Depot, as director of operations.
"We’re still members," said an executive of another retail company. "And as far as I know, they are going to be able to come out of Chapter 11 with this new credit line they’ve secured. They simply invested in assets to grow at the wrong time."
That brings the story to the Meridian, Miss., distribution center. At the groundbreaking in 2009, it was described as a $20 million, state-of the-art facility poised to push the company to new markets in the Southeast. But Handy incurred more than $30 million of debt in connection with the building and operation of the facility, due to operational challenges and the economic environment at the time of opening. It closed Dec. 31.
"We have had many members move SKUs to the competition. But we will expect and hope that a lot of that will come back to Handy over time."
— Morrie Aaron, president of MCA Financial Group