DISTRIBUTORS/CO-OPS

Westlake paints a picture of growth

BY HBSDealer Staff

Westlake Ace Hardware announced it is the first hardware retailer to offer the full line of Magnolia Home by Joanna Gaines Premium Interior Paint in its store. Personally crafted by Joanna Gaines, interior designer and nationally recognized home renovation expert from HGTV’s “Fixer Upper,” the line of 150 interior paint colors were designed by the Kilz Brand to help do-it-yourselfers recreate her hallmark “modern farmhouse” style.

The move is part of Westlake's continual effort to find ways to distinguish itself from competitors and big box stores, while providing a compelling shopping experience, according to Westlake CEO Tom Knox. “One way we do that is by offering highly localized, unique and stylish products that help our customers in new and exciting ways,” he said.

Along with offering other product lines like Magnolia Home by Joanna Gaines Paint and Stihl power equipment, Knox noted that Westlake places a premium on the quality of staff it employs and the service they provide to customers.

The retailer's growth strategy combines quality products with helpful employees, he said.

“Our customer promise to be the best, most helpful hardware stores on the planet wouldn’t be possible without our knowledgeable and service-oriented associates," he said. "The passion they show for their jobs comes to life every day when they interact with customers, and offer advice and product recommendations. As such, we are always creating ways to engage and develop them to their fullest potential, and create an atmosphere that’s attractive to future associates."

Westlake Ace Hardware, the largest member of the Ace Hardware co-op, has added 13 stores since 2015, bringing their total number of stores to 98 in Iowa, Kansas, Missouri, Nebraska, North Carolina, Oklahoma, Texas and New Mexico. According to Knox, that kind of consistent growth will likely continue in the coming years.

“To fuel the expansion of our national footprint, we will continue to pursue acquisitions and organic growth plans that make sense for our customers and business," Knox said.

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Ace draws up battle plans

BY Ken Clark

Atlanta — The military metaphors flew like bullets on a battlefield here at Ace's Spring Convention general session.

Weapons, enemies, battle plans, blitzkriegs — even a cross-section illustration of the WWII French Maginot Line — all served as symbols of the challenges facing hardware stores in 2017.

Marshaling all of these concepts, CEO John Venhuizen promoted sound business (and military) strategies — know the enemy, find their weakness and attack them relentlessly.

He also tackled service, convenience, and quality — "these are the three battles we've got to win," Venhuizen exhorted.

While sounding the alarm to rally its troops, the co-op also celebrated its financial strength. Ace Chairman Jim Ackroyd pointed to running success stories, including four consecutive years of increased customer transactions, seven consecutive years of increased same-store sales, and five years in a row of net new store growth.

He added that 2016 produced the co-op's strongest balance sheet yet, while the co-op's warehouse dividend grew to 5.18.

Meanwhile, the retail battle rages on. Diving into military history, Venhuizen described the failed French Maginot Line defensive fortification from WWII as a classic example of "fighting the last war," and he encouraged dealers to prepare for new threats — most prominently, Amazon.com.

In the Ace military analogy, Amazon plays the role of the blitzkrieg lightning attack.

"Folks, this is quite arguably the single most disruptive business in retail history," Venhuizen said, explaining that almost half of everything bought online is bought from Amazon.

Amazon's biggest weakness, he said, is they don't have local owners embedded in the communities they serve.

"Amazon doesn't have 5,000 stores," he added. "It would be a big mistake if we didn't exploit that. We've got to win the battle of convenience, and it's under attack."

Venhuizen pointed to recent success in the grill category, where promotions, strong selection of leading brands and an assembly-and-delivery program combined to boost grill sales significantly. The result of focus on quality and convenience is two consecutive years of stealing market share in this important category.

Venhuizen encouraged new store openings. "We need more stores with great owners," he said, adding that 98.5% of new stores are working and growing. The co-op's new Ace-to-Ace acquisition program allows dealers to tap into their capital stock to facilitate acquisitions.

And in a message designed to promote the independent hardware store as the channel through which vendor partners can build their quality reputations, Venhuizen described the big boxes and Amazon.com as “places that premium brands go to die."

Executive VP John Surane added his own advice: "Retail is as hard as it has ever been, and we realize how many fronts you're trying to battle on. My wish is that we make the next three days in Atlanta famous for something. Put a stake in the ground."

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LBM Advantage sees more ways to grow

BY Ken Clark

Orlando, Fla. — LBM Advantage CEO Steve Sallah says it was clear that the merger of PAL and ENAP would create business advantages for members.

But one of the pleasant surprises, he said, is the growth in the co-op's business acumen. "The skill sharing has been important," he said. "There were skills we had, and skills they had, sales skills that have benefitted the combined company."

That sharing of skills was on display at the LBM Advantage Annual Meeting and Trade Show, the second such event that combined the forces of ENAP and PAL.

"The mechanics of the integration are done, but we still have more ways to grow our synergy," he said. "We're about 80% of the way there."

And with one merger out of the way, the co-op has another in the works with Smithfield, N.C.-based Independent Builders Supply Association. If all goes according to plan, with board approvals, that merger could take effect in the fourth quarter.

Across the LBM industry, the landscape is changing with companies like U.S. LBM Holdings and Kodiak Building Partners engaged in acquisition plays, and Wall Street-backed BMC Stock Holdings and Builders FirstSource deep into their own integrations. But the competitive focus has held relatively steady.

"By and large if you ask our dealers who their competition is, they will name three other independents in their region," he said. "The independents have their customers, and right now it looks that customer has stayed with the independents."

At the Orlando convention, LBM Advantage rolled out a slogan to reflect its strength in numbers — a "National Buying Power" banner. The idea is to dispel the perception that independent yards have weaker relationships with vendors.

"We're not promoting ourselves, we're promoting that our dealers can buy as well as anybody else," said Sallah, who described the co-op's purchasing power at the $2 billion level.

"The merger has allowed us to improve 100 programs," he said. "They're not improving them 10 points, but everything got a little better, and nothing got worse."

One of the cross co-op learning opportunities took place during a panel of deal discussion on niches explored by a variety of dealer members.

"Everybody came out of the recession with a slightly different flavor than they had previously," he said. "If they didn't adapt, they probably didn't survive."

Across the membership, Sallah sees moves into commercial business, moves into turnkey installed sales, and even into niches as varied as firearms and store-within-a-store consumer electronics.

For single location dealers, There also exists a very clear growth path in the form of multiple locations, he believes. As a rule of thumb, it takes about 15 people to get achieve the first $5 million in sales for a typical lumber dealer. Getting to the next $5 million can be achieved with a lot less.

"We're all for the independent lumber dealer," Sallah said. "And we still have places to grow."

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