Opportunity shines in bulb aisle
Federal efficiency regulations have spurred change in the light bulb industry, and that is good news for hardware dealers whose expertise can set them apart and help grow market share.
Nate Jones, store manager at Yoder’s Shipshewana Hardware, Shipshewana, Ind., is seeing that firsthand. Since a Do it Best reset in February, the 36-ft. lighting aisle at Yoder’s has illuminated in more ways than one. "I don’t have exact sales numbers yet since the reset, but we have done really well with the assortment," he said. "It makes it look like we are in the business of selling light bulbs. The reset was fabulous."
The category is no longer as simple as buying a package of 60- or 100-watt incandescents off the shelf. What’s forcing widespread changes in lighting is the Energy Independence and Security Act of 2007. The law leaves three alternate technologies for most residential lighting: halogen incandescents, CFLs and LEDs — all of which are more efficient than old-style bulbs while lasting up to 50 times longer.
Because of the influx of CFLs and now LEDs, the light bulb category is no longer a commodity, said Do it Best CEO Bob Taylor. "This gives the independents a great chance to remerchandise the category, educate your staff and capture a bigger segment of that business. And I think it’s going to be a more profitable business, too."
Following his store’s reset, Jones marked down his remaining incandescents by 50%, "just to get it out of here," he said. His lighting aisle consists mainly of CFLs and halogens, with about 2 ft. of LED bulbs.
Jones said the trend of energy-efficient, longer-lasting, albeit more expensive, light bulbs has changed the conversation in his store and given his salespeople a chance to educate the shoppers. "It’s not just about attractive displays that we put up — it’s about understanding the new language," he said. "You can’t talk about watts anymore; it’s lumens that we talk about. Kelvins is another conversation piece, because we are talking about color temperature. There’s a whole new way of thinking."
And shopping, as customers accustomed to choosing 60- and 100-watt bulbs now look for "equivalent" bulbs that determine similar light outputs for incandescent, CFL and LED bulbs. This smorgasbord of shapes, styles, output, color temperature and energy dovetails perfectly for the smart hardware store. "It’s definitely an opportunity for the hardware store, provided the [associates] are properly trained," said David Bigham, Orgill’s merchandise manager, electrical.
LEDs: No one disputes that LEDs are destined to become the leading bulb. Exactly when it supplants CFLs is conjecture. At Home Depot, LEDs are the fastest-growing segment of its light bulb business, according to Mark Voykovic, light bulb merchant, who said that during 2011, the LED category doubled in sales volume and is now more than 14% of all light bulb sales. "We have seen over a 500% increase in the sales of LEDs (2010 to 2012). These numbers clearly demonstrate that customers are gravitating toward the high-quality, energy-efficient lighting product despite its higher-than-average price point," he said.
While price is currently an impediment to LEDs reaching critical mass, Voykovic said that as demand increases and technology advances, prices will come down. Home Depot is marketing a new Cree brand LED and Eco Smart 40W equivalent for $9.97 (compared with $20 a few years ago), and a Cree LED 60W equivalent for as low as $12.97. "Combine that with local rebates, and the Cree LED can be the same price as an incandescent light bulb," Voykovic said.
In most cases, though, the price delta between CFLs and LEDs is significant. Bigham said LEDs "are sure not going to take over anytime soon — there is still a pretty significant difference from a cost stand-point from CFLs to LEDs."
Bigham sees LEDs and CFLs coexisting in the marketplace based on the need for different applications. "That’s where asking the right questions with the customer in your store is important," he said.
Voykovic sees a parallel between the adoption rate of new-age LED light bulbs and some consumer electronics products. "Just like flat-screen TVs, LED bulbs started selling at a higher price and are now dropping as technology and manufacturing become more efficient," he said. "Competitive pricing and new innovations in light bulb technology will be essential for survival in the lighting industry moving forward."
Tom Boyle, chief innovation manager, GE Lighting, said that based on consumer research, the size and shape of the LED bulb is important to shoppers. "As LED technology continues to evolve, producing the same quality of light with smaller bulbs will allow consumers to be more creative with lighting," he said. "LEDs can change the way we light our homes."
Short term, Boyle predicts that prices will continue to drop as efficiencies are realized in drivers and chips, thereby leading to wider adoption.
["It’s definitely an opportunity for the hardware store, provided the [associates] are properly trained."]
— David Bigham, Orgill’s merchandise manager, electrical
At Golden Hammer event: ‘Retail is Detail’
Las Vegas — Ray Griffith kicked off the Golden Hammer retail awards presentation with a joke: "Does everyone have an hour? I have a long speech." He got an even bigger laugh when he called out a moderator for his use of the word "entertainment" to describe the panel discussion.
But the concepts that Griffith and the other retail honorees shared during the 29th Golden Hammer Awards ceremony held here during the National Hardware Show contained a serious tone as hardware stores appear to be poised to pounce on a swelling industry recovery.
Griffith, the recently retired CEO of Oak Brook, III.-based Ace Hardware Corp., entered the Home Channel Hall of Fame. He was joined on the ceremony’s retail-award panel by Rocco Falcone, CEO of Springfield, Mass.-based Rocky’s Ace Hardware, the 2013 Retailer of the Year. Also participating was Chris Borrego, general manager of Kearney, Neb.-based Builders, the HCN Tools of the Trade Award honoree.
The three retail representatives showed the proper amount of sportsmanship by congratulating each other and also sharing the recognition with the vendors in the audience and — most emphatically — the team members back at the home office and in the stores. They also discussed some important topics from the front lines of retailing.
On managing change
Rocco Falcone: The only thing consistent now is change. And if you go back to the time period when [my grandfather] ran the business, very few things changed. It would be a big event if he would take on three new products in a year. So I look at that and I think he would be amazed where Rocky’s has made it in 87 years of history."
On the ingredients of a successful hardware store
Ray Griffith: "I think we all believe in the same thing. I think the entry to a successful hardware or home center business is a great location, loaded with great product, in stock and helpful people. And if you put that all together, you have a very good store.
"But for a great store — that requires innovation. I mean, there is a reason customers want to come into your store besides just to repair a toilet. They want to see what’s new. They want serendipity. And the greatest stores on the planet are those that embrace innovation and new product lines."
Falcone: "I think [the people in the stores and the store managers] are the folks out there who really deserve the recognition. They’re the frontline people. They set the attitude in the store. They set the morale. And they kind of drive the business and drive the box."
On growth opportunities
Falcone: "At every meeting we talk about our game changers — paint, outdoor power equipment, pet supplies and tools. We’re driving those categories for our business, and paint is probably the largest one where we see the greatest opportunity."
Chris Borrego: "In the Midwest, we’re seeing significant strength in cabinet sales."
Griffith: "We’re big on paint. We think it’s got a long runway, and it’s our signature department. And I think the other department that has evolved in my lifetime is outdoor living. Holy cow — that has a lot more potential and a lot longer runway. And the third thing is you have to be intrigued by what Tractor Supply, Rural King and some of these other guys are doing in the farm and ranch segment."
On navigating DIY and pro customers
Borrego: "As [Builders founder] Myron [Andersen] says, ‘We’re a slave to two masters.’ At times, it does put you in conflict with the needs of both your customers with the limited resources you have available. We look for the advantages and the commonalities between both customers. We try to elevate our level of service to both of those — particularly our design centers. We have customer service reps that focus on the retail walk-in customers, and we have customer service reps that deal strictly with builder customers. Two different needs, two different wants — but we have a solid approach to both."
On energizing the customer
Falcone: "We were founded in 1920. What’s happened over that time is some of our customers have left us. Meanwhile, we have changed our business dramatically. We’ve done a lot more in terms of branding, getting national brands, including Benjamin Moore, Craftsman and Stihl. We wanted to get our old customers back in the store. And that’s where ‘Rediscover Rocky’s’ comes in.
"So we had to reenergize those people to come back and see what’s new. We instituted much more aggressive pricing, our endcaps, our merchandising. The theme is to come back to the old place and rediscover Rocky’s. We’ve always been here. You’ve missed us and we missed you. And we’re glad you’re back. It’s been an extremely successful campaign for us."
Borrego: "Companywide we probably have a dozen or more software programs that we utilize, whether it be for designing homes, estimating, engineering trusses, designing cabinets, so on and so forth. One of the initiatives we have is working to integrate all of these systems into one. You put the mobile applications with the tablets and it’s quite a challenge, but we feel like it’s an opportunity for project management working on integrating all these systems into one. To provide the customer with the ability to get more detailed quotes faster and quicker ahead of their competitors so they can bring business home and bring it back to us."
Griffith: "I think our industry is struggling with technology right now from the retailer perspective and from the consumer perspective.
"Many of you are spending a lot of money chasing Twitter and Facebook and social media, and now showrooming, and how is it going to work in our business when people can compare prices with their iPhones and smartphones.
"We’re never going to beat Amazon at its own game, but I think it’s important for the co-ops and the retailers to stay abreast of how the consumer is changing."
On the role of the co-op
Griffith: "I believe the co-op plays an important role in stimulating innovation and encouraging entrepreneurial spirit for the successful store."
Borrego: "The exchange of best practices and innovative ideas allows us all to exceed the expectations in our markets.… The folks at Do it Best Corp. sponsor numerous roundtables we belong to and provide us with the tools and resources to meet the demands of our marketplace."
On sales growth
Borrego: "The Midwest has seen its share of wet days, and despite that, we had a really strong April. We made a major investment in outdoor furniture with the help of our Do it Best folks, and the encouraging thing is that — even considering the weather — we’re still selling a lot of outdoor furniture.
"Also, there is a lot of housing going up. There is a lot of remodeling activity. And I would say it’s fairly consistent across all customer segments. It’s broad. And that’s probably the most encouraging thing we see."
Falcone: "The spring was about a month later than it was last year. So we’re starting to see the seasonal business coming in. Our comp stores are growing and at a fair pace, and it’s nice to see things going in this direction."
On a career in the hardware industry
Griffith: "I couldn’t have landed in a better spot, being a kid from southern Illinois who grew up on a farm and had the chance to lead two different companies: Coast to Coast stores and Ace Hardware. And participating with our great retailers and doing whatever we could do to advance this industry has been quite an honor. I’ve been very blessed."
"I think our industry is in a really good position. It’s time tested."
— Ray Griffith, former Ace Hardware CEO, Hall of Fame honoree
"Truly it’s the folks in the stores who make it happen."
— Rocco Falcone, CEO, Rocky’s Ace Hardware, Retailer of the Year honoree
"Innovative ideas allow us all to exceed expectations."
— Chris Borrego, executive VP and GM, Builders, Tools of the Trade Award
Golden Hammer Winner Stat Box
Retailer of the Year
Rocky’s Ace Hardware
• Springfeld, Mass.
• 33-store and growing neighborhood store format is strong in New England and Florida
• Family owned and operated since 1920
Tools of the Trade award
• 3 locations in Nebraska, 1 in Colorado
• Operates warehouse home center format, lumberyard and designer showroom
• Founded in 1977
Hall of Fame honoree
• 19 years at Ace Hardware
• Former CEO of Coast to Coast
• Retired March 31
Sales leaders: It’s in the cards
Costello’s Hardware, Home & Garden of New York’s Long Island has three stores ranked in the top 20 of Ace Hardware’s leading gift card sales stores.
It helps having high-traffic stores in densely populated areas, said David Faulhaber, marketing coordinator for the 19-store chain based in Deer Park, N.Y. It also helps having a high-ticket, "giftier" merchandise mix that includes outdoor living, holiday-related products, power tools and housewares.
The same can be said for Simpson Ace of Sumter, S.C., where an eclectic mix of merchandise is a factor in the company’s league-leading Ace gift card performance: $65,000 in the most recent year.
In-store merchandising matters, according to the Ace marketing team. A key area for gift card visibility is near the checkout. But the experts recommend promoting a gift card program throughout the store, with gift card displays, end-caps and signage.
The math is on the side of the gift card retailer, said Jody Allen, manager of Ace Rewards. "The average load of an Ace gift card is several dollars higher than the average redemption, which results in additional consumer visits," she said.
Success requires more than marketing, however. A major factor in Costello’s ability to sell stored value cards is the ability to satisfy them in other areas, said Faulhaber.
"We have a loyal customer base nurtured over time by delivering outstanding customer service," he said.