When the U.S. economy struggled in 2008, sales fell for most retailers. Although Ace Hardware Corp. also felt the pinch, the company found its niche as the need to maintain and preserve homes replaced building and buying, sending homeowners and contractors into its stores across the country.
In addition to paint and plumbing supplies, shoppers began to stock up on furnace filters, light bulbs and other impulse products — including candy and snacks. That’s where Ace’s Rob Savage, front end impulse merchant, saw an opportunity to build baskets.
“Our stores are attuned to the neighborhood. We have more than 70,000 SKUs overall in our retail support centers nationwide. We pride ourselves on being the most helpful hardware stores on the planet,” Savage says proudly. Ace finished 2013 with same-store retail sales up 4.3 percent. It also opened 152 new U.S. stores.
He knows the company’s approach to retail intimately. Savage joined Ace Hardware as an inventory analyst in 1989 after a successful interview at an Illinois State University job fair. “My father shopped at Ace, and it’s a big company with a small company feel,” he says. “It’s a strong brand, and I liked the people.” He was made assistant buyer of automotive in 1994 and worked in the paint and plumbing areas before being promoted to his current position in 2008.
Founded in 1924, the Oak Brook, IL-based company has more than 100,000 retail associates across all 50 states and in more than 60 countries — it boasted 2013 revenues of $1 billion. Ninety percent of Ace’s business is from do-it-yourself projects by homeowners, churches, schools and small businesses; contractors make up approximately 10 percent — a growing segment. According to Savage, the average transaction is $24, but he adds: “At the front-end checkout, we strive to add $1 or $2 to each transaction.”
Consumers are fiercely loyal to the brand: In 2013 it was recognized for the seventh consecutive time as “Highest in Customer Satisfaction with Home Improvement Retail Stores” in the J.D. Power & Associates’ 2013 Home Improvement Retail Store Study.
Because Ace Hardware has been a co-op since 1973, when it was sold to its independent dealer-owners, every store is different and tailors its merchandise to local shoppers’ needs.
Savage and his colleagues set direction for the stores, selecting SKUs for their 14 retail support centers, providing a strategic plan, negotiating item selection and providing marketing, promotion planning and Ace Show development.
He explains the company holds two closed buying shows each year, which more than 2,000 retailers attend. Savage and Sheila Peters, associate merchant, are responsible for the Impulse Area of the show, which features more than 60 vendors, including 20 to 25 candy and snack companies. “The shows are a great way to market new and existing products and inspire retailers to support the category,” he says. In addition, the Impulse Area features various models of front-end checkouts from which stores can choose.
Regular communication with the stores is done through ACENET, an internal online portal, which announces new items and deals, news about the upcoming Ace Shows, and developing trends in the category.
Typically, new candy and snack items are introduced to the retailers by Savage and his team, but occasionally items are discovered by local Ace retailers. Based on their success with shoppers, some of those items are introduced to all retailers.
Merchandising For Success
Store footprints vary; however, the average store size is 10,000 square feet. Front-end checkouts range from two to five lanes, depending on the size of the area.
Ace’s category management department offers downloadable planograms in two formats: straight checkout counters and grocery-aisle style. Both accommodate approximately 80 candy and snack items.
“Ace retailers have had an increased focus on front-end checkout in recent years,” he says. “They see the potential of candy and snack items to grow their overall sales and profits.” As a result, Savage’s department has increased more than 20 percent in two consecutive years.
“We haven’t had much success with healthy snacks,” he admits; however, the top national brands of chocolate bars, meat snacks and chips are best sellers throughout the chain, with salty snacks gaining momentum. Fun-size six-packs, theater boxes with a $1 SRP and laydown bags of bite-size candy also are popular.
Savage estimates 90 percent of candy and snack buys at Ace are impulse driven, and because the retailers can be personally acquainted with the people who frequent their stores, owners are encouraged to try new products and talk them up to shoppers.
“In the past three to four years, premium gourmet brands with $3 to $7 SRPs have taken off. Consumers have developed more sophisticated tastes and they want something different,” he says. “We’ve become a destination for hard-to-find brands. People buy them on impulse, then they come back to us because they can’t find them anywhere else.”
Although the stores do carry seasonal items, little space is allocated to them. “They’re not a big part of our candy sales, and most times the risk is not worth the reward,” Savage explains. Items that don’t demonstrate strong sales for several months are pulled from inventory.
Savage and Peters track POS data, warehouse sales, vendor data and trends in drug, automotive and mass channels. They also walk competitors’ stores and visit trade shows to stay current with industry trends. He uses the Sweets & Snacks Expo to find new vendors, inviting them to sell their products at Ace Shows.
“When we evaluate vendors, we want to be certain their lines are a good match for our stores,” Savage explains. “If we think a large number of retailers would support the item, we place it in the retail support centers or warehouses.”
Meeting with vendors and selecting items are only half of the team’s job. “We’re both buyers and salesmen. Once we bring products into our warehouses, we put on our sales hats and market these to the Ace retailers,” Savage explains. “Our expectation is that our vendors will partner with us to launch the new products.
“We’re willing to try new ideas, but we have to balance the risk-reward proposition. We have to be aware of the market, our competitors and specialty markets. When we see something that needs to be in our key retailers, we work with the regional managers to build excitement for the item,” he continues.
Retailing Is Changing
Savage says with some satisfaction that within the past six years, the average transaction size has increased, and candy and snacks have played a strong role in that growth.
Because Ace consumers are destination shoppers, the challenge Savage faces daily is finding ways to convert them to browsers by updating planograms, guiding retailers in using endcaps and displays more effectively, and using shippers to drive traffic to power aisles.
“Merchants have become more retail oriented in the past 10 years: their use of planograms and the category management department have grown, and they’re more focused on merchandising,” Savage says. “That makes merchants more conscious of how our choices affect retail execution.”