Category Report: Hardware

While The Home Depot, Lowe's and even Menards certainly lead the hardware category by a large margin, independent chains have by no means been eliminated. In fact, three of the nation's largest co-ops -- Ace, Do it Best and True Value -- shifted their focus in 2006 and implemented marketing programs to keep the independent segment a strong contender."There's still a very vibrant and meaningful sector of the channel that's independently owned and run," says Dan Tratensek, editor and director of publications for Hardware Retailing magazine in Indianapolis, and an analyst with the North American Retail Hardware Association (NRHA). "There are still tens of thousands of independent owners and operators out there competing very effectively, and one of the ways they've been able to do that is by sharpening their retail focus."A consumer segmentation study conducted by True Value Co., Chicago, grouped consumers into six different categories based on what they value from a retail experience, as well as their attitude toward home improvement. One of those, the DIY (Do-It-Yourself) enthusiast, shops at the big boxes and specialty outlets, but these consumers are also making about 13 trips a year into hardware stores."We have a big opportunity there," says Carol Wentworth, vice president of marketing for True Value. "They're in hardware stores already, and what we want them to do is consider coming to us first for some of their smaller projects. We're trying to convince them to think about True Value differently.""With the increasing number of adults planning do-it-yourself projects in the coming year, it's important that marketers use the appropriate medium to promote their products and services effectively," says Jim Litwin, vice president, market insights at Vertis Inc. Results from the Baltimore-based provider of targeted advertising, media and marketing services' Customer Focus 2006 Home Improvement Study revealed that 56% of adults who are planning a home improvement project are the main decision-makers and do the work themselves. According to figures released in November from the Tampa, FL-based Home Improvement Research Institute (HIRI), retail sales of products used for residential repair and remodeling hit $311.1 billion last year, which represents an 8.4% increase over 2005. Richard Johnston, senior research analyst, attributes the unusually high spike partly to low interest rates, all-time high sales of both new and existing homes, and hurricane rebuilding efforts, but the forecast nonetheless seems promising for both retailers and product marketers in this industry.Co-ops Remain StrongTrue Value launched its new national marketing campaign last March. The repositioning effort was in response to years of consumer, retail and competitive research, according to Wentworth. "A lot of consumers told us in focus groups that starting the project right is so important, and they're willing to spend slightly more in a hardware store to get the right advice, the right product and to have an assortment of quality products to choose from."The co-op's new tagline is "Start Right. Start Here," supported by a complete kit of P-O-P materials, including banners and sign kits. The in-line, permanent pieces were designed to be product-specific, Wentworth says, and help customers differentiate between the different quality options available.Ensuring customers have the most up-to-date offerings and assortment of products is key, Wentworth adds. "We make sure we have very solid representation of the market-leading national brands. It helps the store get a higher ring, but it's really designed to give customers what they want when they come into a True Value store."Do it Best Corp. also implemented a new Signature Store Design program in 2006, marking its first major redesign in almost 30 years. "A lot of things have happened from a consumer standpoint in those years," says Bill Zielke, vice president of marketing and international development for the Fort Wayne, Ind.-based cooperative.Not only has the competitive landscape continued to change, but the stores began taking advantage of opportunities in their particular markets, so there wasn't a cookie-cutter answer anymore. "Developing a format that is flexible, customizable and scaleable was what we wanted to accomplish with this new store design," notes Zielke. The stores now reflect the practical needs of consumers -- such as convenience, value and expert advice -- as well as the emotional needs. "Our consumer research told us that folks go to stores looking for inspiration, they want to enjoy the experience and they want to feel fulfilled," he says.The co-op is using more lifestyle shots on signage, as well as photo murals and other merchandising components that change with the seasons. Also new are the company's Authority Towers, enhanced endcaps that instantly tell consumers what a particular store's strength is. "These towers say right away that this store is all about tools or all about plumbing, versus when the consumer would walk down an aisle and see 20 endcaps that were all the same, none of which made a very strong impression about what the retailer was known for." In its prototype store in Indianapolis, the redesign achieved its primary objective: Product sales over the same period last year were up 108%. A commonality among the big three co-ops is the desire to remind consumers that store owners are part of the community. Ace Hardware Corp., Oak Brook, IL, had its biggest year in the past decade last year, with sales up 8% from 2005."We open a new store every 48 hours," says Paula Erickson, director of advertising and brand development. "We want to send a strong message to consumers that not only are we unique because our retailers live right in the communities in which they do business, and they care about these communities; we're also continuing to grow.""Our strategy completely resides with the folks who own and operate our stores," adds Darcy Lee, circular production manager. A new program called "Faces of Ace" uses images of real Ace retailers from across the country. The images, which are changed monthly, are used on circulars as well as on all posters, endcap signs and other temporary materials.Launching this month and supported in stores is the company's Dream Ace promotion, which is a nationwide search to find America's top entrepreneur. The winner will receive a fully stocked and staffed store valued at $1 million. "We want to capture what we believe the magic of Ace Hardware is -- the fact that our retailers are independent businesspeople and true entrepreneurs, which is one of our largest differentiators compared to the chain retailers," Erickson says."The one thing we can do in our stores from a customer standpoint that they can never do in a big box store is meet the owner," says Do it Best's Zielke. "That's an important thing in selling." The company offers in its redesigns the opportunity to put a program putting up photo murals of each store's history.Working With RetailersKaren Wilson, corporate marketing officer for Hyde Tools Inc., Southbridge, MA, says when the company revamped its marketing and redesigned more than 500 of its products, its main goal was to work with retailers to get that message out to consumers."We completely redefined how we would help the big box and independent retailers keep attracting pros and those who want the highest-end tool in their tool box," she says. "We spent a lot of time training retailers on how to increase unit sales. The more we support it with merchandising and signage, while helping the stores see how it works, the better off we'll be. The word 'collaboration' would be the highest word in my mind."Quarter pallets, counter displays and 3-in-1 or 2-in-1 kits have paid off for the company. "The new image at retail has created a lot of energy and our market share growth has skyrocketed because of the presentation in the retail setting," she says. "There's no question that giving retailers a clear definition of our brand and helping it be visible on the shelves has made a huge difference both for the retailers that are carrying it and for Hyde.""We've found a good deal of success with getting displays in when we work together, propose proactive ideas and show innovation," agrees Linda Feldman, director of marketing services for ICI Paints in Strongsville, OH. "We'll work through all the kinks and have pretty in-depth discussions about codes, although we understand those up front based on the conversations we've had back and forth. We adhere to their [The Home Depot's] requirements and make the modifications necessary so it's the best thing it can be in-store."The paint company was recently recognized by The Home Depot with an innovation award for its launch of Team Colors, a series of paints created to match the colors of a variety of sports teams. It's being supported with P-O-P and other collateral.Brad Williams, senior manager of in-store advertising and communications for The Home Depot, says a promotion in September paired the Atlanta-based retailer with hundreds of product manufacturers in a collaborative event.The entire store was focused on innovations throughout the home, highlighting hundreds of new and old products alike. Some were featured on endcaps, others down the aisle. "We pointed out individual SKUs as well as subclasses of SKUs within a given space that were innovative to that department," he says.The products highlighted were chosen by the retailer and then certain manufacturers were asked to participate in an endcap or special merchandising offer, a celebrity clinic or a product demonstration. "We went to them and said, 'This is what we want to do in this space, we want your support and here's what we want from you.' It was the heaviest media, advertising and in-store presence we've ever collaboratively put together for an event to highlight innovation."Satisfying all RetailersRetailer-specific programs are now commonplace in the hardware industry. "We're spending more time customizing, but it's worth it," says Cassie Donnelly, channel marketing manager at Ideal Industries, Sycamore, IL Even when three vendors share a given bay, she says, "You're not necessarily seeing those brands, you're seeing the category. The retailers are promoting the categories, and it's more about working with your competition when those pieces are being developed, because you're sharing that space." ICI Paint's Feldman says her company approaches its merchandising differently in its independent paint dealer and co-op locations because they're shopped differently than a big box store. "It will still have the overriding brand strategy, theme, brand character and brand essence, but we'll modify it so it's more appropriate for that venue."But that's not to say the company doesn't plan for efficiency. Oftentimes, there are a lot of similarities in the guts of a unit, Feldman says. "The furniture might be a little bit different, but we'll use the same tooling for, say, the chip pockets that hold the paint chips. Whenever possible, we try to develop much of the same hardware so there are some commonalities in the piece's parts, but when we put it together, it may look different."When considering programs for the big box stores, Melissa Heisler, merchandising and communications manager for Schaumburg, IL-based ITW Brands, says her team has also made a conscious effort to present the company a bit differently in each retailer. "We understand that they're trying to go toward a different customer, so we tend to focus on different things for different accounts," she says. "Even though they all want to help selection, there may be different ways to get to that information."For a company like Moen that merchandises eight bays of faucets (220 to 240 total) in a big box location, the merchandising team's No. 1 priority is to make the shopping experience easier. According to Todd Teter, vice president and general manager, U.S. retail, for the North Olmsted, OH-based faucet manufacturer, some programs are proposed by his company and some by the retailer. "Ultimately, they're making the choice, though, and there's a certain set of requirements we need to execute once they make that choice."For the smaller independents and hardware retailers, the team at Moen strives to maximize the space where the products are displayed while still giving consumers a wide selection. "It's the same fundamental concepts that we execute with our bigger customers, but we're executing them so they're store-appropriate for our hardware customers," Teter explains. "It's not different; we're just shaping it in the right way so we maximize the productivity for our customers."Communicating With ConsumersAlthough marketing to women has become more of a focus in past years because of women's influence in purchase decisions and their willingness to take on some projects, the marketers we spoke to for this article say it really comes down to the product. Trish Doede, marketing development manager for Andersen Corp., Bayport, MN, says, "We target both men and women because we tend to find buying our products is more of a joint purchase decision. Men tend to want to kick the tires and look at the functionality, while women want to look at the beauty of the product."Four-foot, fully contained alcoves with graphics and hardware accessories are replacing the former swing-rack way of merchandising the company's patio doors in 500 Home Depot stores this year as part of an exclusive agreement with the retailer."The alcoves are fully lit, and they merchandise the product better than just putting it in an aisle," says Doede. "The other advantage is they're not on the aisle, so they're clear of forklifts and tend to stay in much better condition." Graphics show customers the various options available and give them the information to customize their product. A take-home brochure on the display provides additional information. The company's new custom-sized insert windows will also go into stores this year merchandised in educational alcoves. "We're becoming increasingly more sensitive to our messaging to be on target with each category, subcategory, and down even to the individual items we're promoting," says The Home Depot's Williams. "We're paying very close attention to who our core consumer is for every given item. We know that when we're speaking about bath decor, the message is dramatically different than for bulk nailing supplies, and not only does the design layout change, but the boldness of it, where it goes in the store, and especially the language that we use."No matter what the message, one fact is consistent for all manufacturers: Bilingual copy is required on all packaging and P-O-P, especially in the big box stores. "We actually go one step further and make our product trilingual, because we also sell it in Canada," says Tom Barton, national accounts representative for Klein Tools in Lincolnshire, IL. "If you want to sell your product in Canada -- and both Lowe's and Home Depot have Canadian branches -- you either set them up with a bilingual French/English SKU, or you make all your product trilingual. In Canada, there are actually police that come around and, if your product is not in French and English, they kick it out of the country."Major initiatives are also in place to target the Hispanic market, which now accounts for more than 20% of all contractors. "Statistics say this segment remains the fastest-growing group amongst professional tradesmen," Barton notes, "and they're extremely brand loyal and spend a lot of money.""Their growth and ability to spend, their desire for quality housing, their desire to do the work is great, and that energy has to be supported," adds Hyde Tools' Wilson. In fact, it was a focal point for Hyde's redesign. "It was critical because we communicate to professionals around the world, and they have to be able to quickly go in and buy their product and get out the door." Using more photos and less wording on packaging has been a natural response for some marketers. "We have a lot of very small packages, so we try to keep the words off because there are certain requirements for that, too," says Ideal's Donnelly. "In the past couple of years, we've gone with more pictures and icons, things that speak to everyone, versus trying to put it in a language."Where are the Digital Solutions?It would stand to reason that an industry like this would benefit from retail media to help manufacturers educate consumers, but both sides agree that there are some major roadblocks standing in the way.Has the hardware industry moved toward RFID or other ways to measure the effectiveness of the merchandising being put into stores? "Yes and no," says Hardware Retailing's Tratensek. "Our association did a study a few years back in which we measured the effectiveness of different merchandising techniques. This industry in a lot of ways embraces technology, but it's slow to creep its way through the entire industry, so I don't know that anybody on a widespread basis is doing that.""We're constantly open to what digital solutions can do for us, but the trouble is that we're not yet convinced it solves any significant problem for the customer, or that it's worth the investment," says The Home Depot's Williams. "We're not hearing anybody in the industry saying, 'Wow, we put these digital signs in and it increased our sales by X%.' As an industry, we're struggling with how to best use the medium. I think we all feel confident that it's a significant innovation that we'd like to use if we could just find out what problem it would solve for the customer."Two realities in the big box stores, Williams also points out, are forklifts and the noisy environment. "Anything we do would have to be significantly reinforced or it would be damaged, and of course, that's a huge investment. Secondly, our stores are a lot louder than other environments, so either the audio of a digital solution would have to be significantly more advanced so it could be directed to the listener, or the volume would have to be increased, which is when the annoyance factor starts to play in.""It just doesn't seem to fit in with what we're trying to do here," adds Do it Best's Zielke, "but we think there are probably some opportunities. As a co-op, when rolling out programs we have to think about how we can make it flexible, customizable and scaled to the different sizes of our stores."Cost, space and holding consumers' attention all play a role in why Ideal hasn't implemented a digital solution, says Donnelly. "A lot of times the retailer can't give up the selling space, and even if they could, because our products are so technical, customers aren't going to stand there and watch it for a long time," she says, adding that the company instead directs consumers to its website for research and training.

Category Report: Hardware

P2PI MEMBERS

JOIN P2PI

Related Images

Business Topic

Company

Market Segment