Whether it’s e-commerce, supply chain woes, self-checkouts, or drone deliveries, the retail home improvement industry will feel the impact of a number of important trends heading into 2023.

Some of those trends were presented by Hardlines’ own Michael McLarney at the 2022 Hardlines Conference, which was held in the fall. Drawing from the most recent Hardlines Retail Report, McLarney outlined some of the forces affecting dealers and suppliers.

#1. E-Commerce. This is the obvious one, said McLarney, but it’s impact must not be underestimated. He cited some of the incredible e-commerce gains retailers have made. Canadian Tire saw online sales increase 280 percent during Covid. Its online sales penetration through the middle of 2022 was around eight percent. Likewise, Home Depot saw online sales penetration reach more than 13 percent.

However, McLarney pointed out, independents are not capitalizing on their digital potential. Drawing on data from a Hardlines survey earlier in the year, McLarney shared that online sales by independents represent as little as one or two percent of sales, with many citing zero online sales. While some significant exceptions have emerged during Covid, those independent dealers doing double-digit sales in e-commerce are rare indeed.

McLarney challenged the industry to improve its online presence for independents, while stressing the need to maintain a physical retail space that provides a destination and solution centre for customers. In the end, he said, “It’s not how you tie in your e-commerce with your retail, it’s the other way around.”

#2. Improving the supply chain. Many retail groups have invested heavily in improvements to their own supply chains, including DC systems and processes. For example, at the time of the Hardlines conference, Home Hardware had just put the finishing touches on its new warehouse management system. The new system gives Home the ability to ship 150 dealer orders daily and 1,500 orders weekly through three distribution centres across Canada. And the retailer can now ship customer orders to the store or to their home.

Other groups made investments in their DCs, including Lee Valley Tools, at its main DC in Ottawa, while Federated Co-operatives Ltd. built a new LBM DC near Regina early in 2022.

Some major retailers made hacks of their own to get through, investing directly in the supply chain themselves. Canadian Tire invested in part ownership of a port in British Columbia, while Home Depot leased ships of its own to improve its supply of product from overseas.

#3. The last mile. The costliest and most logistically challenging part of the route from the DC to the customer’s front door is that so-called last mile, McLarney said. Smart retailers are making alliances with service companies that specialize in getting products to the customer’s door in innovative ways.

FedEx is using bicycle couriers to make deliveries in Calgary, Ottawa, Windsor, Toronto, and Vancouver. In the U.S., Walmart is using drones in 34 cities, while Amazon has been testing robots that travel along sidewalks to get parcels to customers.

#4. Loyalty programs. Once considered a value-add, loyalty programs are increasingly central to retailers' marketing strategies. As online sales have grown, so has the importance of keeping customers aligned virtually.

Canadian Tire’s loyalty program, called Triangle Rewards, provides an umbrella for all of Canadian Tire’s banners, including Marks and PartSource. The retailer claims to have 70 percent of Canadian households as Triangle members. And Home Hardware made the news this fall when it switched to Scene+ after terminating its relationship with Aeroplan.

McLarney observed that a good loyalty program has to be integral to a retailer’s message. He referred back to Canadian Tire’s overwhelming success with the Triangle Rewards program. “Like e-commerce and customer service, a loyalty program can’t be a tack-on piece of your brand. It has to be a living part of it.”

#5. The contractor customer. “Many years ago the head of a buying group asked me why Hardlines reports on Home Depot so much. I told him it was to keep his dealers informed about all the ways the giant retailer is going after their contractor business,” McLarney said. “Pros account for only four percent of Home Depot’s customers, yet they make up 45 percent of its sales.”

Meanwhile, Lowe’s Canada has aggressive contractor programs of its own, such as its VIPpro program that offers special pricing and hours, supported by an app that lets pros keep track of their orders and billing with Lowe’s.

Home Hardware also has a dedicated pro program, while banners like Kent, Peavey, UFA, and Federated Co-operatives have all been making changes to better accommodate their contractor customers.

#6. Private brands. Proprietary labels have been the cornerstone of good retail for decades. But their importance has sharpened through Covid. At Canadian Tire, private labels account for almost 45 percent of sales. The company plans to launch 12,000 new private-label products across all its banners by 2025.

Home Hardware relaunched its Benchmark label during Covid and has added more brands for everything from lifestyle and kitchenware products to power tool lines for pros. But most hardware and home improvement retail groups are making similar investments in their own brands.

#7. Human resources. “HR issues have loomed large during Covid. Your people are your biggest variable cost and the biggest investment you can make,” McLarney said. The critical importance of taking care of workers has been highlighted exponentially over the past two years. Hiring and wages remain major concerns, he observed, “while issues concerning worker well-being have come to the forefront during Covid.” Hardlines even launched a newsletter of its own to address HR issues within the industry.

(This info was pulled from our 2022 Hardlines Retail Report, a massive study of Canada’s retail home improvement industry. It gives proprietary data on the size and annual growth of the industry, along with analysis of the top players in the industry. A must-have for any marketer preparing for 2023! Click here now for more info!)

Independent dealers now testing self-checkouts in select stores

JL’s Home Hardware is a three-store operation in Guelph, Ont., about an hour west of Toronto. Those stores, a building centre and two hardware stores, are the first Home Hardware stores to get self-checkout technology. But dealer-owner Andre Belisle said that the store is not going to replace humans with machines.

“The self-checkouts are already tested and fully operational as an added service and option for customers who wish to use it,” Belisle said. “Our full-service checkout option will always remain. Our intention is to improve our service for our customers and that includes providing options for any customer’s preference.” The stores are continuing with full-service checkouts while the new format is tested.

Acceo, a retail technology provider based in Montreal, installed the self-checkout units at JL’s, as well as at RONA Matériaux Magog Orford, a building centre in in Magog, Que. While many Lowe’s Canada and RONA corporate stores have received self-checkouts from another supplier, this is the first RONA independent dealer to get the technology.

The installations both went smoothly, according to Marc Leblanc, Acceo’s senior vice president of home and building supply industry ERP.

Lowe’s seasonal and pro sales continue to buoy its quarterly results

Lowe’s growth in the third quarter of 2022, which ended Oct. 31, highlighted the strength of various segments of the business, including the inherent strength of the pro customer and the continued acceleration of online sales.

Sales were fed by both DIY and contractor customers, with comps up overall three percent for the quarter. According to Bill Boltz, Lowe’s EVP merchandising, the company expects that DIY momentum to continue through the fourth quarter as well. Pro business continued to surge, with comp pro sales up 36 percent over two years of Covid. He shared the details on a call with analysts following the release of the company’s Q3 results.

Comp sales of hardlines products at Lowe’s were down somewhat as the company saw spending return to more normal patterns. However, this does not mean homeowners were shifting their discretionary spending. In fact, selling events around holidays have remained strong, driven by product innovation in those categories. For example, consumers were spending $300 and up on specialty Halloween decorations. And Christmas is rolling out with more expensive trees as consumers show a willingness to trade up.

Strong sellers in the quarter were appliances, paint, kitchen and bath, and flooring. A deal with Sherwin Williams in the U.S. will result in the rollout of a new colour wall across all Lowe’s stores south of the border through 2023.

Lowe’s latest business outlook pegs total annual sales for the full 2022 fiscal year (which includes a 53rd week) at between $97 billion and $98 billion, compared with $96.2 billion in 2021. Comp store sales are expected to be flat to negative one percent.

The Western Retail Lumber Association has named Steve Buckle, CEO of the Sexton Family of Companies, as the recipient of its 2022 Industry Achievement Award. The award will be presented on Jan. 19 during the WRLA Building & Hardware Showcase in Winnipeg.

LM2 Marketing has announced the appointment of Mike Hachey as its newest partner and account manager, starting this week. Hachey brings 30 years of industry experience to the role including a series of merchandising leadership positions. At the same time, the company said that VP and account manager Richard Lépine will retire after 47 years in the hardware trade, while staying on in a consulting capacity.

At BMR Group, Caroline Dionne has been named VP, finance. A graduate of HEC Montréal, she continues to report to André Lavoie, EVP, shared services. Dionne joined the company in 2021 as senior director, corporate accounting, and was appointed senior director, finance, in August 2022.

At Home Hardware Stores Ltd., Chief Information Officer Gino Gualtieri has left the company. He’s been replaced by Chris Marinis, who has been promoted to the role of vice-president, information technology. He brings over 25 years of IT experience in the retail and transportation industry to this new role.

Michael Morris has been promoted to the position of SVP of sales at Derby Building Products. Morris started with Derby in January 2018 as a regional sales manager and was promoted to VP of sales in September 2019.

DID YOU KNOW...?

... the latest edition of Hardlines Dealer News is emailing to subscribers on Wednesday? Topics covered include the Canada Revenue Agency demanding to know from Kent Building Supplies which contractors spent more than $20,000 with them this year! Hardlines Dealer Newsis monthly and it’s free: click here to subscribe now!

AD Building Supplies - Canada (formerly TORBSA) is welcoming Velcan Forest Products as a new member, effective Jan. 1. Velcan has manufactured and supplied framing materials and prefabricated wood components for the building industry for some 30 years. It has two Ontario locations, in Ottawa and Oshawa.

Ed Bulley, owner of Ed’s Building Supplies in Fort Nelson, B.C., is the newest RONA affiliate dealer. Serving the area since 1955, the store will undergo a 10,000-square-foot expansion. The total retail space will be 17,000 square feet, with an 11,750-square-foot roofed lumber space and a 20,000-square-foot outdoor lumber yard. Over 400 SKUs will be added across different categories, such as lighting, flooring, and appliances.

Canac, the independent home improvement chain based in the Quebec City area, has received approval from the city of Magog, Que., for development of another store. It’s expected to open in 2024. Canac has more than 30 locations throughout Quebec.

The newest location for Wolseley Canada had its grand opening last week in Oakville, Ont. The 21,000-square-foot facility offers a full range of Wolseley Canada’s roster of plumbing and HVAC products. Vanessa Sawicki-Dunn is the manager of the Oakville branch. Burlington, Ont.-based Wolseley Canada has 220 locations.

Ace Canada has a new location in Arthur, Ont., as owners Doug and Barry Eidt opened their third Ace store this month. Under manager Brent Bowen, the 4,800-square-foot store includes a small farming section alongside pet categories and traditional hardware offerings. The Arthur location joins the Eidts’ Ace stores in nearby Mitchell and Exeter.

Lowe’s Canada’s PROvember campaign raised nearly $40,000. The campaign, held in most Lowe’s, RONA, and Réno-Dépôt stores, gave pro customers the opportunity to make a donation at checkout to support men’s health organization Movember Canada, which focuses on mental health, prostate cancer, and testicular cancer.

Home Hardware dealer-owner Kimberly Seguin-Gauthier is relocating her store in Essex, Ont., to a new, larger location. The store will involve a $13 million investment in the new site on 12 acres of land. According to AM 800, the local radio station, Seguin-Gauthier said she has plans to develop the surrounding parking area on the property with additional businesses.

Lowe’s Cos. has developed the next steps in its “Total Home” strategy. The retailer has plans for growth across five focus areas: deepening pro penetration, accelerating its online business, expanding installation services, driving localization, and elevating its product assortment. The moves are designed to enhance Lowe’s omnichannel capabilities and position it as a one-stop home improvement shopping destination. 

NOTED

Some 7-Eleven stores are testing licensed dining areas (Wow—your gobsmacked Editor). Seven locations in Alberta are expanding their “restaurants into licensed locations with dine-in seating areas” (according to the press release). The release assures us that 7-Eleven’s “adult customers can now enjoy freshly prepared meals from 7-Eleven Canada.” Those culinary delights [sic] include “7-Eleven's Crispy Classic Chicken wings, ‘hot from the oven’ pizza, as well as Alberta craft beers.” Remember, you read it in Hardlines! 

OVERHEARD...

“Technology is a huge accelerator. We can't react to change anymore; we have to get ahead of the curve. And if you want to know what's next, get to that young generation to teach you.”
—Tony Cioffi, president of Lowe’s Canada. He spoke at the 26th annual Hardlines Conference earlier this fall.