| IS HOME DEPOT LATE IN THE ASIAN EXPANSION GAME? |
SPECIAL REPORT — Home Depot made big news in recent weeks with its announced plans to enter China. The move shines the spotlight clearly on the fastest growing economy in the world, as China is being transformed from a nation of producers to one of consumers, as well.However, in a country where the nascent housing market is going through the roof and the economy grew last year by almost 10%, Home Depot is certainly coming late in the game.
According to Jim Inglis, a former Home Depot vice-president who now consults with some of the leading retail groups around the world, Home Depot's first chance to enter China came a decade ago when it helped establish the first western-style home center chain, called Home Way.
"Home Way was modeled after Home Depot, and Home Depot was instrumental in the development of the stores," says Inglis. "They had a chance to move in then, and it would have been a tremendous opportunity."
Inglis was well known for at that time for being a strong supporter of Asian expansion. But during his time there, any intentions to expand into the Orient never got beyond a letter of intent to move forward. "Now they're going in at a late date and at a much higher cost."
 Over the past 10 years, competition has heated up. Home Way is owned by parent company Home World, which has 30 hypermarkets and eight home centers throughout China. Orient Home, another Chinese operation that is privately held, owns multiple outlets in Northern China, while Home Mart is owned in part by the Shanghai government. Other retailers, all from the Europe Union, have targeted China for growth. OBI in Germany and U.K.-based B&Q both own about a dozen stores each there.
(Jim Inglis will be a featured speaker at the Hardlines Conference Series, September 8-9, 2004 in Toronto. For more info, contact...xx) |
| 84 LUMBER OPENS "TEST" DISTRIBUTION CENTER |
| AUBURN, N.Y. — 84 Lumber is moving into internal distribution for the first time. Last week, the nation's largest privately held pro dealer began using a 10,000-sq.ft. former window reload center here as a DC serving 11 of its stores and yards in Rochester and Syracuse, N.Y. That facility, which sits on five acres, distributes roofing and vinyl siding products, confirmed Jeff Nobers, a company spokesman.That facility will provide the stores, which average only around 20,000 sq.ft., with much-needed inventory storage area. In addition, the DC, which 84 Lumber plans to expand by 4,000 sq.ft. over the next two weeks, will have its own fleet of boom trucks for jobsite delivery.
"This is a test to see how these systems work," Nobers told Hardlines. He added that 84 Lumber was looking to expand this concept to other markets, but couldn't say where or when.
This move makes sense, as 84 Lumber continues to expand its store operations and geographic coverage. By the end of this year, the 470-unit company expects to have more than 500 stores opened. Nobers said 84 Lumber is projecting its sales for this year at $3.4 billion, which, if realized, would represent a 36% increase over 2003 revenue of $2.5 billion. |
| INDEPENDENTS MAKE GAINS ON BIG BOXES |
| SPECIAL REPORT — While big boxes have been steamrolling through new markets, smaller independents have been considered the main targets — and victims — of their predatory expansion. And while those big boxes have voraciously gobbled up market share for the past decade, a new study reveals that the rate of their expansion is beginning to slow.The new findings, the results of a study done by Hardlines for the latest issue of its sister publication, Hardlines Quarterly Report, reveal that independents are regaining ground lost during the past decade, as they begin to increase the market share they lost through the last half of the '90s.
Independent dealers, as represented by the dozen or so buying groups to which most independents belong, grew their market share by 9% in 2003, almost double the increase made by big boxes in Canada.
The first sign of a reverse trend was in 2002, when the rate of big box expansion appeared to start slowing. At the same time, independent dealers in LBM buying groups began to show growth that exceeded the overall growth of the industry for the first time in recent years.
(The growth of big boxes vs. independents appears in the latest issue of Hardlines Quarterly Report, which features a special report on buying groups in Canada. This is an amazing report, with everything you need to know on the size and growth of the buying groups.—Michael) |
| HOME DEPOT SUPPORTS ARMED FORCES, BUSH |
| SAN DIEGO — Last Thursday, Home Depot loaded nearly 100,000 tools and other home-improvement related products onto nine tractor trailers, the first leg of what would be an 8,000-mile journey for that merchandise to military installations in Iraq.The delivery of more than $1 million worth of goods to American troops stationed in that war-torn country fulfills a commitment that Home Depot had previously made to the U.S. armed forces. The shipment, which will be handled by the U.S. Army and Marine Corp., also includes thousands of letters from Home Depot associates. More than 1,800 employees are reservists or National Guard members who have been called to active duty in the military conflict, according to Bob Nardelli, Home Depot's chairman and CEO. "We have a special interest in making sure all of the U.S. troops know that we appreciate and support them."
The retailer continues to support its associates who are engaged in the war by equalizing and extending pay and benefits while they are called to active duty.
Nardelli and his company's support of the Bush Administration, which links the war in Iraq to its larger anti-terrorist crusade, is equally unambiguous. The Atlanta Journal-Constitution reported recently that, in the month of May, Home Depot employees were, aggregately, the largest source of contributions to the Republican National Committee. Thirty-six employees kicked in more than $250,000. That same month, the newspaper reported, Nardelli held a fundraiser at his home in the Atlanta suburb of Buckhead, attended by President George W. Bush and several leading area business executives. The event raised $3.2 million, $25,000 of which Nardelli himself donated. |
| LANOGA DIVISION ADOPTS ENERGY SAVING INITIATIVE |
| JACKSON, Wis. — While some dealers are attracting the wrath of eco-terrorists (see also this issue—MM), others are taking the initiative to reduce energy consumption — and save money.A renovation at a United Building Centers outlet here became a test "lab" for energy saving lighting systems that ended up reducing the electrical bill for the 13,000-sq.ft. showroom by about $1,000 per month.
United, one of five divisions of Lanoga Corp., is a chain of 20 yards in 20 states. The store in Jackson ended up trying a new lighting system from Orion Energy Systems, based in Plymouth, Wisc., that replaced more than 200 fluorescent tubes with fixtures that cut energy consumption almost in half. The Orion lights used specially formed, highly reflective surface to "harvest" light that would ordinarily be wasted in a fixture, by directing it downward for greater illumination.
According to Dan Rudolf, manager of the United Building Center, payback on the retrofit is expected within two years. The Orion fixtures are warrantied to last 20 years, during which time they are calculated to save enough energy to equal 1,087 tons of carbon dioxide and four tons of sulphur dioxide, or the equivalent of saving 131,742 gallons of gasoline. |
| DEALER-OWNED BIG BOXES ROLL OUT DOWN UNDER |
 MELBOURNE — Mitre 10, the dealer-owned hardware banner, is focusing more on women shoppers, along with tradesmen, as it rolls out its new Mega big box format. The Mitre Mega rollout follows the lead of Mitre 10 in New Zealand, a similar dealer-owned group with a loose affiliation to the Australian group. In New Zealand, Mitre 10 is opening its third big box, in Hornby, the biggest yet, next month. It weighs in at 11,000 s.m. "We'll have six in place by Christmas," says Patrick Dobson, business manager for décor from the New Zealand group.Meanwhile, Australia's first Mega store opens this month in Melbourne. Mitre 10 is Australia's second-biggest hardware player, right behind the publicly traded big box retailer, Bunnings, which is owned by Wesfarmers. However, Mitre 10 has big dollars backing it, as well. With a AU$20 million investment from Investec Wentworth Private Equity, the group intends to build 30 new stores over the next five years. Of that, $5 million will be put towards establishing Mitre 10 Mega Property Trust, which will own some of the properties. The trust and the big box business will become a publicly traded entity, enabling it to raise more capital as expansion proceeds over the next three or four years. This mirrors the expansion of Rona Inc. in Canada, another dealer-owned group that went public at the end of 2002 to finance expansion of its own big box format. Before the infusion of public money, Rona's big boxes were almost exclusively dealer owned, as with Mitre 10.
Bunnings has only recently entered the New Zealand market and recently opened a new store in Hamilton, a city about 65 miles south of Auckland. Mitre 10 is attempting a pre-emptive strike with its own dealer-owned Mega stores. But competition will really heat up between the two retailers when they start going head-to-head in the same markets. According to Greg Robertson, editor of New Zealand Hardware Journal, observers are waiting to see if Mitre 10 will have deep enough pockets to keep up with Bunnings. He believes Bunnings will count on competing Mitre 10 Mega owners being forced to blink first.
"The hope [by Bunnings] is that the competing Mega owner will have no option but to turn the store's reins back to head office and therefore put off any other members who may be considering the Mega format," Robertson told Hardlines. |
| SEARS ANNOUNCES SITES FOR SPECIALTY OFF-MALL STORES |
| TORONTO — Sears Canada Inc. has finally announced where it will put up its first off-mall specialty stores. The stores, first announced last fall, represent a move by the mass merchant to target specific markets with more focused product assortments appealing to the do-it-for-me customer. Five of the six announced locations will open by this fall, and another by spring 2005, all in Ontario. Two of the formats are Sears Appliances & Mattresses and Sears Coverings. All six locations are based in Ontario.Sears will open four 12,000-sq.ft. Appliances & Mattresses stores: in Stoney Creek, Burlington, Scarborough, and Oshawa. Two 10,500-sq.ft. Coverings stores, which will offer window coverings, flooring, custom wall-to-wall carpet, area rugs, paint and wallpaper, will be located in St. Catharines and Mississauga.
"As the most extensive multi-channel retailer in the country, Sears is in virtually every market," said Mark Cohen, chairman and CEO of Sears Canada in a prepared statement. "However, with the absence of new shopping mall growth, our new specialty format store strategy will bring our key product categories and décor solutions to a growing customer segment who shop in conveniently located power centers on a regular basis."
Sears plans to open 30 new format stores, including one called Sears Wellness, by the end of 2005. They will be primarily located in power centers and high-traffic strip malls. |
| ECO-TERRORISTS CLAIM RESPONSIBILITY FOR STOCK LUMBER BLAZE |
| WEST JORDAN, Utah — The Earth Liberation Front, a militant environmental group, took credit for a recent fire that local firefighting officials estimate caused $1.5 million in damages to Stock Building Supply's yard in this Salt Lake City suburb.The U.S. Federal Bureau of Investigation, which is investigating that claim, has linked ELF, as the group is known, with arson and vandalism dating back to 1996 (even though ELF claims it wasn't formed until a year later), whose damages have been assessed at more than $100 million. Lumberyards, ski lodges, and S.U.V. dealerships have been among ELF's targets in recent years. The FBI and the Department of Homeland Security have identified ELF as an indigenous terrorist organization.
According to an e-mail statement it sent to the Associated Press and KSL news radio, as well a statement it posted on its website, ELF targeted Stock — the industry's largest pro-oriented home improvement dealer — because it claimed that Stock had ignored warnings to fix forklifts that ELF asserted were emitting more pollution than diesel engines would. The initials "ELF" were painted on the side of Stock's building.
The group also hinted at further attacks if its warnings weren't heeded: "They are destroying the ozone and posing a serious health risk to nearby humans and living animals. If the consequences of early Monday morning [June 13] are what it takes to bring their negligence to the attention of the media and the people of the world, then it is well worth it and we will continue in our mission to stop large companies from destroying the environment." |
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| COMPANIES IN THE NEWS |
| SAN FRANCISCO — A class action suit that charges pay discrimination on the part of Wal-Mart is just one more way the giant retailer is being assailed of late. The decision in a San Francisco court allowed the suit to include about 1.6 million current and former female employees. They complain they weren't paid as much as male "associates" and were unfairly denied promotions. Wal-Mart has denied that it discriminated against women and says it will appeal the decision.
TORONTO — Canadian Tire Corp. is expanding its sourcing operations in the Far East with the installation of a new office in Shanghai. The office is in place and will be up and running by fall. The giant hard goods retailer already has offices in Hong Kong, Tapei and Seoul.
WINNIPEG, Man. — Sam's Club, the member-owned warehouse club division of Wal-Mart, will open its first Canadian outlet outside of Ontario when it sets up shop on 13 acres at the Linden Ridge Shopping Centre, according to the Winnipeg Free Press. Wal-Mart Canada currently has six Sam's Clubs in the Southern Ontario market.
LONDON — Tesco, the giant U.K. grocery retailer, has launched an online legal store. The do-it-yourself legal store will make basic legal services available, thanks to deregulation of legal services in the country. Tesco hopes to attract a million-plus unique visitors to the site in the first year at www.tesco.com/legalstore, where they will find a wide range of DIY law kits and everything from downloadable legal forms, many of them free, to a directory of solicitors.
COLOGNE, GERMANY — Innovative products from the garden furniture and garden structures segments will get special treatment at this year's spoga+gafa trade show, September 5-7. Koelnmesse, which owns the show, will be cooperating with the trade journal markt in grün to stage the first-ever "Garden City" Innovation Forum. The Forum will give trade visitors from all over the world an overview of innovative products for this market. Exhibitors from the garden furniture and garden structures segments will be invited to participate. Some 2,450 suppliers from approximately 60 countries will present their products and services, covering all aspects of the garden, camping and equestrianism sectors at the show.
CITY OF INDUSTRY, Calif. — Ace Hardware Corp. has signed a deal to have Global ePoint Inc., a provider of digital video surveillance systems, supply, through its Perpetual Digital division, delivery of Digital Video Recorder (DVR) Surveillance Systems, with point-of-sale interface, to Ace.
WASHINGTON — The Associated General Contractors of America, the nation's largest construction trade association, has called on Secretary of Commerce Donald Evans to temporarily lift tariffs imposed upon Mexican cement products. The request came in light of domestic price increases and reported shortages of cement in many parts of the country. Cement demand has increased more than 8% in the last six months as the U.S. economy has improved. Duties on Mexican cement, which have been set at $57 per ton, have exacerbated tight supplies in all or parts of 23 states, even as U.S. cement mills are operating at full capacity. Cement prices are expected to increase by as much as 15-20% over the next few months as domestic mills, according to a report from the Portland Cement Association. |
| PEOPLE ON THE MOVE |
| Brian Sweeny has been appointed vice-president of sales and marketing for the Maxtech Consumer Products Group. He had worked at Maxtech previously, as sales and marketing manager from 1996 to 2002. Most recently, he served as national sales manager USA for IPEX HomeRite Products. (519-885-5336) |
| U.S. MARKET INDICATORS: |
| New home sales were up a healthy 14.8% last month to a record seasonally adjusted annualized rate of 1.37 million, says the U.S. Commerce Department. That's up from a revised annual rate of 1.19 million. New home sales were especially strong in the Northeast — up about 53.2% in the Northeast to 121,000 — the biggest gain since March 2003. Sales were also strong in the South, where they rose about 20.3% to a record 663,000, the biggest gain since July 1995.Durable goods orders were down in May, sending mixed messages about the apparent recovery of the U.S. economy. Orders for durable goods fell 1.6% last month after a revised 2.6% decline in April. Excluding transportation-related orders, however, orders were off a smaller 0.7%. |
| CANADIAN MARKET INDICATORS |
| Inflation was up in Canada last month, due mainly to increased gasoline prices increases were the main factor pushing the 12-month increase in the Consumer Price Index from 1.6% in April to 2.5% in May. On average, gasoline prices were 30.3% higher in May 2004 compared with May 2003. In the last month alone, they rose 13.6%. Excluding energy prices, the 12-month change in May was 1.3%, a slight increase from the 1.2% seen in both March and April.Wholesale sales were up 1.0% in April, as wholesalers sold $37.2 billion worth of goods and services. After a poor start in the first two months of the year, sales have made up lost ground, as this was the second consecutive monthly increase. The strong performance of the past two months contrasts with the previous 12, when wholesale trade was generally lacklustre owing to declining motor vehicle sales. |
| WHO'S ON FIRST: THE HARDLINES BUYING GROUP ORG CHART |
| Tired of trying to figure out which group is affiliated with which? Can't tell the difference between TIM-BR Mart and Tim-BR-Marts? Want to know how Groupe BMR can belong to Mutual and to Matreco, but fellow Matreco members aren't part of Mutual? Which buying group does Home Hardware belong to? Does AWARD belong to Matreco, or BMR, or both?Confused? Don't despair! All this and more is revealed in this year's BUYING GROUP ORG CHART, included in the latest issue of Hardlines Quarterly Report. Plus: a complete report on the country's buying groups — strategies, expansion plans and more. More Info |
| HARDLINES PARTNERS WITH ONLINE RECRUITER |
| Hardlines has partnered with canadianretail.com to offer the industry an easy and affordable way to place job openings on the Internet. To post a single job on canadianretail.com at the special price of $150.00 plus GST for 60 days, just click here to Register and Post a Job. Click here to read More about the program. |
|
John Caulfield, Contributing Editor
vol. x, #26, June 28, 2004
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