John Caulfield, Contributing Editor
vol. x, #44, November 1, 2004

IN THIS ISSUE: • TruServ in U.S. strives for "Lexus-like" service • Co-ops take lion's share of U.S. wholesale pie • TruServ Canada develops "best practice" store • TSG wants to emulate BMR, ILDC • Canadian show adds seminars

* * * * * * NOTE: Dollar amounts are stated in the currency of the country from which the story originates. — Michael McLarney, Editor & Publisher * * * * * *
"Why don't you get a toupee with some brains in it!" — Moe Howard ("Moe" of the Three Stooges)
CHICAGO — While the renaming of TruServ Corp. to True Value Co. won't happen until January 1, 2005, several initiatives are already well under way, including programs to ensure the long-term viability of independent dealers by helping them appeal to their own retail customers.Pam Lieberman"We're painting a picture for the future, where we want to be the best retail hardware stores for the DIY enthusiast customer segment," says Pamela Forbes Lieberman, president and CEO of TruServ Corp. According to Lieberman, the strategy is a two-pronged one that begins right in the warehouse. Achieving excellence on the wholesale side requires "putting together initiatives that have resulted in industry leading fill rates," she says. Combining that with the right assortments — and low prices — makes for a winning retail formula. Besides being an effective wholesaler, TruServ is focused on serving the members. "We have to hone processes for rolling out retail programs for our members," she says. "For example, a program under way right now is a one-call resolution center, where our members call one party within the co-op, and that person takes [their issue] from beginning to end and owes the response to the member. That way, the members don't have to call any other parties in the building." Effectiveness is directed to member support in the stores, as well. As Lieberman says, it's vital to give dealers tools to win at retail, and store modernization is at the top of the list. "We find, as members make their retail structures exciting for the consumer to shop, there's a 17% pop in sales. "Consumer data that we looked at shows that what consumers want is a great layout with fast in and out, and expert friendly service as well."
WINNIPEG — TruServ Canada unveiled its new "Best Practice store" program to 600 dealers at its recent Fall Market. The new program reflects the member-owned hardware wholesaler's retail focus and is designed to test ideas on all related areas of store operation.One program that's being tested is the "True Value Zone," where well-priced seasonal products are featured on a weekly basis right at the front of the store. "Our long term objective is to use this program to develop new tools, programs and ideas that will help our members increase their ability to compete in today's retail world," said Ray Falkenberg, vice-president, sales, operations and member relations. Three stores have been chosen to launch the program, one for each of TruServ Canada's national banners — True Value Hardware, Country Depot and V&S stores. The True Value and V&S stores recently completed their renovations and both held "Renovation Sale" events in late September. "The best practice store is there for us to test anything that has to do with retail operations. What we're really trying to do is get better at helping our retail members." Best practices will help dealers measure success, not just through sales, but by measuring traffic, closure rate, and average basket size. "If you're not closing 85% or more of your customers coming in, then you're losing opportunity, you're letting business go out the door," Falkenberg says. "We are very pleased with the results to date," he continues, adding that the Country Depot renovation begins this month.
SPECIAL REPORT — Only a few decades ago, America's 40,000-plus hardware and home improvement retailers were being served and supplied by more than 550 full-line hardware wholesalers—plus thousands of smaller specialty distributors.Today, the number of full-line wholesalers has dropped dramatically, the demise of those others brought about in large part by the tremendous growth of just three wholesalers — all dealer-owned — and by the remarkable rise of the big box giants. Wal-Mart's rise as the world's largest retailer, which stocks an extensive line of hardgoods, has also been responsible for thousands of small stores closing or failing, and with them, the wholesale distributors that supplied them. While nearly 100 wholesalers remain, many of them are specialty wholesalers, and the industry actually is dominated by six firms, five of them dealer-owned co-operatives, with Ace Hardware at the top of the list. The exception is Orgill, which remains privately-owned, and ranks in fourth place. Today, these six wholesale distributors account for $8.6 billion in sales to their retailer customers. Of that, the top three move $7.5 billion worth of products to their member customers (source: Do It Yourself Retailing). Dealer ownership encouraged concentration of purchases and operational efficiencies, delivering to member-owners lower costs for goods purchased as well as the lingering profits of the wholesale operation. It also encouraged offering multiple ways to buy, so independent retailers could better compete with larger chain store competitors, with programs such as drop-shipments direct from factory to store, but billed through the wholesaler; or pool-buys brought into a single shipping point and then redistributed to individual retailers. Group advertising coordinated by wholesalers also enabled stores to convey more effectively their messages to consumers with colorful, professionally prepared advertising. The concept of dealer ownership has been exported around the world to other countries, but only in Canada and Australia has it attained the kind of success it achieved in America, though it also is strong in New Zealand and more recently in South Africa.
MISSISSAUGA, Ont. — Canada's newest buying group is slowly, but surely, establishing itself as a viable option for dealers who specialize in commodity supply.The Signature Group (TSG) is holding fast at nine member dealers, but expects to add another four by the beginning of 2005. And that's getting near the ideal size envisioned for the new group by its founder. "I don't believe we'll ever be more than 15 in number," says Doug Skrepnek president of TSG. "I'd like to have 13 by January 1." He refers to the discussions he has had with a number of dealers whose business is primarily selling gypsum, insulation, steel and other building materials directly to contractors and builders. Then, he says, growth within the group will come either from the dealers themselves as they grow their respective operations, or from "diversification of product lines." Though, he notes, "even that's limited, as we don't ever want to be lumber buyers." But what kind of a group does Skrepnek envision? "I see continued consolidation, and I see the groups that can direct volumes being the winners. They will persist." He believes that even combining existing groups, such as the rumoured consolidation currently occurring among two Matreco members (see last week's issue—MM), won't offer advantages unless those dealers really make their purchases in a unified way. "Otherwise, they're booking volumes that won't benefit the supplier." That effort to deliver orders from the members — and value to suppliers — is what Skrepnek believes will be key to TSG's success. And he looks to existing groups that already deliver that kind of value, such as Le Groupe BMR and Independent Lumber Dealers Co-operative, as the ones for TSG to emulate.
MISSISSAUGA, Ont. — The Canadian Retail Hardware Association, and its new partner, Messe Frankfurt Inc., have announced some new features to the repositioned Canadian Hardware Show, which has been renamed Hardware + Home Improvement Expo & Conference (H2X Canada).H2X Canada will be held February 19-22, 2005 at the Toronto Congress Centre, near the airport. As part of a morning program, the CEOs of two of Canada's major home improvement retail groups will speak. Robert Dutton, president and CEO of Rona inc., will speak on Monday, February 21, and Bill Morrison, president and CEO of TruServ Canada, will speak on Tuesday, February 22. Attendance at these talks is included in the registration for H2X Canada. H2X Canada will also offer a seminar program on the day before the show, Saturday, February 19, aimed at retailers, retail store staff, manufacturers and sales agents. Topics will include: winning retail strategies, building community relations, risk management, dealing with the municipal government, hiring and firing tips, loss prevention and best practices. Store tours in the Toronto area are also being organized as part of the seminar program and participants will have the option of attending either the afternoon sessions of the conference or taking the store tour. Stores in the tour will include Elte Carpet, Summerhill Hardware and Ginger's Boutique, as well as a new LCBO store.
TORONTO — Canadian Tire Corp. opened the doors last Friday of two new format 20/20 stores in the GTA last Friday. One store is at the former Canadian Tire distribution center at 1019 Sheppard Avenue East in North York (beside the Ikea), and the other is also on Sheppard Avenue, but in the east end in Agincourt. The stores feature new designs, layouts, and product categories and significantly expanded space. (We'll have more for you on these stores next week—Michael).TOWSON, Md.— Sales of home improvement products helped Black & Decker improve its third-quarter profit. Net income was up from $74.4 million to $112.5 million, while earnings from continuing operations rose from $73.2 million a year earlier to $111.3 million. Sales from continuing operations increased to $1.28 billion, from $1.12 billion a year ago. Excluding the effect of acquisitions, sales were up 9%. Sales and operating profit in the Power Tools & Accessories unit had a 6% increase in sales, while profits were up 24%. Consumer products sales, however, were down. The recently completed acquisition of Pentair Inc.'s Tools Group is expected to produce $65 million of cost savings. SAN JOSE, Calif. — When it comes to white goods, Sears still claims it has more than double the market share of its closest rival (that would be Lowe's — MM), but it's feeling the heat, so it's adding appliances to four of its Orchard Supply Hardware stores in this state. These stores are now carrying Amana, GE, Frigidaire, Kenmore, Maytag and Whirlpool. Major appliances include refrigerators, washing machines, dryers, dishwashers, freezers, countertop microwaves, over-the-range microwaves, and washers. MISSISAUGA, Ont. — Dynamic Paint Products has acquired Legebokoff & Son Import/Export. The family held business, based in Burnaby, B.C., has been a Dynamic distributor for many years. The deal is expected to shave time off deliveries to Dynamic's Western customers of paint sundries. VANCOUVER — West Fraser Timber Co. reported 3Q earnings of $78 million on sales of $700 million. That's up from earnings of $3 million on sales of $484 million in the same period in 2003. For the first nine months of 2004, earnings were $171 million on sales of $1.85 billion. This compares to earnings of $9 million on sales of $1.45 billion for the first nine months of 2003. ROCKFORD, Ill. — Amerock Corp., a division of Newell Rubbermaid, will lay off 450 workers and close the doors on its cabinet hardware facility here in 60 days. Although production is closing — a victim of outsourcing — Amerock's admin services, including distribution, customer service and HR, will remain for an indefinite term. VANCOUVER — Canfor Corp. had net income of $201.6 million for the third quarter of 2004, up from $17.8 million in the same quarter of 2003. Year-to-date net income was $377.2 million, compared with $51.2 million in the same period in 2003. Operating income in the third quarter was $216.6 million, which is an $8.6 million decrease from the previous quarter, but $174.7 million higher than in the same quarter in 2003. While market conditions continued to be strong, prices fell off through the latter part of the quarter and were further reduced by the impact of the strengthened Canadian dollar on US dollar sales. Canfor says the integration of Slocan is proceeding successfully, with anticipated synergies by the second quarter of 2005.
Lesley Fulton has joined Wolf Gugler & Associates Ltd. as senior associate, working out of the Toronto office. Her background includes 12 years in the executive search field, recruiting for large and small clients on high-volume recruiting projects, as well as individual high-level confidential searches. Wolf Gugler & Associates has established itself as a primary executive search firm for the North American home improvement retailers and suppliers, with offices the U.S. and Canada. (Canada: 416-386-1719; U.S.: 405-848-3006)At Catalina Lighting Inc., the designer, manufacturer, and distributor of lighting products for residential and office environments, Jim Scott, currently managing director of Catalina Canada, will take on the additional responsibility of senior vice-president in charge of North American sales, effective immediately. In this newly created position, Scott will work out of Catalina's Miami and Toronto offices, reporting to CEO Bob Varakian.
New home sales in September were 1.206 million, up 3.5% from August and up 7.0% from one year ago, says the Commerce Department. That's the highest level since May and the third-highest on record. Also: the National Association of Realtors says sales of existing homes jumped by 3.1% in September.Durable goods orders were up slightly in September, by 0.2%, held back by another sharp fall in commercial aircraft.
Housing starts will reach 226,800 units this year, says CMHC, as favourable economic factors carry starts to a 17-year high. However, residential construction activity is expected to slow in the months ahead, as rising prices and mortgage rates will result in lower housing demand. Starts are forecast to remain high, though, at 210,200 units in 2005.
"If we expect our members to be giving 'Lexus-like' service to the consumer, then we need to be mirroring that on the co-op end." — Pamela Forbes Lieberman, president and CEO of Chicago-based TruServ Corp., on her company's commitment to provide the same kind of high quality service to members as they are expected to give to their retail customers.

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