John Caulfield, Contributing Editor
vol. xi, #45, November 28, 2005

IN THIS ISSUE: • CanWel Hardware will leave the buying to TruServ • Matreco comes to an end • Bargain Building makes inroads outside Quebec • U.S. agrees tentatively to Nafta softwood ruling • RONA’S Dutton: why Lowe’s is good for business • Hudson’s Bay losses increase in 3Q • “Mr. Hardware” celebrates 90th • SpanCan realigns membership, adds TruServ • ILDC adds member * * * * * *

”Why a four-year-old child could understand this report. Run out and find me a four-year-old child. I can't make head or tail of it."–Groucho Marx (the greatest, 1890-1977)
Is this the end of Rico, I mean, Matreco?
CALGARY & LONGEUEIL, Que.–The Matreco buying group once had four members: Homecare, TIM-BR MART Ltd., AWARD, and Le Groupe BMR. But last year, the first one merged with the second, and the third is going to join them by year’s end. During that time, the fourth one had created a new hardware distribution company, with the first and third ones. That company was called Quincaillerie Matreco Hardware, and the alliance resulted in AWARD starting its own distribution company, which was fed by QMH. The QMH alliance even survived Homecare’s merging with TIM-BR MART at the end of 2004. Even though TIM-BR MART West never had a supply deal with BMR (it was relying mainly on Sodisco-Howden Group, now called CanWel Hardware), many Homecare members continued getting supplied by QMH, even after they joined TIM-BR MART West.Then, this past summer, TIM-BR MART came back to BMR to renegotiate the terms of the deal with its Ontario members. That deal, says BMR president Yves Gagnon, would end up making QMH simply another wholesale supplier for the TIM-BR MART members, something Gagnon couldn’t agree to. “They asked BMR to be a wholesaler and we are not a wholesaler. We sell only to members and give them back the rebate.”Gagnon severed his ties with the TIM-BR MART organization, and the QMH shipments were to end by Nov. 1. However, a number of TIM-BR MART’s Ontario dealers have continued to rely on BMR’s hardware supply capabilities, while they consider their options, either within TIM-BR MART or without. While all this was going on with the Ontario Matreco members, AWARD in Atlantic Canada was having troubles of its own. Unlike its Ontario counterpart, it rushed to install a distribution arm of its own, called AWARD Distribution Ltd. (ADL). But, by August 2004, AWARD’s distribution business was shuttered, putting an end to about $5 million in sales to QMH’s Atlantic region customers. Okay, so QMH is dead. But what about Matreco? Right now, TIM-BR MART is no longer negotiating within Matreco, even though both TIM-BR MART and BMR are members of Matreco. But the deal will wind down in 2006, and Tim Urquhart, president of TIM-BR Mart, expects his group to resign from Matreco sometime later in the year. By the end of the year, any ties his two merged members had with QMH will also come to an end. “We look to grow our business substantially with [CanWel Hardware] next year,” says Urquhart. “We’re looking at the demise of QMH and the addition of the volume from Homecare and AWARD that used to go to QMH. [CanWel Hardware] should be able to double their volume with us. “But,” he adds, “at the same time, they only represent about 50% of our hardware purchases.” The other half, which comes in the form of direct ship orders, will be negotiated through TIM-BR MART’s new alliance with ILDC under the hardware buying group IHDA. As for Gagnon at BMR, he wants his group to remain within Matreco, keeping the name–and the potential for the group–intact for future considerations. “I want to continue with Matreco myself,” he says. “I don’t want to leave Matreco. I am one of the founding members of Matreco.”
RONA’s Dutton: Lowe’s is good for business
MONTREAL–During a meeting with a group of investment analysts and journalists in Montreal recently, someone (inevitably) asked RONA CEO Robert Dutton about the impact of Lowe’s entry into Canada. The head of Canada’s second-largest home improvement retailer had some impassioned opinions about his company’s ability to compete against Lowe’s–and its announced plan to open six to 10 stores here in 2007.Lowe’s stated plan is to open up to 100 stores in Canada eventually. But regardless of the number, RONA has to be ready, says Dutton. “We have to manage this company like Lowe’s is going to open 100 stores,” he said. To do that, RONA will continue to open stores of different sizes, to suit the various markets it is growing in, with a continual emphasis on service. And in those RONA stores that wil compete head-to-head with Lowe’s, “We have to ensure that the shopping experience at our big boxes is very different.”Even though big box operators in both Canada and the U.S. are toying with smaller footprints, Lowe’s is expected to rely on its traditional large format for its initial entry into Canada. RONA, said Dutton, will continue building stores of all sizes, including traditional big boxes. “But we’ll build 30-40,000-sq.ft. stores and recruit smaller stores. We have to block all the mid-sized and small markets.” Dutton added that the announced entry of Lowe’s has been very good for his company from a recruitment standpoint, as concerns about increased competition drive many smaller independents to look for some sort of succession or support. The same thing happened, says Dutton, when Home Depot announced its arrival into Quebec in 1999. “When Home Depot announced its Quebec expansion, we recruited 50 new dealers in the months immediately following that announcement.” The Lowe’s news has been equally propitious. “The day after Lowe’s announced its expansion into Canada, we didn’t have enough people to answer the phones.”
CanWel will leave buying to TruServ under new alliance
VANCOUVER–The new alliance between hardware distributor CanWel Hardware (formerly Sodisco-Howden Group) and TruServ Canada Cooperative marries up a true wholesale distributor with a retail company. That, says Tom Donaldson, president and CEO of CanWel Hardware, and its parent company, CanWel Building Materials is the heart of the partnership. CanWel’s role will be restricted to shipping product–as “a pure distributor”–while TruServ will handle, he says, all aspects of managing the banners.“Part of the strategy of the alliance is that the functions of branding, marketing and product category management are being passed to TruServ.” Category management, he adds, includes vendor selection and approval of products from those selected vendors.Within that category management function, he says, TruServ will sit with vendors to handle all buying, “but CanWel won’t be sitting down there.” The distinction between the duties of the two companies becomes more crucial than ever, as TruServ Canada has been accepted into the ranks of SpanCan along with CanWel Hardware (see Companies in the news), a move that means TruServ will leave Mutual Hardware. With its focus strictly on distribution, Donaldson has had to deal with disgruntled dealers, as fill rates fell while CanWel Hardware converted to a new system. However, he says, the problems are finally behind CanWel Hardware. “Certainly, there were interruptions in our fill rates as we moved to a new system. But that’s all behind us. “In the last couple of weeks, the movement of “A” and “B” items is up to 95%, with “A” items shipping at 98% and “B” items at 96%. We’re aiming for an overall fill rate of 95%,” he says.
”Mr. Hardware” celebrates 73 years in the industry
PETERBOROUGH, Ont.–He celebrated his 90th birthday this past week. Fully 73 years of that life have been spent in the hardware/home improvement industry. He’s been known as Mr. Hardware and as Mr. Stanley; he’s given out more than 500 Gold hammers over those 73 years, and he’s personally received more than he can remember.He’s Les Groves. He spent a large part of his many years in this industry as a salesman for Stanley, earning the moniker “Mr. Stanley.” He even went on to write a column in Hardware Merchandising magazine under the nom de plume “Mr. Hardware.” Groves moved recently from St. Catharines, Ont., to his new home here in Peterborough, about two hours east of Toronto. When Terry Jenkins, co-owner of Chemong Home Hardware Building Centre, got wind of it, he recruited “Mr. Stanley” for the store’s grand opening here last week. Refusing to even take a chair to sit in, Groves spent the better part of an eight-hour day talking with customers, signing autographs and giving away souvenirs donated by Stanley. “I really enjoyed doing it,” says Groves. “I don’t feel like I’m 90,” he adds.
Bargain Building Materials continues growth outside Quebec
ST-ANTONIN, Que.-Materiaux en bas prix/Bargain Building Materials is increasing its penetration of markets outside its home province of Quebec with its latest opening. A new store has been established in Sudbury, Ont., representing a ground-up enterprise by an affiliate dealer. While the store had a soft opening Oct. 26, a grand opening is planned for sometime in January or February. Co-owned by France Ducharme and Daniel Moreau, it becomes the 23rd Bargain Building Material location in total – and the third in Ontario. The other two are located in the Ottawa-area communities of St-Isidore and Stittsville. The store marks a surge in openings for the privately held retailer. Three other stores have opened in as many months, with recent openings in Moncton and Woodstock, N.B., and Victoriaville, Que. Bargain currently has three models in its network: corporately owned stores, franchise dealers and affiliated dealers. Besides new stores like this one in Sudbury, the company recognizes the power of the independent owner and is actively looking for affiliate dealers to take over its remaining seven corporate stores.
Hbc’s losses deepen in third quarter
TORONTO–Hudson's Bay Co. reported sales for the third quarter 2005 of $1.63 billion, down 3.5% from $1.68 billion in the same period last year. The sales decrease reflects declines in most product areas, except fashion accessories, jewellery, housewares and pharmacy products. Same-store sales decreased 3.6% from the third quarter of 2004. The company suffered a loss before interest and income taxes of $73 million, compared with a profit of $1 million in the same period last year. Sales for the first nine months of the year were $4.70 billion, vs. $4.81 billion in the same period of 2004. The company reported that third-quarter results reflect primarily a decline in customer traffic over the first half of the year, even though basket-size was flat to slightly up. The sales drop during the nine-month period reflects declines in the Bay (excludes Home Outfitters) and Zellers, offset partly by an increase in Home Outfitters. Same-store sales for the first nine months decreased 4.0% at the Bay and 0.3% at Zellers.Some of the strategies Hbc is implementing to try and turn itself around include a big push on the company’s Designer Depot specialty chain, which is slated to grow to seven locations by the end of the year, and is expected to reach as many as 45 stores by 2010. Style Outlets are being installed in select Bay stores nationwide, with plans put them in as many as 30 locations. In addition, the “Power Buy” program will continue for all Hbc formats. The company will continue to go after a share of the appliances and furniture market with its “Big Ticket” initiative. That program has already been introduced into the Bay and more than 100 Zellers stores.
Renovated German trade show site readies for next Practical World
COLOGNE, Germany–The world’s largest hardware show will have new digs come this spring. The fairgrounds of Koelnmesse, which owns and operates Practical World–the International Hardware Fair/DIY’TEC (it may be the longest name, too!–Editor) have been completely overhauled, with the addition of four new Northern Halls, while the former Eastern Halls have been modernized and renamed the Southern Halls. In addition to about 75,000 m² of outdoor space, the four new halls will offer a total of about 80,000 m² of total exhibition space. The layout of the Northern Halls features large entryways and single-storey halls to allow for larger, higher exhibits. According to Koelnmesse, the new halls, with ceiling heights of 11 and 15 meters and support-free construction, will be big enough to accommodate large machines and commercial vehicles of almost any size. The newly renovated Southern Halls feature new catering facilities, renovated toilet facilities, the provision of wireless LAN connections and the links to the Trade Fair Boulevard, the Piazza and the new Entrance South. The modernization measures also include the creation of additional capacity for Koelnmesse’s outdoor areas, which, from 2006 on, will provide trade and industry with extensive areas for open-air product presentations in the proximity of the exhibition halls. The new Northern Halls will replace the Rhineside Halls, which will no longer be available for use beginning in 2006, because Europe's largest private TV broadcasting company, the RTL Group, will be moving into the historical halls. (For information on exhibiting or attending, contact Darrin Stern of Koelnmesse at 416.598.3343)
AJAX, Ont.–Spancan has announced the restructuring of the operations of its member companies, CanWel Hardware (formerly Sodisco-Howden), TIM-BR MART, and the Independent Lumber Dealers Cooperative. Spancan will now consist of two members, one made up of the alliance of CanWel Hardware and TruServ Canada, and the other of the buying group Independent Hardware Dealers Association (IHDA), whose members are of TIM-BR MART Ltd. and ILDC. Spancan operations will continue to be handled out of the Ajax location by Mike Daniels, general manager. In other news, ILDC has added a new member. Simcoe Block (1979) Ltd. in Barrie, Ont., will join effective Jan. 1, 2006. The contractor-oriented yard, a former member of TORBSA, becomes the 25th member of ILDC, replacing Totem Building Supplies, which was sold to RONA at the end of 2004. ILDC’s mandate is to have no more than 25 member companies in its ranks.VANCOUVER & LONDON, Ont.–CanWel Building Materials Income Fund has announced that it has entered into a distribution agreement, through its wholly owned subsidiary, CanWel Building Materials Ltd., with Emco Building Products Corp. The deal involves CanWel Building Materials taking over distribution of certain allied building products on behalf of Emco, namely Emco roofing products and wood fiber ceiling tiles. CanWel Distribution, a division of CanWel Building Materials, will provide the national logistics for this distribution agreement.BOUCHERVILLE, Que.–RONA continues to expand its dealer base, having signed five new affiliate dealers and opening one new store in the past several weeks. A major signing was an independent on Vancouver Island, Duncan Pacific Building Supplies, a three-store chain with about $43 million in sales. In addition, Calgary-based Totem Building Supplies opened its 17th store on Nov. 24th, in Lloydminster, Alta. It’s the sixth opening by the chain since 2001. The 51,475-sq.ft. outlet features almost 40,000-sq.ft. of retail space and a six-acre yard. Totem was purchased by RONA inc. at the end of 2004. PETALUMA, Calif.–The longtime owner of Yardbirds Electric and Plumbing, which operates 10 Yardbirds Homes Centers, reportedly has agreed to sell his chain to Home Depot. The Santa Rosa Press-Democrat, quoting sources it said were familiar with this transaction, reported that John Headley, Yardbirds’ 72-year-old owner, was in the final stages of negotiating with Home Depot to sell the company he founded in 1975. Yardbirds, with sales in 2004 of $185 million, was the 59th-largest home improvement retailer in the U.S. that year. MARYSVILLE, Ohio–Scotts MiracleGro has completed its acquisition of the industry's No. 2 supplier to the wild bird category, a $700 million retail sector in the U.S. Scotts paid $77 million for Gutwein & Co., which markets its product under the Morning Bird brand. Gutwein generates about $85 million in annual revenue from a wide range of retailers that includes Wal-Mart and Sam's Club. But Jim Hagedorn, Scotts' CEO, noted that no clear leader has emerged in this category, and that his company would work on improving Gutwein's products and packaging. CORTE MADERA, Calif.–Restoration Hardware’s losses deepened to $4.2 million in the third quarter, compared with a net loss of $3.1 million in the third quarter of the prior year. Same-store sales decreased by 2.1%, vs. an 8.7% increase in the same quarter last year. Net revenue increased 9% to $128.4 million from $118.2 million. LONDON–Sales at Kesa Electricals, the British retailer, were up 2.5% during the third quarter to 973.1 million pounds (US$1.68 billion). Same-store sales fell by 1.0%. Kesa’s businesses include Comet in Britain and Darty and BUT in France.
David Mains has joined OGC Inc. as regional sales manager for Southwestern Ontario. Before joining the retail POS systems provider, Mains operated his own POS systems business. He will work out of OGC’s Kitchener, Ont. office … Douglas A. Ausmus has been appointed sales manager for Western Canada at OGC, working out of the Calgary office. He was formerly in hardware retail management, and most recently in corporate communications with AT&T. (877-642-9378)
The leading indicator posted a solid 0.5% gain in October, up from a 0.4% advance in September, reports Stats Canada. However, there’s been a shift in recent months in growth from household spending to investment demand. In fact, housing was the only one of the ten components to decline.In its latest survey of Quebec consumers, the Retail Council of Quebec reveals that nearly three-quarters (74%) of Quebec consumers will spend as much as last year (63% of respondents) or even more (11% of respondents) on their holiday purchases. In addition, two-thirds of Quebec consumers indicated that the current economic situation would have little or no influence on their holiday spending intentions. Thirty percent of respondents had already started their holiday shopping at the end of October, while 32% will start in November and 32% in December.
U.S. firms exhibit once again at London DIY Show
For the third year in a row, American and Canadian firms will be exhibiting in the DIY & Garden/Totally Tools exhibition at Earl's Court in London in January. The Worldwide DIY Council, a trade association comprised of American active exporters, is sponsoring a group pavilion at the fair. In addition to those members exhibiting with the Worldwide DIY Council, other members are exhibiting on their own or with local agents/distributors. A number also are participating in the show with Chesterman Marketing. Members participating in the Council's pavilion include the following: Bigg Lugg Inc., Ettore Products, H. D. Hudson Mfg. Co., H. F. Staples Co., Meter-Man Inc., North American Tile Tool Co., Padco Inc., Protective Coating (Paintz), Seymour of Sycamore, and Superior Chemicals/Krud Kutter. The association, whose members sell in more than 140 countries around the world, will also hold its annual meeting in London around the time of the show. Scheduled for Jan. 18-20 at the Copthorne Tara hotel, the meeting will feature eight presentations from leading retailers and distributors in the UK and Europe. Presenters will include my old friend Colin Petty, editor of the U.K. publication DIY Week, and representatives from Focus (DIY) Group and Kingfisher.For more information, including web page catalogs of members’ products, visit
"My job is to ask questions. It’s your job to provide answers.”–Peter Drucker, business guru and one of the great management thinkers of our time, overheard speaking once to a corporate client. Drucker died on Nov. 11 at age 95.
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