Hardware and home improvement retailers enjoyed unprecedented sales growth through the Covid years, with overall sales volumes increasing by more than 30 percent from 2019 to 2022.

But can it last?

These numbers, as reported in this year’s Hardlines Retail Report, showed a big turnaround for the industry from 2019 to 2020—a shift that was as challenging as it was beneficial. Retailers scrambled to get product and to get it into the hands of customers as lockdowns and fears of the spread of the Covid virus held the world in its grip.

The Hardlines Retail Report is an annual study by Hardlines that compiles sales growth year over year, identifying those sales according to store formats—hardware stores, home centres and building centres, big boxes, and Canadian Tire (yes, it gets its own category). Sales are also examined regionally, with performance by each province and territory examined.

Pre-Covid, this industry was watching sales slow to the point that, in 2019, Hardlines reported negative sales growth for only the second time since we began tracking the industry almost 30 years ago. A year later, sales increased by a whopping 15.5 percent, leaving retailers struggling to meet demand while suppliers scrambled to get product, raw materials, and access to shipping lanes. The following year, 2021, saw double-digit growth again, but by 2022 that growth had slowed—or normalized—to less than five percent year-over-year (and below the 6.8 percent rate of inflation).

But 2023 is shaping up for many retailers to be a different reality. According to the report, the industry is forecast to remain steady this year, with an anticipated slowdown in the second half of 2023 that is already, for many dealers, setting in. Regionally, Alberta is forecast to lead any growth this year, with Saskatchewan close behind. Modest growth is anticipated for New Brunswick and Nova Scotia.

The external factors affecting the industry are acute: as interest rates remain high, it puts pressure on housing affordability and on renovation investment, while higher prices for food and essentials are putting further limits on consumers’ discretionary spending abilities.

In addition, major retailers anticipate flat to negative growth for the year, and our surveys of the retailers in this sector, large and small, have forecasted largely flat sales growth this year. Based on all these factors, Hardlines forecasts that growth for the sector will be stable at best for 2023.

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RONA makes acquisition through its Dick’s Lumber division

Since the takeover of the Lowe’s and RONA business in Canada, the new owners have been colouring pretty much within the lines—until now. Under the ownership of Sycamore Partners, RONA inc. has made its first strategic acquisition, and it’s not a traditional dealer.

Through its Dick’s Lumber division, the company’s commercial and contractor business, RONA has completed the acquisition of ZyTech Building Systems, a manufacturer and distributor of building components and engineered wood products. The deal is intended to allow Dick’s Lumber to expand its design and manufacturing footprint to developers and builders in Western Canada.

Founded in 1997, ZyTech is headquartered in Balzac, Alta., and has locations elsewhere in the province in Airdrie, Red Deer, and Leduc, as well as one in Saskatoon and one in Dallas/Forth Worth, Texas. It also has sales offices in Calgary and Stony Plain, Alta. ZyTech had been owned, since 2014, by TriWest Capital Partners, a Calgary-based private equity firm.

ZyTech specializes in floor and roof systems, including I-joists, engineered steel columns and floor trusses, as well as prefab stairs and wall panels, to builders and contractors.

While RONA would not confirm further details of the acquisition, a quote in the original press release attributed to Mike Powell would indicate he will remain CEO at ZyTech. Powell’s background includes a role as VP and general manager at Star Building Materials in Calgary and, more recently, as VP finance for TIMBER MART’s head office. RONA would not confirm whether Powell will report directly to Dick’s Lumber’s president, Paul McKeown.

“We are thrilled to welcome the ZyTech team to the Dick’s Lumber and RONA families,” said Andrew Iacobucci, CEO of RONA inc. “ZyTech is a very strong player in its field. This acquisition will strengthen our position in the Alberta and Saskatchewan markets and improve how we serve our valued customers.”

Garant’s repositioning reflects the power of brand in an age of message clutter

How important is strong branding? Drive down the coast in Miami, Fla., and you’ll see lots of condo developments being built, but more and more these buildings are adopting valuable brand names. Brands like Porsche and Armani are gracing the sides of condo buildings—in an effort to heighten their appeal and sense of exclusivity.

Names such as the Aston Martin Vulcan, with a penthouse listed at $59 million, and the Porsche Design Tower, which has units that cost as much as $32 million, are becoming more common in Florida.

The importance of any company’s brand must be carefully nurtured, something Garant, the outdoor tool manufacturer based in Quebec, has focused on under its general manager since 2021, Pierre-Yves Martin. Drawing on a legacy that dates back more than 125 years, Garant has launched a plan to establish its products as “the Canadian brand of choice for all essential tools and accessories related to outdoor work and projects,” according to the company.

With headquarters in Saint-François-de-la-Rivière-du-Sud, Garant is known for its lines of gardening, snow removal, and striking tools, including rakes, hoes, shears, shovels, sledgehammers, and axes. The company plans to double brand recognition across Canada, with ambitions to increase sales by 50 percent and to boost project design innovation revenues by 20 percent within the next five years.

“We have decided to concentrate all our activities under the Garant brand by gradually eliminating several of our sub-brands,” says Martin.

Garant is working with LG2, a Montreal-based advertising and communications agency. The agency’s mission was to establish “a new brand platform that reflected the company’s evolution while respecting its legacy and heritage,” said Jacques de Varennes, a partner and VP at LG2.

The transition will take place gradually as the Botanica, Xtra, Econo, Cougar, Practica, Blizzard, Agro Series, Proflow, Yukon, Alpine, Nordic, and Lynx brands are gradually pulled from the shelves to make room for a broader Garant identity. Garant is unveiling a new logo, and the transition will be supported by an advertising campaign and a new website that will become transactional in 2024.

When the Hardlines Conference starts this week in Whistler, B.C., the increasing “digital divide” in our industry will be put under the microscope by at least three speakers.

While Home Depot doesn’t release its online sales figures, the company was thought by analysts to do about US$22 billion via e-commerce in its most recent (2022) fiscal year. That represents 14 percent of its online sales.

Walmart, which does break out its e-commerce sales, did a similar online percentage—13 percent of its total sales, or a whopping US$80 billion, in 2022.

In this country, Hardlines estimates that the leading corporately-owned retailers in our Top 20 Retailers—Home Depot, RONA, and Canadian Tire—do about 10, 10, and eight percent of their sales, respectively, via e-commerce. While lower than the U.S. numbers cited above, that is well above the retail industry average in this country. StatCan reports that Canadians spent 6.2 percent of their total retail expenditures through e-commerce last year.

But the dilemma that independent retailers face—compared to the well-heeled, high-tech box stores—is how to compete in a digital world. Indeed, the 2023 Hardlines Retail Report estimates that independent stores in our industry do barely 0.1 percent of their sales online. That means that the box stores are doing 100 times the percentage of online sales that their family-run competitors are doing.

This has been dubbed the “digital divide” by the podcast The Business of Retail. It features David Ian Gray, a retail consultant in Vancouver whose firm DIG360 has consulted for Lee Valley Tools, a hardlines retailer that has excelled at e-commerce in addition to its bricks-and-mortar presence. Gray will be speaking at the Hardlines Conference about—you guessed it—The Digital Divide, among other topics.

The topic will also be addressed by customer-engagement expert Romain Mercier, who specializes in using data to reach customers in the retail space at PS&Co Data Lab, Vancouver. Mercier will talk, in part, about funding that is available to help smaller retailers begin their digital transformation. And, finally, Dan Tratensek, CEO and publisher of the North American Hardware & Paint Association (NHPA) will address the digital divide from a both-sides-of-the-border perspective.

For anyone that doubts that the digital divide is a threat to traditional methods of retailing, consider this: the total sales of Amazon (the world’s largest digital retailer) last year were US$514 billion—which just happens to be approximately the size of the entire American retail home improvement industry. Or 10 times bigger than our own retail home improvement industry.

Joanne Moore has joined Derby Building Products as territory sales manager for the province of Quebec, representing Derby’s Tando Composites and Novik brands. In her new role, Moore will focus on strengthening relationships with distributors and dealers to drive business growth. She will also work with installers and specifiers, as well as siding and renovation contractors, builders, architects, and designers.

At Wolseley Canada, Mark Evans has been appointed director of sales, plumbing, and HVAC for western Canada. In this newly created role, he will work closely with the regional sales managers. Evans was most recently senior director of corporate development at Viega.

DID YOU KNOW...?

… that the entire Hardlines Team is in Whistler, B.C., this week? We are preparing to host the 27th annual Hardlines Conference, in partnership with the BSIA of B.C. It’s gonna be a blast!

RETAILER NEWS

Amazon now has a pickup depot in Iqaluit. The company says the new facility will reduce delivery times in the region to between just three and five days, compared with the previous window of two to three weeks. Amazon has partnered with the airline Canadian North. Flights from Ottawa to Iqaluit every Wednesday and Sunday will transport Amazon Prime orders to northern communities. Iqaluit Mayor Kenny Bell told CBC that he estimated Amazon delivered 200,000 parcels to Iqaluit in 2019.

Home Hardware Stores Ltd. has partnered with local artists across Canada to mark World Mental Health Day. Home Hardware stores have selected organizations in their communities and presented indoor murals featuring colours from BeautiTone’s 2024 Colour Trends Card.

Home Depot is among the major North American retailers facing larger and increasingly better organized theft rings. But where does all this stolen merch go? An investigation in Florida came to the conclusion that a pastor in Tampa was behind a years-long crime ring that was allegedly responsible for stealing $3 million worth of products since 2016. Robert Dell is a pastor who ran a drug recovery program. He is accused of recruiting vulnerable individuals in the program to shoplift the products, then in turn selling those wares online.

Canadian Tire’s JumpStart charity aims to foster equality in sport and recreation. It funds sports fees for the children of families in need—and it also builds sports and recreation infrastructures. The largest playground ever built by JumpStart was officially opened last month in Barrie, Ont. The city’s Painswick Park is the location of the Muriel and A.J. Billes Family Playground.

Wolseley Canada held a grand opening last week for its newest store, in Port Coquitlam, B.C. The 16,000-square-foot facility is one of two stores set to open in British Columbia over the next year, as part of Wolseley Canada’s planned expansion in the region.

Walmart has been testing AI to help its employees serve customers. Staff at a store in New Jersey, among others, use a special app to gauge what needs restocking, plotting the most efficient route they should take between the stockroom and the shelves. The app shaves 30 percent off employees’ time to complete restocking tasks, the company has said. Walmart has said that, within five years, 65 percent of its stores will have this technology.

Richelieu Hardware’s third-quarter profits fell by $30.7 million. Consolidated sales declined by 2.9 percent to $459 million. The company pointed to a weaker loonie and higher warehousing costs as contributing to its financial results. For the year to date, consolidated sales reached $1.3 billion, down 0.8 percent. Since the beginning of the year, Richelieu has made six acquisitions, four in Canada and two in the U.S.

The total monthly value of building permits increased 3.4 percent in August to $11.9 billion. However, residential permits declined 3.7 percent to $6.8 billion, largely due to weaker multi-unit construction intentions in Ontario, Quebec, Manitoba, and Nova Scotia. These declines were partly offset by monthly gains in the value of single-family home permits. (StatCan)

The first half of 2023 showed an uptick in new home construction for several major cities. The increase, however, was slight, and rested largely on the strength of the multi-family sector. Factors like higher building and borrowing costs are expected to put a damper on the pace of homebuilding. Housing starts were up in just two of the six cities reviewed (Toronto and Vancouver) over the comparable period of 2022. (CMHC)