Ace’s new chair: Building the brand

Ace Hardware has been a fixture in David Ziegler’s life as long as he can remember. The 52-year-old Illinois native grew up working in the Ace store his grandfather founded in 1934, when the Ace company was just 10 years old. His father, James Ziegler, helped grow Ziegler’s Ace Hardware into a 10-store chain in the northwest suburbs of Chicago, and David’s daughter, Leah, now works in the human resources department and is married to store manager Doug Hammerl.

Ziegler—who has served on the Ace board of directors since 2001—was named chairman of the co-op’s board when Tom Glenn retired from the position in the spring. He told Home Channel News about some of the early challenges on the job and how he’s trying to build the Ace brand internally and externally.

HCN: How would you characterize the way Ace management handled the aftermath of the accounting issue that made last summer so difficult for the co-op?

Ziegler: The Ace leadership team placed a tremendous amount of focus during the last 12 months on the ramifications of the accounting issue. And some of my outside business associates were really amazed at the speed, quantity and quality of work that’s been done in the last 12 months. It’s really a credit to our CEO Ray Griffith and our (former) chairman Tom Glenn, that we moved through this stage in our history as well as we did. Initially, I’m happy that Ace managed to continue to keep the trucks rolling, and the Ace brand in the marketplace didn’t suffer.

HCN: Were you surprised by the support the Concerned Ace Owners received during the recent board election?

Ziegler: I’m glad I was asked about that subject matter, because it’s been the focus of a large amount of my time since early June. You know, our election process last year I believe was very healthy for our company. In the end, we had more store owners participate in the election than ever before. The board-endorsed candidates prevailed by about a 2-to-1 margin, but that means about a third of our membership did not endorse the board-endorsed candidates. As the incoming chairman, I decided this was something I needed to personally understand better.

HCN: How are you working to include them in the process?

Ziegler: At the beginning of the June stockholder meeting, and following up with phone calls, personal visits throughout the United States, I believe I have engaged in conversations with a large number of that block of our voting membership. And I really believe that when individuals can talk one on one, a certain sense of understanding is the result.

HCN: How will you encourage this kind of communication?

Ziegler: I totally supported our CEO’s idea of having face-to-face meetings throughout the country this summer, and I personally attended six of those. I think Ace had over 1,000 retailers attending, and they were very successful in providing clarity and understanding for all parties on various issues and concerns within the Ace family. It appears that the vast majority of retailers now are ready to move this company forward, rather than dwell on the happenings of the past year.

Ms. Schaefer goes to Washington

When Gina Schaefer decided to open her first Ace Hardware location in 2003, she couldn’t pretend to be a veteran hardware retailer who knows how to fix everything. But the former biotech executive could recognize a business opportunity in her gentrifying Washington, D.C., neighborhood.

“There was so much renovation going on, and people really needed a hardware store. Our neighborhood was desperately underserved,” Schaefer recalled. “And I had always wanted to own my own business.”

Schaefer now owns five Ace units, opening one new store, on average, each year. She focused on soon-to-be-chic areas in the Washington metro area, and named the stores after the neighborhoods: Logan Hardware, Glover Park Hardware, Tenleytown Ace Hardware, Federal Hill Hardware and 5th Street Ace Hardware.

“It’s a bit of a branding nightmare,” admits Schaefer, “but I think it’s our strong suit. It gives our customers a sense of identity with the stores.”

Schaefer’s strong suit is clearly her momentum. She belongs to civic and professional organizations, and when she speaks to groups of businesswomen, brings up the idea of owning a hardware store. It’s no surprise that Ace tapped the 37-year-old entrepreneur for an open board seat this year.

Schaefer said she was “flattered” when she got the call asking her to run for a three-year term. “I didn’t have to think very long. I just said yes,” she recalled.

A member of the Progressive Ace Leaders, Schaeffer hopes to focus attention on the under-40 group of Ace members. Many are in the process of taking over their parents’ businesses, she said, and they confront a host of issues that go beyond succession planning.

Urban store owners like Schaefer also face unique challenges, such as inventory management and retail site limitations. One of Schaefer’s stores has no parking lot, and another is completely subterranean. Her largest store, part of a former Hechinger’s, is 12,000 square feet—but only 8,000 can be used as retail selling space. Hechinger’s loading dock now holds overstocks and seasonal items.

Schaefer’s husband, Marc Friedman, quit his IT job early on to join in the venture. The couple has learned the hardware business from Ace training courses, vendor educational opportunities and their own customers. They’ve hired managers to help run their stores—“We hire for attitude, not experience,” Schaefer said—and continue to look for new store opportunities in the nation’s capital.

HCN: To what degree do you think two good quarters in 2008 have restored member confidence?

Ziegler: Well, I think it’s going to take more than a couple of good quarters to restore all our members’ confidence in Ace. What happened last year and leading up to 2007 was certainly a significant event, and I believe it will take a few years of diligent work and execution by our leadership team to get the confidence level to the point it previously was. That being said, though, it’s certainly encouraging how many of our members are already looking forward rather than back.

HCN: What in your background as a retailer has prepared you for this job?

Ziegler: My family joined Ace in 1934 as Ace’s 49th store, and I’ve been involved in Ace operations for most of my life. So I believe I’m well-grounded in what Ace is all about.

HCN: What are some of the challenges that have surprised you, and how have you handled them?

Ziegler: Well, I quickly became aware of how much of a glass fish bowl I now live in within the Ace world. There’s a lot of people watching and listening to me, and I always need to be mindful of what is in the best interest of Ace as a whole. Just like most retailers, I have a number of personal dreams and aspirations and opinions about Ace. But when I’m chairman, I need to understand and represent what is in the best interest of the entire Ace enterprise.

HCN: The competition is great out there. How will you lead the charge in keeping Ace competitive in the marketplace?

Ziegler: Well, you’re right about the competition, but let’s be clear about one thing: Our CEO Ray Griffith is the one we have confidence in to lead the charge in keeping Ace competitive in the marketplace. My role as chairman is one of leading the 12 members of our board as they fulfill their roles and responsibilities within the organization. We all have to be mindful of our various relationships as we all serve the Ace enterprise.

HCN: What specific programs do you believe give Ace an edge among its competitors?

Ziegler: First and foremost is our procurement and distribution system here at Ace. But beyond that, there are a couple that I’d like to comment on. The first is the organized approach Ace takes to encouraging retailers to be part of a local or regional dealer group. We all learn so much from each other when we gather and share as retailers. Ace district managers participate in this process, and I firmly believe that it’s a good investment on Ace’s part.

Customer service survey: Another list for Ace to top

When it comes to customer service, you could say Ace Hardware is two-for-two.

The Oak Brook, Ill.-based co-op won the highest ranking in the J.D. Power and Associates Home Improvement Retail Store Study in 2007 and 2008—the first two years the company has tracked this category.

The study measures customer satisfaction with home improvement retail stores based on performance in five categories: sales staff (helpfulness, availability); store facility (cleanliness, ease of parking, convenience of the store location); merchandise (quality, variety, in-stock performance); value (price paid for products and services received); and sales/promotions.

In 2008, J.D. Power surveyed 9,770 consumers who purchased a home improvement product or service within the previous 12 months from a store that sells home improvement products—asking 19 questions in each of the above areas. Ace scored 791 on a 1,000-point scale, doing particularly well in the sales staff and store facility categories, which are weighted the most heavily. Lowe’s (784) and Menards (779) placed second and third, with the average score of the companies considered being 768.

“The underlying premise is that the overall score is based on a weighted performance in these five categories, with the first two being the most important,” said Dale Haines, senior director of Real Estate Industries, J. D. Power and Associates. “The jingle about Ace being the place for helpful hardware is true. Our research confirms that people who shop at Ace are primarily very happy with customer service.”

J.D. Power tried to get a representative cross section—both geographically and demographically—of respondents, who spent an average of $2,400 on home improvement during the previous 12 months.

The study also found the following key patterns:

Customers spend approximately 72 percent of their total home improvement budget, on average, at their primary home improvement retailer.

More than one-quarter of respondents report shopping at their primary home improvement retailer more than once per month. Overall, 8 percent of respondents report shopping at their primary retailer at least once per week.

Approximately 7 percent of customers report experiencing some sort of service issue during their last store visit. The most frequently reported problems include: no members of the floor staff were available, the floor staff was not knowledgeable and merchandise was out of stock.

Approximately 62 percent of customers report shopping at their primary retailer’s garden center, and 24 percent report shopping through their primary retailer’s Web site.

“One of the things we find is when you look at the scores overall, you will find a pretty large divergence top to bottom in the rankings,” Haines said. “Even though Ace stores are owned by a divergence of co-op members, consumers can have highly similar experiences across Ace stores.”

HCN: What other programs have been successful?

Ziegler: Recently, Ace has been focused on the concept of pilot improve, which I like to think of as research and development of line items in other large companies. We certainly need to continue investing in R & D, and the best thing about this is the results are based on solid data, rather than someone’s opinion. All Ace retailers have the opportunity to benefit by the learning from the labor force organization and the merchandise mix pilot.

HCN: Do you believe Ace has any weaknesses that must be addressed at this point in time?

Ziegler: That’s an interesting question, and I’ll answer it this way: Our biggest weakness is also our biggest strength, and that is the motivation level of the individual retailer. I’ve recently been in some Ace stores with dilapidated storefronts, poor lighting levels, more pegboards than inventory showing and rusty shopping carts in front of the store. To me, it’s obvious that this owner is not motivated to represent the Ace brand or their own individual brand well in the marketplace, and I consider that a serious weakness of our company. On the other hand, I’ve recently visited some stores that are really thinking out side the box—both Ace stores and individually branded stores. And I participated in some really exciting grand openings. The entrepreneurial spirit of our retailers is, in my opinion, our greatest strength. It all comes down to the motivation level of the individual owner.

HCN: How is Ace addressing this inconsistency?

Ziegler: Ace has over the years tightened up its membership agreement, and the hundreds of stores that have recently been added to the Ace family are, for the most part, representing Ace well in the marketplace. As for the others that are not, I believe the American economic system has and will continue to assist in that matter.

HCN: When you have a chance to address Ace members at the market in St. Louis, what do you hope they will learn about you?

Ziegler: I’m working on my first speech, and that will be focused on reminding the Ace family of the opportunity to get to know me better. Many of them know how convicted I am about Ace, but some do not. I’ve been asked to serve a leadership role in our company, just like many of them have been asked to serve in different leadership capacities. I understand that I need to earn their trust over the coming years, and I intend to give everything I have to give in an effort to serve them. If nothing else, I hope they leave St. Louis with the understanding that I am committed to the continued improvement of the Ace enterprise and their individual success.

HCN: What do you think is Ace’s most important role to the retailer—buying strength, marketing or business support?

Ziegler: It’s a blend of things, and I would say that Ace’s role will continue to be as a world class distributor of low-cost merchandise and services, while at the same time, investing in improving the store model and enhancing the Ace brand from the consumer’s point of view. Ultimately, this allows our owners to live the American dream of owning their own hardware store or stores and passing them along to additional generations.