Service rules: Hardware retailers stay in the game with attention to niche businesses and their customers

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In 1782, a man named Daniel Waldo founded Elwood Adams Hardware in Worcester, Mass., providing early settlers with saddles, oil lamps, shovels and hand tools. This represents an American retail institution—the hardware store—that has not only survived the last 225 years, but it continues to thrive in the 21st Century.

Elwood Adams Hardware—still in business today—is one of at least 21,000 independent hardware stores currently operating in the United States. Ranging in size from under 3,000 to more than 60,000 square feet and found in the cities, suburbs and our most remote farming communities, these stores generate an estimated $19.5 billion a year—a little less than 5 percent of total home improvement sales, according to the U.S. Department of Commerce.

More than 14,000 hardware stores belong to one of the three co-ops—Ace, True Value and Do it Best—which allows them to tap into group pricing, circulars and programs at a discounted rate. Approximately 6,500 stores buy from Memphis-based distributor Orgill Inc. (with at least a quarter of these also holding a co-op membership), and then there are several smaller distributors, including Handy Hardware and House Hasson, that supply mom and pop stores across the U.S.

Since the 1970s, the story of independent hardware retailers has to large extent been the story of their competitive relationship with the large home improvement retailers, whose stores range from 70,000 to 125,000+square feet and offer consumers a wider, deeper product selection and, in some cases, better pricing. while the proliferation of this large box formula has been the downfall of many shops over the last 30 years, others have continued to prosper by drawing on their roots of service and the in-and-out convenience factor demanded by many Americans.

What’s a hardware retailer?

In compiling the Top 50 Hardware Retailers list, HCN included home-improvement-oriented companies with diverse hardlines assortments and stores that measured less than 70,000 square feet. Excluded were specialty retailers, design showrooms and stores with LBM yards.

Service is the cornerstone of success for Orchard Supply Hardware, which appears at the top of HCN’s inaugural list of the Top 50 Hardware Stores. (See next page.) The 75-year-old chain of home and garden centers in California averages 50,000 square feet per store. Originally established as a farmer’s cooperative in San Jose in 1931, OSH now has more than 85 locations, and the average employee has logged in seven years with the company—the average manager 16 years.

“Some people will ask me, ‘How can you compete with Home Depot and Lowe’s?’” President and CEO Rob Lynch told HCN earlier this year. “I say, ‘We don’t have to.’ This company has a very nicely defined niche. Our associates and managers know how to take care of people. Our customer service is legendary.”

Matt Howe, manager of Gillroy’s Hardware (No. 22) in Flushing Michigan, said his company’s excellent service record has helped it expand from a single store opened in 1945 to 24 locations throughout Michigan (and one in Peachtree, Ga.) today. “The thing people appreciate about us is that when they walk in the door we say, ‘Hello,’ ‘How are you?’ and ‘What can I help you find?’ ” Howe said. “And if I don’t have it, I can get it quickly through our warehouse or from the manufacturer. We’ll go out of our way to get it done for the customer.”

The modern hardware store comes in all shapes and sizes, offering core categories such as plumbing, electrical, hardware, paint and lawn and garden, but also focusing on areas like barbecue grills, farm and ranch, pet supplies, crafts, windows and doors and countless special order categories. What these stores have in common is that they cater primarily to DIY homeowners and professionals, trying to carry enough inventory to satisfy the needs of their very local and specific clienteles.

“We have a niche in our marketplace, which helps when going head to head with the competition,” said Tony Penca, director of merchandising for Portland, Ore.-based Rejuvenation Hardware (No. 37), which specializes in period authentic lighting and hardware. Customers of their 38,000-square-foot Portland store and 10,000-square-foot Seattle store can order doors and customize them to their particular needs—even if that means putting different style hardware on front and back.

“For us, that’s a competitive advantage. Our product is unique to a certain extent, and we go beyond in the service area, allowing the customer to mix and match to their own needs,” Penca said.

Mark Schulein, president of Crown Ace Hardware (No. 11), agrees that service is the key to the independent hardware store’s success. “Service and convenience: that’s our mantra,” he said. “We offer the customer a good experience every time he comes into the store.”

Schulein, whose company is about to open its 16th store in a wealthy suburb of California’s Orange County, also emphasizes the importance of keeping the stores as clean and modern as possible—from outdoor signage, to the sales floor, to the restrooms. “I think it’s important to make the stores attractive, female-friendly, child-friendly,” he said. “We know our customers shop at Nordstrom and other upscale home stores. They have expectations when they shop.”

Each of the co-ops has developed programs to help members keep up with modern customer demands in this increasingly competitive retail environment. True Value’s Visual Merchandising aims to improve a store’s retail environment through lighting, organization and merchandising. Do it Best’s Signature Store Design offers three format choices, depending on whether the store wants to be fully branded, co-branded or individually branded. And last month Ace launched a pilot in 11 of its members’ stores in Phoenix and Chicago to readjust layouts and reset all merchandise for maximum appeal.

Many stores are taking advantage of the programs—as well as co-op incentive money—to extend their reach and buying power in their communities. For example, since 2003, family owned Costello Ace Hardware (No. 14) has opened six new stores across New York’s Long Island, ranging from 14,000 to 30,000 square feet, and emphasizing core categories as well as niches like upscale decorative hardware, fashion lighting, flooring and patio furniture.

The latest Costello store in North Massapequa—the grand opening was held Oct. 12—brings the family’s total number of Ace locations to 13 (they also own one Do it Best store). According to company president Mike Costello, they have taken advantage of needs in the marketplace, finding underserved markets and/or re-opening stores where others had been forced out by big box competition.

“Each additional store makes us a larger entity and increases our buying power, lets us take advantage of larger quantity pricing, closeouts,” he said. “Now that we have the volume, we’re becoming a bigger player on some vendors’ radar screens.”

Crown Ace has also continued to reinvest in the business—through expansion, or by giving some stores a facelift, or by bringing in new products—most recently, the Benjamin Moore paint brand—that might appeal to a store’s customer base.

“If you’re standing still, you’re going backward,” Schulein said. “Service starts with the cashiers and works all the way up to the corporate offices. We want to make the store an asset to the community, but we’re only as good as how we take care of each customer.”