Ace boosts Internet profit equation
Orlando, Florida -- With Internet sales growing faster than other channels across the U.S. retail scene, Ace Hardware rolled out a new Web-embracing deal for dealers.
In essence, retailers that sign up for Ace’s In-Store Pick Up service receive 100% profit on Internet sales, up from 70%.
The new structure was announced here at the Ace Hardware General Session in a dramatic flourish -- as the audience of dealers cheered, a giant digital dial graphically illustrated the increase from the current level of 70% profit all the way up the scale to 100%.
The move reflects a change in Ace’s thinking toward the increasingly important e-commerce movement, said CEO John Venhuizen in an interview with HCN. The company rolled out acehardware.com with the intention of keeping retailers free from costs, charges and fees.
“When we rolled out acehardware.com, we developed a model that said you won't pay a thing, unless you get a sale,” Venhuizen said. “And when you get a sale, we'll take a piece of the gross profit, and then we willl pay the bills.”
However, that kind of profit sharing created the impression of a second-class sale, leading to the new deal announced in Orlando. The Web is too important to let the impression linger, he said.
“We don't want the Internet channel to be viewed as a conflict for them,” Venhuizen said. “So we said, let's just give the full profit as if they sold it out of the store.”
He added: “The person who matters in the equation is the consumer. We have to give them what they want, where they want it and when they want it.”
The expenses to manage an e-commerce operation are real and include fraud protection, he said. “Corporately, we are absorbing all the expense and not dinging the retailer a couple bucks every transaction.”
Meanwhile, Ace Hardware is expanding its use of the services of eBay Enterprise to deliver the omnichannel In-Store Pickup services to its customers, which is due to be implemented in a total of 1,000 stores nationwide.
"Ultimately, the goal is to drive people to the store, because that's where the relationship is built,” Venhuizen said.