Ace gets serious about simple
Oak Brook, Illinois-based Ace Hardware relies heavily on the mountain metaphor to describe 20/20 Vision, its long-term strategic growth initiative. “Climb” has been the operative word, but the way up in 2016 is calling for a bit of focus in addition to all the standard big-picture proclamations.
“We want to turn the vision into reality,” explained president and CEO John Venhuizen at the General Session of the Ace Spring Convention in Las Vegas last month. “We want to turn a bunch of talk into a bunch of money.”
How? One idea is based on the well-founded theory that time is money. A retailer simplification project is in effect in order to “unearth and expose the low-hanging fruit of bureaucracy and junk corporate tends to inflict on you,” as Venhuizen put it.
Led by EVP and CFO Bill Guzick and VP retail development and supply Brian Wiborg, the initiative aims to slash 1 million hours of excess fat from the Ace retail schedule, freeing associates to spend more time assisting customers.
“For Ace, 1 million hours as it relates to retailer simplification is both a goal and a mind-set,” Wiborg said. “We are trying to eliminate 1 million hours from our store model in 2016, which equates to approximately 230 hours per store. From a mind-set perspective, we want everyone in the corporation to think twice about what we are asking our retailers to do, and how long it takes. How can we eliminate waste? How can we reduce a task that currently takes two hours, and streamline the operations and systems to only take one hour?”
Guzick and Wiborg are focusing their efforts on ordering; back-office processes; and statements, credits and invoices. Part of the approach will involve rolling out workforce management software to help with hiring, compliance and bureaucracy.
Additionally, Ace is adding vendors and SKUs to ACENET Direct so retailers can order dropship merchandise the same way they order from the Retail Support Centers — using an electronically integrated system with a price-match guarantee. Ace is also promising to take some pressure off its members by handling the discrepancies.
“Dropship business is a great opportunity for Ace Hardware, and the ACENET Direct program provides a centralized, integrated catalog that delivers rapid vendor and product exposure that streamlines the ordering and reconciliation processes,” said Wiborg. “Leveraging a strong vendor partnership, the program is able to offer guaranteed pricing, complete catalogs, and positions Ace retailers to complete ongoing replenishment of these orders.”
Among other major initiatives:
• Store renovations: Ace is rolling out a patronage loan program for $5 million in funding for five years in order to spur more. “We live in a world where consumers are making fewer visits to brick-and-mortar stores,” said Venhuizen. “This is the sixth year that brick-and-mortar retailers have had declining transactions.”
• Smarter advertising: Ace is also looking to get smarter about where it spends its advertising budget. By narrowing its print advertising from 21 circulars to 16, that $5,000 savings will be reallocated to Ace Rewards. Additionally, TV, digital and radio are getting boosted to $60 million in ad spend, with 5 billion impressions, according to John Surane.
And, according to Jeff Gooding, senior director consumer marketing, the co-op is rolling out over 30 unique television spots over the course of the year, versus just four or five boilerplate ones that used to make the rounds.
• B2B growth: Ace intends to use LED lighting as “a crowbar into [the B2B market],” according to Wiborg. “Ace Hardware is bullish on B2B. B2B leads to more sales and profits, and is weather-resistant,” he said.
Out of $11.6 billion in retail sales, $2 billion can be attributed to B2B transactions. Ace is currently setting its sights on being a $16 billion company by 2020, with B2B growing to $4 billion. In order to do that, Ace is encouraging retailers to make business owners a deal they can’t refuse: Buy our LEDs, and save yourself some money in the process. Their No. 1 selling tool in this game is, as Wiborg put it, an actual energy bill.
When Ace first adopted 20/20 Vision in 2012, the co-op outlined its four pillars of growth: investing in the brand, digging down with training, enriching the product assortment, and making moves into B2B, which later took the form of The Supply Place.
Since then, revenue has grown by $1.2 billion in the last three years to reach $5.05 billion; net income has increased by over 90% to hit $156.2 million in 2015. For winning stores of the future, Venhuizen is setting the goal at 8% operating income, 18% pre-tax return on equity, and 90% or more in rankings from customers on mystery shopping engagement.
Ace By The Numbers
(FY2015)
2015 wholesale sales: $5.05 billion
2015 sales gain: up 7.3%
2015 net income: $156.2 million
2015 income gain: up 10.5%
New stores opened in the U.S.: 158
Net new stores: 60
Total store count: 4,311