Catching up with Venhuizen
Las Vegas — There’s a lot to talk about in the hardware business. And Ace Hardware CEO John Venhuizen had a lot to say during the co-op’s recent Convention here. During a break in the action, he spoke with HBSDealer editor Steph Koyfman.
Q: It seems as though there was a lot of good progress to report at the General Session, but are you roughly where you thought you’d be now with your 20/20 implementation?
A: Knock on wood, we’re actually exceeding the plan significantly. Our job is to make sure we keep doing that. In terms of the number of stores that are executing the initiative, the number of stores that are meeting the metrics, and then overall same-store sales, same-store gross profit and transactions — all have exceeded our goals three years in a row. So we feel like we’re getting some good momentum. Lots to do, and far from perfect, but we’re very pleased that it’s well above [our expectations].
Q: What about new member acquisition and turnover? I know you mentioned in the past that Ace had an issue with its aging population. Are your members getting younger?
A: Not dramatically, though we have made good progress in that regard. We’ve got a number of initiatives for the next generation, one of which is called Progressive Ace Leaders, where we try to get the sons and daughters of owners who are up and coming in business together. That has been an exciting, good group and it gives me encouragement that the next generation is taking over. And the second is new investors. New blood coming in tends to be significantly younger than our owner base. Third, member turnover. We lose some stores to our competitors; we get a lot of stores from our competitors. We hate losing any of them, but on balance, the score has worked out pretty well in our favor. I would say in the last four years, we have had 280 more stores come to Ace, and we’ve lost 130. So it’s more than double, and the dollars are more like triple.
Q: What are Ace’s biggest threats at the moment?
A: There’s a lot to be afraid of. I usually go to the three Cs: we operate in a very competitive environment. All retailers do; hardware retailers significantly do. We have some very strong, well-funded enemies. Never take them lightly. Second is, it’s a very capital-intensive business. Brick-and-mortar retailing is struggling. Third, the world and the business just seems to get more complex. Not easier. Between competition, the capital it takes to be good, and just the complexity of business, you can’t get too pride-filled about past success when everything that lies in front of us is still challenging.
Q: Did you happen to see Edward Lampert’s letter regarding Sears’ most recent quarterly results?
A: I’m not going to take that bait, but it shows you, from a pretty iconic brand, and a pretty well-funded retailer, how hard retail is. At the same time, it’s great encouragement to us, frankly, as to how powerful independent small business owners can be. I said this yesterday and I really do mean it. When you have a local, skilled, embraced entrepreneur that has the tools, resources and scale that a brand like Ace can bring, and you put them together, and give them a lot of flexibility and autonomy, awesome things happen. And we believe in that — we will be preaching that message for 100 years. High touch, high service, local ownership.
Q: Is there anything your competitors are doing that you admire or seek to emulate?
A: Lots. We learn from our competitors regularly, both in our industry and outside. Look at Home Depot and Lowe’s — they’re clearly competitors of ours. And yet I’ll tell you, they’re great retailers. Look at their numbers. They’re both on very impressive runs. Home Depot had an unbelievable fourth quarter. What they’re doing with the pro, what they’ve done with Christmas gifts, what they’ve done with their store operations — there’s a lot to learn there. They’re very good at what they do.
Q: What about your performance in 2015 are you most proud of?
A: This is going to sound trite: It truly is the disciplined execution of the Ace team. And by that I mean the corporate folks, the folks in our distribution centers and our store owners. It really is the power of the team and their execution moving in a similar direction.
Q: How are your efforts going to expand into farm and ranch?
A: We’re a little behind there. Long way to go, but good progress. These are round numbers here, but in the last two years, we’ve added 1,200 new SKUs to our warehouses, which has almost doubled our mix specific to farm and ranch. So we’ve made a pretty good investment in the stuff our stores need to really be credible in the business, and the business is coming. I think we were up about 13% last year. So that’s a relatively small volume compared with the rest of our volume, but it’s encouraging.
Q: Last year was supposedly the year of the light bulb. How did that go?
A: We sold a few light bulbs. Let me put it into perspective for you here. It’s probably more like the decade of the light bulb. We can hardly keep up, and in fact, some of our suppliers can hardly keep up. Every retailer is selling a lot more LEDs. In general, I think we were up 350% in light bulbs. So that includes all of them.
It is an incredibly important category to our stores for the next five to 10 years. And that’s just consumer. Now we’re making a major push into LED for stores and businesses. We’ll be pounding that drum pretty hard for a long time.