Family value
here.) Killingworth, Conn. — Except for its long, winding driveway and its big red barn of a storage facility, Killingworth True Value is an example of a classic family owned-and-operated hardware store, with a few modern twists. (Watch the HCN TV video store tour of Killingworth True Value
The Cost family—Tom Sr., Jackie and their son Tom Jr.—relocated their much smaller store here in June 2009, rolling out 20,000 sq. ft. of advanced selling strategies under the Destination True Value store design program. That means the signage, lighting and general layout of the store fit the co-op’s shopper-friendly prototype that was unveiled in 2007.
On one level, the store’s success depends on its local market knowledge and retail execution—and the Costs have several ideas about both. But in a larger sense, Killingworth True Value is a modern retail laboratory where some big-picture questions are playing out against an ever-changing retail landscape with national implications.
For instance, can a hardware store that “goes big” continue to benefit from the perception of small-store service and intimacy? Also, is a long-running period of economic weakness the right time for an expansion in the first place? And can a mom-and-pop retailer with deep community ties in small-town Connecticut learn anything from co-op headquarters in Chicago?
SIZE
One thing is certain about the expansion of Killingworth True Value. It’s going to be a heck of a lot easier for Cost Jr. to park his car in his garage at home. With power equipment companies generally shipping products in one load in the spring, the store’s previous location was overwhelmed.
“My wife would joke that the only way she could tell if the season was going well was if she could get the car back in the garage,” Cost said.
There are considerable advantages beyond storage capability. The 20,000-sq.-ft. store (the previous Killingworth location was under 10,000 sq. ft.), allows the store to take advantage of bulk purchases—pallet specials—during its market events. Case in point: The main aisle of the new store is strategically merchandised with boxes of cleaning supplies, toilet paper, bottled water—all priced to move and priced to build store traffic.
“The main aisle design was huge for us because in order to maintain a high profit margin, you have to have aggressive stuff,” he said. “When I go to market, I could never buy pallet buys, I had no place to put it.”’
Size opens up a new customer base, as well. At the old store, the Costs would catch customers at the tail-end of home improvement projects, because the store didn’t have the space to handle the demands of full projects and didn’t have the volume to justify more than once-a-week deliveries.
“We knew from our experience down the street that certainly the core hardware departments needed to expand to be project complete. To have room for enough of a single item for multiple projects between True Value deliveries and to have everything the customer needs to do the job.”
One of the most frustrating aspects of the small store environment, according to the Costs, was the fuel it gave to the perception that the big box was the place to start and finish the project—a perception that Cost Jr. said he and others in the hardware retailing business fight every day. With 20,000 sq. ft., however, the tide is turning. Cost Jr. pointed to a faucet sale that included a new tailpiece and other incidentals.
According to Cost, True Value’s “Start Right. Start Here.” slogan is better served at 20,000 sq. ft.
The typical, old 3,000 sq.-ft. American hardware store—dimly lit and cluttered merchandise stacked high in narrow aisles—is a romantic and nostalgic idea. “But from an economic standpoint, you can’t make ends meet in that kind of store today,” Cost said.
On the flip side, when does a hardware store become a big box? “It’s a balancing act,” Cost said. “I think the 20,000-sq.-ft. size area is about it.”
“The customers don’t like the old-fashioned style,” president Jackie Cost said. “They like Target, and they like Macy’s. And they expect that kind of environment in all of their shopping experiences.”
Customer expectations also influence the stores operational focus on pushing products forward on the shelves and running a tight ship. “We keep our store faced and cleaned all the time,” she said. “And I think our customers expect that.”
TIMING
Back in Chicago, True Value Co. executives are crunching the numbers and laying out expectations for 1 million new sq. ft. of Destination True Value formats this year.
Last year more than 50 retailers participated in growth funds offered through the Chicago-based co-op, and True Value CEO Lyle Heidemann told HCN that the co-op expects more than 100 this year. In Chicago, co-op executives have crunched the numbers and plan to remodel or relocate or open 1 million sq. ft. to the Destination True Value format.
“Every retailer, independent of the economy, needs to take a hard look at their marketplace and ask themselves: ‘Am I the leader in the marketplace in my categories?’ and ‘Am I relevant from a customer standpoint?’ And if not, the question becomes, ‘What do I do about it?’ ” Heidemann said.
For Killingworth True Value, the timing of opening a store in a down economy wasn’t ideal, but business couldn’t wait for a turnaround.
“Let’s face it: We did this right in the beginning of this hard, challenging down economy,” Cost Jr. said. “We have absolutely not hit the sales goals we expected. We are up, but not as much as we expected to be.” Still, the need for expansion required action.
Then more good news: “We are still seeing, almost on a daily basis, customers who have never shopped us before.”
Another factor in the timing of expansion is the cost of money. And in this metric, it’s a favorable reading, according to CEO Heidemann. For those contemplating expansion or remodeling, “Money is cheaper today than it’s going to be 12 months from today,” he said.
CO-OP
The Cost family has been operating a hardware store in Killingworth since 1983. ( See sidebar, “Cost analysis: All in the family.” )Still, there were things about the area—in five-, 10- and even 50-mile radii—that they didn’t know. “One thing True Value did for us that helped us a lot is understanding the demographics,” Tom Cost Sr. said. “The question was, were there enough people in the market area to support a 20,000-sq.-ft. store?”
Clearly, Chicago thought so. And it did so with the help of POS data collected from stores around the country. Some 1,700 stores are supplying POS data into a tool called Retail Workbench.
The Cost family hardware business began in 1983 when Tom Sr. and Jackie bought a store with 1,800 sq. ft. of selling space. When Tom Jr. graduated from the University of Maine in 1992 with a business degree, he formed a partnership with his mom and dad.
That background gives the Cost family a unique perspective on running a business across generations. Not only is it possible to combine business and family, it works well, too. But it has to be done right.
“As a parent, your offspring will always be your children,” said Jackie Cost, president and mother. “But as far as the business is concerned, I view us all as having very specific roles that overlap with each other.”
Tom Cost Sr. carries the title of secretary, and Tom Cost Jr. serves officially as VP.
The idea of working with family is an appealing luxury, and it resonates with customers, according to Tom Sr. “We’ve had comments from customers who say they’re envious that our family is so close,” he said.
“One of the things Tom [Jr.] brings to the business, aside from his energy, is the vision and perspective of being in his age group, that we want to have in our store. Left to ourselves, we never would have brought some of the things into the store because we’re older, and we have a different vision of what people need than he has. And that’s critical.”
Another critical consideration: knowing when to put business first, according to Tom Jr. “There were times, but not anymore, when I thought: ‘Am I going to get a spanking because of something I’ve done in the business, or are we going to talk about it as business partners.’”
Said his mother: “I think we do a pretty good job of separating family and business.”
Steve Poplawski, senior VP retail operations for True Value, said the availability of POS data allows the company to shift its focus from what leaves the distribution center to what sells at retail.
“That’s an absolute shift for us,” he said. “It helps us from an efficiency standpoint. We’re buying the right inventory, we’re landing the right inventory, and we’re not carrying surplus.”
According to Cost Sr., the collected body of knowledge is a real benefit. “If you’re not getting feedback from the stores in a quick time frame, then you’re kind of guessing what you need in the warehouses.”
And the biggest question playing out, and this isn’t unique to the Cost family of Killington True Value: What does it take for a small-town hardware store to successfully compete in 2010?
According to Cost Jr., the answer revolves around service.
“We’re hammering home and reinforcing to our employees that we now have a phenomenal store environment, but that alone is not going to make us successful. We gotta have the people who are going to give great customer service.”