Heavyweights in the ring
High-volume mass-market retailers may seem to be marginal competition for home centers and hardware stores, but inspired by the soft economy, they are picking their competitive spots.
Of course, mass-market retailers are important rivals in a couple of critical categories, most of them associated with outdoor living. Recently, one major mass-market player has matched a home center on a major backyard initiative.
Target announced on Jan. 8 that it had purchased the assets of Smith & Hawken from the Scotts Co. in a move that will give it operational and developmental control of a brand it had been licensing. The Target initiative is not without precedent. The company has purchased rights to major brands before, although usually on an exclusive licensing basis as it has done with Smith & Hawken previously in outdoor living and the Fieldcrest label in domestics.
Target has developed a significant patio business and seasonally expands it to include an array of such big-ticket items as patio furniture and grills. Not only that, but it supports its big-ticket purchases with everything from outdoor glassware to hot dogs. So Target is unlikely to appreciate anything that might distract customers from their warm-weather visits to Target stores.
Home Depot’s partnership with Martha Stewart, announced last year, is a deal that could impact such high-volume retailers as Target. The customers who typically shop mass-market stores might not have found compelling reasons to shop Home Depot before, but the attraction of the Martha Stewart label, one that developed its reputation with the trade channel they’ve patronized, could lure Target customers.
The competitive intents of both Target and Home Depot are suggested by timing. Martha Stewart launched in Home Depot with outdoor living—the segment where her product rollout most directly challenges the cross-channel competition—just a few weeks before Target and other mass-market retailers began their shift from holiday clearance to patio furniture and grills. By doing so, Martha and Home Depot stole a march on Target. Consumers who were most anxious to move on outdoor living products would be welcome at Home Depot before Target could get clear of clearance Christmas decorations and discounted sweaters.
For its part, Target announced its Smith & Hawken purchase on Jan. 8, just as the Martha Stewart launch was getting ready at Home Depot. As part of the announcement, Kathee Tesija, Target’s executive VP merchandising, described Smth & Hawken as “an admired and iconic brand.”
The description makes the product line just about right to counter what Martha might produce. Moreover, a Target source, who asked to remain anonymous, noted that the purchase came too late in the year to affect the retailer’s plans for the introductions rolling into stores now. So, Target will have a year to scrutinize, analyze and be ready to counter whatever challenge Martha presents its outdoor business next season, which is just about the time it requires.
Although Target didn’t mention rivals in announcing its Smith & Hawken initiative, Meijer doesn’t mind saying it wants to be more competitive with home centers. The supercenter retailer has enlisted Katie Brown, public broadcasting personality, columnist and an author of cookbooks and home decorating tomes, to help it launch a new collection of household items that includes a range of outdoor living products.
The host of PBS’s “Katie Brown Workshop” will lend her name to a product line that includes kitchen textiles and tabletop products, as well as patio furniture, outdoor decor accents and gardening tools.
Meijer spokesman Frank Guglielmi characterized the Katie Brown patio furniture launch as a “big deal” for the company. “It’s going to be a higher level of product than we’ve had but very competitively priced,” he said.
Guglielmi noted that Meijer believes the recession provides the company with a solid opportunity to draw off some business from home centers and hardware stores.
“We see a continuing trend of people shopping price and not assuming big-box specialty stores are going to have the best prices,” he said. “It opens up an opportunity for us to compete.”
Meijer has beefed up its garden center business in recent years to make it more competitive.
“We are getting a lot more looks because of price,” Guglielmi said. “We saw last year in the garden center that bags of fertilizer we were selling were 15% less than at home centers. Our garden center business really is strong.”
Inside the store, Meijer is positioned to be price competitive in hardware, as well. In its stores, Guglielmi noted, “There are multiple aisles dedicated to hardware. One aisle is dedicated to hand and power tools. Stanley and Shop Force are the brands that are highlighted. We have four or five SKUs of Sheffield utility knives alone. The DIY thing has been a growing trend. Consumers are shopping price in a tough economy and realize: ‘I can get it at Meijer and get it cheaper.’”
Then there’s that retailer from Bentonville, Ark., you might have heard of. Walmart sees opportunity in several categories that are central to home center and hardware store operations, but how deep it intends to penetrate varies.
Walmart has experienced changes in customer shopping patterns, with DIY purchases gaining, and automotive and home improvement departments benefiting.
The retailer recognized that consumers weren’t shopping its stores for help with major home improvement products, so it adjusted assortments appropriately.
“Our head merchant said it’s really about tailoring for repair and not things like replacement,” said Melissa O’Brien, a Walmart spokeswoman. “Also, what we’ve seen our customer doing is moving toward things that improve the efficiency of their homes. A good example of that is insulation. So we’re interested in having those types of items that lead to better heating and cooling. We’re offering home solutions.”
As it does through the store, Walmart is applying its analytical capacities to determine customer needs in garden, tools and related categories, then adjusting assortment on a local basis.
“We look to move inventory in line with what customers are looking for,” O’Brien said. “We know that this do-it-yourself customer continues to be there. It’s a growing trend, and we want to respond to that. We’re committed to simple solutions in hardware.”
O’Brien acknowledged that the company sees some longer-term opportunities in hardware and home improvement. Among the segments where it sees special opportunities are paint and eco-friendly water fixtures.
For warehouse clubs, hardware and home improvement aren’t categories targeted for expansion as much as they are extensions of the services provided members.
Of course, of all mass-market retailers, Sears is the biggest competition home centers and hardware stores face in tools and related home improvement categories. The competition became more active as Sears began expanding its Craftsman product line into its affiliated Kmart stores. The Craftsman line may be more limited there than at Sears. Still, the Kmart presentation helps promote the brand to shoppers who might not ordinarily visit Sears stores but who might start after being familiarized with the brand.
FIGHT CLUBS: MEMBERSHIP WAREHOUSE PLAYERS PICK THEIR SPOTSFor warehouse clubs, hardware and home improvement aren’t categories targeted for expansion as much as they are extensions of the services provided to members.
Warehouse clubs tend to have a limited selection of home improvement products in their stores, and they tend to focus assortment on a category basis. As is the case with appliances, for example, they might offer as few as one item on a regular basis in a given segment, and rotate in others based on occasion and on availability of deals. An increase in assortment of hardware items might occur around Father’s Day, for example.
One way to understand how tools are positioned at warehouse club operations is to look at where most of the assortment is available, and that’s online.
Hardware, said Ginnie Roeglin, senior VP e-commerce and publishing at Costco, “is one of our line extensions where we offer additional selection above and beyond the warehouse.”
Costco maintains a standard product range in each of the categories it offers under the hardware tab on its Web site home page. It offers 17 categories, and the segments contain a varied depth assortment. While tool kits in the hand tools and accessories category recently offered four items, tool storage and accessories offered 28, including tool chests approaching $1,000 in price.
So, selection may vary in the categories Costco carries, but a core of products will be constantly available.
“We’ll have some hot buys that will sell through, but we’ll have a good presence on the site all the time,” Roeglin said.
When it comes to true home improvement categories, Costco actually offers a significant array of merchandise online.
“We do a good business in a lot of home improvement categories, including kitchen, bath and closets,” Roeglin noted.
Indeed, Costco members can shop anything from kitchen cabinets to wrought iron doors to tumbled marble tile on its Web site.
While it doesn’t provide as elaborate a home improvement assortment as Costco does, BJ’s Wholesale Club has a consistent presence in tools. For example, it carries a selection of hand and electric tools under the Buffalo Tools brand, although it will carry items from other labels, such as ACDelco. What’s available varies, but only to a point.
“We do carry Buffalo Tools year-round, but we take advantage of special buy opportunities whenever we can,” said BJ’s spokeswoman Nancy Cosimi.
The majority of outdoor living products that warehouse clubs stock are purely seasonal, particularly where the climate doesn’t accommodate full-year patio relaxation. At BJ’s, the seasonal outdoor effort has been gearing up.
“Most clubs set for outdoor seasonal in the first or second week in February,” Cosimi said, adding that, in January, “some Florida clubs may have it in there already.”
Sears, seeing an opportunity to outfit rookie DIYers in the recession, pushed drills heavily in its promotions for the recently completed holiday season, but home improvement products were part of multiple initiatives. For example, Sears launched a program of weekly Black Friday specials in the period leading up to Christmas that included an offer for 50% off—save $200—on a Craftsman 302-piece tool set.
The company also featured home improvement products as part of a holiday promotion under the aegis of its Sears Blue Tools Crew—a marketing vehicle it has created—dubbed the 25 Days of Deals, “where we offered specials on specific products for one day only,” said Larry Costello, a Sears spokesman. “This was promoted through our social media channels.”
Sears, too, has a clear focus on the economy and the opportunities it affords the company.
“Americans are more focused than ever on value,” Costello said. “It’s one of the reasons we’ve seen a rise in DIY in recent years. Consumers are choosing to invest in improving their own homes, rather than move. With an eye toward value, we know that our tools and products must incorporate useful and practical innovations that deliver the performance and benefits that consumers truly need.”
With changing conditions come changing habits, and Sears sees opportunity in the market evolution. “An increasing number of women are embracing DIY projects,” Costello noted, adding that Sears is working to match product, job and customer better.
“Craftsman has the tools that offer value and performance for everyday DIY projects,” he said. “Models designed for light DIY projects and occasional use get the job done right without overwhelming the users with more power than they need.”
In Sears’ case, though, it isn’t all about basic equipment. At the recent International Builders’ Show, the company debuted the Craftsman C3 line of cordless products for lawn and garden devotees. Featuring an interchangeable 19.2-volt rechargeable DieHard battery, the new lawn and garden products act as an extension of the C3 powered line of Craftsman tools.
There’s an old saying: “Retail is a punch-in-the-nose business.” If a company wants market share, it has to take it from another retailer. Clearly, where they can, high-volume, mass-market retailers are picking their spots.