True Value CEO describes strategy

MUNDELEIN, ILL. —In the American retail hardware landscape, there are the highly structured chain stores on one side and the highly varied presentations of independent operators on the other. True Value CEO Lyle Heidemann identified a “competitive opportunity” in the vast middle ground between the two.

Capturing this ground is one of the strategic efforts Heidemann outlined during a presentation to the American Hardware Manufacturers Association (AHMA) annual meeting in Mundelein, Ill., late last month. He also officially said goodbye to the turnaround mindset, and hello to a growth mode for the 4,200-member co-op.

Standing in front of a chart with wholesaler Orgill on one extreme (an example of minimal retail standardization) and Home Depot and Lowe’s on the other side (examples of very high standardization), Heidemann described True Value’s movement toward the moderate level of standardization and the opportunity for “flexible retail-focused solutions.”

“We believe there’s a place in the middle—not being franchised, not being a wholesale, but being in the middle,” Heidemann said.

Competitor Ace Hardware appeared on Heidemann’s chart near the two big-box chains. Heidemann described Ace as a co-op that has transformed itself with a national format that shows “great consistency from a customer standpoint in stores built since 2000.”

Competing co-op Do it Best appeared closer to Orgill on the low-standardization/high-independence side of the chart.

For their part, Do it Best and Ace both can point to programs they would describe as “flexible” and “retail focused.” What makes True Value’s goal noteworthy is that it comes as the co-op has significantly restructured its field organization, and, according to Heidemann, has emerged from a turnaround mindset to a growth mindset.

In the field, True Value’s reps are engaged in building business plans for members, providing merchandising best practices and other sales and margin related matters, he said. “These aren’t calls on members to buy them a cup of coffee and keep them happy,” Heidemann said. Rather, they reflect a mindset change at True Value from that of a wholesaler organization to that of a retail organization.

“The key phrase here is ‘remaining independent while being willing to change and adapt to retail successes,’” said Heidemann. And again, echoing a common sentiment from the other two major co-op competitors, he explained that True Value will encourage its members to be willing to adopt best retailing practices, while allowing the retailers to run their businesses independently.

One centralized retail-like decision is a de-emphasis on house brand merchandise, despite the margin opportunities presented by products sourced in China. “The fine line is, if you put your name on something perceived to be lower quality, over time, that transcends to the brand name outside of the building.”

Heidemann, who joined True Value in June 2005 after a 37-year career at Sears, pointed to another shift at True Value—to a growth phase, following a turnaround phase precipitated by accounting errors of the late 1990s and mass defections earlier this decade. He described the turnaround mindset as “trying to make decisions that are good for tomorrow morning, so that in fact you’re still in business the next morning.”

“The biggest move is to move from a turnaround mindset to a retail growth mindset,” he said. “In 2007 through 2009, we believe we are now in a position for growth.