True Value pushes ahead

For many businesses, the natural inclination in a down economy is to cut back on spending. True Value executives are urging co-op members to do just the opposite.

“Many of our competitors will be making cutbacks in marketing, customer service, inventory levels and store cleanliness—all things that make first and lasting impressions,” said Lyle Heidemann in an address to members during True Value’s 2009 spring market last month in New Orleans. “Don’t fall into the same trap. Remember, we actually have an opportunity to grow and increase market share during an economic slowdown.”

Heidemann believes economic recovery is still nine months to a year away, but he believes the neighborhood hardware store can prosper in the meantime by appearing healthy—which means well lit, well stocked, neat and prosperous looking.

These are all principles emphasized in the Destination True Value format, which the executive team hopes will continue to be used in new stores and remodels. To make the format even more attractive to True Value retailers, Heidemann announced that for new stores, the co-op is increasing funding from $15 to $25 a square foot and raising the cap from $300,000 to $400,000. On expansions or remodels, the program has changed from a 50/50 percent equity match loan on capital items with a cap of $75,000 to a 75/25 percent loan on the total expense capped at $150,000.

Heidemann also emphasized that now is not the time to let up on advertising, citing a study showing that companies that cut advertising during the 1981 to 1983 recession grew just 19% in the five years after that, while those who maintained or increased the advertising spend grew 275% in the following five-year period.

“One of the easiest things to do during a down economy is to reduce your advertising,” he said. “Even though it may sound like a great decision in the short term, it’s a very bad decision in the long term.”

VP marketing Carol Wentworth underscored the point by showing members two new 30-second TV spots, while also explaining new promotions and print buys. She urged members to participate in such promotions as the $5 off $25 coupon and 50% off any item under $50, the latter of which ran during Thanksgiving weekend 2008 and brought the following results: Stores that participated saw sales increase by 20% over the prior year, compared to a 1% increase for the entire retail industry that weekend.

Shawn Clifford, an owner of Bethel True Value in Bethel, Conn., said the Thanksgiving promotion was one of the most successful in his store’s history. “We have never done something like that before because it seemed like it would be a hassle, but it was easy to implement and had good returns,” he said. “Even if a promotion like that is a wash, it gets people into the store, so the benefits go beyond the dollars you bring in.”

Mark Gerry, a buyer for McFarlane’s True Value in Sauk City, Wis., said his store has found that direct mail advertising to the store’s True Value Rewards members is the most effective way to increase store traffic. He said it tends to be more pinpointed, and “since they’re our best customers, we know what they’re looking for and that they’re going to come to us to get it.”

From a merchandising standpoint, True Value continues to emphasize its Certified True Blue assortments (CTBs), which now number 410. Mike Clark, senior VP and chief merchandising officer, said the co-op has already completed four line reviews this year and would do 22 more for a total projected savings of 12% or better.

Clark also told members that they are “in the right business at the right time,” pointing out that hardware retailing is a “need-based business” and that people can’t put off basic repairs.

“When customers take on those projects, they are looking for low-cost, do-it-yourself alternatives,” Clark said. “In fact, recent research on the home improvement industry reports a growing trend toward do-it-yourself versus do-it-for-me.”

Rodney and Glenda Kassab, owners of Saucon True Value in Hellertown, Pa., agree that the local hardware store stands to benefit if the inventory levels are kept up and the store continues to send out circulars and advertise locally, offering coupons and other specials.

“When the economy goes down, people come to the hardware store more often,” Rodney Kassab said. “Contractors tend to shop at the big boxes, but when people do it them selves, they tend to go to the hardware store for help.”

Once again, Greener Options had a strong presence at the market, and although the number of product SKUs hasn’t increased significantly, the marketing of the program has been stepped up, said merchandising communication specialist Jennifer Zerwer, who oversees the program.

“We’re continuing to be creative with more endcaps, more product assortments, and some stores are creating entire valleys in the store,” she said. The program has also been expanded with biodegradable True Value bags that are as sturdy as traditional plastic bags. Also on display at the Greener Options booth were battery recycling boxes that are free to members who request them.

Paint was also a major area at the market, as True Value has redesigned its paint section format so the Color Center is the first thing the consumer sees when he or she enters the department—not the paint desk. In addition, both the EasyCare and Weather All house brands have been re-branded and re-packaged to focus more on color. But that doesn’t take away from True Value’s emphasis on national brands, said global product merchant of paint Ken Lanis.

“Our consumer—in addition to our brands—also wants national brands, so we’ve partnered with Sherwin-Williams and Dutch Boy, and we’ve seen tremendous success with these in the stores,” he said.

Lanis also pointed out that painting is the No. 1 DIY activity among consumers, which makes it an even more important focal point in today’s hardware store. That’s why in addition to promoting paint in every circular, True Value is doing a four-day event over Memorial Day weekend where customers can buy one gallon and get one free—up to a total of eight gallons.

“None of this is recession-proof, so we have to be aggressive and stay on top of product and promotion to drive people into the stores,” Lanis added.