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Ace Hardware Creates Better Experience With Toys

Ace Hardware is a well-known American hardware store with a rich history in neighborhoods. Providing consumers with the right set of tools and home goods is a big strength of the brand. Did you know they also sell toys?

Introduction – Ace Hardware

Snapshot – Ace Hardware Corporation
Also known as: Ace Hardware
Founded: 1924 (99 years)
Headquarters: Oak Brooks, Illnois, United States
Number of stores: Over 5,000 with he majority of those stores independently owned and operated by local entrepreneurs
Revenue (2022): US$9.1 billion (a new record) – up 6.7% from 2021
Profit (2022): US$340.6 million (a new record) – up 3.2% from 2021
Retail Gross Margin (Q4 2022): 44.9% – up 0.3% from 2021
Slogan: The Helpful Place
Loyalty Program: Ace Rewards (Membership: Free, Points: 10 Points/US$1 Spend

Ace Hardware has been a mainstay of American home improvement scene for nearly a hundred years. It is highly rated and earned J.D. Power’s highest ranking for satisfaction for home improvement retail stores. It currently sits at the top of the annual J.D. Power U.S. Home Improvement Retail Satisfaction Study for the 16th time in the past 17 years (fifth consecutive year in a row). Specifically, the chain leads in the following categories: Staff and Service, In-store Experience, Online Experience and Merchandise.

2023 U.S. Home Improvement Retailer Satisfaction StudySM

Ace Hardware came in first while Lowe’s and The Home Depot came in second and third for 2023.

Even with the pandemic fueled home improvement bump resided, Ace Hardware continued to post record breaking runs on revenue and profit for fiscal year 2022. This speaks to the company’s ability to attract and maintain customers through an array of goods and service. It also have a fun rewards program that focused on spending.

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Transcript

Welcome

DeAnn/Larry
Hi. Welcome to Retail Mashup. I’m DeAnn. I’m Larry. This is the podcast where we talk about the intersections between customer experience and the realities behind running a profitable retail business.

Over A Weekend Walk – A Discovery About ACE Hardware

DeAnn
Larry, I don’t know how your weekend was, but I spent it in my doing my usual. Store visits a k a shopping.

And I was fascinated to walk into an Ace Hardware and I spotted something that I hadn’t paid a lot of attention to before I had seen it, but never really cared to take a deeper look until that moment. But they sell toys. I didn’t know. Did you know they sold toys?

No, I have never heard of or seen it. I would never associate a hardware store selling toys. No, me neither. And these are kind of cool toys, too. They’re a little bit vintage, a little bit unusual, and very interactive. No no electronics and fancy toys. It’s all kind of hands-on. Very analog toys.

Ace Hardware store track circa 1950s

I was kind of looking at this. I didn’t see a lot of people engaging with it, but I did see people kind of go by and take a look at some of the products on this end cap. And I did some research because I was fascinated by this very simplistic, plain-looking end cap. They took their regular store fixture and put toys on it and they added a sign at the top that says “toys”.

Toys Are Not A Small Department!

Nothing fancy. It turns out that Ace Hardware makes over a billion dollars (US) a year from toy sales. They’re the 14th largest toy seller in the US. Blew my mind. Who knew? And it got me thinking about the importance of identifying these little things that you could do in your store that add value to your customer’s experience.

When you think about mom or dad coming into the store with their kids, they’re looking for a hardware piece or a part to go with something. they’re distracted, they’re busy. There’s something the kids can look at. Or if they’re out running errands or a small, affordable gift they can take home, it just makes so much sense.

Case Study – Dollar General

It’s surprising to me that a lot of other people don’t think to do this. If you look at somebody like Dollar General, for example, they have a greeting card aisle. Used to be two cards for a dollar. I think now it’s a dollar each for these greeting cards. Very simple. Nothing special. They haven’t done anything to really plus it up in the store.

I understand from Dollar General Leadership, they make almost a million dollars over a million dollars a day across their chain on greeting cards. Considering they have 15,000 stores, that is a massive chunk of money for something so simple. these items are very high-profit margins.

They’re easy to source. They’re using existing fixtures in the store. They’re not asking for additional staff training in any way. You’re just taking what you already have and you’re pulsing it up a little bit. In exchange for that, you’re earning a reliable, steady recurring revenue stream on unexpected things, that catch the consumer’s attention as they wander around the store. as I said before, they add a layer of interest to the customer’s experience.

Discussion

DeAnn/Larry
What an interesting story. A little background. Ace Hardware is celebrating a hundred years next year. that’s gonna be very exciting to see how one of the oldest hardware brands today transforming into a day-to-day experience for consumers. They’re operating like a mini department store with a hardware focus.

If you go to ace hardware, like any hardware store beyond just the hammers and nails that you can buy, you can also buy tools or lawn chairs kitchen appliances, and things for your pets. it makes sense. we have always talked about how brands need to think about the next thing in the journey for consumers.

ACE Hardware’s YouTube channel has great tips for customers. This is an example where Chef Jason, Ace’s Grilling Expert, provided tips on grilling frozen burgers.

if you’re buying a mixer, you need something to mix with. A brand would benefit from selling the ingredients for you to use in the mixer. in this case, if the father’s buying a hammer, Maybe the kid following the father may want to play with a toy hammer. Now that you talked about it, in a way makes sense to me that they would want to sell toys because why not have the kids mimic what their parents are doing?

Like parents like kids – Stanley Jr. chainsaw (for US24.99) mimics the real thing so that kids can learn more about what their parents do with power tools. Source: Ace Hardware

I love what you just said. It ties in so much to hyper-focusing on your customer, paying attention to not just what they come into the store and buy, but how they live their lives and what are the other things that would fit into their lives.

Of course, they have toys if they need toys, if they have kids, or if they have pets, of course, they need pet products. that reminds me of the fact that Lowe’s, Is now opening Petco shops as a partner, especially in some of their rural locations. I used to live on my grandparents’ farm.

A store with a store concept – petco has been available in select Lowe’s stores since 2019. This is a perfect example of brand partnership in extending customer relationships. Source: Lowe’s.

I spent a summer every summer with them growing up in rural Kentucky. They lived on a rural route. Their address was not a street address. It was a rural route number, and there were a lot of delivery companies that would not deliver to a rural route. So they would have to get a post office box with a street address and drive to pick up deliveries to the home.

Getting products delivered to your door is not the easy, convenient thing that it is for us city dwellers. Partnering with Petco for these rural locations that are already serving customers in remote communities or communities underserved by other retail, just makes so much sense and it’s focusing on the life of your customer end to end creating experiences around those needs.

Absolutely. They may not always be known as the “fancy” hardware store, but customer experience has always been something that plays a very important part in their culture. I know that they have scored well with J.D. Powers. They have gotten good scores on the home improvement retail index.

Speaking about toys they made US$9 billion last year, if a billion dollars it’s from toys. Well, that’s more than 10% of the revenue alone.

It’s an eye-opening idea. Other brands may not know to include toys and so they’re not directly competing with home hardware at all.

Exactly.

215-piece store brick set available online for US$24.99. Source: Ace Hardware

Hardware it’s better that you go to the store because you don’t know the specific types you need. Maybe you need some education. Being in a store asking the right people would provide a better experience than you would buy things from Amazon.

Yeah, and it goes with their brand personality too. Ace Hardware is more of a boutique hardware store. They don’t carry the broad range that a Lowe’s or a Home Depot would carry. they have much smaller footprints.

They tend to be closer to urban communities and they serve people who don’t necessarily need to go and buy a bunch of lumber to go build a playhouse in their backyard. They, tend to serve people whose toilets are broken and they need, they need that little rubber dew hickey that so you don’t have to jiggle the handle.

Paint or things that are much more manageable. Toys fit into the end-to-end lifestyle experience of the customer. Coming in to buy something to paint a room, you happen to buy a toy. Or as you said, buy a hammer as a gift for somebody, or because you need to hang some pictures you see this little toy hammer and you buy one for your kid.

I do love this idea and I’m very impressed with the consistency of revenue that it’s generated for them. It costs them absolutely nothing to display it in their stores and their supply chain’s already in place.

it’s not a big ask to expand the supply chain or to ask the supply chain to extend into sourcing some of these toys. Absolutely. I think a lot of people may not know, they donate a lot of money over the years to the Children’s Miracle Network Hospitals. They have donated more than US$130 million over 30 years. Kids have always been part of their DNA.

Curt’s ACE Hardware raising money for Children’s Miracle Network

Yeah, and we just didn’t know about this until you went to the store. So thank you for hearing that. Well, I don’t have kids, I didn’t notice it until then, so my bad. But it just shows the power of staying true to your brand and serving your customer.

To create an experience that resonates well with customers and it is Ace Hardware, a franchise organization, must support its franchisees with a good product mix. They have done an excellent job in the toy area. Well, thank you so much for this beautiful topic.

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* We made some modifications to the transcript to improve understandability and flow.

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