This is the eighth installment of a special series, presented by the National Hardware Show, exploring key trends and developments driving the growth of housewares and home goods in the home improvement retail business.
True Value President and CEO John Hartmann provided the keynote address at the recent National Hardware Show. In an exclusive interview with HomeWorld Business, Hartmann outlined how True Value’s recapitalization a year ago transformed its co-operative corporate structure, fueling reinvestment in its independent hardware store members while recharging its marketing and strategy for new generation of first-time home owners and do-it-yourselfers.
In March of 2018, True Value struck a deal with ACON Investments, a private equity firm, which has led to the development of the new corporate structure. ACON got a 70% stake in the company based on its $229 million investment, while True Value retailers retained the 30% holding in the newly constituted True Value Co. True Value retailers received back capital invested in the corporation, money they could use to invest in their businesses.
Hartmann called access to the benefits of a national and international brand without any membership fee “a game-changer” for the hardware channel as it allows True Value retailers to invest more in their own local formats.
“True Value has been around since the 1940s,” Hartmann said. “It allowed individual store owners to bundle their buying power. We have the same goal today, to do the things for independent retailers that allow them to grow their businesses profitably in a very competitive marketplace.
“So we changed our structure from a 100% cooperative into a private organization. Our focus was on freeing up the assets for our independent store operators that had been tied up in the company. A quarter billion dollars owned by storeowners was trapped in the company. The plan was to unlock equity and return 70% of the ownership equity to them and allow them to reinvest in locally as they know best.”
Hartmann said he neighborhood hardware store stands to benefit from younger consumers who already have expressed a preference for shopping locally and favoring “authentic” experiences.
As they purchase homes, Millennials, Hartmann said, “tend to be inexperienced and less familiar with home improvement projects. That falls into True Value’s sweet spot. Our independent retailers are in a great position to provide a local, relevant assortment of merchandise and product knowledge they seek. Millennials are more cost conscious with their home improvement projects and typically tackle the smaller, lower-cost projects first, and they love to shop local stores.”
Younger consumers are apt to shop more broadly online but older shoppers are catching up, and that reality is having a bigger effect on the hardware channel, Hartmann said. The DIY/hardware retail channel has been experiencing increasing digital demand, and online buying trends were a prominent consideration in the True Value reorganization. In moving more resources to online, True Value is aware both of the opportunity to better serve more customers and also of the competitive reality that Amazon and big box competitors are pushing to capture more DIY dollars.
“There is a really strong history of how the independent hardware channel has battled back against intense competition,” Hartmann said. “The original onslaught of big boxes was game changing in the mom and pop space. We’re drawing a lot of similar lessons as we’re facing more online competition. There are over 25,000 independent hardware stores, garden centers and home centers across the country that compete right under the shadow of big boxes. The local heritage, deep product expertise and personalized service that our independent retailers offer their customers every day cannot be matched by online competitors or large format stores. True Value is more local convenience hardware with a quick in and out, where store owners know customers by name and are the cornerstone of their community.”
True Value is devoting resources to support the individual websites of its affiliated stores. Overall, the company has been developing what Hartmann calls a “hyper-local” approach to promotion, both traditional and online, to ensure more marketing communications directly link consumers to their local True Value stores.
At the same time, the company can apply its own market research to look beyond the individual store. True Value can build information on each market where its independent retail partners operate and provide data that helps each of them update marketing and product assortments.
“We can see what works in different markets, and help customize and planogram stores for that geography,” Hartmann said.
Hartmann said the new True Value corporate structure allows the company to engage more retailers, including hardware stores that might have been reluctant to commit to a single cooperative and now can connect with True Value. Under the new structure, garden centers, lumber yards and home center retailers that may emphasize other product categories but who have a DIY orientation can now buy from True Value. Hartmann said the company already has begun working with 500 new retailers, giving True Value more muscle and lend itself to building the investment its member retailers retain.
In February, True Value announced a $150 million investment in supply chain optimization, one that included development of a modern million-square-foot distribution center in Hanover Township, PA, slated to open this fall.
The 2020 National Hardware Show, set for May 5-7 in Las Vegas, will once again partner with the North American Retail Hardware Association on the NRHA All-Industry Conference. NRHA is a trade association dedicated to helping independent home improvement retailers. The conference, concurrent with the Show, includes a series of educational seminars, networking opportunities and a speaker lineup that offers valuable insights into industry topics and trends.