How Private Label Products Help ACE Hardware Thrive in the Competitive Big-Box Space

We have witnessed just how tough things have been for businesses since the onset of the pandemic, many have struggled to regain revenue losses, some even have to shut down their companies. In that chaos when other companies saw no way out, one industry though that has surged.

While the US economy contracted by 3.5 percent in 2020, spending on home improvements and repairs increased by over 3 percent, totaling nearly $420 billion. This growth was driven by households modifying their living spaces for work, school, and leisure in response to the COVID-19 pandemic, according to Improving America’s Housing 2021.

Talking about hardware stores, we need to bring Ace Hardware to the table because Ace Hardware is well known for being people’s favorite place to shop than any other retailers. You’re going to get it when you can be a sidekick with your customers, but there are a lot more to it to have a broaden view on their success, and the first one is their co-op (cooperative) model.

Co-op Structure – Every Owner is at a Better Position

Cooperative (co-op) is a business which is owned and operated jointly by its members who split returns equally. This is a type of business that is owned by people who benefit directly from its products or its services. It’s the opposite of a franchise system.

A retail cooperative is created when a group of small local retailers band together to operate under a single brand. That turns into a co-op, which they do since they can now negotiate lower prices with suppliers. They can buy things in large quantities, which obviously lowers the price.

That’s the case of ACE Hardware. According to Andy Enright, vice president of retail development at Ace Hardware, the independently owned and operated co-op model allows each store to operate freely and customize its product variety to better meet the demands of its local customer.

Often, companies are controlled by a central organization that is either owned by the public through the stock market like Lowe’s or Home Depot, or privately owned, typically by an investment firm or the family who started it.  But the Ace Hardware company is different in that it is owned by the people who operate those individual stores.

Ace, which was founded in 1924 by a small group of Chicago hardware shop owners, revolutionized the retail industry by enabling individual stores to buy goods in bulk to get the best deals and save money.

This co-op model powered the smaller stores to gain competition despite the presence of larger stores in the game. Ace Hardware Corporation is still owned solely and exclusively by the local Ace retail entrepreneurs until these days.

Over that the course of 100 years, Ace Hardware has expanded its store network to achieve bigger savings through economies of scale.

In the 1960s, hundreds of Ace Hardware stores emerged nationwide, supported by warehouses in California and Georgia. Presently, Ace Hardware store owners can purchase tens of thousands of products from over a dozen strategically located warehouses across the country.

Through this co-op structure, local owners may join their resources, boosting the overall strength of the group. Unlike top-down business models where significant decisions are made by a small number of executives, every local store participates in the cooperative’s decision-making process.

The model is great, but don’t forget to build a strong brand as what Ace has been doing.

Build a Strong Brand – Get Your Business Recognizable

The fact that all of these stores are branded under the same name contributes to its increased trustworthiness and recognition, to the extent that it is currently ranked among the top 100 most recognizable brands worldwide.

For many years, advertising has played a significant role in it; these store owners have been sharing the expenses of national campaigns, which currently cost over $100 million annually and frequently feature celebrity spokespersons like Suzanne Somers or John Madden.

At Ace Hardware, marketing strategy is driven by utilizing the advantages of community and small business. Continuously strengthening the idea of helpfulness has drawn more women, more younger buyers and homeowners.

According to Ace Hardware CMO Kim Lefko in an interview with Forbes in 2021, their integrated marketing and promotional campaigns are focused on how Ace is the preferred destination for paint, grills, power equipment and home preservation.

Kim Lefko stated that, “The focus is simple; the high-quality brands in each of these categories that consumers want and only Ace carries, and trusted expert advice their neighbors expect. As a reference, this assortment of high-quality brands Ace carries nationally include Benjamin Moore, Magnolia, Weber, Traeger, Big Green Egg, Ego, Stihl, Toro and Milwaukee.”

More women, new home buyers, and younger shoppers than ever before have been lured to Ace. Ace stores provide high-quality products, expert advice, and the convenience of in-neighborhood shopping. This differentiation brought Ace in front of new customers. They also worked at engaging and collaborating with younger DIYers.

As the organization is a retailer owned cooperative, the marketing strategy has to fit in.

As share by Kim Lefko, “With over 4,500 stores in the U.S., 75% of the U.S. population is within 15 minutes of their local Ace store, and no two stores are alike. These locally owned stores are part of the community, and you can feel that upon entering, each offer a unique assortment of products and their own special shopping experience.”

She added, “The majority of Ace stores are local small businesses, often family-owned, with the autonomy to tailor their store offerings to their communities. While we have a national advertising campaign strategy that drives overall awareness and affinity with Ace, we concentrate on always providing platforms and tools we enact for local customized marketing around every store to attract their local customer.”

In order to stay under Ace Hardware’s name, the store owners have to perform well and maintain key standards; otherwise, the company won’t allow them to leverage Ace Hardware branding anymore.

That’s why when you see a store that’s called Ace Hardware, you can have certain expectations as a customer. It’s not just about what you can find in these stores, but also about how you feel while shopping. That leads us to the third point – customer service.

Customer Centric Approach – Be Helpful to Your Shoppers

Ace Hardware is all about convenience and service, even when those other big-box retail businesses can offer better value in terms of both pricing and selection. For the sake of convenience, there’s always one in your area; they aim to position themselves as your go-to hardware store.

Statistically, more people live closer to an Ace Hardware, making it easier to access. When households are working on a small project or need something quick for their house, Ace is a likely option.

Furthermore, there are situations when a smaller store format is preferable. Ace Hardware provides a less overwhelming shopping experience because there aren’t many options on the selves, making shoppers quickly locate the items they want to purchase.

Regarding service, JD Power publishes an annual customer satisfaction ranking for retail home improvement retailers. From surveys from over 2,000 customers ranking them in five categories, Ace Hardware repeatedly comes in at the top of the list. Menards, the chain in the Midwest, was able to secure that title in 2018, but Ace has been the winner every other year since 2007.

After all, their slogan is that they’re “the helpful place” and has self-proclaimed their employees “the helpful hardware folks.”

This means that Ace Hardware has become a helpful force for customers. Ace Hardware prides itself on its friendly, knowledgeable, and helpful employees. They prioritize delivering a personalized, neighborly experience that sets them apart from larger stores. And to achieve this, the culture and people within the company play a very important role.

People – The Driving Force Behind a Thriving Company

As expressed by Kane Calamari, Senior Vice President – Chief Human Resources Officer & President at Ace Hardware, “Our core values are service, convenience and quality. We make sure staff are trained and equipped with everything they need. They represent our brand every day: When your tagline is ‘helpful hardware folks,’ employees know they’re every part of the customer experience.

He added, “We work hard to leverage that internally and externally. We want the best people, the best brands, the best customer experience we can provide; that relies on employees.”

Kane Calamari continued, “We walk our values, the first being humility. We call it a humble swagger. We want people to have pride in our results, but we never take them for granted. At the retail level, it’s about community. When the customers you serve are neighbors you go to church with and coach Little League with, you’d better be a member of the community.”

At corporate, the company want people to want to be here. They want them connected to the cause and loving what they’re doing.

“Our CEO is in the cafeteria eating with the rest of the staff, demonstrating that humble swagger. That’s what it’s like to work here,” said the SVP.

Ace knows that growing people is important; more and better leaders make everything better at Ace.

They have developed a high-potential program through their “Ace Academy.” They seek out employees who demonstrate leadership qualities and make an effort to foster them. Additionally, employees can grow at their own speed with the help of their online “Ace Learning Place.” Employees are thrilled that the business is investing in them.

The Home Improvement Heaven – Power of Product Mix

Another reason behind Ace Hardware’s success is the range of products they offer in their stores, which can be examined in several ways.

Geographically Tailored Range of Products

We have to look back at one thing that, Ace Hardware’s stores are locally owned and operated by people who are locals, so theoretically, they know what their customers want to buy.

While each of those business owners has the option to choose among tens of thousands of products to sell in their sites, they only select those that will sell best in their own neighborhood.

At Ace Hardware stores, you’ll find a wide range of products including tools, hardware, building supplies, paint, lighting, garden tools, outdoor accessories, home decor, and much more. Whether you’re tackling a small DIY project or a major home renovation, you can find everything you need either online or at your local Ace Hardware store.

Also, because convenience is a key selling feature, they promote smaller products, like light bulbs, that consumers might want to run out and purchase right away.

Over the years, they have sold a lot of light bulbs since people want to replace a broken light in your home as soon as possible. And one of the quickest ways you can make that happen is often going down to Ace Hardware.

The Secret Sauce – Private Label Products

Along with many other recognizable brands that they were already selling in stores, private label items have been a major success for them. In the early 1990s, Ace launched a range of private-label products, carrying on a trend that started in retail foods.

Private label products enable retailers to offer their customers a consistently low-priced product while generating higher profit margins for themselves. One of Ace’s first private label goods was paint.

Paint, despite its low growth potential, is a popular choice for do-it-yourself projects. Due to its low brand loyalty and price sensitivity, it became an ideal product for private labeling. By the early 1990s, Ace’s paint division was growing faster than the industry average, forming the basis of a private-label program with 12,000 items.

Today, customers actively seek out Ace Hardware’s private label products for their quality, durability, and value. Ace offers a range of exclusive brands including Ace, Living Accents, Celebrations, OakBrook Collection, Home Plus, Steel Grip, and Grill Mark. These brands collectively contribute a significant portion of the corporation’s annual revenue.

“Do it Yourself” – Riding the Coattails of DIYers

Another reason for Ace Hardware’s success is the continuously growing population of do-it-yourselfers (DIYers) – individuals who prefer to undertake their own home improvement projects rather than hiring professionals.

Certainly, the rise of DIYers contributes to the success of many hardware stores, but Ace Hardware has been at the forefront of this trend longer than most. Established in the 1920s, just before the major stock market crash and the onset of the Great Depression, Ace has remained a central player in serving the needs of DIY enthusiasts.

It was a perfect timing because when people didn’t have money to hire someone else to make repairs, they have to purchase their own equipment and doing it themselves, which has been benefiting Ace Hardware.

After World War II, more people began purchasing older homes that need renovations, which led to the beginning of the massive DIY trend that only became stronger over time. Particularly in the 1980s, that industry more than tripled in size throughout the decade.

As expected, competition increased, and businesses that had no prior involvement in hardware like grocery stores began setting up their own hardware sections.

Carve Out a Niche – Stand out from Other Rivals

Ace Hardware operates within the home improvement market alongside industry giants like Home Depot and Lowe’s. CEO and president John Venhuizen acknowledges the strengths of Home Depot and Lowe’s, recognizing them as “good companies” that excel in their operations. However, Venhuizen points out a significant difference between Ace Hardware and the big box competitors.

According to Venhuizen, Ace is more focused on home “preservation” and maintenance than big-box rivals Home Depot and Lowe’s, which specialize in larger home renovation projects.

“They’re primarily focused on home renovation, whereas we’re more focused on home preservation,” he said.

To that end, Venhuizen said Ace isn’t the place to go when you’re looking to drop “thousands of dollars to renovate your home.”

“Ace has always been about home preservation, helping you fix, repair, and maintenance your biggest asset,” the CEO explained.