1. technology and computing
2. hardware

6/10/2013
104: How To Do Business with
Ace Hardware
Tim Duvall, Ace Hardware
Ken Goodgame, Ace Hardware
Terrance Howard, Ace Hardware
About Ace Hardware
 For nearly 90 years known as the helpful
hardware store in neighborhoods across America
 Ranked in 2012 “Highest in Customer
Satisfaction among Home Improvement Stores
for the Sixth Consecutive Year” according to
J.D. Power and Associates.
 Over 4,600 hardware stores locally owned and
operated across the globe
 Represents the largest hardware cooperative
in the industry.
 Headquartered
eadqua te ed in Oa
Oak Brook,
oo , Ill
• Operates 14 distribution centers in the
U.S and also have distribution capabilities in
Shanghai, China; Panama City, Panama; and
Dubai, United Arab Emirates.
• Retailers’ stores located in all 50 states,
the District of Columbia and approximately 60
countries.
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Ace Hardware at Its Core
Vision
• The best, most helpful hardware stores on the planet
stores on the planet
Mission
• We are committed to be the best provider of products, services and operating methods to convenience hardware retailers
Core Values
C
V l
• People, Integrity, Excellence
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Ace Hardware as a Cooperative
 Retailer-owned Cooperative
• Wholly owned by its independently operated store owners
• Retailers purchase stock as their initial investment in Ace
• As shareholders, our retailers have voting rights
 A Cooperative is unlike a Franchise
• Franchises have a certain amount of control over its members' participation in promotions,
product offerings, policies and operating standards
• Ace retailers are true entrepreneurs, operating under certain standards, but taking pride in
their independence and the freedom that brings.
• Ace retailers enjoy the benefits of being part of a larger national brand, but also appreciate
the flexibility to customize their store offerings and promotional activities to best meet the
specific needs of their neighborhoods and communities.
. . . Together we are ACE
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Merchandise Sales to Retailers
 Ace offers its retailers a full line of hardware products consisting of approximately 75,000 stock keeping units (“SKUs”)
 The Company sells merchandise to retailers in three ways:
1. Warehouse sales from merchandise inventoried at our RSCs WAREHOUSE SALES BY MERCHANDISE CLASS
Houseware
& Appliances
6%
General Hardware
10%
Plumbing
& Heating
17%
Hand
& Power Tools
9%
2. Direct shipment sales from vendors to our member retailers
Electrical
10%
Sales Type
3 Bulletin
3.
Bulletin sales involving special sales involving special
bulletin offers
 Ace Corporate earns profits through the additional charges it assesses to retailer purchases
Paint & Cleaning
22%
Sundry 11%
Lawn & Garden
15%
% of Sales
Additional Charges
Handling Freight
Handling
Freight
Warehouse
73%
10%
Yes
Direct Shipment
22%
Up to 2%
No
Bulletin
5%
6%
Yes
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Geographic Diversification of Member Retailers
 Ace retail stores are located in 50 states and approximately 60 foreign countries
 Over 85% of domestic stores are Ace bannered stores  Top 10 retailers collectively own 230 stores and represented approximately 8% of merchandise sales in 2011
 Ace’s largest retailer owns 89 stores ‐‐‐
represented approximately 2% of our merchandise sales in 2011
Location
# of Stores
California
398
Florida
247
Illinois
224
Texas
219
Georgia
172
Michigan
163
New York
149
Top Seven State Total
1,572
(35%)
All Other States
2,587
(58%)
International
332
Total Stores
4,491
(7%)
MERCHANDISE SALES BY LOCATION
International
5%
California
11%
Florida
5%
Top seven states with the most Ace seven states with the most Ace
 Top
stores comprise approximately one‐third of total stores as of fiscal 2011 year end
Pennsylvania
4%
Illinois
6%
Texas
4%
New York
4%
All Other States
61%
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Our Strategy
Wholesale & Logistical Excellence + Leading Retail Performance
 Retail success is a primary objective because it drives both the performance of Ace retailers and growth at the wholesale level
 Ace’s 2020 Vision p
program is a best practices strategy designed to improve g
p
gy
g
p
overall competitiveness and performance in the convenience hardware market –
Ace Retailers who use our best practices and retail operating methods perform up to 25% better than those that don’t.
 2020 Vision retailers are committed to improving their stores and exceeding consumer expectations by embracing Ace brand initiatives in:
1. Product assortment: Relevant, end user centric 2. Customer service:
2. Customer service: Ace “Rewards”
Ace
Rewards loyalty program, now featuring instant loyalty program now featuring instant
savings. Exclusive to Ace retailers‐driven by customer feed‐back
3. Store experience: Consistent store décor and improved store design
4. Training: High quality retail programs including inventory management
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Ace’s Extensive Distribution Network
 14 Retail Support Centers (RSCs) across the U.S. which total 8 million square feet
 Nearly 97% Service Level to Ace Retailers at our RSCs consistently each and every year
 More than 75% of Ace Corporate employees work at our RSCs  The RSCs are open 7 days a week, 362 days per year
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Consumers Shop Ace for its Convenience
Shop Ace for its Convenience
Type of Ace Shoppers
 Mission Shoppers comprise 68% of Ace shoppers and come in and out with one h
d
d
h
thing on their mind to buy
 Browsers 16% come in for an item but are willing to browse for other items
 Project Shoppers 16% are the weekend warriors who spend the most money in a hardware store and try to buy
a hardware store and try to buy everything needed to complete a project
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Home Improvement vs. Convenience Hardware
 The Convenience Hardware market is a subcategory of the larger Home Improvement market, with substantially different market dynamics
Size
Major Competitors
Key Merchandise
Average Ticket Price
Home Improvement
• $300 billion in annual sales
(approximately)
Convenience Hardware
• $35 billion in annual sales
(approximately)
• The Home Depot
• Ace Hardware
• Lowe’s
• True Value
• Menards
• Do-It-Best
• Building Materials
• Home Repair
• Large Appliances
• Paint
• Kitchen
Kit h & Bath
B th Remodeling
R
d li
• Lawn
L
&G
Garden
d
• The Home Depot: $54.89
• Ace Hardware: $23.42
• Lowe’s: $62.82
Recession Sensitivity
“Handle” Phrases
• More
• Less
• “Renovation”
• “Preservation”
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Ace Convenience Hardware Dominance Equation
Fasteners
&
Fasteners & Hardware
Electrical
Repair
Signature
Ace
Lawn & Garden
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Plumbing
Repair
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Relevant Differentiation
2011 Customer Service Champs
1.
L.L. Bean
2.
USAA
3.
Apple
4.
Four Seasons Hotels & Resorts
5.
Publix Super Market
6.
Nordstrom
7.
Lexus
8.
Ritz-Carlton
9.
Barnes & Noble
2012: Ace Hardware was ranked "Highest in
Customer Satisfaction among Home
Improvement Stores Six Years in a Row"
by J.D. Power and Associates
10. Ace Hardware !
Ace Hardware received the highest numerical score among retail stores in the proprietary J.D. Power and Associates 2007-2009 Home Improvement Retail Store StudiesSM. 2009 study based on responses from 8,186
consumers measuring 5 stores and opinions of consumers who purchased a home improvement product or service within the previous 12 months. Proprietary study results are based on experiences and perceptions of
consumers surveyed March-April 2009. Your experiences may vary. Visit jdpower.com.
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Ace Niches – Relevant Differentiation
Over the years, niches were developed within Ace stores to drive retail sales and differentiate ourselves from the “big boxes”. Ace provides tools for stores to identify the market potential for various niche categories.
Niche Core Categories
•
•
•
•
•
•
Pool
l
Pet Supplies
Work wear
Bird Feeding
Specialty Cleaning
Candles
•
•
•
•
•
•
“Branded” Niches
Pneumatics
S
Storage and Organization
dO
i i
Filtration and Purification
Garage Storage
House wares and gift wares
Hearth Fireplace Accessories
Ace Private Label
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World Class Brand Partnerships
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Craftsman Partnership
Craftsman Retail Sales
Craftsman
Retail Sales
projected to be over
$500m YE 2014
Significant Consumer Brand Strength
Craftsman is the Tool Market Leader:
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Valspar Partnership

More Profit •
Effective January 1, Ace retailers will make at least 10% more gross profit dollars  More Advertising • Over the first 10 years of this alliance alone, we will inject over $125m to inform consumers that “Ace is th Pl ” f
the Place” for paint.
i t

More Store Support and Training • A core driver of our winning alliance will center on the deployment of an Ace dedicated field force of 50 paint professionals
 Less In‐store Capital, Equipment and Confusion • One common colorant platform from which retailers can mix both brands
 Retail Ready Décor Program • A complete décor support program will be available including new décor elements, chip rack, mixing stations, colorant systems and auto tinters
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Compelling Competitive Advantage
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Ace Hardware Retail Store Model Summary
 Best brand
 Focused strategy on store operating model and continual
improvement
 85 years off growth
th
 World class supply chain
 SAP compliant
 Retail-centric
 Primo brands - strong vendor partnerships
 Strong end user loyalty programs
A Great Place To Be
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Ace Hardware Supplier Relations - Supplier Portal
Inform
Purpose: Inform, Instruct, Perform
Our vendors.com site is the main vehicle for
communication with our vendors. The site is updated
regularly w/news and changes to vendor requirements.
www.acehardware-vendors.com
Instruct
Public:
News
On- Boarding
Compliance Manuals
Forms & Agreements
Department Contacts
Semi- Private: (E-tools)
Ace Hardware’ Supplier Portal Perform
Private: (Toolbox)
Scorecarding
Reporting
New Item Start
Supplier AP Data
Event Planning
 Purchasing Workbench
Training
Ace Directory
Ace Convention
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Ace Hardware Compliance – The Perfect Order
On
Time
Complete
Problem
Free
Accurate
Documentation
Why it’s important?
• Minimize Supply Chain Disruptions
• Control Cost
• Manage Service Level Risk
• Maintain Inventory Levels
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Ace Hardware Compliance - Documents
Electronic Document Requirements:
• Electronically transmit purchase orders (850)
• Submit Functional Acknowledgement (997)
• Submit Advance Ship Notices (856)
• Accurate, Complete & Timely
• Streamline order processing
• Expedite shipments
• Shortens the receiving process
• Utilized by Ace to measure performance
• Submit an Electronic Invoice (810)
• Accurately invoice for what was ordered, correct qty, and price
• Receive Payment electronically via EFT and Remittance Advice Data
• Receive Credit/Debit Adjustments via (812)
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Ace Hardware Compliance - Receiving
Quick Response Program:
13 criteria that defines the required shipping
standards to Ace’s RSCs. The compliance program
expedite and monitor how shipments arrive
Ace helps
Hardware
Compliance
into our RSCs.
• Electronically, it evaluates 100% of your freight
delivered to Ace’s 14 RSCs.
• Through daily calculations, it assesses compliance
for every vendor.
• It communicates timely, shipment specific QR
issues via email the day following the receipt i.e. pallet
heights, pallet qty, preferred carrier, packing list, shrink
wrap, etc.
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Ace’s GS1 US Registered Company Prefix
082901
0
8 2 9 0 1
0 0 0 0 1
UCC-12
3
Ace Assigned Trade (Product) ID or Item Nbr = 00001
-This
This is NOT ALWAYS the ACE SKU # and is a sequentially assigned or next
available #!!!
Single Item
00 082901 00001 3
GTIN – 12
Consists of:
 00” Data is IMPLIED and acts as a placeholder when storing the
data
 The GTIN-12 is stored in a 14-digit database field length
 It is the Retail 12 digits right justified and left zero filled!!
 Company Prefix = 082901
Check digit = 3
Product ID = 00001
Inner Case/Carton
UCC-14 10 082901 00001 0
Consists of:
 Package Indicator: Ace standard schema is to use a “1” for inner
packs
 Data Placeholder = 0 (zero)
Box of 6 Hammers
 Company Prefix = 082901
10082901000010
Inner Pack #1
Inner Pack #3
10082901000010
10082901000010
Inner Pack #4
Inner Pack #2
10082901000010
GTIN – 14
Check digit = 0
Product ID = 00001
Master Case/Carton
UCC-14 20 082901 00001 7
GTIN – 14
10082901000010
4 Boxes of 6 Hammers
Total = 24 Hammers
Consists of:
 Package Indicator: Ace standard schema is to use a “2” for
Master Cartons
 Data Placeholder = 0 (zero)
 Company Prefix = 082901
Product ID = 00001
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Check digit = 7
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20082901000017
Ace Hardware Compliance - Performance
Ship On Time
(by Expected Ship Date)
+
100% Fill Rate on
1st Receipt
S
= Success
Provides Ace:
 Higher Service Level to our Retailers =
Higher Sales $
 Higher Inventory Turnover
 Lower Inventoryy Investment
Provides Supplier:
 Higher Sales $
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OnBoarding - Becoming an Ace Supplier
Objective:
Minimize supply chain
disruptions by getting it right
the first time.
1.
2.
3.
4.
5.
6.
7
7.
Establish Contact with/an Ace Buyer
Gain Approval from Buyer
Complete All Documents
Request Access
Submit items w/pricing
Participate in EDI testing
Comply with Ace
Ace’s
s Labeling
Labeling, Barcode
& Quick Response criteria
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Scorecarding – How Do you Measure Up?
Ace Monthly Vendor Scorecard
V#: XXXXX
Page 2
Page 1
V#: XXXXX
Ace Hardware Compliance
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Wrap-Up
Questions?
Ace Hardware Compliance
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