CHICAGO – True Value Co. chief executive Lyle Heidemann spends a lot of his time shopping these days. And that’s a good thing for a chain that had lost its way in retail.
Roaming the aisles of big-box competitors and other retailers that have put hundreds of True Value stores out of business, Heidemann is on the prowl for more customers after a restructuring that cleaned up True Value’s financial problems and has given it new momentum.
Whether it can regain business lost to home improvement behemoths Home Depot Inc. and Lowe’s Cos. remains questionable. But after years on the defensive, the 6,000-store, member-owned cooperative is fighting back with an aggressive marketing strategy and what its first-year CEO calls “a whole new beginning” for True Value.
The quest: Attract more “weekend warriors” away from the giant stores.
“We’re trying to now not just survive, but in essence put together a strategy for growth,” Heidemann said. “And … probably the biggest difference is that we’re focused on retail versus wholesale.”
True Value has always acted as a wholesaler to its retail members, but now is focusing on what will help them improve store sales and profits, he said.
Heidemann is pounding the aisles of big and little stores alike, taking mental notes in search of competitive tips. In the previous week alone, he visited Home Depot, Lowe’s, Restoration Hardware, Linens ‘n Things, Crate and Barrel, Target and Bed, Bath &Beyond outlets.
True Value was synonymous with hardware for many Americans for decades after its establishment in 1948 by hardware wholesaler and distributor John Cotter.
The Chicago-based cooperative of 25 dues-paying retailers was originally called Cotter &Co. By his death in 1989, sales exceeded $2 billion and nearly one in every four U.S. hardware stores bore the True Value name.
Since then, the cooperative – which became TruServ Corp. and then was renamed True Value Co. in 2005 – has been buffeted by the relentless expansion of giant discount competitors, financial losses and accounting errors that led to a Securities and Exchange Commission investigation and a restatement of earnings for 1997-99.
More than 1,000 cooperative members have left, most closing down but some defecting to rival such as fellow cooperative Ace Hardware.
Financial specialist Pamela Forbes Lieberman was brought in to straighten out the mess in 2001, and headed the company until June, when she was replaced with Heidemann, an industry veteran. Heidemann spent 36 years with Sears, Roebuck and Co. before retiring in 2003, overseeing its hardware, tools and paint, and lawn and garden businesses.
Heidemann,61, credits Lieberman with leaving True Value in solid shape, including four consecutive years of improving profits and same-store sales growth of 2 percent last year, when revenues totaled $2.04 billion.
That momentum has enabled him to undertake new initiatives, such as adding regional items – for example, snow shovels in the North, fire ant killer in the South and moss killer in the Northwest – and changing pricing and inventory procedures.
Despite the financial recovery, retail consultant Howard Davidowitz isn’t sure True Value and its independent operators can stay viable in the face of continuing growth by the discount powerhouses.
“They do have a convenience element, and they have some niche businesses,” said Davidowitz, chairman of Davidowitz &Associates Inc. in New York. “But in this environment of Wal-Mart, Target, Home Depot and Lowe’s, can they be competitive on price? I think the book is out.”
The continuing loss of 150 to 200 members a year, which hardware industry trends suggest is likely to continue, underscores the challenge.
Hardware stores are seeing their share of the do-it-yourself market shrink steadily, with sales growing in the low single-digit percentages annually, while their big-box rivals grow at a double-digit clip, doubling their sales in the last five years.
“Home Depot and Lowe’s are going to get bigger and bigger, and they’re going to take more market share away from small mom-and-pops,” Morningstar analyst Anthony Chukumba said.
“They have much more purchasing power, a wider selection and lower prices, and at the end of the day that’s what customers are really looking for.”
Heidemann says True Value, which also operates Grand Rental Station, Taylor Rental, Party Central and other stores, isn’t trying to be “a little box carrying all the big-box items.” But it is providing its member stores with more detailed information about competitors’ prices in individual markets in order to help them compete better in its core areas of plumbing, electrical, lawn and garden, and paint.
Its new print and television campaign introduces an updated slogan – “Start right. Start here.” – reflecting the consumer trend away from repair and maintenance and the billions of dollars now spent annually on home upgrades, alterations and enhancements.
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