hhiq 2q 2011

c o n n e c t i n g t h e h o m e i m p r o v e m e n t i n d u s t r yh A r d L i n e s . c A

Home Improvement Quarterly

How will your store measure up post-recession?

tHe lonGroaD BaCK

F e A t u r e s t o r y

SeConD Quarter / 2011 n premier issue n

pLus:n RONA’s Robert Dutton

n Business conditions

n Market share update

n P&L primer

At the heLmStraight talk with Home Hardware CEO Paul Straus

LAs vegAs LoomsDealers can build business at combined show and convention

Canadian Publications Mail Agreement # 42175020. POSTMASTER: Send address changes to Hardlines Home Improvement Quarterly, 360 Dupont St., Toronto ON Canada MVR 1V9

Hardlines Home Improvement Quarterlywww.hardlines.ca 3Second Quarter / 2011

PubliSher ’S Me S S age

elcome to the first issue of Hardlines Home Improvement Quarterly. As Publisher, I feel a special sense of

accomplishment in bringing this new pub-lication to you.

HARDLINES has been steadfastly com-mitted to the retail home improvement industry for more than 16 years. During that time, we launched the industry’s first weekly electronic news service, devel-oped ground-breaking research and industry leading reports, created the internationally rec-ognized Hardlines Executive Conference, hosted networking events, and established awards and research programs for this industry.

Now we offer you the leading publication for industry knowledge.

HHIQ uses HARDLINES’ rich resources of knowledge and research. No other team pos-sesses the understanding of the issues in home improvement retailing like HARDLINES does. That’s why we’ve been able to gather the industry’s top retail reporters and experts to investigate the topics of the day.

In this issue of HHIQ, and the issues to come, you’ll find proprietary research on business conditions and retail market shares, based on our regular surveys of retailers and

manufacturers. You’ll read store manage-ment and training insights gained through our partnership representing the North American Retail Hardware Association in Canada. And, of course, you’ll get first-hand access to the best practices from the best retailers across Canada.

We are sending HHIQ out to Canada’s most progressive and innovative retail leaders —

truly the retail decision makers in this indus-try. HHIQ offers sophisticated, intelligent editorial and a credible, readable vehicle for any advertising message.

Sharing this information and these insights will, I believe, lead to a stronger industry. Please enjoy this inaugural issue of HHIQ. Then clear a place on your book-shelf — because I’m confident you will want to refer to it again and again in the months to come.

And please, let me know your thoughts by becoming part of our HARDLINES online community at hardlines.ca/hhiq.

the leading Publication for induStry knowledgeBeverly Allen, PublIsHer

W

HHIQ uses HArDlINes’ rich resources of

knowledge and research.“ ”

[email protected]

Hardlines Home Improvement Quarterly 5Second Quarter / 2011

Second Quarter / 2011

NRHA CoNveNtioN PRevieW

BrIngIng It All togetHeR

CoveR FeAtURe

Dealers expect their sales to normalize in 2011

DePARtMeNtS

7

8

10

18

40

42

44

46

48

eDitoR’S MeSSAge

turning challenges into opportunities

BUSiNeSS CoNDitioNS

Dealers cautious about 2011

MARket RePoRt

Improved sales mark turnaround year

CAtegoRy SPotligHt

new tools & building supplies

StoRe MANAgeMeNt

Understanding your P&L

CoNtRACtoR BUSiNeSS

Making money in tough times

eXPANSioN

test driving a growth strategy

CoNSUMeR tReNDS

What a consumer wants

eNDCAP

Executive break with rOnA’s robert Dutton

NeWSroundup

IrLY acquisition rounds out tIM-Br MartS’ distribution

Kent once again on the expansion trail

rona’s senior merchant identifies hot categories

BMr launches proprietary, upscale brands

tSc expands Villager franchise program

Big-box reinvention means opportunities for independents

Sexton general manager expects stronger 2011

12

YEAr Of correctIon

eXeCUtive Q&A

StrAUS At tHe HelM

c o n t e n t S

Interview with Home Hardware’s president and CEO

31

34

24

Share ideas with other dealers in Las Vegas

Celebrate the national Hardware Show’s 66th year

NHS PRevieW

tHE InDUStrY gAtHeRS iN lAS vegAS38

V o L u M e I , n o . 1


[email protected]

e d i t o r ’ S Me S S a g e

he retail home improvement indus-try faces big challenges these days. A wave of consolidation at the dis-

tribution level has changed the landscape of this industry irrevocably. At the top of the list are the purchase of CanWel Hardware by TIM-BR MARTS Ltd. and RONA’s acquisi-tion of TruServ Canada.

Both provide new options for independents. The bold move by the country’s largest buy-ing group could give CanWel Hardware, now renamed Chalifour Canada, new life under a new team and a new name. RONA will give the True Value banner the support and dollars it deserves to become available to a wide range of smaller dealers.

Meanwhile, a buying group that just a few short years ago began on a determined path of reinvention is now reasserting its position as a market leader. Castle has established a strong brand, a competitive offering, and now a hard-ware option for its members through a land-mark alliance with the US wholesaler, Orgill.

Giants like Home Hardware continue to build their ranks — and their brands — nationally, while strong independents everywhere, represented by the ranks of groups such as Independent Lumber Dealers Cooperative, build their own brands locally.

And then there’s the customer. With more information, less money and no time, the consumer has become more demanding — and, I daresay, more cranky — than ever before. The bar has been raised. Competitors are tougher than ever, customers more complex, and the tools for managing, marketing, and building a business more sophisticated — and they are all changing at an increasingly rapid rate.

That’s why Hardlines Home Improvement Quarterly was created. It has been designed

as a tool for helping today’s retail decision makers understand the changes taking place in this industry, and arming you with the tools to respond to those changes.

In addition, we are proud to represent the North America Retail Hardware Association in Canada, an organization that reflects our commitment to best practices and training programs for dealers. Now, with HHIQ, we have a vehicle to effectively convey those best practices, those trends, those insights into the changing retail landscape. Consider it a road-map for turning challenges into opportunities.

Welcome.

turning challengeSinto opportunitieSMichael Mclarney, EDITOR

T

The range of challenges facing today’s retail decision maker is

broad — and often daunting.“ ”

Hardlines Home Improvement Quarterly www.hardlines.ca8 Second Quarter / 2011

rom a strong first quarter in 2010, wherein almost two-thirds of dealers reported higher sales than the first

quarter a year earlier, to a mere 12.3% citing improved business in the last quarter, the decline in business conditions for hardware and home improvement dealers last year was a steady one, which effectively dampened expectations of a speedy recovery from the recession of 2008-2009 as the industry came into 2011.

The industry pulse was drawn from the lat-est HARDLINES Quarterly Business Condi-tions Survey, done in conjunction with the North American Retail Hardware Associa-tion Canada. The survey measures the busi-ness conditions experienced in the quarter compared with the same quarter a year earlier.

While dealers who saw their year-over-year sales increase in the fourth quarter were

in the minority, the majority — 57.9 percent — reported that their sales remained flat. The balance, 29.8 percent, said sales were actually down.

Vendors appeared to come out of the fourth quarter in better shape, with almost half (47.4 percent) reporting that business was up compared with the fourth quarter of 2009, and only 26.3 percent saying that business was down.

How tHe industry fared in 2011For the year as a whole, dealers were divided in their results, reflecting just how slow the recovery in Canada’s economy has been. More than half of dealers (55.7 percent) said their business was up in 2010, while 44.3 percent said that business was down.

By comparison, vendors were definitely more upbeat about results for 2010: 68.4

percent said sales were up for the year while only 31.6 percent said their sales were down.

Looking aHeadWith the ups and downs of 2010 now well in the past, dealers and vendors were asked to look ahead at business conditions in 2011. Without a doubt, this year’s tough winter gave many dealers cause to be cautious. Asked if they expected business to be up in the first six months of 2011, 46.1 percent of dealers said they did expect sales to increase. Another 30.4 percent said they did not expect sales to increase, and 23.5 percent were not sure.

Longer term prospects are more upbeat, however. Looking out 12 months, fully 65.2 percent of dealers expect sales to increase, while only 17.4 percent said they did not expect an increase.

2010 was a year of

Big upSand disappointing

downsa year that began with a bang ended with a whimper. in 2010, each quarter saw a dramatic drop in business conditions year-over-year — a drop felt by both dealers and vendors alike across the country.

QuarterLy Business Conditions

f


B u S ine S S c o nd i t i o n Sfirst Quarter

deaLers faCe CHaLLenges in 2011Hardware and home improvement retail-ers face a range of challenges — from fac-tors both internal and external. Without question, the leading concern for dealers remains customer retention, with 61.7 per-cent citing this as the top issue at the end of last year. Another external factor, increased competition, was cited as a top issue by 55.7 percent of retailers.

Internally, staffing and training were both considered leading concerns for deal-ers trying to manage their businesses better. More than half (55.7 percent) said train-ing was an issue of concern for them, with almost an equal number (54.8 percent) reporting that staffing was an issue going into 2011.

Vendors faCe unCertaintyHardware and home improvement vendors felt the brunt of a slowing economy in the latter half of 2010, but they share dealers’ cautious optimism about business condi-tions for the short term: more than half (55.0 percent) said they expect to see their sales increase during the first six months of this year. Less than one-third (28.2 per-cent) do not expect an increase in sales during the first six months of this year, while 16.8 percent said they are not sure.

Vendor optimism improves longer term, however, with more than two-thirds (70.7 percent) expecting sales to increase for the full year ahead. Fifteen percent of vendors said they did not expect an increase this year; 14.3 percent said they weren’t sure.

Plagued by a cold winter and a spring that was reluctant to arrive, dealers are pragmatic in not expecting a quick turn-around in 2011. And vendors are only slightly more optimistic. However, look-ing ahead for the entire year, the majority of both dealers and vendors anticipate moderately prosperous business condi-tions for 2011.

0

10%

20%

30%

40%

50%

60%

FOURTH QUARTERFIRST QUARTERUP DO

WN

SAM

E

65.4

15.419.2

SECOND QUARTER

SAM

E

DOW

N

UP

53.3

16.7

30.0

THIRD QUARTER

SAM

E

DOW

N

UP

37.1

25.7

37.1

SAM

E

DOW

N

UP

12.3

57.9

29.8

retaiLers: 2010 quarterly business conditions vs. 2009

55.7%UP

44.3%DOWN

68.4%UP

31.6%DOWN

retaiLers: annual sales 2010 vs. 2009

retaiLers: do you expect sales to increase over the next 6 months?

Vendors: do you expect sales to increase over the next 6 months?

retaiLers: do you expect sales to increase over the next 12 months?

Vendors: do you expect sales to increase over the next 12 months?

Vendors: annual sales 2010 vs. 2009

4Q1Q 2Q 3Q

YES NO NOT SURE

0

20%

40%

60%

80%

100%

76.4

51.7

34.346.1

14.222.5

34.3 30.4

9.4

25.831.4

23.5

4Q1Q 2Q 3Q

84.072.8

57.3 55.0

8.015.5

22.728.2

8.0 11.720.0 16.8

YES NO NOT SURE

0

20%

40%

60%

80%

100%

4Q1Q 2Q 3Q

YES NO NOT SURE

0

20%

40%

60%

80%

100%

71.761.1

56.565.2

10.4 14.4 15.9 17.417.924.4 27.6

17.4

4Q1Q 2Q 3Q

89.080.6

76.370.7

8.0 7.8 9.215.0

3.011.7 14.5 14.3

YES NO NOT SURE

0

20%

40%

60%

80%

100%

Source: HARDLINES Quarterly Business Conditions Survey results


T

Bill

ions

2005 2006 2007 2008 2009 2010 2011

$40.54*

$39.12

$40.29$40.92

$42.24*

$36

$38

$40

$42

4.0%y-o-y change

3.5%y-o-y change

-2.9%y-o-y change

-1.5%y-o-y change

4.7%y-o-y change

$39.08

6.3%y-o-y change

$36.76

5.6%y-o-y change

Retail sales growth 2005-2011

* Forecast

the industry managed to pull itself out of the slump following the recession of 2008-2009. although recovery has been slow, it is expected to continue into 2011.

he retail home improvement market in Canada was valued at $39.12 billion in 2009, a 2.9-percent drop from the

previous year, when the industry was already down by 1.5 percent. (That number comprises sales at retail by all hardware stores, building centres and home centres in Canada, includ-ing related hardware/home improvement/seasonal sales by Canadian Tire, Costco and mass merchants. It also includes only hard-ware and home improvement sales from the co-ops, excluding petrol and agro products.)

This two-year consecutive drop in sales marks the first negative growth recorded in a quarter century of tracking this sector, as the industry came to the end of an era of tre-mendous growth. In fact, home improvement retail sales literally doubled in size in only nine years (1997 to 2005). While the first signs of a slowdown actually began in 2007, the industry bottomed out in mid-2009, and the 2.9-per-cent drop in sales volume for the industry that year would have been a full percent worse if not for the effects of the Home Renovation Tax Credit, which, by HARDLINES’ estimates,

generated an additional $500 million in sales for home improvement retailers that year.

Despite an industry slowdown in the last half of 2010, positive growth is forecast at a rate of 3.0-3.5 percent, and into 2011 at a rate of 3.5-4.0 percent.

MaRkeT shaRe by RegionEach region of the country has weath-ered the slump and is coming through

the recovery in a different way. Atlantic Canada, for example, is perennially resis-tant to the economic highs and lows that can bounce other provinces up and down. The economic lows of 2009 offer a case in point: retail sales for the entire region were actually up 1.6 percent, after dropping 1.2 percent in 2008.

By contrast, the Western provinces continued to lose ground in 2009. Sales

TuRnaRounD

yeaR


33.1%Ontario

26.7%Quebec

10.0%BC

11.4%Alberta

3.1% New Brunswick3.5% Nova Scotia

2.5% Newfoundland0.4% P.E.I.

0.2% Yukon0.4% NWT

0.1% Nunavut4.3% Saskatchewan

4.3% Manitoba

Market share by province

M a r K e t r e P o r tMaRkeT shaRe uPDaTe

$1,821 Mass merchants $1,454 Club stores

$5,264Hardware

stores

$17,608Building centres

$8,279Big boxes

$4,690Canadian

Tire

TOTAL$39,116

breakout by store type 2005-2009 ($ millions)

store type 2005 2006 2007 2008 2009 2008-2009y-o-y Change

hardware stores $5,473 $5,184 $5,614 $5,678 $5,264 -7.3%

building centres $16,531 $18,313 $18,663 $18,027 $17,608 -2.3%

big boxes $8,022 $8,569 $8,836 $8,409 $8,279 -1.5%

Canadian Tire Retail* $3,999 $4,279 $4,694 $4,845 $4,690 -3.2%

Mass Merchants* $1,509 $1,510 $1,751 $1,821 $1,821 0.0%

Club stores* $1,230 $1,230 $1,365 $1,514 $1,454 -4.0%

ToTaL $36,764 $39,085 $40,923 $40,294 $39,116 -2.9%

how many stores are there?Province hardware building supplies big box Canadian Tire

british Columbia 165 308 30 52

alberta 298 344 32 57

saskatchewan 172 209 4 12

Manitoba 173 176 9 14

ontario 664 781 124 203

Québec 453 871 64 93

new brunswick 37 118 6 17

nova scotia 55 115 7 24

Pei 12 17 1 2

newfoundland 28 110 3 12

yukon 9 13 0 1

north West Territories 14 14 0 1

nunavut 10 5 0 0

ToTaL 2,090 3,081 280 488

Market share by store type

Source: HARDLINES Retail Report, HARDLINES Market Share Report

dropped in the region by 7.3 percent, after a drop in 2008 of 4.5 percent. The great-est drop was in the North West Territories, where sales were down 9.6 percent.

Ontario, which accounts for almost one-third of the Canadian market, saw sales shrink for the second consecutive year, with a drop of $571 million, or 4.6 percent, following a 1.2 percent decline in 2008. Quebec, which represents about one-quarter of the Canadian market, increased sales by 2.6 percent, thanks in part to a healthier DIY market in that province.

MaRkeT shaRe by sToRe TyPeIn 2009, traditional hardware stores felt the brunt of the recession the most, with sales down by 7.3 percent. This follows a slight gain in 2008 of just over 1.0 percent. The big boxes kept their sales decline to a minimum thanks to a strong fourth quarter in 2009, and due to the rapid expansion of Lowe’s Canada. Sales by traditional home centre and building centre dealers fell by 2.3 per-cent in 2009, following a more severe drop of 3.4 percent in 2008.

Mass merchants stayed flat, as Walmart, the largest component of this format, posted strongest gains in grocery and dis-count clothing. A similar trend occurred in club stores, in tandem with the closing of six Sam’s Club stores at the end of 2008 by Walmart. This leaves Costco as the only retailer in this format.

*Comprises sales at retail by all hardware stores, building centres and home centres in Canada, including related hardware/home improvement/seasonal sales by Canadian Tire, club stores, co-ops and mass merchants


IM-BR MARTS’ efforts to create a truly national hardware distribu-tion network, through its Chalifour

Hardware division, really took shape with the acquisition of the distribution facilities of IRLY Distributors.

IRLY, the regional buying group based in Surrey, BC, has its own hardware and building materials distribution serving its 46 members. This had made it a unique model for Canada. (TIM-BR MARTS aside, the only other buying group with its own dedicated distribution is BMR in Quebec.)

The purchase includes the lumber, build-ing materials and hardware inventory assets of IRLY and its members. “This acquisition gives TIM-BR MARTS Ltd. a powerful coast-to-coast distribution network,” says Tim Urquhart, president and CEO. He says there was a gap in Chalifour’s distribution net-work, which is being filled by the IRLY deal. “This arrangement addresses that need.”

The merger solidifies an existing agree-ment between the two groups, whereby IRLY and its dealers were already mem-bers of TIM-BR MARTS and already share in the purchasing strength and programs of the larger group. The existing agree-ment included IRLY supplying hardware to TIM-BR MART dealers in the west through its own IRLY distribution centre;

this merger brings the IRLY distribution business directly into Chalifour Canada.

The addition of the Surrey DC will also give the dealers better access to Chalifour’s ever-growing import programs, with con-tainer loads coming directly from China. “It will allow our import program to grow, since we can land goods and ship to our dealers and customers quickly and effi-ciently,” Urquhart says.

Nor will the acquisition affect the opera-tions of the IRLY dealers themselves. They can choose to become full members of TIM-BR MARTS or continue to keep the registered name of “IRLY Building Centres.” A third option is to co-brand with TIM-BR MART.

“TIM-BR MARTS Ltd. offered the IRLY family the opportunity to keep their independence, yet be part of the largest buying group in Canada — and a strong brand. It was clearly win-win,” says Susan Robinson, president and CEO, IRLY Distributors Ltd.

It’s also a win for the management and staff: “The entire IRLY Distributors team will remain in place to ensure there is no interruption to the excellent service our members and customers have come to expect,” Robinson adds.

IrLY acQuISItIon roundS out tIM-Br MartS’ dIStrIButIon

T

Kent once again on the expansion trailThe opening by Kent Building Supplies of a 65,000-square-foot store in Gander, NL, is the

Atlantic home improvement retailer’s 34th outlet. The store carries more than 22,000 SKUs

and includes a cut shop, kitchen design, custom colour matching, a project centre, and

installed sales service.

Kent, a member of Independent Lumber Dealers Co-operative, is the market leader in

Atlantic Canada, with estimated sales in 2010 of more than $450 million. With the economic

vitality being experienced in Newfoundland, the company has made a commitment to con-

tinued expansion there, with more stores reportedly planned before year’s end.

IrLY’s 46 member stores in Western canada have the choice of converting to the tIM-Br Mart banner, remaining under the IrLY name, or simply co-branding with the larger group.

Newsroundupo F t H e H o M e I M p r o V e M e n t I n d u S t r Y Visit Hardlines.ca for breaking news in the Home Improvement Industry


rona’S SenIor MercHant IdentIFIeS Hot categorIeS

hile increased ranges of private-label products and enhanced adher-ence to policies of sustainability are

guiding principles within the buying offices of RONA inc., a number of categories have been fingered as growth opportunities where it counts most — on the store shelves.

“Storage is certainly an area where we want to focus more on in the future,” says Normand Dumont, executive vice-president of merchandising for RONA. He

explains that the category has evolved and RONA is evolving with it. For one thing, commodity items such as totes and stor-age bins are too price-sensitive. He’d rather leave that to retailers such as Walmart.

Storage for Dumont includes organiza-tion, and the planning and installation of custom products. For example, RONA offers an online closet organization soft-ware that lets a consumer design a shelving and storage system. The online shopper can then print out a detailed product list that can then be taken into the store, or turned over to RONA for an installation quote.

Another area that’s getting a lot of focus, says Dumont, is RONA’s range of live plants,

branded under the Vitalia name. This program, which is mainly for RONA’s big boxes, is being supported by an enhanced flyer program that includes a custom garden insert tailored for differ-

ent regions of the country.RONA’s fastest growing category last year

was light fixtures. “And it’s still a strong category this year,” he adds, one that’s being driven by advances in LED technology.

W

Leave price-sensitive items to Walmart, says Normand Dumont, rona’s executive vice-president of merchandising.

BMR stores is introducing two new pro-

prietary brands this spring. The buying

group and wholesaler has developed

the lines as more upscale alternatives

to BMR’s existing BMR brand, while

being positioned price-wise below

BMR’s national brand products.

The first is “Evolution,” which is being

branded on a line of faucets made by

Taymor. “It’s an extension of BMR,” says

Bruno Baldessari, marketing director

for the group. “It’s a plus for the stores

that want to expand the section.”

The other brand is “Torkk,” a premium

power tool line. It will be positioned

between BMR’s own “Easytool” brand

and national brands. Baldessari adds

that these brands will be expanded to

other lines over time.

BMR’s packaging also got a make-

over, one that reflects the company’s

expanding lines of eco-friendly prod-

ucts. “We already have all kinds of eco

products from all kinds of suppliers.

But we didn’t want to ‘greenwash’ in

any way. So we decided to establish a

brand with packaging that is 100% recy-

clable, unbleached cardboard, printed

with vegetable inks,” Baldessari says.

“So you’ve got the eco-friendly

product – and the package.”

KNowleDge is PoweR. Stay in the know every single week with HardLIneS. Subscribe online at Hardlines.ca

“ Storage is certainly an area where we want to focus more on in the future.”

BMr launches proprietary, upscale brands


Newsroundup

tSc expandS VILLager FrancHISe prograMSC Stores has experienced rapid growth in recent years, with new corporate stores going up through-

out Southern and Central Ontario — and even into Manitoba. But another expansion strategy coalesced for the farm and hardware retailer three years ago when it decided to create a franchise program, as well.

The franchise stores are branded “TSC Villager,” a reworking of a name used for a test hardware “store within a store” for building centres that TSC had tried out a few years earlier. At between 7,500 and 8,000 square feet, the Villager stores are smaller than traditional TSC outlets to suit smaller communities. And they fit in with the launch of TSC Country Pro Services, its new hardware distribution business.

The first Villager stores were former Country Depot outlets and the latest store, in Aylmer, is also a conversion from Country Depot. “The owner liked what he’d seen of TSC and decided to make the switch, rather than sell outright to TSC,” says Paul Chapman, director of dealer development for TSC.

The addition of the Aylmer outlet brings the number of Villager stores to five. Three of them are corporate stores, but Chapman says TSC already has prospects lined up to take those over.

He expects another three or four to be opened this year, all in Ontario. However, he anticipates expansion outside of the province in coming years. “We have lots of interest from dealer prospects.”

T

this new Villager store in aylmer, ont., is the latest franchised outlet from farm and hardware retailer tSc Stores.

Big-box reinvention means opportunities for independentsBig-box retailers are facing new challenges

from a changing demographic — and that’s

good news for independents, says Doug

Stephens, president of Retail Prophet

Consulting and a leading retail futurist.

With aging baby boomers no longer

driving consumerism like they did over the

past three decades, the role of retail has

shifted. “We’re going to see a move over

from goods to services,” Stephens says.

“Once you reach 50, you don’t need as much

stuff. But you are thinking about services.

Boomers are thinking about downsizing.

They’re thinking about health care, insur-

ance, travel.”

As Canada ages, it also becomes more

urban. Stephens pointed out that the 33

urban regions of Canada are growing faster

than the rest of the country. “We’re becom-

ing a nation of cities.”

And even in suburban and smaller town

areas, people are looking for a more urban

environment, from more shops within walking

distance in new residential developments to

revived main streets in those smaller towns.

According to Stephens, as big boxes try

and adapt to these changes, independents

can adapt faster. They can identify service

opportunities for their markets and respond

quicker than a big box chain can.


teve Buckle is optimistic about the year ahead for the indepen-dents in the Sexton Group. The

vice-president and general manager of the 285-member buying group notes that last year, despite a slowdown in the second half, was almost as strong as 2008 — “which was a very good year.” Purchase volumes, he adds, were up about 20%.

“I have high expectations that the market overall is going to be as good as 2010. And while he admits the first few months were tough due to the cold winter throughout the country, “overall, it’s going to be better.”

He expects the improvements to come from at least two sources: partly from the improving market conditions and partly from more affiliation by dealers to Sexton’s buying programs.

His optimism extends even to his dealers in the West. Serving a farm community that was plagued last year by excess precipitation,

and an oil patch that has yet to make its recov-ery felt in all areas, those dealers, like their counterparts throughout the country, have the advantage of serving a small, local market.

“In many of these communities, where, for example, consumers and contractors in that community are coming into the store all day long, dealers are able to assess the opportunity for growth at the local level.”

Sexton generaL Manager expectS Stronger 2011

S Sexton’s Buckle: “dealers are able

to assess the opportunity for

growth.”

AFA opens in saskatoonAFA Forest Products inc. has opened a distri-

bution centre in Saskatoon. The facility has a

team dedicated to service, sales, customer

support, and promotional activities through-

out the region.

The location reinforces AFA’s strategic plan to

create a truly national building materials distri-

bution network and brings to 13 the number of

divisions it has across the country. It also oper-

ates a facility in Portland, Ore., and a Visulam

melamine plant in Lachute, Que.

walmart Canada to open 40 supercentreswalmart Canada plans to open 40 supercentres

in the company’s coming fiscal year, which ends

Jan. 31, 2012. The projects, which will include

building eight new stores and expanding, remod-

elling or relocating 32 existing stores, represent

an investment of more than half a billion dollars.

Walmart Canada’s supercentre format,

which was first launched in Ontario in 2006

and is currently in Alberta, British Columbia, and

Saskatchewan, provides a full range of grocer-

ies and general merchandise under one roof.

By the end of its fiscal year, Walmart Canada

will have 325 stores, including 128 supercentres.

Retail shows signs of recovery world-wideMore than one-third of the world’s 250 largest

retailers suffered a decline in sales in fiscal year

2009 as the global downturn led to more cau-

tious consumer behaviour and a drying-up of

available credit.

However, a new report by Deloitte Touche

Tohmatsu Limited suggests that the efforts of

many companies to cut costs and adjust their

inventory levels have paid off, with net profit

across the top 250 retailers increasing from

2.4% in 2008 to 3.1% in 2009.

Home Furniture reflects retailer’s upscale shiftHome Hardware is steering its dealers — and its assortments — to go more upscale, espe-

cially as entry price points have become the realm of Walmart and the dollar stores.

The leading edge of Home’s foray into higher end, upscale merchandising is definitely

its Home Furniture dealers, who sell everything from furniture and heavy appliances to

lights, mirrors, and other décor accessories.

“We think of ourselves as the softer side of Home and we marry off very well with our

Beauti-Tone paint division. We work very closely with them,” says Bruce Hammer, general

manager of the Home Furniture division.

The Home Furniture banner has grown gradually over the past 30 years, enjoying a

push over the past five that has seen the addition of new stores by both independents

and existing Home Hardware dealers. In fact, one-third of the stores are “combo” stores,

in conjunction with a Home Hardware store. The company has added five new stores to

its network this year, for a total of 68 Home Furniture locations.


here have been a number of notewor-thy changes in the power tool indus-try over the past few years. In general,

tools have better ergonomic design, making them more comfortable to use over longer periods, reducing worker fatigue and increas-ing productivity. The use of high impact ABS plastics, glass fibre reinforced nylons, die-cast aluminum alloys, and advanced electronic circuitry, along with other technological improvements in the industry, has resulted in smaller, lighter, quieter, more durable and reliable tools. LED work lights and laser guides increase accuracy and precision, par-ticularly in less than ideal lighting conditions, while on-board battery fuel gauges notify users to recharge batteries.

But perhaps the single most important development has been the introduction of lithium-ion (Li-ion) batteries. In very short order, they have all but replaced conven-tional nickel-cadmium (NiCd) and nickel metal hydride (NiMH) batteries.

Li-ion batteries have a much higher energy density — for their size and weight, they can store more energy than other bat-

tery formats. They also have low discharge rates, retaining their charge for a longer period. Nor do they suffer from memory loss — they always maintain their maxi-mum energy capacity when recharged. Moreover, all of these features are com-pressed into a smaller physical size.

Li-ion technology has enabled manufac-

turers to offer users most of the traditionally corded tools in a cordless format — drills, drivers, saws, sanders, grinders, rotary hammers, routers, hand planers, chain-saws, mowers, and trimmers. Corded tools still provide more power and torque than cordless tools, along with a continuous run time, ensuring their demand on industrial and commercial work sites. However, for just about every other application, the con-venience and portability of cordless tools, along with advancements in power and per-formance, make them a sound choice.

Li-ion powered tools are available in 3.6-volt to 36-volt platforms. Full-sized 18- and 36-volt tools are the standard choice for contractors and industrial workers, who place a premium on power and runtime. Likewise, most outdoor power tools use a 36-volt platform. However, homeowners, DIYers, and increasingly trades people, are moving to the 12-volt platform.

A primary reason for this surging demand is the weight-to-power ratio, as 12-volt tools are considerably lighter and smaller than their 18-volt cousins, making

them much easier and more comfortable to use. Yet, they deliver ample power and run time for a wide range of drilling, driving, sanding, and sawing tasks. Batteries typi-cally re-charge in 30 to 40 minutes.

Cabinet makers, finish carpenters, installers, electricians, plumbers, and avid DIYers are finding that they can frequently

dispense with big, heavy, high-torque tools in favour of more compact and sub-com-pact tools. Another reason for the growing popularity of 12-volt tools is the increasing number of women entering the trades — and taking on more DIY tasks in the home.

Just about every tool manufacturer has a line of 12-volt tools. The DeWALT 12 Volt MAX Lithium Ion platform (dewalt.com) features seven tools, all of which come with a three-year warranty — a 1/4-inch screwdriver and impact driver, 3/8-inch drill driver and impact wrench, inspection camera, infrared thermometer, and LED work light. These tools have two attractive features. First, the batteries are suspended under the tool han-dle (rather than inside the handle), which results in a slimmer, more streamlined han-dle that many users find much more com-fortable. The larger flat base also makes the tool more stable when set down on a work

c at e G o r Y S P o t L I G H t

CorDLess PoWer TooLs HIt tHeIr StrIde

TThe DeWALT 12 Volt MAX Lithium Ion

1/4” Impact Driver

Homeowners, dIYers, and increasingly trades people, are moving to the 12-volt platform“ ”

NeW TooLs & BUILDING sUPPLIes

BY CArL DUGUAY


surface. Second, on the drilling and driv-ing tools, DeWALT has redesigned the work light, which now completely surrounds the end of the chuck, and has three LEDs. This arrangement delivers a brighter, more evenly distributed light on the work surface, with minimal shadows. It provides superior illu-mination in poorly lit or confined spaces.

The Milwaukee M12 platform (milwau-keetool.com) has by far the largest and most varied range of 12-volt Li-ion tools. It consists of 26 tools, including a 1/4” screwdriver and impact driver, 3/8” drill/driver, right angle drill driver, and hammer drill-driver, along with a multi-tool, rotary tool, and palm nailer. There is a range of trade-specific tools — including a fork meter, non-hub driver, grease gun, multi-media inspection camera, and PVC shears — plus a selection of digital measuring and layout tools. Most of these tools come with a five-year limited warranty. Quite a few of the tools can be purchased as bare tools (without batteries), a great option, as the batteries are completely interchangeable.

Consumers can expect to see more scaled down versions of commercial tools built on the 12-volt Li-ion platform. The Milwaukee Hackzall reciprocating saw (2420-22), for example, is just 11-1/2” long and weighs 2.6 pounds, making it is less than half the

size and weight of a conventional recip saw. Using 4” or 6” blades it can make more than 80 cuts in 1-1/2” PVC and more than 90 lin-ear feet of 1/2” drywall on a single charge.

Rotary and oscillation tools have been extremely popular over the past several decades, primarily because they are so ver-satile. In the past few years, a number of com-panies have released cordless versions of these multi-function tools — virtually all using 12-volt Li-ion batteries. Rotary tools, like the Dremel 8200 (dremel.com) have high speed, low torque motors that use a variety of small bits and attachments for precise cutting, rout-ing, sanding, grinding, and polishing tasks. Oscillating tools, such as the Milwaukee 2426-22, have a motor that moves an offset blade rapidly back and forth across a small arc. The offset blade cuts, sands or scrapes flush with the work surface, and is particu-larly useful for working in tight quarters.

The new ridgid JobMax r82235 (ridgid.com) is a different kind of multi-function tool. Basically, it’s a battery operated power handle onto which various tool heads can be attached. And yes, it’s powered by a 12-volt Li-ion battery. This is a very prac-tical and convenient system. Buy a single tool body, and then purchase separate task-specific tool heads as you need them. The interchangeable heads include an oscillat-

ing tool, 3/8” drill, 1/4” impact driver, 3/8” square drive ratchet and an auto hammer.

The advent of Li-ion batteries has resulted in the profusion of a range of cordless digi-tal test, measurement, layout, and safety tools. Li-ion batteries deliver more longer lasting power than alkaline batteries, with the indirect benefit of fewer batteries end-ing up in landfill sites. More important to most contractors, is the cost-effectiveness of Li-ion. The ryobi Tek4 system (ryobi-tools.com) for example, is based on 4-volt Li-ion battery that delivers the same power as three AA alkaline batteries, and can be recharged up to 2,000 times.

The Tek4 system has 17 products, including a stud sensor, plumb, distance meter, inspection scope, and key lock box. Milwaukee offers a choice of 38 tools in nine categories, most powered by their M12 Li-ion battery, and some powered by alkaline batteries. The

NeW TooLs & BUILDING sUPPLIes

the Milwaukee M12 platform has by far the largest and most varied range of 12-volt Li-ion tools.

c at e G o r Y S P o t L I G H t

The new ridgid JobMax r82235: buy a single tool body, and then purchase separate task-specific tool heads as you need them.

The ryobi Tek4 system has 17 products,

including a stud sensor, plumb, distance meter,

inspection scope, and key lock box.


tools include clamp meters, temperature guns, two-beam plumbs, inspection cam-eras, and voltage detectors.

Hose-free nailers have been on the mar-ket for some time, primarily geared to the construction industry. We are beginning to see more of these tools designed spe-cifically for professional craftspeople and DIYers. The beauty of these tools of course is that they do not require a compressor or airline. Rather, they use on-board battery powered fuel cells.

Bostitch (bostitch.com) for example, has 15-, 16- and 18-gauge nailers, ideal for interior or exterior finish and trim work as well as cabinetry and furniture assembly that weigh in at a paltry four pounds, and run on a 3.6-volt Li-ion bat-tery that recharges in about an hour. The tools feature tool-free jam clearance and depth adjustment, accept nails between 5/8” and 2” long, and sink about 1,200 nails per fuel cell.

Given the somewhat intense competition between the major power tool manufac-turers, the growing consumer interest in energy efficient products, and future tech-nological developments, we can expect to see even more value added enhancements in the cordless power tool market.

Bostitch nailers run on a 3.6-volt Li-ion battery that recharges in about an hour.

AsPhALT ToPs tHe reSIdentIaL roofInG InduStrY

Itshould come as no surprise to learn that some 80 percent of Canadian homes rely on asphalt roofing. After

all, it’s been the most prevalent, most cost effective roofing material for much of the past century. Increasingly though, con-sumer and environmental health concerns, coupled with a demand for more energy efficient products, have, in part, spurred new innovations in the asphalt industry.

Homeowners today have a much broader choice when it comes to asphalt shingles — longer life products that are more envi-ronmentally-friendly, provide significant improvements in fire and wind resistance — that offer a greater variety of design choices. Continued product innovation will serve to maintain asphalt as the industry leader for some time to come.

FIBreGLAss shINGLes GAINING IN PoPULArITYAsbestos shingles are classified as either organic based or fibreglass based. Organic shingles, synonymous with the traditional three-tab design, are made from a mat of cel-lulose fibres saturated with asphalt to make it waterproof, and then coated with UV and fire-resistant ceramic granules. Copper granules are sometimes added to provide a measure of algae resistance. Two advantages of organic shingles are that they resist tearing, making them less prone to damage during installation and in high wind environments, and they do a better job of concealing irregularities in the roofing underlayment.

While organic shingles are built on a mat of cellulose fibres, fibreglass shingles use glass fibres. They offer better fire resistance and are less susceptible to moisture intrusion than

organic shingles, which means less curling and cupping. Though available in the tradi-tional three-tab design, most fibreglass shin-gles come in an architectural (or laminated) design. Multiple layers of fibreglass are coated with stabilized asphalt, giving them a three-dimensional appearance. This provides hom-eowners with a much greater choice in roofing styles; architectural shingles can replicate the look of slate or wood shakes, and they come in a wide range of colours and texture variations.

Building Products of Canada (bpcan.com) manufactures fibreglass-based shingles in two distinct collections. Home owners looking for a traditional, three-tab square-cut shingle can select from the Classic col-lection, which includes the Dakota, Mirage and Yukon series. These shingles come in a choice of 14 colours and 25- to 30-year warranties. The standard wind warranty covers up to 115 km/h, and up to 130 km/h when installed using the special application techniques outlined by BP Canada.

The Architect collection offers double-layer laminate shingles that feature deep profiles and random tab designs for a more contem-

The Architect collection from Building Products of Canada offers fibreglass-based double-layer laminate shingles that feature deep profiles and random tab designs.


porary, upscale look. This collection includes the Eclipse, Everest, Harmony, Mystique, and the new Manoir series. A heavier weight shingle than the Classic collection, they are available in 16 different colours with 35-year to limited lifetime warranties.

The designs in the Architect collection range from the chiseled wood shake appear-ance of the Eclipse shingles to a more dra-matic look in the Everest shingle, and the distinctly dimensional, sculpted slate look of the new Manoir shingles.

Another manufacturer, IKo Canada (iko.com), offers three lines of fibreglass-based shingles, a number of which are available with algae resistant treatment. Their Traditional line is represented by the Marathon series, featuring a three-tab design, available with 20 to 30-year limited warranties, and rated for winds of 97 km/h.

IKO’s Architectural line (the Cambridge series) has a random shake-look design with a unique dual band shadow colouration, and come with both a limited lifetime war-ranty and a 15-year iron-clad non-prorated warranty. Available in 14 colours (including an ENERGY STAR qualified Super White shingle), they are rated for winds of 177 km/h (210 km/h with special application).

The Premium Designer line consists of four designs that have the same warran-

ties and wind ratings as the Architectural line. The Armourshake series has a random shake-look design and unique color con-trast, while the Royal Estate series boasts a range of subtle colour variations that evoke the look of true slate. The Crown Slate and Grandeur series feature SBS (styrene butadiene styrene) modifiers on the exposed side of the shingles. These modifiers increase resistance to hail, wind and extreme heat, yet allow the shingle to remain very flexible.

sTeeL rooFING sLoWLY MAKING IN-roADsWhile asphalt shingles are likely to domi-nate the market for the foreseeable future, other roofing products, particularly steel, are gaining in popularity.

Steel roofing isn’t new of course — galva-nized steel roofs have long been a staple on farms across the country. However, it’s only in the last few decades that steel roofing has moved from the barn to the home, as advancements in coatings technology have made significant improvement in durabil-ity, maintenance, and colour availability.

While steel roofing is more expensive than asphalt roofing, it does offer a num-ber of advantages. It’s considerably lighter — between 80 and 140 pounds per square (100 feet) compared to asphalt’s 200 to 300

pounds. Additionally, steel offers greater resistance to fire, hail, wind, mould and mil-dew, is totally waterproof, and is virtually maintenance free. While the percentage of recycled material in asphalt shingles is very low, and few facilities exist for recycling used shingles, up to a quarter of the steel used in metal roofing is from recycled material, and steel recycling facilities abound.

VicWest (vicwest.com) manufactures seven residential styles of steel roofs and five styles of stone-coated steel roofs in up to 30 different colours. Stone-coated roofs consist of ceramic or organic stone bonded to a pre-painted base coat, cured, and then sealed using a clear acrylic glaze.

VicWest metal roofs are made from 20 to 30 gauge steel, are rated for winds of 193 km/h, and come with 40-year to limited lifetime warranties. Homeowners who want the tra-ditional look of a steel roof can choose from the VicElite and SuperVic series, which fea-ture a standing seam profile. For a roof that looks almost indistinguishable from high-end asphalt shingles there is the Guardian series.

VicWest also offers designs that emu-late board and batten (UltraVic, SnapRib, Prestige), rustic wood shakes (Ridgewood), and natural wood shakes (Woodlawn). The Talavera series, which replicates the look of traditional terra cotta clay tiles found for cen-turies in Europe and Latin America, offers a more exotic look. The Courtland and Tudor Slate series provide the look of old Victorian slate, without the weight (1,500 pounds per square), maintenance requirements, and at a fraction of the product and installation costs.

Whether the choice is asphalt or steel, today’s homeowners have a wide range of design and pricing options when it comes to roofing. And no doubt, with the grow-ing demand for energy efficient products, increased public concerns over environ-mental sustainability, rising energy prices, and changing housing demographics, we can continue to anticipate innovative, cost-effective solutions from manufacturers.

NeW TooLs & BUILDING sUPPLIesc at e G o r Y S P o t L I G H t

IKo Canada’s Armourshake series have a random shake-look design and unique color contrast.


long with architectural design and landscaping, siding is one of the most important factors in determining the

curb appeal of a house. Options range from the more traditional high-end products, like brick, stone and solid wood, to the contem-porary and typically more value-priced prod-ucts — vinyl, metal, and composites.

Homeowners, designers and contractors have traditionally placed a high emphasis on durability, low-maintenance, long-term value, ease of installation, and, of course, aesthetic appeal. These factors will continue to have a major impact on their purchasing decisions. Add to this the growing concern over the impacts that building products like siding and roofing, have on environmen-tal sustainability, energy conservation, and personal and environmental health.

WooD, The orIGINAL eCo-FrIeNDLY sIDINGWood remains the popular choice because of its inherent beauty, durability, and ver-satility. Cedar, redwood, Douglas fir, pine, and spruce are the most commonly used wood species. Wood siding is available in a wide range of styles, including shingles, board and batten, shiplap, channel, bevel, drop cove, and tongue and groove, and can be left natural or finished with stain or paint. Periodic refinishing is required, with the frequency dependent upon the quality of the applied finish. However, prefinished siding is available in either a paint-based or a polymer-based finish, with warranties from 15 to 25 years.

Cape Cod (capecodsiding.com) offers six distinctive styles made from select Canadian Lodgepole pine. Consumers can specify any

colour shade or tone they want, or select from six ready-stock colours in a 100% acrylic, breathable, water-based paint coating. The siding comes with a 15-year warranty.

eNGINeereD WooD sIDING, The WooD-LIKe rePLACeMeNTEngineered wood siding is made from wood fibres fused under pressure with resins and waxes. Homeowners can obtain the texture and look of real wood siding, with better dura-bility and greater moisture resistance. These products are designed to eliminate many of the flaws common to real wood siding, such as bending, twisting and warping, yet remain cost effective to install and to maintain.

Canexel (canexel.ca) siding, from LP Building Products, carries a 25-year lim-ited warranty (15 years on the finish) and is available in 19 colours. Five coats of

baked-on paint and a topcoat sealer provide increased resistance to cracking, splitting, warping, splintering and buckling, along with UV protection. The Ridgewood D-5 line comes in the popular Dutch lap style. Also available are the Ultra Plank line for a more contemporary look, and the Ced’R-Vue line, with the appearance of traditional deeply textured lap cedar.

CoMPosITes, The NeW TeCh sIDINGComposite siding blends the natural look and feel of real wood with the durability and reli-ability of engineered wood. There is a range of different composites on the market, most manufactured using a blend of cellulose fibres with exterior-grade resins, thermo-plastic polymers, or cement and sand.

Composite siding has become popular among many mid-to-high-end homebuild-ers and renovators. This is because the prod-uct is very durable, moisture resistant, and has a relatively low rate of expansion and contraction. Estimates put fibre-cement siding at less than 10 percent of the North American market, which reflects its price

sIDING oPTIoNs, froM tradItIonaL to conteMPorarY

A

Canexel siding, from LP Building Products, carries a 25-year limited warranty and is available in 19 colours.


NeW TooLs & BUILDING sUPPLIesc at e G o r Y S P o t L I G H t

position, and the fact that the product is still relatively new.

James hardie (jameshardie.com) is one supplier of fibre cement siding. Made from equal amounts of cement and silica sand with 10-percent wood fibres, fibre cement siding can be made to mimic the appearance of wood, stucco, or masonry. It is fireproof, rot and moisture resistant, termite-proof, and can withstand winds of up to 240 km/h.

There are three product lines, all carry-ing a 30-year limited lifetime warranty, and a 15-year finish warranty. Consumers can choose from among 27 different colours.

MAsoNrY VeNeers ProVIDe AFForDABLe eLeGANCeTraditional brick and stone sidings are elegant, durable, and, when properly main-tained, very long lasting. However, they are about the most expensive siding options available. Manufactured masonry veneers offer the same look, for less than half the cost of the traditional products. These veneers (or facings) are generally lightweight, non-

combustible, may not need (depending on the manufacturer) wall ties or footings, and come in a wide variety of different designs and colours.

Bellastone, from Crane’s exterior Portfolio collection (exteriorportfolio.com) is made from a high-density polyethylene, polyure-thane foam and stone aggregate mix that are formed into main panels (up to 24” wide and 50” long) and matching corner panels. The finished product has an R-value of 2.5, and comes in three colours. It carries a 50-year warranty and is rated for wind loads of up to 370 km/h.

eldorado stone (eldoradostone.com) makes a somewhat different product in both face stone and brick veneers. These veneers are made from a lightweight con-crete mix consisting of Portland cement, lightweight aggregates, and mineral oxide colors. Eldorado siding comes with a 50-year limited warranty and is rated for wind loads up to 240 km/h. Consumers can choose from 18 stone veneers patterns and four brick patterns.

VINYL, The sIDING oF ChoICe Vinyl siding is, by far, the most popular siding in Canada, accounting for as much as 80 percent of the market. Homeowners love the product because it is value-priced, virtually maintenance-free, and comes in a wide range of styles and colours, while contractors and avid DIYers favour vinyl because it is very quick and easy to install.

Colourfastness, which used to be a prob-lem, is becoming a thing of the past. The colour in today’s vinyl siding goes all the way through each panel, so scratches do not show, and there is no peeling. Thicker panels provide greater impact resistance, and improved nail hems provide easier and more secure installation, along with much higher wind resistance.

The royal Group (royalbuildingproducts.com) markets two premium siding product lines in Canada, both featuring non-prorated limited lifetime warranties. The Woodlawn series, in a distinctive board and batten pro-file, is available in 16- and 25-foot panels that reduce the number of seams, improving the curb appeal of the house.

With innovative products that offer greater insulation benefits, better impact-resistance, and superior colour retention, coupled with competitive product pricing, quick and easy installation, and minimal maintenance, vinyl will remain a strong siding choice in a category that continues to grow in popularity among homeowners and contractors alike.

Canexel siding, from LP Building Products, carries a 25-year limited warranty and is available in 19 colours.

the royal Group markets two premium siding product lines in canada, both featuring non-prorated limited lifetime warranties.


Year ofCorrectiondealerS expect their SaleS to normalize in 2011BY John Caulfield

Inthe month of January, Wellesley Home Centre, a 16,000-square-foot store serving a rural market nestled

between Kitchener/Waterloo and Stratford, ON, produced $5,600 more revenue than it did in the same month a year earlier.

Before you can dismiss that as small pota-toes for a dealer that typically does around $8 million a year, John Kuepfer, Wellesley’s

owner, jumps in to insist that this increase was significant, thanks to the impetus of the Home Renovation Tax Credit. “Our January 2010 sales last year really rose because of the tax credit. In the last two days of that January alone, we sold $100,000 in construction items.”

The tiny sales bump in January 2011 told Kuepfer that business might be sustainable

through the rest of the year, even with-out government stimulus. Dealers across Canada hope he’s right, and that hom-eowners and contractors are in a buying mood again during what Paul Straus, CEO of Home Hardware Stores Ltd., predicts will be “a year of correction” for home-improvement dealers and distributors, as they adapt to new post-recession realities.

Sellers of hardlines and building prod-ucts are searching for good news after com-ing out of a year in 2010 that started out strong, and then flattened out dramatically by mid-year, taking the wind out of the sales of a much-anticipated economic recovery.

Winnipeg-based Sexton Group has reason to expect better days ahead, after purchases by its 285 members — whose locations are

mostly in the Prairie Provinces — rose by 20 percent in 2010, says Sexton’s general manager Steve Buckle. On the other hand, dealers serving markets near urban centres in Nova Scotia, Quebec, and Ontario, which only now are emerging from their economic slowdown, are more cautious about pro-jecting how their businesses will fare, after reporting flat or modest sales growth and lower margins in 2010.

“There’s no such thing as ‘the marketplace’ anymore,” observes Bill Morrison, president of the 642-member TruServ Canada. “But there are market conditions that vary across the country, and dealers that adapt to those conditions are doing well.”

He says he’s heard “tremendous optimism” about 2011 from dealers in Saskatchewan, parts of Alberta and parts of Ontario. “If you’re in Fort McMurray or Red Lake, ON, where there’s been a run-up in commodities prices, the


i n d e p e n d e n t SfeaTuRe

“There’s no such thing as ‘the marketplace’ anymore”


boom is back.” But he’s also heard “concern” about the future from dealers in other areas such as Southwestern Ontario, where “cross-border shopping is back with a vengeance.”

Morrison advises dealers to stay on top of what’s happening in their communities, because reacting quickly to customer needs will be the key to gaining market share profitably.

STimuluS afTeRmaThDealers should be able to gauge more pre-cisely just how strongly Canada’s economy is recovering this year, without having to factor in variables that, intentionally or inadvertently, induced sales in 2010.

For example, the Harmonized Sales Tax (HST), which went into effect in Ontario and British Columbia on July 1, 2010, seems to have accelerated new-home construction and home sales before the tax made buy-ing a house more expensive. “Last year was the reverse of most years because most of our dealers got 60 percent of their business in the first six months,” says Bob Holmes, general manager for the buying group TORBSA, many of whose 27 members are gypsum specialty dealers.

Consequently, HST may have contrib-uted to a decent year for new-home con-struction in 2010, when housing starts

nationwide rose by 27 percent to just under 190,000, according to Canada Mortgage and Housing Corp. That activity fell off in the later months of the year, and is likely to recede in 2011, when CMHC forecasts home starts will fall back to 174,800 units.

Like much of the province, Springdale, NL, lately has been a hotbed for housing. But construction activity was no guarantee

of sustainable sales at George Warr Ltd., an 8,000-square-foot Castle dealer on two acres. It had its best year ever in 2009, when it generated $4.5 million. Brian Warr, the company’s president, says his location’s sales through to September 2010 were up by 10 percent. But business during the last three months went into a tailspin, and the com-pany ended the year only 0.5 percent ahead.

Still, Warr says he’s optimistic about his business, partly because of the area’s natu-ral resources and mining initiatives. His decision a few years ago to bring sporting goods, uniforms, and workwear into his store has increased customer traffic. But he acknowledges that his company will need to work harder this year to grow, after two TIM-BR MART-affiliated yards opened in his market in 2010.

leaning TowaRdS RenovaTion and CommeRCial In British Columbia, Invermere Home Hardware Building Centre is a 36,000-square-foot home centre on 10 acres that gets 55 per-cent of its annual sales from pro customers. But it’s just finally getting over the aftershocks from Canfor closing a mill that was a major local employer.

Invermere’s sales in 2008 and 2009 fell by 30 percent, but stabilized last year,

despite the fact that several multi-fam-ily construction projects “got shrink-wrapped, and came to a complete halt,” says co-owner Al Miller. Invermere’s salvation, last year and now, is a thriving renovation market, “which is going to get stronger.” Miller’s company sold a lot of decks last year, and in 2011 is getting into siding in a bigger way.

Supplying commercial projects has also been a godsend for home-improvement dealers in several markets. Morrison of TruServ points to “robust government spending” on infrastructure that some dealers are capitalizing on. And RONA inc. has been beefing up its commercial and pro services through acquisitions that include its deal last October for HVAC distributor Don Park.

Jim Flank, who owns Nor-Ont Supply in Thunder Bay, ON, says he’s anticipating stronger sales in 2011 because “there’s a great deal of commercial construction” underway in his area, including a highway expansion and the proposed construction of a court-house and seniors’ residence. He also says the “Ring of Fire” (a chromite deposit northeast of Thunder Bay) “is gaining interest” and could generate more employment.

Capturing this business, though, will be tough. “Competition in this market is fierce,” says Flank. He is up against two Home Depots, two Home Hardwares, Patene Building Supply, and four other independent pro yards. “We need to be aware of every project and how we can help our contractor.”

A fact of life for most dealers is that their sales growth hinges on lowering prices to attract bargain-hunting customers. TruServ

this year is introducing a promotional pro-gram called “Red Hots Every Day,” where — like Costco and Walmart — its dealers can offer their customers value on volume items like adhesives and light fixtures.

Price reductions, though, put pressure on margins, which eroded for many dealers last year, and might continue to do so in 2011.

i n d e p e n d e n t S feaTuRe

Last year was the reverse of most years because most of our dealers got 60 percent

of their business in the first six months“ ”Continued on page 28


Take Probex Building Supplies in West Roxboro, QC. This 8,000-square-foot RONA store on an 80,000-square-foot lot, which gets 80 percent of its sales from con-tractors, had a good year in 2010, says owner Carl Strulovitch. Supplying commercial projects such as condos, hospitals, and schools has certainly helped. And he’s pro-jecting that his store’s sales could increase to $14 million in 2011.

But Strulovitch says that more custom-ers are soliciting bids from multiple supply sources before they order anything, and that guaranteeing prices for the length of a project, or even just three months, “is becoming part of our game.” He’s also resigned to the fact that some of his larger customers are going to ask for end-of-year rebates on purchases.

Concessions to their customers don’t stop at price, either. “We’ve had to increase our inventory levels because, if you’re out of something, you’re going to lose the sale with pro guys,” says Omer Sauve, owner of Sauve’s Lumber in Timmins, ON, a 38-acre lumberyard with a tiny, 600-square-foot store. Sauve hopes he can draw more consumer traf-fic by converting warehouse space on his premises to a 3,200-square-foot office and showroom that will display doors, windows, and cabinets.

CommiTTed To gRowThOne of the inevitable by-products of any recession is consolidation, which contin-ues to redefine the competitive landscape of Canada’s home-improvement sector. Consolidation has ranged from small

events like Strulovitch buying out his long-time partner Morris Rudnitsky, to major deals like RONA buying TruServ, TIM-BR MART acquiring CanWel Hardware, Castle Building Centres aligning with the U.S.-based distributor Orgill, Inc., and with TSC Stores’ formation of its TSC Country Pro Services subsidiary.

Generally speaking, mergers, acquisi-tions, and other such unions demonstrate

their participants’ confidence that this is still an industry worth investing in.

In August 2009, the owners of Starland Supply in Burns Lake, BC, bought out a local Home Building Centre, and then merged that store with its own two yards into a single location with a 7,500-square-foot store on 1.1 acres, which generated $3.1 million in sales in 2010.

Owner Leroy Wiens says that when Starland, an IRLY member, re-merchan-dised, it identified “large volumes of out-of-date and non-moving stock that we dealt with.” Starland also brought on new lines of flooring, plumbing accessories, and barbecue grills. With better inven-tory control, more attention to “strategic planning,” and an improving economy that includes the opening of two new pel-let plants, Wiens is anticipating 10-percent sales growth this year.

Last August, Allan Mansfield acquired a 51-percent stake in the retail opera-tions in Caledonia, NS, he managed from its owner Blair Douglas. He changed the name of the business to Mary Lake Hardware, and moved its hardware store (which had been a quarter mile away) into a new 8,000-square-foot building

on the location’s lumberyard. Mansfield also executed “a total remerchandising” of the larger store, with new fixtures and the addition of flooring and appliances.

With these and other improvements, Mansfield believes it should be relatively easy for his store to bump up last year’s $1.6 million in sales by 5 to 10 percent in 2011.

Mary Lake Hardware is a Home Hardware member, and that co-op saw 123 members implement its “Build a Better Home Store” program in 2010, 20 of which expanded their locations. “Home dealers are invest-ing in their stores and seeing the benefits on their bottom lines,” says Straus at Home’s head office. He also points to the growing number of dealers who use the co-op’s vari-ous training programs, which include Solid Base, a combination of hands-on training, videos, lectures, and group exercises.

Kuepfer of Wellesley Home Centre has invested in his company, too, by doing things such as increasing his advertis-ing expenditure. He has also added a tool rental department and installed a contrac-tor tool centre. Those two initiatives added $200,000 to his store’s inventory.

But like most of Canada’s home-improvement dealers, Kuepfer has become more cost conscious and profit oriented. His store’s margins were off by 1 to 2 per-cent in 2010, so he’s reduced inventory in other categories and corralled salaries. An outdoor boiler that runs on wood scraps, which Kuepfer installed in 2009, now pro-vides 80 percent of the store’s heat, on a cost basis.

“I think everyone wants to make a few more dollars after years when it was just rock and roll,” observes Strulovitch. “It’s kind of calmed down.”

i n d e p e n d e n t S feaTuRe

give uS YouR feedBaCk! www.hardlines.ca/hhiq

We’ve had to increase our inventory levels because, if you’re out of something, you’re

going to lose the sale with pro guys“ ”


HHIQ: How is Home Hardware advising its dealers to cope with the slow recovery Canada is still going through?Paul StrauS: When we see reports com-

ing from the dealers, we see them weath-ering the downturn much better than we anticipated. They continue to leverage our industry service levels, using our weekly deliveries to stay in stock and on time with their inventory. They’re really just staying focused on their customers and focused on their customers’ needs. And this helps to generate opportunities for additional vol-umes and add-on sales.

t’s stable, but not staid. It’s big, but far from sluggish. It’s centralized,

yet remarkably diverse. and with sales approaching $5 billion from more than

1,100 independent dealers, Home Hardware Stores Limited is canada’s largest

dealer-owned home improvement co-op.

one of the key personnel changes in this industry in 2010 was the appointment of Paul

Straus to president and ceo of Home Hardware. He had long served in the ceo role, but

the president’s title had remained with Home Hardware co-founder Walter Hachborn. With

Hachborn’s effective retirement, Straus’s title finally became an official match for his duties

at the helm of the giant co-op distributor.

Straus took time recently to speak with HHIQ editor Michael McLarney about his role, and

the role of Home’s independent dealers, in hardware and home improvement retailing today.

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InterVIeW WItH HoMe HardWare’S PreSIdent and ceo, PauL StrauS

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P a u L S t r a u S exeCutIve Q&a


HHIQ: What is Home Hardware doing to strengthen its logistics and technology?Paul StrauS: This is something we’re really

proud of — that we can really get good products to dealers in a timely manner. We continue to re-evaluate our systems and our efficiency. Last year, we engaged Manhattan Associates to enhance our distribution and transportation process, so we can continue to find ways to increase speed of getting product to our stores on a timely basis at a low cost.

HHIQ: How is Home Hardware helping lBm dealers with their contractor customers?Paul StrauS: Our building materials side

continues to thrive and grow as more and more of these kinds of dealers choose to join Home Hardware. We have 500 dealers now that carry lumber and building materials, up from 460 in 2008.

We’ve also got four regional buying offices across the country, so every building materi-als dealer gets the best deal on their products — no matter where they’re located.

We also have programs especially designed for contractors, for example, our “Top Notch” program and our “Tough as Nails Club” — which help dealers and con-tractors to have a closer relationship.

HHIQ: What product categories are getting a push at Home Hardware?Paul StrauS: The advantage of being a Home

dealer is they have the option of choosing their own products and what to sell, tailored to their own markets. But overall, Home has really been pushing some key categories that help drive our members’ profitability — like our Beauti-Tone paint, Benchmark tools, and, of course, the eco-friendly Natura.

The outdoor living category, outdoor power, patio furniture and gardening, we believe will be important, as well.

HHIQ: In an era marked by takeovers and mergers, why has Home Hardware remained

independent, despite overtures from these other groups?Paul StrauS: Home Hardware’s concept is

to do whatever we can to help the dealers grow their business. Any thought of selling that to a third party goes contrary to our mandate to serve the independent.

Joining with a larger group would require some of the profits to be turned to its share-holders — and not the dealers themselves. We’ve always stayed true to our mandate to stay true to the independents.

HHIQ: Succession is possibly the biggest single challenge for independent retailers. Does Home Hardware have a way of helping its members in this regard?Paul StrauS: We’ve got profitable stores

that are in demand by entrepreneurs. Home has a lot of experience helping dealers sell their businesses. Over the years, we’ve com-pleted a lot of transitions from one genera-tion to another. That’s not just from father or mother to sons and daughters; it could be to other dealers or to outside investors.

We have the financing programs to help new dealers get started.

HHIQ: Can you talk some more about the ways in which Home Hardware is helping independents to face today’s challenges to growth?Paul StrauS: The independents today are

looking at several factors to grow their busi-ness. One they are looking for is a supply of products that features good pricing and quality. They want to be able to compete against the big box with competitive prices. They need the support from the back end.

We’ve tried to support this with 60,000 products in our warehouse, together with good pricing and great margins. Our distri-bution system is something we’re really proud of. It lets our dealers have the whole package.

Another area that poses a challenge for independent dealers is financing. On the banking side, it’s been a problem for dealers

for years. With our “Letter of Comfort” program, we’re able to give dealers the sup-port they need to talk to their banks.

Home is the first group to have a buy-back program for our stores. It gives the banks a level of security when dealing with our retailers. The last thing we want is to have a new dealer bite off more than they can chew.

HHIQ: In an era of consolidation among whole-salers, what has been Home Hardware’s compelling strength that attracts dealers?Paul StrauS: Our strong branding, market-

ing, and advertising programs are widely rec-ognized across Canada. But it goes beyond that, right back to our central mandate: Home really has the strongest programs for the independents — we really want them to succeed. We’re always focused on building a strong business here at St. Jacobs and we’re really blessed with a good staff here.

Our staff know it’s really important to have successful dealers and they work really hard to achieve those goals.

What I’ve learned...Paul Straus grew up in St. clements, a town in the rural Mennonite country around St. Jacobs, ont., where Home’s head office and distribution centre is situated. though not a Mennonite him-self, he was imbued with a work ethic that reflected the farm culture around him, including time spent working on his grandfather’s farm.

HHIQ: Can you cite a single role model or business situation that has influ-enced how you approach your role as CeO of Home Hardware Stores?Paul StrauS: right from day one, our

dad always had us out sharing the workload. There’s no other answer than hard work.

exeCutIve Q&aP a u L S t r a u S


his May, the North American Retail Hardware Association is bringing three dealer events together for

the first time, starting with the NRHA All-Industry Convention and the 2011 International Hardware Association Congress at Las Vegas’s Bellagio Hotel May 10-12. These two events will run concurrently with the National Hardware Show, being held at the nearby Las Vegas Convention Center.

NRHA convention attendees will have

the opportunity to combine the network-ing and educational benefits of the conven-tion with both the product selection at the National Hardware Show and the interna-tional perspective of delegates attending the IHA Congress.

“Attendees will find this year’s event a remarkable opportunity to network with other attendees from around the world, explore new products, and learn from a full

business program of seminars, speakers, and social events,” says Bill Lee, president and CEO of NRHA. “Everyone is sure to leave with a re-energized outlook and strat-egy for their business.”

Attendees will spend their morn-ings attending educational workshops at Bellagio, followed by time to explore the National Hardware Show during the afternoon. Transportation will be pro-vided between the two venues. Evenings will be dedicated to social and network-

ing events at both locations, including the Young Retailer of the Year Awards and the NRHA–IHA Cocktail Reception.

Independent retailers from Canada and the United States, as well as wholesaler and manufacturing representatives and spon-sors, will come together in Las Vegas to learn about issues and strategies pertinent to today’s independent home improvement retailers.

Convention seminars and workshops The NRHA speaker series will allow retailers to learn new strategies to promote and mar-ket their businesses. Jim Welch, president and founder of The Growth Leader Inc., will present “Winning through Generational Marketing.” He will examine how market-ing techniques differ between Baby Boomers, Generation X, and Generation Y, and will provide specific tips to draw in and increase customer loyalty among the next generation of home improvement consumers.

Phil Mitchell, founding partner of Discovery-Based Retail, will continue along the same theme, talking about the latest advertising opportunities. His seminar, “Differentiating Your Business in Today’s Changing Retail Environment,” will exam-ine the changes occurring in advertising delivery options and suggest a formula to increase the impact of the retailer’s message, regardless of the advertising medium used.

retail innovators of the YearEvery day, independent retailers are finding new and inventive ways to run their busi-nesses. Learn how today’s top retailers are

t

attendees will find this year’s event a remarkable opportunity to network with other attendees from around the world“ ”

the nrHa all-Industry convention will join forces with the national Hardware Show in Las Vegas

BrIngIngtogetHer

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blazing new trails along the retail landscape as NRHA and sponsor Vermont American honour these retailers at this year’s Retail Innovators of the Year lunch and awards cer-emony. The program will include a panel discussion and video presentation highlight-ing how these breakthrough retailers con-tinue to reinvent and revitalize their busi-nesses in today’s competitive environment.

soCial media panel disCussionsTo round out the convention’s educational line-up, NRHA will dedicate a morning to two of the most talked about trends in 2011— social media and internet marketing.

“The influence of social media on both today’s consumer and the retailer is some-thing that all retailers need to learn about,” says Lee. “With millions of users, programs such as Twitter and Facebook are making a historic impact on how business is con-ducted all over the world. It is our responsi-bility as the industry’s association to discuss today’s most influential and noteworthy business practices — and in 2011 that prac-tice is social media.”

During the workshop series, retailers from the United States and Canada will reveal how integrating social media into their business plans has changed their advertising and marketing efforts, allowing

them to develop a community among cus-tomers — and ultimately increase revenue.

Young retailer of the Year awardsEach year, NRHA hosts the Young Retailer of the Year program in conjunction with the convention. The program highlights young, aspiring hardware retailers and honours them for outstanding achievement as owners and managers of independently owned hardware and building supply stores in Canada and the United States. The purpose of the program, now in its 15th year, is to recognize outstand-ing performance and encourage talented young people to pursue a career in the retail hardware business. To date, the program has honoured more than 100 young retailers.

The event will become the featured open-ing-night gala event for both the NRHA All-Industry Convention and the National Hardware Show. The awards ceremony

will feature a reception and entertainment, honouring both national and international retailers.

nrha-iha CoCktail reCeptionAttendees are also welcome to take part in a variety of social activities. On Wednesday evening, all convention and IHA 2011 Congress attendees are invited to participate in a cocktail reception at Bellagio, designed to encourage networking in a fun, casual man-ner setting. Immediately following the recep-tion, attendees can partake in one of two Las Vegas stage shows at a discounted group rate: Cirque du Soleil’s “O” or the Blue Man Group.

independents’ daY at the national hardware showTo close this year’s event on Thursday, May 12, NRHA All-Industry Convention attend-ees will gather at the NRHA Village within the National Hardware Show to take part in an event that will honour independent retailers during Independents’ Day at the National Hardware Show.

The event will include presentations and panel discussions focused on issues pertain-ing to independent entrepreneurial business owners. It will culminate at noon with the “Spirit of Independents’ Award,” where three independent retailers will be honoured for

n r H a / I H apreview


their ongoing efforts to support their local communities. This one-of-a-kind event will conclude with a picnic at the NRHA Village celebrating independent retailers.

iha 2011 CongressAs part of NRHA’s ongoing efforts to share best practices from retailers across the globe, for the first time ever it will host the 2011 Biennial IHA Congress, May 9-12, at the Bellagio Hotel. There, IHA Congress attendees from around the world will come together to connect with industry professionals and NRHA All-Industry Convention attendees. It will also be the first time the event is held concurrently with the National Hardware Show.

A gathering of international retailers, manufacturers and distributors from all over the world, the 2011 IHA Congress itin-erary will include an exclusive program of seminars and events, as well as a program that overlaps with the NRHA All-Industry Convention program.

iha seminars and workshopsWhile many of the IHA and NRHA pro-grams will be shared, delegates of the IHA Congress still have an itinerary catered specifically to their event. Workshops will focus on actionable techniques to help international retailers take their business to the next level. Retail experts Michael Bergdahl, a former Walmart executive, and Pete Luckett, owner of Canadian grocery powerhouse, Pete’s Frootique, will offer their insights and experiences to attendees through two workshops on May 10.

Berghahl’s presentation, entitled “How to Compete and Win in a Walmart World,” will talk about how independent retailers can compete and win in a world of global giants. Luckett will describe how to cre-ate the ultimate customer experience and develop loyal shoppers in his presentation, “Turning Buyers into Believers — How to Create Raving Fans!”

retail store Bus toursInternational attendees are also invited to experience some of the world’s most noted retailers in the United States for a firsthand look at store formatting, merchandising and operations. Several guided retail bus tours will allow attendees to experience one of three themed tours, each focusing on a spe-cific niche operation in the Las Vegas area. Participants may choose from the follow-

ing themes: housewares, mass merchants or independent hardware/home centres. Each tour will include a host, interpretive materials, and lunch.

From seminars and panel discussions to awards ceremonies and developing interna-tional connections, this year’s attendees are in for a winning combination of programs at the NRHA All-Industry Convention and 2011 IHA Congress.

n r H a / I H a preview

tuesdaY, maY 10 8:00-8:30 a.m.Networking Breakfast

8:30-9:00 a.m. Official Opening of NRHA Convention

retail workshop program – held at Bellagio9:15-10:00 a.m.“Winning Through Generational Marketing,” Jim Welch

10:15-11:00 a.m. “New Ways to Market Your Business,” Phil Mitchell

11:15 a.m.-12:30 p.m. Retail Innovator of the Year Awards and Lunch

optional afternoon programming –las vegas Convention Center1:00-5:00 p.m. National Hardware Show Floor Visits

Young retailer of the Year awards program –las vegas Convention Center 5:00 - 6:00 p.m. Young Retailer of the Year Reception

6:00 - 7:30 p.m. Awards Ceremony

wednesdaY, maY 118:00-8:30 a.m.Networking Breakfast

retail workshop program – held at Bellagio8:45-9:30 a.m. Joint NRHA/IHA Social Media Workshop 1

9:45-11:30 a.m.Joint NRHA/IHA Social Media Workshop 2

11:45 a.m.-12:45 p.m.Joint NRHA/IHA internet & E-mail Marketing Workshop with Lunch

optional afternoon programming – held at las vegas Convention Center1:00-5:00 p.m.National Hardware Show Floor Visits

evening programming – held at Bellagio5:30-6:30 p.m.NRHA-IHA Cocktail Reception

7:00 p.m. OPTIONAL: Blue Man Group – held at The Venetian

7:30 p.m.OPTIONAL: “O” Cirque du Soleil – held at Bellagio

thursdaY, maY 128:00-8:30 a.m.Networking Breakfast

9:00 a.m.-3:00 p.m. Independents’ Day at the National Hardware Show

12:00-12:30 p.m.Prize Awards and Farewells

nrha all-industry Convention contact: Allison DeWitt, 317-275-9414, [email protected]

nrHa all-Industry convention Schedule of events

www.hardlines.ca

orth America’s premier trade show for the retail home improvement industry will be held May 10-12.

Retailers and suppliers from around the world will converge in Las Vegas, NV, as the show celebrates its 66th year serving this industry.

The show had its roots in New York dur-ing the post-World War II housing boom in the U.S. and moved to Chicago in the 1970s. Now making its home in Las Vegas, it is the place for global manufacturers, asso-ciations, organizations, and the media to unveil new products, innovative ideas and fresh insights to a broad spectrum of home improvement resellers.

Major brands join national Hardware sHowThis year’s National Hardware Show is

attracting more big brand names to its roster of exhibi-tors, as the show — and the U.S. economy — regain

strength following the recession there.More top-of-the-line companies are

exhibiting in each product category at NHS. Industry leaders such as 3M, Scotts Co., Robert Bosch Tool Corporation, Char-broil and Jarden Safety & Security have joined the list of national brand vendors who will exhibit this year.

“We are excited at the depth of suppliers signed up for the 2011 National Hardware Show,” says Rich Russo, event director for NHS. “We will see more of the industry’s big-gest brand names on the show floor, including some that haven’t been with us in a few years.”

One section of the show that is really getting a boost from new companies is the paint and accessories segment. More than 250 companies, including Benjamin Moore, will be part of a lineup of participating companies here.

new products will be sHowcased New product introductions are expected to take centre stage at the 2011 National Hardware Show.

The show itself will be organized within these show categories: Hardware & Tools; Homewares, Lawn & Garden-Outdoor Living, Paint & Accessories, Plumbing &

Electrical, Storage & Organization, and Tailgate-Outdoor Recreation. These core product categories will be further featured in the Show’s International Sourcing area.

“The industry can look forward to seeing some of the most creative solutions imaginable in all segments of the industry,” says Russo.

The show will devote four areas to new products, including the New Product Launch Spotlight, located right in the lobby of the Central Hall. New power tools from com-panies such as Skil and Ryobi, as well as new lawn and garden products, will be tested in the Handy Gardening How-To Product Test Shop.

“buying desk” will let independents place ordersAdam Busscher, owner of Picton Home Hardware Building Centre in Picton, Ont., is just one of the many independent dealers who intend to make the trip to Las Vegas this spring. He hopes to send six company rep-resentatives this time, up from four in 2010. Busscher and his staff will be looking for new products in all the hardlines categories.

“It is very important to me and my company that, when we are attending the National Hardware Show, we are able to see all the biggest vendors with the most excit-ing new products,” Busscher says.

n

national Hardware sHow

The indusTry gaThers inLas Vegaslas Vegas conVention center, las Vegas, neVada • May 10-12, 2011

Hardlines Home Improvement Quarterlywww.hardlines.ca 39second QuarTer / 2011

One of the new features that’s drawing Busscher and other independents like him is a new “Buying Desk Program.” Suppliers attending the 2011 event will be able to sell products to independent retailers through their existing co-operative and distributor programs.

“This new program will give independent retailers the chance to show new products to co-op and distributor buyers on the spot and get these products into their stores more quickly,” says Russo.

Orgill, Distribution America, Ace, True Value, and Lancaster make up the list of co-ops and distributors signed up for the Buying Desk Program so far. Together, they represent $7.7 billion in sales and more than 40,000 independent retailers.

Exhibitors participating in the Buying Desk Program will have a counter card at their booth that says, “Independent Retailer Program.” In addition, each co-op and dis-tributor will have a meeting room on site at the Las Vegas Convention Center where they can facilitate orders, network with retail

customers, and discuss products they do not currently stock in their distribution centres.

seasonal products on tHe rise The rise in importance of seasonal and holiday promotions for hardware and home improvement dealers is reflected in the mix of lights, decorations, holiday themed figurines, wreathes and even fully decorated Christmas trees featured at this year’s National Hardware Show. In fact, the seasonal area will be expanded to include

hundreds of innovative products. “Holiday décor is thriving in the market-

place, and the number of hardware retailers carrying holiday décor is increasing every year,” says Christina Barnes, general man-ager of Accents Unlimited, a seasonal prod-ucts company. “The National Hardware Show provides a great opportunity for companies to meet with holiday buyers to review future holiday trends, and add to their upcoming holiday selections.”

In addition to products related to the winter holidays, the seasonal category includes lawn

and garden products, sleds, towables, snow shovels, ice melt, and a variety of other items.

nHs will co-locate witH nrHa conVention The 2011 National Hardware Show will attract more independent dealers than ever, thanks to its co-location with the North American Retail Hardware Association’s Annual All-Industry Convention. A full pro-gram of seminars and networking with other dealers from throughout North America and

around the world will include such events as The Young Retailer of the Year and Retail Innovators of the Year awards.

The National Hardware Show held in conjunction with the NRHA All-Industry Convention will also present for the first time an “Independent’s Day,” a celebration of independent hardware dealers that will close out the three-day combined event. Under this theme, the show will promote such ideas as “finding new products,” “find-ing new customers,” and “increasing out-reach to existing customers.”

n h spreView

The industry can look forward to seeing some of the most creative solutions imaginable in all segments of the industry“ ”


ver the years, I have been shocked by how little retail managers often know about business financials. Without

receiving monthly financial reports, reviewing progress, and making necessary changes, how can one expect a store to reach its full potential?

The recently updated training program by the North American Retail Hardware Association, “Three Pennies of Profit” (available at www.nrha.org), can help.

Highlights of this valuable training video include a focus on the five key controllable financial measurements, while identify-ing opportunity for growth and tips on improving profit.

Let’s take a simplified look at the five key controllable financial measurements…

Gross marGIn after rebateThis is where everything starts. Gross margin after rebate is a primary measure of a com-pany’s operating performance. It details your operating efficiency by showing how much of each dollar sale ends up as net income.

For example, an average retail lumber dealer with $5 million in sales will have a typical gross margin after rebate ranging from 23.8 to 28.9 percent, with the average 24.8 percent. This includes a rebate of 0.6 to 0.9 percent, varying by group and mix of product sales, and how a company negotiates for rebates.

It is important to emphasize the differ-ence between gross margin and markup, as there is often confusion among staff:• for a gross margin of 40 percent, you will

use a multiplier of 1.67;• for a gross margin of 30 percent, you will

use a multiplier of 1.42.

Here are just some of the issues that can have a detrimental effect on gross margin:• product mix• discounting• heavy promotional activity• inventory shrinkage• costing errors• poor inventory count or cut off• freight cost not added to cost of goods• inventory receiving – shipping errors• back end vs. front end sales percent• lack of step-up selling

This is an important primary measure of the performance of your business, but one that requires constant monitoring.

operatInG expensesPayroll accounts for the largest operating expense in a company (usually ranging from 50 to 55 percent), or 13 percent of sales. Look for savings in operating costs

in areas such as advertising, promotion, and interest expense.

A key area to review is receivable col-lection. If, for example, you are running your receivables to 63 days or greater, try reducing them to 60 days or less. This is an opportunity to generate additional cash flow to reduce interest costs. Bad debt loss can be significant if not managed on a timely basis.

Other operating expenses can be a bot-tomless pit if you just accept what has been charged to this area. Examine the various practices and procedures within your busi-ness. Are things done that way for a good reason? New technologies or changes to the marketplace could warrant a revision of some of these practices. Look at the ser-vices you provide. Are you charging enough for deliveries? How about a fee for product assembly? These fees could help you recover many of the costs related to those services.

Inventory & fInancIal ManageMent

o

by bIll WIlson retaIl advIsor, nrHa canada

– ONLY FROM HARDLINESPERFECTPACKAGE

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ONLY HARDLINES CAN DELIVER YOUR

MESSAGE TO THE WHOLE INDUSTRY.

• Hardlines Conference Series, October 27-28, 2011

• Hardlines Johns Manville Dealer Conference,

February 2012 at the LBMAO’s Canadian Home

Improvement Show

• On the website

• In the e-newsletter

• Hardlines Home Improvement Quarterly magazine

EVENTS

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ONLY HARDLINES OFFERS YOU ALL THESE OPPORTUNITIES.

To fi nd out more about packages just for you, contact Beverly Allen, Publisher:

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Inventory turnsInventory turnover is the ratio measuring how fast inventory is sold over a year span. To calculate, divide the cost of goods by average monthly inventory at cost. Average inventory turns should range from 3.5 to 5.0.

The financial benefit of one extra turn is very significant to an improved cash flow, lower operating loans, and the ability to re-allocate assets to other investments. By exam-ining inventory duplication, clearing seasonal inventory on a timely basis, and making sure to always have ample inventory of products accounting for at least 20 percent of sales, a company is better equipped to succeed.

Gross marGIn return on Inventory (GmroI)Gross margin return on inventory measures the amount of gross margin dollars gener-ated by each dollar tied up in inventory, and

allows you to evaluate products and depart-ments that have varying gross margin and investment needs.

Retailers can compare high turn-low turn margin lines against slower moving high profit ones. GMROI will range from 128 to 145 for a high profit lumber yard.

The calculation for GMROI is:Gross margin – inventory x 100

return on net WortH (pre-tax)Return on net worth, or equity, is the mea-sure of how well the net worth of a company is able to generate earnings. Companies

must earn an adequate return to satisfy the owner’s needs. Minimum standards should be about 10 percent, with averages running from 3 to 17 percent. The NRHA’s latest “Cost of Doing Business Survey” shows, for example, -0.5 to 7.3 percent for high profit LBM outlets.

Bill Wilson is Retail Advisor for the North American Retail Hardware Association Canada. He has a background of more

than 40 years of experience in hardware and home improvement retailing and distribution and is committed to training for independents.

S t o r e M a n a g e Me n tf le

“ ”the financial benefit of one extra turn is very

significant to an improved cash flow, lower operating loans, and the ability to re-allocate assets


he number and value of residential building permits issued in Windsor, one of Ontario’s hardest-hit com-

munities during the recession, rose by 66 percent and 44 percent, respectively, in 2010, according to Statistics Canada esti-mates. But those gains are still a far cry from where this market’s construction sec-tor had been before its auto industry and economy tanked.

“Permits are way down” over the past three years, laments Matt McKay, a partner in Windsor’s 100,000-square-foot RONA Home & Garden, which depends on pro customers for between 35 and 40 percent of its revenue. “Plus, we used to get busi-ness from customers in Detroit, and that went to zero.”

But McKay and his partners — who

ran two independent contractor yards that RONA bought out in 2009 and then incorporated into its big box location in Windsor — didn’t sit idly by waiting for business to improve. While their store is

now part of a national organization with tremendous purchasing clout, it still had to answer the same questions facing every other independent dealer to be successful: what is my niche, who are my customers, where’s my bottom line?

The Windsor RONA has remained battle ready to hold onto its sales to its contractor

customers. Two outside salespeople call on builders, trades and commercial accounts, and another salesperson for windows and doors exclusively calls on contractors, architects and homeowners. “Our thinking is that if we can get architects to spec our products, we’ll get the customers’ business,” says McKay.

Another associate designs floor-joist and roof-truss systems, as well as deck, fence and garage packages. Windsor RONA “really promotes” package sales, says McKay. “We don’t like to sell ones or twos of anything.” It offers installation services and multiple financing options, which McKay says have been “big draws” for homeowners doing remodeling work.

Recently, Windsor RONA started pur-suing agro sales, specifically by offering a pole-barn materials and labour package to farmers. Given the dealer’s position in this market, it was inevitable, says McKay, that several competitors would follow its lead.

But unlike other local yards that McKay says automatically send out price lists, even for projects they have no chance of supply-

ing, he doesn’t allow salespeople to fax or email price lists to customers, and insists instead that they sit down and talk with clients. “Relationships are the most impor-tant thing for our store. I demand that of our salespeople and many of our customers have become good friends. We want to be part of their businesses.”

MaKInG MoneY In touGH tIMeS

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If we can get architects to spec our products, we’ll get the customers’ business“ ”

a rona big box adjusts to difficult market conditionsby John Caulfield

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Windsor rona, in one of ontario’s hardest-hit communities during the recession, didn’t sit idly by waiting for business to improve.

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he most dangerous thing you can do is to try and predict the future,” says Mark Scherer, president and

CEO of Scherer Brothers Lumber, based in Brooklyn Park, MN.

Scherer knows something about get-ting through difficult times: His three pro yards serve the Minneapolis-St. Paul mar-ket, where foreclosures are still a headache and where housing starts last year were about one quarter of their pre-recession levels.

Scherer thinks that too many pro dealers cling to their yards’ past glories, instead of taking a hard look at what they need to

survive in uncertain economic climates. “Most dealers live in denial, don’t do pro formas, don’t plan.” During the recession, Scherer Brothers sold its flagship yard, mothballed another yard, stopped mak-ing cabinets, reduced its staff, and con-solidated management roles. “I had to let a lot of very good people go, but this is like going to war,” says Scherer.

However, he avoided “knee-jerk” reac-tions to the recession, like trying to save money by letting experienced salespeople go “and then watching business walk out the door with them. We’ve been very methodical in our staff reductions.”

Scherer carefully analyzed his business on a continual basis throughout the reces-sion. That included everything from care-fully examining which staff were effective before making cuts to tracking every single delivery using GPS to determine which drivers were most effective.

LeSSonS froM souTh of The border

Mark scherer, president and ceo of Scherer brothers Lumber, says most dealers live in denial, don’t do pro formas, don’t plan.


ike Doyle Jr. is a member of castle Building centres Group. Its 268 member stores are spread throughout canada,

but dominate in many smaller, rural markets. doyle, however, is not typical, he says, of many of his fellow members. For one thing, his store, the Home Improvement Warehouse Ltd., is in the middle of a major urban market — calgary.

For another thing, he relies on a lot of direct imports.

“About 80 percent of our business is import,” says Doyle. He sources product directly from overseas. “We go to China, Brazil — and even found stuff in Egypt last year.”

He doesn’t carry lumber in the 60,000-square-foot store, but he does sell a lot of laminate and hardwood. “And tonnes of doors. You come into our store on any given day and you’ll find 5,000 to 6,000 doors.” He also sells pre-hung doors and manufactures his own millwork.

Nor does he cater to contractors, as do so many of his Castle compatriots. His busi-ness is mainly DIY.

But, like so many dealers, his business had grown to a point that he realized he wanted another location.

But he didn’t know how it would work out. He’d been operating out of this sin-gle location in the Calgary community of Franklin for five years. A move into a sec-ond location would mean a lot more than adding more product and hiring more peo-ple. In fact, these were the least of Doyle’s concerns, as he is already used to pushing a lot of product through the one store.

Rather, Doyle was concerned about the logistics of moving all of that product through two outlets, instead of just the one. So when Sobeys moved out of a location in nearby Strathmore before the lease was due, Doyle was able to sublet from the grocery chain. “I got it for next to nothing,” he says.

The 18,000-square-foot location became a perfect testing ground for a second loca-tion. “We set up a regular retail store and hired from the Strathmore community. And I already knew some people there whom I could trust.”

Now, with a perfect combination of loca-tion, product and people, Doyle had an ideal scenario for driving business through two locations instead of just one. During that time he worked the bugs out of his logistics. The site, just 10 km away, was close enough to the parent store that problems could be dealt with quickly, “but far enough away that they had to live on their own,” Doyle says.

“We needed to get this expansion model down. What we had to learn was how logis-tically we could move product.”

The opening of the second store was entirely opportunistic — and so was its clos-ing. After 30 months the lease ended. Doyle and the landlord could not see eye-to-eye on new terms, so he simply exited the property.

However, he managed to take most of the new business generated at the second

location — and most of the staff — back to the original store.

What did he learn? “I figure I can support up to three more stores from our existing location, without any expansion of my dis-tribution,” he says. But, he adds, he’s going to wait until his community begins feeling the direct effects of the recovery that is now taking place in Alberta.

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I can support up to three more stores from our existing location, without any

expansion of my distribution“ ”

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Mike Doyle Jr. is not a typical member of castle Building centres Group. His store is in the middle of a major urban market.


What a conSumer WantS

nthony Stokan, partner at anthony russell Inc., is a retail con-sultant who scours stores and shop-

ping centres the world over to understand what consumers want and identify which retailers are providing it. his insights into retail are used by retailers and shopping centre owners to plan their own strategies. he is also the canadian spokesperson for a recent survey by american express of global consumer trends.

here he offers up some of his insights into the survey’s results on consumer tastes — and the role of the independent retailer in satisfying those tastes.

Shop local“It’s a great example of the exciting things going on in the times we live in. And, of course, the independent retailer is in the best position to capitalize on this trend.

“A dealer network or franchise offers the best of both worlds: retailers get back-room support, branding and other services. But the reason they are successful is the inher-ent connection they have with their com-

munities. In fact, we see zero growth among independent retailers in Canada — except among the dealer networks. In every part of the country and across a range of sectors, we see the success of a buying group, a dealer network, of being part of a franchise.

“The key here is the tools provided to these independents that would have been out of their grasp a generation ago. They

have the advantage of group buys and services. It allows them to compete head-to-head with the large national chains because what they’re offering is just as sophisticated — but with that localized understanding.”

Big BoxeS“Don’t underestimate the ability of big chains like Lowe’s to create powerful urban destinations. But the independents have tremendous local advantage.”

The environmenT“We all want to feel good about the environ-ment. We all want to do our bit. But when it actually comes to analyzing the cost-benefit of what that means, it’s very often difficult to justify the additional cost.

“On a small project, for example, where the use of eco-friendly products might add only $10 or $20 to the cost of a project under

$100, we might be willing to overlook that for a greater good. But it’s on a large-scale residential project that the difference in cost really adds up, sometimes in the hundreds or thousands of dollars — and that does make a difference.

“Overall, the shift to sustainable con-sumerism is a slow-moving, plodding-along kind of reality. People are not making dras-tic lifestyle changes to accommodate the eco movement. We all want the ‘feel good’ without the financial strain. We do the stuff that’s easy to do.”

online Shopping“Canadians, hands down, are the most tech-savvy of all six countries in the American Express survey — and that’s across all ages.

“However, unlike some of the other countries surveyed, with Canadians, it’s predominately product information that they go online for, while in other countries they do buy online. Canadians are huge pre-shoppers online, constantly looking for product information and reviews — they tend to trust the opinions of their fellow shoppers.”

A

Canadians, hands down, are the most tech-savvy of all six countries...“ ”

anthony Stokan, partner at anthony russell Inc., says people are not making drastic lifestyle changes to accommodate the eco movement

c o n S u m e r t r e n d S F le


obert Dutton is unusually ani-mated today. the president and ceo of rona inc. has been pumped, for sure,

by the energy surrounding his company’s first show in calgary. He holds up a newspaper insert that appeared in the calgary Herald a week before the arrival here of hundreds of dealers from across the country.

“Would you like to talk about my com-pany?” He smiles impishly and spreads his hands. “I mean, our company.” His passion for the company he has led since 1992 is deeply personal.

But Robert Dutton is somewhat agitated today. He is bothered, irked by the state of independent dealers in Canada. Never have they had more opportunities — or been faced with greater challenges. He believes RONA’s role is to offer support to maxi-mize those opportunities — and offer solid

succession strategies to ensure the continu-ity of the independents — something he believes other groups have failed at.

He searches for a word… “I am …” he glances to the others in the room, as though asking for help. “I am … scandalisé. The real issue is the issue of succession. What’s going to happen with that? Every week, dealers are looking for help in selling their business.”

His hands clench and he leans forward intently. His passion fills him with frustra-tion at the perceived lack of attention to this key issue: “The governance of the boards of all the co-ops and buying groups fail at succession planning — it’s a shame.”

He leans over again: “Yes,” he says, “you can write that.”

As companies like Walmart and Home Depot announce their intention to open

smaller stores, they pose, says Dutton, a “direct threat” to the lifeblood of the smaller independent. And he rails against what he claims is the lack of financial and planning strategies for independents. He questions competitors that buy up busi-nesses they are not familiar with. Instead, he says, they should focus directly on assist-ing their members to become stronger operationally.

He believes his company’s acquisition of Winnipeg-based hardware wholesaler TruServ Canada fits into a larger strat-egy to help independents. By adding dis-tribution in the West, RONA’s effective reach to smaller independents increases. But perhaps more importantly, TruServ’s True Value Hardware program offers an alternative to some dealers. True Value will represent, he says, a lower cost investment for those independents who don’t need the range of retail support and programs that full affiliates commit to.

The deal also satisfies Dutton’s number-one mandate, to grow and strengthen a Canadian company and ensure jobs and profits that stay in Canada.

“Even here in the West, where people may not always be sure of us because we are from Quebec, we tell them, ‘we speak French, but we are all Canadian.’ ”

In the evening, more than 2,000 RONA dealers, managers, and vendors are gathered in a banquet hall at the Calgary Stampede. Enthusiasm is mounting for the evening’s proceedings, which will pay tribute to 71 years of company history.

When Robert Dutton comes up, he talks about that 71-year history. He talks about the passion of the independents who built RONA. He shifts his speech between French and English, the latter, despite years of prac-tice, still not as smooth as his native tongue. Nevertheless, he manages to convey the passion of his message.

When he is finished, that passion earns him a standing ovation.

The governance of the boards of

all the co-ops and buying

groups fail at succession planning —

it’s a shame.

“

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executive break witH rona’S robert duttonBY Michael MclarneY

R

r o b e r t d u t t o n enDcap


advertiSerS: Second Quarter / 2011

in the next issue of hhiQ:

a d i n d e X

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castle Building centres OBCwww.castle.ca/vivalarevolution

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home hardware 27www.homehardware.ca

national hardware Show 30www.nationalhardwareshow.com/hd

nrha canada 47www.nrha.org

nrha convention 33www.2011nrhaconvention.com

orgill 45www.orgill.com

Philips 4www.philips.com

rona iBCwww.rona.ca

Sexton Group 37www.sextongroup.com

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Sylvania 29www.sylvaniaLeD.ca

techniseal 15www.techniseal.com

Orgill in Canada — how the giant hardware distributor is setting its sights north of the border.

PLus: expansion strategies for independents, dealers do social media, new product trends for 2011, strategies for managing your business better, and more!

hhiq 2q 2011

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