June 16, 2010
There’s an old saying in sports: “They don’t ask, ‘How?’ They ask, ‘How many?’
But sports are simple, and retail is complicated—especially the brand of retail practiced in the co-op model, where individual store owners make individual decisions. So when Ace Hardware Corp. won its fourth straight customer service award, it became an important business matter to ask: “How did they do it?”
Home Channel News took the question directly to John Venhuizen, VP retail and business development for Oak Brook, Ill.-based Ace Hardware. As you might expect, there’s no simple answer. “I think it’s a long, consistent road of pounding the same drum,” he told HCN.
A word about the award: The J.D. Power and Associates 2010 Home Improvement Retail Store Satisfaction Study ranked Ace Hardware the “Highest in Customer Satisfaction among Major Home Improvement Retail Stores” for the fourth consecutive year. The rankings are based on responses from more than 6,400 consumers who made home improvement purchases in the previous 12 months. Ace Hardware ranked highest among major retailers with an overall satisfaction index score of 791 on a 1,000-point scale.
The awards are nice, according to Venhuizen. But the company understands that the game is far from over, and competition renews every day. He pointed to the co-op’s emphasis on four customer service keys. They are: balancing the assortment, managing the inventory, improving the customer experience and promoting value.
“We make a promise to our consumers that we’re helpful—that’s our brand promise,” Venhuizen said. “Well, it’s the associates, those 70,000 folks working the stores, who fulfill that promise. And when they know the needle-moving metrics of the store, it helps.”
Among those retailers that have taken advantage of Ace programs is three-store Mitchell Hardware of Tacoma, Wash.
“I think, for our company, what helps is we try to follow Ace’s way of retailing,” said Dale Murphy, regional manager for Mitchell. “They’re the ones who have been doing the research and doing the homework. They have positive, successful programs in place.”
Labor force optimization is a prime example. Ace worked with outside consultants who turned to some of the same ideas behind Toyota Lean Manufacturing to reduce the time it takes to do many of the tasks that eat up a hardware store employee’s time away from the customer—for instance, dealing with incoming freight.
“When the truck does come in and they unload it in the receiving area, we take the time to stage it where you’re loading totes specific to aisles, which really, really helps,” Murphy said. Now, totes are organized to a specific aisle, instead of a single tote traveling around the whole store, cutting time in half, she said.
Mitchell Hardware is also a big believer in greeting customers as they enter. The term the stores used for this key frontline position is “quarterback.”
“The communications are key,” Murphy said. “[The employee] greets our customers, sends them to an aisle, gets on the radio and says, ‘I have a customer heading down to plumbing aisle 25 who needs filters.’”
It’s part of retailing basics, she said—giving the customer the best service, with the right product at the right price. “It’s just a relief for our customers to go in, get exactly what they need and go home and know that they fixed it—whatever it is,” she said.
By hitting those notes repeatedly, Ace’s Venhuizen believes the reputation for service and the kind of recognition they consistently receive from J.D. Power will follow. “When your brand is all about helpfulness and customer service, to be acknowledged for that is both flattering and very encouraging,” he said. “I know our stores have earned it, and they take a lot of pride in that.”
THE FOUR KEYS TO ALL-STAR PERFORMANCE
There are many roads to all-star customer service. Here are four points of emphasis in the Ace Hardware Corp. playbook, according to John Venhuizen, VP retail and business development.
Balancing the assortment
Developing an assortment that is both big enough to complete the project and small enough to fit in a convenient hardware store format has been a major strategy for headquarters. “We have spent a lot of time over the last several years studying this and making sure that we have a credible assortment, but not a redundant assortment” Venhuizen said. “It can’t be confusing to the customer, and it has to be productive for the store.”
By credible, Venhuizen means a balanced assortment and store layout that allows for convenience and reflects the way the customer thinks and shops.
The co-op points to success with a loan program introduced at its Spring Market, through which dealers can monetize their stock in the co-op in order to move forward with a store layout and assortment upgrade. About 220 stores have signed up. “It’s been really good. We’ll continue to pound that drum,” he said.
Service means a lot of things. At its most basic retail level, it means having items on the shelves.
“We always tell our stores, ‘You can have the best customer service in the world, but if the customer comes in for their widget and you’re out of stock, you not only have no chance of winning them over with customer service, but you’ve also just exposed your price strategy, because they’re going to go somewhere else to shop.’”
Basic management principles are at work here, starting with the need to measure performance.
The co-op is working to improve members’ Inventory Record Accuracy—or IRA—and has seen a 13% improvement across participating stores, Venhuizen said. Also at work is an effort to measure and improve in-stock performance. The working goal is to experience less than 25 out-of-stocks per 1,000 sq. ft. of selling space. Stores participating here have seen reductions in outs to the tune of 45%, he said.
“Customers expect our stores to have that hard-to-find item and our stores need to stock it, so this is a very important initiative for us,” he said.
Improving customer experience
Within this core area, Ace has emphasized an effort first to take care of business behind the scenes. “All those non-consumer-facing tasks that have to be done in a hardware store, we just want them to be done very efficiently,” he said. With learnings borrowed from Toyota Lean Manufacturing, Ace stores are instructed on how to perform store tasks in less time, for instance: sort-segregation of incoming freight. Being efficient away from customers allows more time in front of them, but that’s just the beginning, he said.
“Being helpful is far more than just being friendly,” he said. “We work with our stores on leveraging their own entrepreneurial and independent flair within their local market, but also putting some systemization to the customer experience.” Ace has a phrase for this; it’s called “operationalize helpful.” And it involves understanding the metrics that matter most. Among them are “units per transaction,” and conversion rate.
That last one is particularly important in a tough economy.
“You work your butt off to get traffic into the store; the last thing you need is to have folks leave without purchasing anything,” he said. “And a lot of that depends on customer experience.”
Another phrase with new and significant meaning at Ace Hardware is “Get credit for value.” It’s an overall retail pricing initiative that communicates the co-op’s opportunities to compete on price and incorporates Ace’s 10,000 or so private-label SKUs. “Almost all of them are a value in comparison to the national brand,” he said. “Communicating that to the consumer is a great way, in this economy, to show that there is value in a hardware store.”
Another way to get credit for value is through discounts for multiple-item purchases and everyday low prices on the 100 or so items that are known as “key value items,” thus giving the customer a better shopping experience in the store.
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