Unlike those in Ace Hardware’s fold, however, DiB members tend to have and want to keep strong brand equity on their own, says Cyr. “Ace wants a consistent feel and touch to its members’stores,” he says, while DiB is less picky about such details. “Some guys don’t need the Ace sign to sell product.”
Despite an impressive record of at least 96 percent member retention (tracked by the number of new and expanded locations still in the fold after five years), Venhuizen admits that Ace isn’t for every dealer. “We try to blend the entrepreneurial spirit [of the independent dealer] and what consumers want out of a brand [like Ace],” he says. “If consumers want the red sign and you don’t, you’ll go to another co-op.”
In addition to branding policies, Ace, Do it Best, and True Value vary on LBM inventory: lumber and building materials account for at least 20 percent of DiB’s revenue, Ace tallies about 5 percent of its revenue from those categories, True Value none. “Others have gone in and out of LBM, but it’s always been a focal point of ours,” says DiB’s Heine.
Cyr says True Value’s growth strategy lies somewhere between those of its two bigger brothers, a less-focused tactic that might in part explain that co-op’s recent struggles; despite lifting a four-year moratorium on purchases of its stock in mid-2004, the Chicago-based entity abandoned Web sales to consumers and forced its CEO to resign that year. Through the first three quarters of 2005, revenue was flat.
However the top three and the dozens of smaller lumber and hardware co-ops below them choose to grow revenue, store locations, and market share, the value-added services they offer are increasingly attractive to pro dealers looking to hedge against a variety of market pressures and take advantage of new profit opportunities.
Value-Added Services As a member of the Lumbermens Merchandising Corp. (LMC) cooperative, GBS Lumber, a four-location, $50 million operation based in Greenville, S.C., enjoys several benefits that help the pro-focused dealer compete with chains and big boxes in the markets it serves.
But for Lou Hutchings, the dealer’s director of marketing, the biggest membership advantage beyond buying power for lumber and hardware (the latter through LMC’s distribution partnership with Memphis, Tenn.–based Orgill) is the opportunity to share experiences with similarly sized dealers from around the country. “LMC is a great source of other services, such as merchandising and back-office support, but the regional network setup with other members helps us at a grassroots level,” he says. “I didn’t realize how valuable that was until we joined.”
Among a variety of ideas and potential solutions for problems shared by most independent dealers and small chains in LMC’s non-competitive forums, which meet two to three times a year, Hutchings is considering creating a builder advisory group to help GBS Lumber connect with its core customers and better chart its future. “Discussing issues and solving problems [within the LMC network] adds strength to the programs we have.”
Though cooperatives often lead with their ability to deliver volume discounts and reliable distribution, the increasing breadth and sophistication of other member services is designed to attract a wider variety of members, including pro dealers. “Every member is different, there’s no typical profile,” says Heine. “We want to make sure members have the best chance to be profitable.”
To that end, Do it Best has devised a stable of kits and programs, including a Big Box Competition Kit (for members to plan for and manage through that instance), AdPack (a customizable shared-cost advertising program), and RetailSTART (a step-by-step strategy for starting or converting a store).
