Upgraded TrueValue.com debuts this month

Home Channel News, Feb 21, 2000 by Monica Toriello

Site will offer 25,000 skus to e-shoppers by July

TruServ may lag behind its rivals in the Internet race. Do it Best's online hardware store opened in July 1999, and OurHouse.com, which is 20-percent owned by Ace Hardware, debuted five months later. But TruServ is vowing that when it launches its upgraded www.truevalue.com this month, it will immediately raise the bar on e-tailing in the field. Now all it needs to do is get its membership convinced.

Currently, TrueValue.com allows users to find a nearby store and, if that store has a "shop online" icon, purchase products from that store's Web site. But that will change soon. Eric Lane, TruServ's director of e-business, told NHCN that TrueValue.com would itself become an e-tailing site by the end of the month.

Initially, the site will offer 2,500 skus in hand and power tools. The sku count will be built up one department at a time, and by July there should be 25,000 skus available on the site. The co-op will handle all order fulfillment, whether the products are ordered directly from TrueValue.com or from the linked Web site of one of its dealer-members. The co-op's distribution center in Butler, Pa., has been reconfigured and equipped to handle "onesie-twosie orders' in the words of chief information officer Neil Hastie.

"We now have a designated section in the Butler DC -- a warehouse within a warehouse -- specifically for online orders," Hastie said. He said two other warehouses, one in the Midwest and another in the West, could be turned into Web fulfillment hubs in as little as 60 days if the sales volume through TrueValue.com so warrants. But TruServ isn't relying on its DCs alone. The co-op is forming e-commerce alliances with distributors such as bath products wholesaler Ferguson Enterprises and lock supplier Secure Rite to expand its distribution network. The partners' offerings could jack up the sku count at TrueValue.com to more than 100,000 skus by September.

"We plan to form many more alliances," Hastie said. "We're not by any means attempting to do this by ourselves."

A RESPONSE TO DEMAND

The business model for TrueValue.com is one that allows dealer-members to benefit from the site in a number of ways. Hastie explained that if a customer logs on to a dealer's Web site and orders something, then TruServ and the dealer split that sale evenly. Dealers will also profit from purchases made directly from TrueValue.com; the e-tailing entity will purchase inventory from TruServ at member cost, the same way an independent dealer would. Those monies then go into the rebate pool to be allocated to the membership. Dealers receive a share of the money in their patronage dividend, the co-op's term for its annual rebates to members.

TruServ rejected the common model of allocating sales commissions based on the customer's proximity to a local dealer. In that scenario, a New York City dealer would have received a percentage of the purchases of New York City residents within a certain zip code.

"It's unfair to do it by zip code," Lane said, "because we have members in very small markets. They don't have the population base to make such a commission meaningful to them," Leon Jamison, owner of Marble Falls True Value in Marble Falls, Texas, population 4,200, is one of those small-market dealers who are pleased with the plan.

"It's fairer to dealers like me who aren't located in big cities," Jamison said. "Besides, if you did it by zip code, it would be very difficult to determine who gets the commission if two retailers are in the same market. This way, everyone gets to share."

But not all the dealers are as enthusiastic in their support. One of the skeptics is Sam Costa, owner of single-unit Costa's True Value in Smethport, Pa, who is at best taking a wait-and-see attitude about TrueValue.com.

"We'll never see [the rebates] they're talking about," he predicted. "It'll be just another way for the co-op to explain why we didn't get any patronage dividend." But Costa doesn't just doubt the business model. He's not hot about his own store having an Internet presence at all.

"I'm in a town of 2,000 people," he said. "No one's going to look for me on the Internet to see if they can buy a box of screws from me." Costa said the $75 fee that TruServ charges to build a Web site and link it to TrueValue.com wouldn't be worth it. "I'm not sure I'd make that much profit in a year," he said.

Costa's opinion isn't unique. TruServ officials have stated previously, somewhat quixotically, that they expected all members to be Web-capable by mid-2000. As of late January, only about 800 dealers--less than one-tenth of the co-op's total membership -- had built their own Web site through TruServ's program, and only about 500 of those had online selling capabilities.

Other members aren't comfortable with the idea of their co-op pursuing sales on the Internet that could otherwise be transacted in their stores. "We emphasize to our membership that we are taking these steps because of consumer demand," Lane said. "Every week we get e-mail from customers who want to be able to buy products directly from the site. Some of our members inevitably fear cannibalization, but what they have to understand is that when it comes to the Internet, you'll be conspicuous by your absence. We need to be on the Internet."