New concepts paint prettier - and more profitable - picture

Home Channel News, Feb 21, 2000 by R. Michelle Breyer

Consolidated labels and departments are supported by national ad campaign

TruServ refuses to paint itself into a corner.

The co-op is building on its successful paint business by improving manufacturing efficiencies, launching an aggressive national advertising campaign and offering its members new products, innovative planograms, extensive training programs and never-tried-before promotions.

TruServ believes paint sales will further increase as ServiStar and Coast to Coast members switch to the True Value banner.

The co-op is using these weapons to help members capture a bigger chunk of the $17 billion paint market, which they compete for with national paint retailers like Benjamin Moore and Sherwin Williams, as well as the large home centers.

"Paint is extremely important to us," said Bob Simmons, vp-manufacturing for TruServ. "It's a dominant department, one of the highest-margin departments in the store."

Paint alone accounted for $150 million of TruServ's $4.5 billion in revenue last year, a figure that is expected to increase 13.3 percent to $170 million in 2000, Simmons said. That's not bad in an industry segment that is growing at only 3 percent a year, he added.

"If you're going to grow beyond that, you have to take business from somebody else," he said. "We're constantly updating our product line, our positioning and our advertising to increase market share."

Much of the category's growth will come through the co-op's Paint Shop program, a highly effective merchandising initiative. There are more than 900 stores with Paint Shops in them, and dealers that install the department are enjoying first-year sales gains that average 18 percent, or two to three times the typical store's total sales increase.

Paint Shop, one of several store-within-a-store concepts at TruServ (see story, page 39), was launched in 1994. The idea came out of discussions between members and staff about how to expand sales of paint and sundries. Everyone agreed at the time that the merchandising of these products was weak.

The solution was to devise a department that would display the paints and sundries attractively on the selling floor, creating a focal point for consumers. Stores with Paint Shops must set aside at least 188 linear feet, or 15 percent of their total selling space, for the specialty department.

"It was the first time we offered our members a complete merchandising program for a department," said David Patrici, assistant vice president of TruServ manufacturing sales and marketing.

To make it as easy as possible for its members, TruServ sends paint consultants to the stores to set up the Paint Shop with as little disruption as possible. The consultant does the layout and ordering and even provides a crew to remerchandise the store. TruServ expects an additional 200 to 250 stores to add Paint Shops in 2000.

DEALERS VOICE APPROVAL

Jody Kalbas, owner of Conrad True Value in Conrad, Mont., a former Coast to Coast dealer, spent about $20,000 to get his Paint Shop up and running. That cost included a new color-matching computer, an upgraded dispenser, a paint shaker and five-gallon cans. He said the expense was worth it.

Paint sales are up 20 percent since the store added the department. To make the Paint Shop more affordable for its members, TruServ allows all elements of a department to be financed through the co-op for three years, with no money down. TruServ also offers a 10 percent reimbursement credit based on the increase of all TruServ-manufactured purchases after the first 12 months.

"We put Paint Shops in two of our stores and saw an immediate spike in sales," said Jim Blair, co-owner of Blair's True Value Hardware in New Berlin, Wis., and a member of the co-op's Paint Advisory Council. "We've been experiencing tremendous growth every year since we put the Paint Shop in."

"The Paint Shop tells the customer, just by its presentation, that we're in the paint business and we're serious about it," Blair said.

For stores that haven't installed Paint Shops, True Value has introduced several new additions to a product line that already includes the popular E-Z Kare and WeatherAll premium paints. These range from the company's new Kid Play Colors to the new Prestige line (see below). Also introduced this year is TruServ's Wood Care Center, a store-within-a-store merchandising concept that focuses on the company's Woodsman wood-care products.

TruServ also believes it will gain substantial market share in the paint and sundries category by bringing all members under the True Value name.

Close to 95 percent of True Value members carry the True Value paint line, with 80 percent stocking nothing but that label. In contrast, only half of ServiStar's 3,500 members sold ServiStar paint, Simmons said. Most ServiStar members sold other brands like Benjamin Moore.

TruServ's proprietary brands have more marketing power, Patrici insisted. Its E-Z Kare premium line, for example, has twice received a No. 1 rating from Consumer Reports.

"It's much easier to talk someone into the True Value line of paint than the ServiStar line," conceded Gary Barrone, co-owner of Chalmette Hardware Home Center, a former ServiStar member in New Orleans. "ServiStar never had recognition as a paint leader."