Marketing and technology join forces - at Ace Hardware - Brief Article

Home Channel News, May 1, 2001 by John Caulfield

Recently, I was talking with Bill Moore, Ace Hardware's vp-advertising, about the nexus between technology and marketing, which the co-op is vigorously embracing through its Vision 21 "think retail" strategy (see page 1).

By getting more of its dealer-members to install the same merchandising programs and computers in their stores, Ace would be better able to gather data on product movement and consumer shopping habits that could be used for everything from developing new national TV commercials to deciding how many hammers a store in Des Moines, Iowa, should be stocking between the months of August and November.

The big change in the industry -- from, say, 15 years ago -- is that dealers seem to accept this premise as critical to putting their businesses on a somewhat more even keel with warehouse dealers whose own computerization has contributed significantly to their successes.

"Right now, we have 3,000 dealers with 3,000 separate operating systems," said Dave Hodnik, Ace's president. And at the buying group's spring convention in New Orleans last month, the busiest area by far was where dealers got details about Eagle Vision, Ace's computerized operating network that the co-op is urging its members to migrate their own systems into over the next 24 to 36 months.

One member told me that the cost for Eagle Vision to a dealer with one store would be around $16,000, one-fifth of which has to be paid upfront. The more complex a store's point-of-sale and back-office functions, the higher the cost.

During the industry's Paleolithic Age -- the 1980s -- many independent dealers would have squawked loudly at the thought of spending that kind of money on something as extravagant as in-store computerization. And the truth be told, Home Depot and Lowe's weren't much more sophisticated then, either. In its early years, Depot's store managers openly ignored as irrelevant or out-and-out wrong the inventory management data that the retailer sent regularly to the stores. Remember how many dealers were using their own internal bar codes and product IDs?

The industry moved into the 20th century when it accepted a common language for the transmission of data electronically, which remains one of the most important events in the history of retailing in this country to date. (It's worth noting that Ace Hardware and Newell reportedly spent more than $1 million to establish one of the industry's first full-blown EDI links in the industry.)

Only then did dealers, distributors and manufacturers begin to see the potential that technology held out for virtually all aspects of their operations. And only then did companies begin to gain access to ways to collect information about their customers that they could use to make decisions about what they sold, for how much, when and to whom.

With the Internet, the nexus between technology and marketing could take on a whole new dimension, especially as dealers use these data they gather to customize their marketing to specific consumer groups, based on those groups' preferences. That customization should also have a positive impact on inventory control and profitability, as dealers and suppliers rely less on looking in the rearview mirror of past sales to see what's ahead in terms of consumer buying patterns.

Now if the industry can only find something that can predict the weather.