Big three discounters each take a different hardware tack - Wal-Mart, K Mart and Target - Discount Industry Annual Report, part 2

Discount Store News, July 20, 1992

Discounting's Big Three chains are taking widely divergent paths in hardware/home improvement merchandising.

The biggest hardware development in discounting to look for in 1992 will be Wal-Mart's continued introduction of a complete line of private label hardware marketed under the name Popular Mechanics.

Under an exclusive licensing agreement with Popular Mechanics, a Hearst magazine that is a bible to serious home and auto repair buffs, Wal-Mart will introduce over a two-year span hundreds of skus, including: mechanics hand tools, tool boxes, vices, hammers, work belts, aprons, nails, nuts, bolts, extension cords, small electrical supplies such as switches receptacles and wall plates, and plumbing supplies such as toilet balances and faucet repair parts.

The licensed line replaces an abortive attempt to develop a new private label brand name from scratch, called Promark. The Promark name appeared on a short-lived line on 11 skus of mechanic hand tools, including wrenches and screwdrivers.

Wal-Mart is shipping Popular Mechanics handtools as the discontinued Promart items sell through.

The Popular Mechanics line comes with two built-in advantages: a name well-known among the 1.6 million subscribers to the 90-year-old magazine and a testing program.

To protect its image, Popular Mechanics is requiring Wal-Mart to submit for testing every hardware item that will carry its name.

The first items submitted for testing by the magazine's independent laboratory were mechanics hand tools. They were tested against Sear's Craftsman private label line and performed as well. Other hardware items, such as toilet repair parts, performed properly for their intended use, although no nationally known brands were available for direct comparison.

As do Craftsman tools, Wal-Mart's Popular Mechanics tools carry a life-time guarantee, but cost about half as much.

To make sure its customers get the point, Wal-Mart began carrying the Popular Mechanics magazine this spring at about a 20% discount from its $1.95 price.

At least now, the Popular Mechanics line won't include either paint or power tools. In paint, Wal-Mart has switched to brand names, such as Glidden in about half its stores and Dutch Boy Kem-Tone in the other half.

As a control, however, it continues to carry its Wal-Mart brand private label paint in about 200 stores.

Rather than take as profits the higher margins from its expanding offerings of private labels goods, Wal-Mart will use them to subsidize the prices of nationally branded goods, further enhancing its image as the lowest priced merchandiser of national brands, one analyst predicts.

Kmart also has made a major decision in the hardware and home repair products arena: shutting its 327 in-store Home Centers when it remodeled or relocated existing stores.

In a corporate policy decision, the space once developed to home center merchandise, such as storm doors and insulation, was given to other departments.

The stores that had home centers lost 40% to 60% of the space devoted to hardware and home repair lines, but the space that was devoted to hardware remained unchanged for the other remodeled units.

But chainwide, Kmart pared down its assortment of slower-moving skus in hardware, which enjoys at best only 2.6 turns in the discount store industry, and got out of some fringe lines of hardware.

Kmart also totally redid its paint program, eliminating private label paint and switching to all national brands. It now calls its paint department, "America's Paint Store."

In a major vendor consolidation Kmart gave all its lighting business to Catalina since last year, whereas it previously sourced from five vendors.

Taking up the home center slack, Builders Square introduced earlier this month a new 125,500-sq.-ft. prototype named Builders Square II in the Sawgrass Mills off-price outlet mall in Sunrise, Fla. The new prototype also houses the Idea Center, an upgraded version of its Decor Center.

Target, in contrast, in its Greatland concept store continues to trim its hardware selection to the base essentials necessary for the simplest of home repair projects. In a Greatland, shoppers are apt to miss the hardware department completely if they blink when strolling past.

Most discounters are taking the Target tack of paring hardware offerings so they can devote additional space to fashion apparel and home goods.

Hardware(1)

$13.6 Billion

Full-Line Discounters   $3.8B
Catalog Showrooms       $0.1B
Membership Warehouse    $1.4B
Specialty Discounters   $8.3B(2)

Full-Line Discount

Store Productivity

Sales                   $3.8B
Sales Per Store        $475,000
Dept. Size           3,000 Sq. Ft.
Sales Per Sq. Ft.      $158.33
Turns                     2.6
Initial Markup           35.2%
Gross Margin             27.8%

(1) Hardware includes paints, tools, and home improvement (2) Includes home center warehouses and other home Improvement discounters Source: DSN research