Sales of hardware edge up 2.9% for 1987 - discount store sales - Annual Industry Report, part 2

Discount Store News, July 18, 1988

Sales of Hardware Edge Up 2.9% for 1987

Hardware sales rose modestly in 1987, reflecting the spotty success discounters were reporting all last year with the category.

Sales of hardware products rose a mere 2.9 percent in 1987, to $7 billion. Almost all of it, $6.9 billion, was rung up by full-line discount department stores. Only $100 million of the total was associated with catalogers.

The 2.9 percent increase in the hardware category was among the smallest gains of the 13 merchandise categories surveyed by DSN. Hardware products also produced the third-lowest turn rate among the other merchandise categories, 2.5 turns, the same as in 1986.

In addition, statistics on sales per square foot, gross margin and initial markup all declined between 1986 and 1987, reflecting the difficulty discounters are having with the category.

Sales per square foot fell 54 cents in 1987, to $187.16. Gross margins on hardware items dropped from 32.7 percent in 1986 to 32.4 percent in 1987. Initial markups declined to 41.6 percent from 41.8 percent in the year-earlier survey.

Despite all this, full-line discount stores collected a total of $842,200 per store in hardware sales, the fourth-largest sales department in the stores. That total was up 2 percent, or $16,300 per store from 1986. The actual size of the hardware department increased 100 square feet between 1986 and 1987, to 4,500 square feet.

Much of the sales and department size growth can be attributed to line extensions in a number of popular categories. Among them were home security items, basic hardware, cordless tools and assorted rechargeable items, and lawn and garden products, now the driving forces in the department.

Expanding the Selections

Throughout the year, discounters like K mart, Bradlees, Gold Circle and Quality Farm & Fleet, among others, reported they were expanding their selections in these key categories to both build and in some cases revive the hardware business in their stores.

In fact, Quality Farm & Fleet has decided to expand its entire hardware/home improvement department to tap the growing do-it-yourself business. In 1987, Quality began focusing attention on serving the "hot" kitchen and bathroom remodeling sector by offering products in these categories. "It's what customers are looking at," according to Cliff Cook, merchandise manager for Quality.

Quality also looked at adding water filtration systems and other more traditional home center merchandise lines to its hardware department mix.

K mart, too, has expanded its selection of basic hardware and home improvement products, particularly in its 350 home care center departments, which feature greatly expanded hardware selections.

This year K mart plans to add another 50 home care centers for a total of 400 outlets. Roy Jones, buyer in charge of home care center projects, eventually sees a time when home care centers will be in half of K mart's stores.

The home care centers--15,000-square-foot departments containing about 1,200 sku's in the expanded format--were developed for K mart with the assistance of its home improvement division, Builders Square. They were designed to be a "destination department," Jones said.

K mart maintains two formats for the home care centers. The "expanded" version constitutes the thrust of the company's expansion program in this area.

This department features some building materials including dimensional lumber, an expanded line of kitchen cabinets and bathroom vanities, hardware, power tools, paint, electrical and plumbing products.

Many discounters are also tallying some significant sales gains with a somewhat new category of hardware items: tools and accessories in powder blue and pink that are marketed directly to women.

A number of manufacturers began producing such traditional hardware items as tool boxes and screwdrivers in these fashion colors as a way to enlarge the DIY population and generate sales. Companies such as Akro Mills, for example, touched off a series of new business opportunities for retailers when it introduced its Ms. Fixit line of pink and blue tool boxes. Other manufacturers quickly followed and new product introductions have been continuing.

Many more products aimed at developing a strong female DIY customer base will also come from redesigned tools more suited to women's hands and weight considerations.

The hardware category, perhaps more than many others, enjoyed a year full of new product introductions. The new products primarily came in the home security area.

Among the new products Gold Circle recently added, for example, are four sku's in Stanley LightMaker controls and a "911 locator," a flashing light for houses that helps emergency vehicles find the correct location.

Quality Farm & Fleet added an expanded selection of door locks, a natural gas and propane detector and a radon detector.

Other recent new product introductions in the home security area include Keepsafer Compact and Key `n' Keyless by Schlage. In the cordless tools category, two recent introductions include Black Decker's cordless power ratchet kit--slated for formal introduction at the August Hardware Show in Chicago--and Dremel's Freewheeler, a multipurpose cordless tool that can cut, grind, sand, saw and drill.