Study: hardware holds untapped potential - discount store sales

Discount Store News, August 7, 1989

Study: Hardware Holds Untapped Potential

Nationwide DSN Report

A consumer study of 15 departments of a discount store showed that hardware offers some surprising growth potential if discounters invest in improving the depth and quality of their assortments.

The study reveals that the spending inclination of consumers on hardware supplies is relatively high compared to other merchandise categories, but discount store customers do not view the current offerings at discount department stores as being competitive with other retailers that sell the same products.

Hardware falls into a group of merchandise categories, along with women's clothes, and auto supplies and accessories, that the survey identifies as having moderate growth potential. These departments trail high growth potential categories, like toys, houseware, H&BA and stationery.

But hardware appears to be a better candidate for growth than "mature" departments like sporting goods, electronics, cameras and accessories, and men's clothes, where there was no inclination among customers to increase spending and a high tendency for customers to shift spending to other types of retailers.

The study, based on telephone interviews with 900 households across the nation, found that 58 percent of consumers who purchased some hardware supplies in the past year bought at least some of their hardware at a discount department store.

That's not bad compared to the other departments. For example, only 40 percent of consumer electronics purchasers and 39 percent of men's apparel buyers used a discount department store for some of their purchases. The average percentage of discount shoppers for all 15 departments in the survey was 57 percent.

However, the study shows that discounters need to entice those customers who are buying hardware to spend more money at their stores.

Last year, only 15 percent of the dollars spent on hardware by discount store customers was spent at a discount store. That figure ranked ninth of the 15 departments studied. By comparison, discount stores garnered over 40 percent of the total dollars spent by shoppers who bought toys and housewares.

Consumers were also asked whether they expected to buy more or less products from each of the 15 departments in the survey. Hardware, with 22 percent of respondents expecting to spend more at a discount department store, showed a relatively strong potential for sales growth. However, discounters will have a tough time cultivating that potential if they don't change consumers' views of their hardware departments.

Asked to grade each department based on their experience in purchasing merchandise at discount stores and other types of retailers, consumers gave discounters' hardware departments a mediocre score of 6.15 on a scale of 1 to 9, with 9 meaning it's the "best" place to make their purchase. Of the 15 departments, hardware ranked 10th in this measure of competitiveness. In all, 15 percent of hardware purchasers said the discount store's hardware department was the "best" place to shop for hardware supplies.

Regionally, discount stores in the Midwest attracted the highest percentage of hardware shoppers. Nearly 70 percent of hardware purchasers who live in the Midwest bought some supplies at a discount store, compared to 58 percent in the South, 53 percent in the East and only 47 percent in the West.

The survey, conducted by Leo J. Shapiro & Associates, Chicago, also found that Midwest shoppers spent a higher percentage of their hardware dollars at discount stores. An average of 22 percent of their hardware purchases was made at discount stores. Shoppers in the South spent 17 percent of their hardware dollars at discount stores; in the West, 12 percent; and in the East, 10 percent.

When asked what discount stores could do to spur them to spend more money at that type of store, hardware customers listed "lower prices" "better quality," and "better variety" equally as the three major changes they would like to see.

Discount store hardware customers tend to be slightly younger and a bit more affluent than the overall survey respondents. They have a mean age of 39.1 years and a mean annual household income of $34,100. As could be expected, a high percentage of discount store hardware customers are male, 59.1 percent, higher than any other department in the store.

By comparing the demographic characteristics of hardware customers who expect to buy more from a discount store next year to those who plan to spend the same or less, it appears the prime prospects are younger, make less money, have more kids, tend to be white collar workers, and are more apt to be female than the ones who are not inclined to spend more.

Those inclined to increase spending average 36.5 years of age, compared to 40.7 years for the other group. Their average annual household income is $32,700 nearly $2,000 less than the average of those who don't expect to increase their spending in discount stores. Thirty-four and a half percent of the inclined to buy group have children, vs. 29.3 percent of those not inclined to buy; and 62.7 percent of the chief breadwinners of the buying group are white collar workers vs. 53.5 percent of the non-buyers.