K mart takes aggressive lead in hardware

Discount Store News, Dec 14, 1987

K mart Takes Aggressive Lead in Hardware

When it comes to making a purchase at K mart, Wal-Mart and Target, not many shoppers put hardware at the top of their list.

In fact, when shoppers were asked what they mainly spent their money on when they shop at these three retailers, hardware ranked rather low compared to other product categories, especially if customers bought apparel on the same trip, according to a survey conducted for DSN by Leo J. Shapiro and Associates, Chicago.

Out of 15 merchandise categories, only K mart's hardware department finished in the top half, the study found.

With gross margins in hardware of about 40 percent, these retailers, like other discounters, are losing out on some substantial sales, sacrificed to the higher-margin yield of soft lines.

For example, market research conducted by security products manufacturer, Schlage, San Francisco, found that discount stores have the same high traffic level of home centers, yet reap only 10 percent of the available hardware sales, vs. 40 percent at home centers and 30 percent at hardware stores.

Untapped Potential

It is an "untapped potential," observed Greg Markes, consumer electronics products manager for Schlage, but one he anticipates will not go unanswered for long.

A number of hardware manufacturers contacted by DSN, observed that all three discounters are getting much more aggressive in this area than in previous years, especially K mart.

And, K mart shoppers have noticed the change, ranking its hardware department sixth of 15 merchandise categories, behind apparel, housewares, health & beauty aids, garden supplies and automotives, the Shapiro study found. If shoppers went to K mart to buy apparel, however, only 3.4 percent bought hardware. But if they did not stop by specifically for apparel, hardware was purchased 7.6 percent of the time.

Hardware ranked eighth among Target shoppers as the product category in which they mainly spent their money during the past year, behind apparel, housewares, H&BA, auto supplies, stationery, toys and garden supplies. Six percent said they bought hardware if they didn't go to the store mainly for apparel, but bought hardware items only 1.7 percent of the time if they did go to Target for apparel.

Wal-Mart shoppers ranked hardware 10th, ahead of home soft goods like towels, linens and draperies, crafts, infant supplies, electronics and shoes. Only 4.6 percent of Wal-Mart shoppers bought hardware when in the store to make purchases other than apparel. If they went to Wal-Mart just to buy apparel, only 2.7 percent bought hardware.

K mart has been leading the other two chains in developing a stronger hardware presence through the development of its home care centers.

This department, developed four years ago with the assistance of K mart's Builders Square home improvement division, merged hardware, paint, electricals, plumbing and assorted hard lines products--including building materials--under one banner to help create a "destination department," explained Roy Jones, buyer in charge of home care center projects at K mart.

The department runs its own advertising circulars twice a month, on Sunday or Wednesday, plus ROP ads on alternate weeks from the circulars.

K mart is doing this not only to attract customers already in the stores, but also to draw new crowds. K mart has about 350 home care centers, 42 of which are "expanded" home care centers, the thrust of the company's expansion program in this category.

The expanded home care center features a wide assortment of home improvement products, about 1,200 stock keeping units, merchandised on 8-foot warehouse racks in 15,000 square feet of floor space. The department features some building materials, including dimensional lumber, an expanded line of kitchen cabinets and bathroom vanities, in addition to hardware, power tools, paint, electrical and plumbing products.

Stores converted to this program can expect to chart sales increases of between 25 percent and 30 percent, Jones said.

In 1988, K mart will add about 50 more of these departments, and Jones visualizes a time when home care centers are installed in about half the K mart stores. They won't ever be in all K mart stores because not every neighborhood is suitable for them, he said, noting that not everyone is a do-it-yourselfer.

In addition to the expanded home care centers, K mart has two other versions, the limited home care center which has no lumber, and the regular home care center which is smaller than the expanded department, featuring a merchandise assortment limited by available space.

These three versions of the home care center are proving to be testing grounds for new products that eventually appear on the shelves of its traditional hardware departments, Jones said. Such new additions have recently included portable electric generators, wood clamps and arc welders.

Although K mart is being the most aggressive of the three in hardware, both Wal-Mart and Target have been expanding their assortments, improving depth and upgrading their merchandise.