Hardware Retailing

SEP 2017

Hardware Retailing magazine is the pre-eminent how-to management magazine for small business owners and managers in the home improvement retailing industry.

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HARDWARE RETAILING | September 2017 56 The Challenge One look at NRHA's Cost of Doing Business Study last year told Adam Barden he had work to do. "We knew from looking at that study that our gross margins were below where they really should be for our type of store," says Barden, who owns Vassar True Value Hardware, with two locations in Vassar and Frankenmuth, Michigan. "At that point, we set some very specific goals about where we wanted those numbers to be and then talked about the different ways we could get there." His two stores have quite a bit in common. Both are in rural markets, with each home to about 3,000 people. Both markets include independent stores as competitors, and both are about 30 minutes from the big boxes. Both also see a customer mix of about 70 percent DIYers and 30 percent contractor and industrial business. In both stores, lawn and garden is the top-selling department, and paint is second. Even with the commonalities, Barden had his work cut out for him. He quickly determined that a thorough review of pricing in both stores would provide the biggest impact and the fastest way to see some movement in gross margin numbers. Improve Gross Margin Pointers for Success Look Past Pricing Misconceptions "For a long time, we thought we had to be the best price on every single item in our store," Barden says. "You really can't do that, because then your margins erode to the point that you can't operate your business. You need to find areas to be competitive and others where people are willing to pay more for a convenience or a service that's being provided." 1 Change Prices As Often As Necessary Barden says the new pricing profile is constantly being tweaked. "You can't just set a plan and say, 'OK, that's it,'" he says. "You have to stay on top of things; you have to keep up with your plan, or your margins will erode over time. We do price changes every single week now." 2 Know Your Competitors Going forward, Barden plans to develop a process to make himself and his team a little smarter about how to shop competitively and how to set prices relative to his stores' local competitors. "Right now, we check prices on high-velocity items, but we don't check as many of the slower-moving items," he says. "My plan is to develop a process to check every month on slower-moving items so we can get a competitive environment around those as well. We want to make money, but we don't want our customer to come in and have an experience that, pricingwise, is way out of line." 3 Adam Barden (left) does pricing changes as often as necessary, even if it's every week for some items. Numbers to Watch Gross Margin

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