Ace Hardware active in 68 countries worldwide

Australian Hardware Journal

Ace Hardware Corp., currently America’s second largest hardware wholesaler is firmly committed to global expansion. It recently displaced TruServ as the largest American wholesale firm.

Ace is showing its international commitment by having the largest backup staff (51 employees) of any US hardware wholesaler serving retailers in worldwide markets. Murray Armstrong, managing director, and Angel Garcia, director of international marketing and merchandising, are joined by two other key individuals – Dan Olsen, vice president of new business, and Rob Collins, who is in charge of international administration, operations and logistics. The division is headed by Paul Ingevaldson, vice president – international and information technology.

Ace continues actively expanding internationally and invited two representatives of a buying co-op from Poland to learn more about an Ace affiliation

Ace has actively served retailers in other countries since 1963 when it first signed up stores in Guam. It has six outlets there now. However it wasn’t until 1990 that the company made a major commitment to grow the international business. By 1992, Ingevaldson was named vice president of international and in 1994, an international board committee was established.

In 1996 Ace Canada opened and today is a major player in that market. An international representative became a full fledged board member in 1998 and in 2001, Armstrong was given the title of managing director of the international division.

International business today represents 4% of the company’s total sales, and Canada alone comprises 1.5% of sales. The company is serving retailers in 68 countries around the world, although 52% of its international business comes from Latin America. Over the years, Ace has learned that the product and program needs of its international retailers often will differ substantially from that of domestic Ace retailers.

It operates a freight forwarding and logistical operation in Miami to make it easier to consolidate shipments and lower costs for its international customers in Latin America and the Caribbean, and also consolidates freight for shipment from port cities Long Beach, CA, and Baltimore, Maryland.

Ace International customers

Usually, a store owner that becomes part of the Ace International family is a retailer running multiple stores, and the average store size is larger than that of the average domestic Ace member. In most cases, the international account is licensed to use the Ace name, programs, etc., and does not necessarily become a member of the co-op, as do domestic stores.

It signed licensing agreements in Indonesia in 1995, Philippines in 1996, Malaysia in 1997 and Taiwan in 1998. Singapore, Japan and Hong Kong signed up in 2000. It expected to sign an agreement in China in the first quarter of 2002.

These accounts have different product requirements and are already selling non-US products. In some cases, they are not experienced in importing but in other cases (usually the larger chains), they do have some importing experience.

Ace has learned that in most overseas markets, there is a preference of European styling. Plumbing and electrical codes are different, of course, and there are local country standards, different sizes and languages to deal with. In addition, many of these stores are strong in non-traditional categories – in some respects almost being general stores rather than pure hardware stores.

Top 10 markets

Ace International’s biggest markets in which it operates (in order) are: Puerto Rico; Saudi Arabia; Guam; Ecuador; Spain; Chile; Guatemala; Netherland Antilles, American Samoa and Costa Rica. Ace has also recently taken some key retailers on buying trips to European and Asian sources, one result being an arrangement with Lux, the big German tool marketing firm.

Its marketing managers visit with Ace International customers at its twice-yearly buying markets to understand their needs, as well as at industry events like the Hardware Show and Housewares Shows in Chicago. Members of the international sales team also visit existing Ace dealers as well as continually prospect for new ones.

Ace wants its retailers to be successful in their local marketplaces so its marketing department provides special circulars for grand openings and helps retailers devise a strategy for their local markets which is then reflected in the special circulars developed for each retailer. The buying staff works on export programs, everyday drop shipments and show specials and aggressively seeks opportunistic buys.

Future expectations

Will Ace set up an international cooperative? No decision has been reached, but certainly there are some acquisition targets among the smaller international hardware cooperatives that do exist. Also, it might be possible for Ace to become a significant factor in the European market, perhaps by establishing strategic buying alliances. Ace International, now doing $100 million in sales, expects to double those figures by 2005.

Trouble at TruServ

Meanwhile TruServ’s battle to survive continues. Recently the company has been beset by a host of financial problems, sustaining large losses and facing the possibility of defaulting on some debt.

The last problem was averted when its lenders extended the maturity of the co-ops $200 million of revolving credit, but one of the terms of the extension is that five outside drectors will now serve alongside five member-dealers and the form’s CEO, Pamela Forbes Lieberman.

The financial problems of the company have resulted in a large number of dealer defections to Do It Best Corp, and Ace Hardware. While the numbers may not be significant in total (TruServe still has thousands of member-dealers), what is significant is that many of those defecting are high-volume retailers whose volume would hurt the company’s plans to grow.

Most recently, TruServ reported net earnings for the quarter ended March 30, 2002 of $4.6 million, an $18.5 million inprovement compared with a loss of $13.9 million for the same period a year ago.