Ace Now Actually Owns a Member; Acquires Westlake Hardware
For years as the editor of Chain Store Guide’s Home Center Operators & Hardware Chains database files, I have received a consistent volume of inquiries regarding the makeup and nature of industry buying groups and cooperatives such as Ace Hardware, True Value and Do It Best. Most of these questions lead with assumptions. Rather than first asking about the functionality of these entities, many of the inquiring clients, students and retailing professionals begin their thoughts with the assumption that these co-ops own, or at least franchise, the thousands of retailers Chain Store Guide updates annually as member affiliates.
Some ask why these retailers are not a part of the Ace corporate listing. Others wonder why there is such a variance in their individual retailer company names, many excluding the Ace, True Value or Do It Best brand from within their company ID. Here again we have the assumption that these stores are owned and operated by Ace Hardware Corporation, etc. In fact, as signed up members of a co-op, retailers are free to change or relinquish their affiliations annually.
These member co-ops are a fundamental key to the success and even survival of most of the industry’s independents, local and regional chains. Cooperative buying services offer members the ability to purchase product through pool ordering systems which approach manufacturers and distributors with a purchasing power akin to major chains. Thus even small independent retailer members can compete with established chains in terms of consumer pricing.
At the same time co-ops offer members top quality private label products. These products offer members exclusives while allowing them to charge competitive prices at an enticing margin. Not to be forgotten are the merchandising services programs, promotions and training which members receive. Here a small independent member retailer can be promoted as part of a national ad campaign, with store merchandising props and services designed to give shoppers the feel of a national retailer without disrupting the local entrepreneurial spirit.
All this talk of member-retailer independence recently came under question as headlines exploded with the Ace corporate acquisition of its largest and perhaps its most prominent retailer-member, the 85 store Westlake Ace Hardware chain. After years of much misunderstanding as to the Ace (co-op store) Hardware model, were member stores company owned or franchised-neither!, Ace finally owned some stores.
Ace bought the 85 store Westlake chain from private equity firm Goldner Hawn Johnson and Morrison, which had owned Westlake since 2006. Upon announcing the purchase, Ace stated Westlake would be operating as a wholly owned subsidiary. Ace also announced it would be leaving Westlake management intact in order to maintain the admirable capabilities for which Westlake management was famous. Through the years Westlake executives had become desired speakers at symposiums and have reputations for cultivating excellent community relations and communications a key to successful store product placement.
To show how much the Ace corporate setup has been misunderstood, several sources commenting on the acquisition wrongly stated that the Westlake locations were indeed the first stores ever owned by Ace corporate. This is not exactly correct. Several years ago Ace opened and operated what ultimately became a company owned chain of twenty seven stores. These however were brought into being for the express purpose of operating as a living retail laboratory for Ace corporate.
The company which eagerly invests in research and development as can be seen with the careful planning and nurturing of their private label products lines (many of which are viewed in the premium category at international Ace-member locations). Ace began to invest and open these owned and operated laboratory-type locations to gain what the company viewed as invaluable data as to the needs, wants and shopping habits of both established and prospective customers.
To the average shopper these were simply fairly state of the art but normal Ace locations. However, to Ace this first round of actually owning and operating stores was a matter of topline research designed to ultimately improve all member’s store offerings to customers. Ultimately, after eight years the project was abandoned and the stores were sold. Ace corporate felt it had received considerable rewards in terms of data from its laboratory project. Upon the project’s demise, Ace used its close relationship with many long-term owner-members, including Westlake, to continue high level consumer research. The Ace Corporate store experiment began in 1998 with six locations and ended in 2004 as the final twenty three left Ace direct corporate responsibility.
The question must now be asked as to why Ace is suddenly or finally taking ownership of actual locations. The answer it appears is that the investors were looking to sell the chain. Ace saw no way of reversing this. Rather than risking the possibility of seeing its most prominent member sold and being moved to a competing co-op or having the parts sold separately and thus the whole being broken up, Ace decided this relatively small $85 million investment was difficult to pass up for the most prosperous of co-ops.
For years Westlake Ace Hardware has often been seen as one of the key members of the Ace Hardware family. Westlake’s reputation for customer and community relations has been virtually unsurpassed. This manifested itself not so much in terms of public relations splashes but in one-on-one relationships, in terms of seeking out what new products customers want and need. Customers in communities which were in close proximity were not assumed to be the same or be driven by the same motivations.
In an industry which is often thought to be old-world, Westlake was seen as undaunted by progress, always looking for new ways to please traditional customers while attracting new ones. A Chain Store Guide Insight posted in late 2011, focused on a clever Westlake promotion which was far from anything this industry has seen. At a time of the rising popularity of the zombie phenomenon, especially in popular media including video games, Westlake Ace decided to embark on a promotional campaign by setting up its own Zombie Preparedness Center.
Westlake hired local actors to humorously portray the strange beings in a series of fake news vignettes that would have done John Stewart proud. The buzz that was created was picked up by real local news affiliates and quickly went viral on YouTube. Westlake Hardware is a jewel that Ace, the king of co-ops, just couldn’t afford to lose.