How Ace Hardware Turned Corner Stores Into A $4.7 Billion Co-Op

By Clare O'Connor | HTTP://WWW.FORBES.COM/SITES/CLAREOCONNOR/2015/02/1 | Monday, March 02, 2015

When Jeremy Melnick's grandfather opened his first Ace Hardware store along Chicago's ritzy Gold Coast in 1950, there wasn't a whole lot of competition. Wal-Mart? An Arkansas five-and-dime. Lowe's was two stores in North Carolina. Home Depot was still 29 years away from opening its first location. Amazon CEO Jeff Bezos was 14 years shy of being born.

The Melnicks - Jeremy, 43, and dad Les, 67 - own six of the 4,794 Ace Hardware stores that make up the country's largest retail cooperative outside the grocery sector.

As they've expanded their family business-within-a-business into a local chain, some 20 Home Depots have cropped up along greater Chicago's highways and strip malls in the past two decades, each 100,000 square feet (versus the Melnicks' 8,000-square-foot corner stores). "They surround us," Jeremy says.

Not that he's complaining. Despite the competition, his business is good. Surprisingly good. And so is Ace Hardware's bottom line. The Oak Brook, Ill. co-op expects a year-on-year revenue increase of 13% to about $4.7 billion and a profit boost of 35% when it releases its 2014 annual report in April, following eight consecutive quarters of record sales.

The reason for success, explains Ace CEO John Venhuizen, a charismatic 44-year-old who speaks with the fervor of a preacher, is store owners like the Melnicks: entrepreneurs with a deep knowledge of their local market, inventory fine-tuned to a neighborhood's demographic and the sort of exacting customer service a typical big-box store with low pay and high employee turnover just can't match.

Jeremy knows the make and model of bathroom faucets installed in every condo complex and apartment building within a short drive of all his Chicago stores - a boon in attracting fellow small business owners, like local plumbers, to Ace.

"It's a big deal," says Venhuizen, a 22-year company veteran. "It's a differentiator. And I'll tell you, it's exceedingly hard." Jeremy knows his stores' strengths. He doesn't sell lumber. For that you can go to Home Depot or Lowe's. He does sell what seems like every kind of light bulb in production. When a bulb blows he knows you'd rather grab a new one from your local Ace than navigate the labyrinthine aisles of a big box or wait in the dark for an Amazon delivery. "If you want to remodel your house, you"ôll go to them," he says. "We're making our money $20, $25 at a time."

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Ace Hardware Corp.
2200 Kensington Ct.
Oak Brook, IL

Phone: (630)990-6900
Fax: (630)368-3394

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