USA update
Private equity owns True Value
True Value strikes a deal with private equity
True Value strikes a deal with private equity
 
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Lowe's needs a new CEO and Home Depot partners with Pinterest on a shopping tool
HNN Sources
True Value to enter the deal with ACON Investments; Lowe's CEO Robert Niblock will retire as soon as the company finds a successor; Home Depot and Pinterest expand "Shop the Look" feature with over 100,000 decor products; Lowe's has a new artificial reality feature in its mobile phone app; and a female-led paint company is taking it up to the corporate players in terms of environmentally-safe products.
True Value moves out of retail co-op model

A private equity firm has taken a majority stake in True Value that will shift the hardware retailer away from its co-operative roots that dates back to1948.

Eighty-five per cent of True Value members voted to pass the deal, which will turn over 70% equity of the Chicago-based retailer to ACON Investments. Current members will keep the remaining 30% equity, as well as receive a USD196 million cash payout.

About USD229 million of ACON's funds will be used to return 70% of retailers' capital, promissory notes and dividends. In an interview, True Value president and CEO John Hartmann Hartmann said the returned money would give store operators more financial flexibility.
The concept of a co-op, which I'm very respectful of even though I've asked shareholders to move away from that, is that individuals came together as a group to do things they couldn't do on their own. The unfortunate thing is it traps their investment, their equity, in the company.

The retailers who retain a stake in the new True Value can use the returned funds to invest in their business or use as they see fit. Mr Hatmann said:
Our independent retailers operate in a very competitive space, so freeing up this capital is a really big deal. It allows them to reinvest in their stores, modernise their stores and invest in new stores.

The retailer's day-to-day operations at existing stores will not change, at least for now. Members will continue to receive True Value merchandising and marketing support. In the future, a minimum-purchase threshold will entitle retailers to use the True Value brand in the store and in local media, as well as participation in the True Value e-commerce ship to store program. Mr Hartmann said:
The partnership also will let True Value broaden its brand's reach by eliminating the requirement that anyone selling True Value products purchase stock. The company is now free to sell to anyone who wants to buy from us.

Mr Hartmann acknowledges that members "have weathered some significant intrusions from very able competitors" including big box home improvement stores like Home Depot and Lowe's. He also concedes the company is "not 100-percent insulated from Amazon". But he remains optimistic that True Value has carved out a solid niche.
Our stores are community-based, very convenient, small retail. A drone can't get you a hammer any faster than you can get it from your local True Value, and it can't mix your paint, either.

ACON's investment was particularly attractive, Mr Hartmann said, because the firm already has investments in wholesale, retail and manufacturing - all three of which are part of True Value's business. In addition to its retail locations and wholesale distribution arm, the company also operates a manufacturing facility for its branded paint. In a prepared statement, Aron Schwartz, managing partner of ACON said:
True Value is an iconic brand and one that we have long admired. We believe that independent hardware retailers are an essential part of our society, providing consumers and communities with unrivalled service and expertise. We share True Value's passion for helping to ensure that the independent hardware retailer thrives for decades to come, even as times change and the competition gets tougher.

True Value currently has about 4,400 independent retailers worldwide and revenue of USD1.5 billion in 2017. It operates under the store identities of True Value, True Value Rental, Grand Rental Station, Taylor Rental, Home & Garden Showplace and Induserve Supply.
Lowe's CEO stepping down, investors happy

Robert Niblock is stepping down as chief executive of Lowe's Home Improvement, and according to a report in Bloomberg, investors are hoping a new leader can bring the mojo back to a chain that has spent years in the shadow of rival Home Depot. Seema Shah, an analyst at Bloomberg Intelligence, said:
The market is likely excited for new leadership. It is hoping for a leader who can better capitalise on the macro tailwinds and drive improved bottom-line performance.

Lowe's same-store sales growth has trailed Home Depot's for many years, weighed down by a focus on DIY customers compared to Home Depot's core customer base of professional contractors who buy more bigger ticket items.

In the most recent (fourth) quarter, same-store sales grew by 4.1% at Lowe's, while Home Depot reported an increase of 7.5%.

While both Home Depot and Lowe's have benefited enormously from the home improvement boom caused by increasing home values and the ageing housing stock in the United States, Lowe's has not been as adept at capitalising on that. Home Depot has also achieved better sales performances, thanks to better store locations because they are located in more lucrative areas than Lowe's. In addition, its earlier investments in e-commerce and more responsiveness to changing market trends through product assortment, has helped place Home Depot in a leading position.

And Home Depot is not ready to cede any of its leadership. In addition to an aggressive move into appliances, an area where Lowe's leads it, Home Depot is roughly doubling its capital spending in the next three fiscal years to some USD11.1 billion on store remodelling and new technology to make store workers more productive and deepen their interaction with customers. (Last year, Home Depot's online sales rose 21.5%.) Mr Niblock said in December that Lowe's will increase its own capital spending to USD3.6 billion from 2017 to 2019.
Strategy for improvement

Lowe's executives have announced plans to get profits back on track through initiatives aimed at improving the in-store shopping experience. They also want to bring in more exclusive product partnerships like the one it announced with paint giant Sherwin Williams.

The company has also reinvested in its workforce to increase motivation and performance; it has announced bigger bonuses as well as higher benefits packages for its employees. At the same time, Lowe's is expanding its supply chain by launching its first ever direct-to-customer fulfillment centre in Nashville.

The home improvement retailer is expecting a growth in revenues of about 4% and same-store sales are expected to increase by 3.5% this year. Additionally, Lowe's is expected to build another 10 stores in the US in 2018.
Home Depot expands decor strategy with Pinterest

The Home Depot is doubling down on its interior home decor push, broadening its partnership with image bookmarking site Pinterest.

The home improvement retailer said the partnership will "dramatically expand" Pinterest's visual discovery feature called Shop the Look, to include more than 100,000 new shoppable home decor products. That includes vanities, faucets, lighting, textiles, tabletop and interior decor, according to a press release.

Shop the Look is meant to simplify the way Pinterest users can search and buy similar products to the ones featured in Pins.

In an article in AdWeek, Melanie Babcock, senior director of agile marketing and social media at Home Depot, explains:
In the past, a user would go to Pinterest, find a room scene they liked and see an item they really liked ... but now what? In order to find that item, they would have to go to another website and make a search describing it.
On Pinterest with Shop the Look, they're taking all that extra work out. Customers can roll over hot spots and see an assortment ... hopefully, an exact match and others like it appear in the customer experience.

Home Depot is now working with Pinterest to identify products in Pins whether they're from Home Depot or not to help that customer experience go from inspiration to discovery to sale in one experience, Ms Babcock added.

Ms Babcock said that Pinterest is ideal for Home Depot because "it's a great place" for people to start home improvement projects "in a safe way".
Home Depot has expanded our offering to consumers from traditional do-it-yourself to the home decor business. For us, our strategy with Pinterest was originally around an introduction to do-it-yourself projects and has evolved to drive awareness around soft goods...
I have been Pinterest's No. 1 advocate at Home Depot for a number of years. Shop the Look is the first time we're able, as a retailer, to see the direct relationship between Pinterest and how it meets customers' need [for] discovery, which is why we're doubling down on multiple versions of types of ads and experiments with components.

Pinterest debuted Shop the Look in February 2017; the feature combines computer vision and human curation to make recommendations. At the time, Pinterest said visual search was one of its most-used features, with hundreds of millions of searches every month.
Video campaign

Home Depot launched a video campaign on Pinterest in earlier this called "Built in Pins" that demonstrates the work for home improvement projects inside a pinned video. The Pins feature how-to guides and tip-sheets for the projects and are fully shoppable. Ms Babcock explains::
Sometimes, when you're a big company and have a campaign or message you want to send, you tend to create a creative strategy that is generic across multiple channels. In this case, we knew customers are going to Pinterest to seek out help around home decor and redoing rooms, and we wanted to build a strategy for the actual pins.

Home Depot said the partnership expansion with Pinterest complements its growing online catalogue of home and interior decor products. Most notably, it fits with the company's acquisition in December 2017 of home decor online retailer The Company Store from Hanover Direct.

Last July, Home Depot also joined online startup Laurel & Wolf, which describes itself as a "digital decorating platform," to provide customers with a professional designer.
Lowe's using AR for faster buying decisions

Home improvement retailer Lowe's has partnered with Google to launch an augmented reality (AR) enabled feature showcasing the latest spring collection on its mobile app.

The new "View in Your Space" mobile tool allows Android users with ARCore-enabled devices to place lifelike, size-accurate items from Lowe's spring catalogue into their outdoor spaces, according to the company's website. They select certain products in their homes prior to making a purchase.

Lowe's research reveals consumers often take weeks when considering big-ticket items such as patio furniture and bbq setups, culminated in the "stalling out" of more than USD70 billion in home improvement projects. The goal for Lowe's mobile augmented reality is to close this gap.

Typically that lag in purchase is due to ensuring the potential product will fit and look appropriate in the home or yard space. The AR capability eliminates any concern about how the items will look once in place as it lets consumers embed products into a scanned image of the space.

Gihad Jawhar, head of digital development at Lowe's, told Retail Dive in an interview:
There are a lot of returns driven by a product not actually fitting in a space. Many times it doesn't look like what it looked like it did in the picture, because you're looking at this two dimensional picture on a small screen even if it's on a desktop...
Product-in-place

With the "View in Your Space" feature, a Lowe's app user taps on the option while browsing products on the retailer's website. The customer can then scan, via the device camera, a potential product location and then drag and drop a product into the desired spot.

Shoppers can even "walk" closer to the product or walk "around" it to get a look at how the item looks from different vantage points. If all looks good, consumers just need to click an icon in the lower right-hand corner to move it into their online cart.

While technology is the centerpiece to Mr Jawhar's job, he acknowledges that Lowe's doesn't have a competitive advantage when it comes to technology but companies like Google and Apple do, so partnerships are a critical piece to staying ahead of the retail competition.

Stores are an important piece of tying everything together. Roughly 60% of all in-store sales are influenced by digital, Mr Jawhar said. Where Lowe's hopes to continue to differentiate from online players like Amazon and other brick-and-mortar companies that haven't invested much in technology is with the interplay between channels, allowing customers to research online or on mobile and then come into stores to get advice and browse materials and potentially buy them.
Paint brand challenging others to think green

Colorhouse is a US-based women-led, women-owned company that is making its product as eco-friendly as possible. Established in 2005, it became one of the first paint companies to combine an eco-formulation (of acrylic-based paints) with an emphasis on colour and sustainability.

The paints are GreenWise certified, the highest verification available for a paint brand. As part of that certification, the following chemical compounds are not allowed: methylene chloride, 1,2 dichlorobenzene, phthalates, isophorone, formaldehyde, methyl ethyl ketone, methyl isobutyl ketone, and heavy metals (antimony, cadmium, hexavalent chromium, lead, and mercury).

Puji Sherer, company president, said the eco-sensibility goes beyond just the formulation: the paint comes in recycled content containers with 100% PCW chlorine-free labels, and brochures; it is manufactured in a LEED gold manufacturing facility, and the company is a member of the EPA SmartWay transportation (to streamline freight and delivery). Colorhouse headquarters is run on renewable energy and serves as a paint can drop off site.

When founders, Virginia Young and Janie Lowe, started the company, they wanted to adapt their clay-based paints to make them easier for consumers to use in their homes. But the company ended up going beyond just formulation to think more deeply about their impact. Ms Young said:
Our search for healthier paint options pointed us to the vibrant green building community, a grassroots community that is about sharing knowledge and pushing the envelope on building materials that are better for us and the planet.

That trickles down to small details: for instance, the company doesn't hand out colour cards. Instead, they ask customers to purchase the cards (for 50 cents a piece) on its website. It is simply to reduce waste and unnecessary paper usage. And instead of having a long roster of colour cards, Colorhouse has 128 in total.

Kim Martin, e-commerce manager, works with customers to find the right colour. She answers everyone's questions whether it is on email, Facebook Messenger, or Instagram. Ms Sherer said:
The biggest challenge for Colorhouse has been competing in an industry with only a few major players, all with deep pockets. From offering free colour chips to Google Adwords, it is expensive for us to compete in the traditional marketing world, so we rely on our reputation for quality, our creativity, and grassroots marketing ideas to get the word out about our brand.

Colorhouse has received investment from Solera Capital, a women-owned, mission-based private equity firm that invests in emerging-growth companies.

That said the economics of running a small business in a massive industry can be challenging. The paints do cost more than standard options at Home Depot but they have zero smell, which some consumers appreciate, making it easy to swiftly move into the space after painting it. Ms Sherer said:
We have a toll manufacturing agreement that allows us to share in the cost of raw materials and helps to keep the cost of our paint down. As an independent paint brand, it would be difficult to keep costs down without this arrangement.

As the company expands, it is turning up in more stores: Ace Hardware, Home Depot (online), Amazon, Crate and Barrel.
HNN Sources


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