Planning for Expansion – “My next shiny object”

There are many factors that can and should go into planning for expansion. The Hardware Journal asked Gina Schaefer, ACE Retailer, to highlight their expansion planning decision making process. This includes the importance of local community interest that can make a single store operation grow exponentially. Gina is co-owner of ‘A Few Cool Hardware Stores’ with her husband Marc and just recently, thanks to an Employee Stock Ownership Plan (ESOP), her employees.

Shortly after opening our first location in 2003, community members from other parts of Washington DC started petitioning us to expand. We got phone calls, emails, and good old-fashioned letters. It was flattering and terrifying at the same time. We were still figuring out how to operate in one location, how could we possibly expand to two?

But our suitors were persistent, and we found ourselves making a few operational decisions that ultimately allowed us to be in two places at once.

We documented our values to solidify how we wanted our teams to operate. We were small (but mighty!) and created a fledgling Human Resources program that included an employee handbook, health benefits, interview questions and operational procedures. We asked our current team to help with these tasks and their input was crucial as we continued to grow.

Having a baseline to monitor our culture proved invaluable, especially when we opened a store in a city far away.

We outlined important criteria that we honour to this day when choosing a new location.

a. Situational awareness is key. We look for neighbourhoods with a strong name and some history. We have come to realise throughout the years that a proud, recognised name is synonymous with a strong community, no matter the demographics or average household income. Our first location in Logan Circle had set the gold standard for us. It was a neighbourhood that had a personality that was palpable. It had real character and vision, a raw energy that anyone living there could feel, and a growing population determined to grow a strong sense of place.

b. We want as little competition as possible! We factor in boutique businesses, garden centres, pet shops, kitchen stores, big box retailers, etc. We want to make sure that we don’t hurt a small business or run into the side of a big one.

c. Finally, there has to be a desire to Shop Local. We want our communities to want to support local businesses. We want customers who, like us, do not want to get into their cars to run errands.

Loyalty is actively encouraged.

We like walkers – people who stop in on their morning and afternoon dog walks and want to congregate on sidewalks with their neighbours.

Once we had these bases covered, we could start to focus on some bigger logistics. Should we buy an existing hardware business or start from scratch? We’ve built 10 from the ground up and purchased four. All fourteen of these businesses have come with their own challenges, rewards and lessons. It’s good to let people know you are open for expansion – sellers need to find buyers and if everyone is too tight-lipped, it’s hard to make a transaction happen.

The shop local & support local message is constantly promoted in store.

We let landlords, developers, brokers and business owners know that we are open for expansion and acquisition conversations. Once we sign a new lease or make an acquisition, we bring in our partners at ACE Hardware to help with the store layout and product assortment. We’ve had some funny comments over the years such as “what do people in a city need from a hardware store?”. Well, they need batteries, ladders and lightbulbs just like everyone else!

We also have a captive audience of walkers – folks who want to stop in on their afternoon dog walk or on their stroll to the grocery store. About half of our stores don’t have any parking so we rely heavily on foot traffic.

ACE works their magic with the core assortment of products and we wrap our magic around the practical stuff. Toys, dog treats, colourful pottery and houseplants line the aisles and entice shoppers who don’t need a hammer and nails. It isn’t enough to just have the basics if we want to compete, especially with on-line competition getting stronger and richer. This gives our buying team the ability to focus on trade shows and trade publications outside of the hardlines industry for inspiration. What are they seeing spotlighted on social media platforms like Instagram? What is being shown at big housewares shows? We make this part of their job requirement so our niches can reflect what the community wants and needs outside of traditional hardware departments.

Of course, the expansion part is fun – I call it “my next shiny object”. But the real work starts the day we open for business. We have standard reporting mechanisms that we monitor daily or weekly as appropriate. Our primary reports include sales per payroll hour which is how we determine our staffing levels, inventory accuracy, gross margin and negative quantity on hand reports.

On the people side, I monitor and report out twice a year on our turnover rate and pay equity based on gender and race to make sure we are living up to our goal of being a great and fair place to work.

We have had two underperforming businesses that we have closed in our 19 years in operation. Both stores had less than 3% profitability and for the amount of work our team does, that wasn’t enough to keep our doors open. As soon as our leases ended in those locations, we exited the building.

There are many factors that can and should go into planning for expansion – I have really just hit the highlights but with the right planning and interest, a single store operation can grow to two and then three or more.

Gina Schaefer is an ACE Retailer and co-owner of A Few Cool Hardware Stores with her husband Marc and now her employees.

They currently have 14 locations that range from 4,000 to 13,000 square feet. They have expanded from Washington, DC into Baltimore, Silver
Spring, Maryland and Alexandria, Virginia.

They have about 250 employees and will add 50-80 more when their spring/
summer season starts. Of the 14 stores they purchased four and built the rest from scratch. Their revenue average is approximately $3.5 Million (€3.3 Million) per location. The company is currently transferring ownership of their stores to their employees through an Employee Stock Ownership Plan (ESOP). Within the next couple of years the staff will have full ownership of the company.