The brutal truth, merchandising/pricing policy/housekeeping

Gathering Feedback from Honest Sources
In 2013 I invited a group of peers, affectionally self-named “the pteradacyls” to tour our locations and provide feedback on what they saw and experienced during their visit. My husband Marc and I had joined this group a year or so prior and knew that these visits could be brutal. It was a “no holds barred” kind of gathering; at the time consisting of seven retailers plus us. The combined strength of the group was over 55 locations and
at least $175M in annual revenue. Basically, we were all doing something right.

It was understood that we could find anyone to give us platitudes – to sing our praises about what we were doing well in our businesses. But only a Pterodactyl would give us the honest truth; point out our warts and areas for serious improvement. In short, if we were going to spend our own hard earned cash to fly around the country and critique each other, we wanted to see tangible results and not hear fluff. It was a time for self-reflection most likely to be followed by heavy lifting. We were in this business to make money and believed we needed the help of strong friends to push us to new heights.

The group arrived on a Tuesday and we spent the next day and a half driving them around from Washington DC to Baltimore, proudly showing off our locations. And like proud parents, we were blind to most of the glaring issues. You see, we had always assumed that if our teams appeared happy and our sales were high, everything else was unimportant.

Boy was I wrong! After the tour ended, we convened in a conference room so the group could relay their feedback. I’ll cut to the chase and just say that the meeting ended with me in tears. My notebook was so full of notes that I wasn’t sure how I’d ever resolve all of the issues they uncovered. One visitor related in a follow-up email “Overall, I think this store needs some TLC and possibly a retrofit. The volume is impressive, but it should be doing much better. The housekeeping was just bad. If this store was cleaned up, you would do so much better. I am sorry to be rude, but you had to have seen what I saw.”

They say that “what doesn’t kill you makes you stronger” and my team and I went to work the very next day righting our “egregious wrongs”. What emerged were cleaner stores, better displays, and polished up merchandising plans. The follow-on results were indeed tangible, sales rose and we actually found more space for new items.

Work is never a one and done

Those practices carry forward to this day but that doesn’t mean we always remember the pain of the exercises. I think it’s human nature to let down our guard over time, especially when business is good. But managers come and go, trends and consumer habits change, and we focus our energies elsewhere, one day leading us right back to needing an intervention. Even if your operation isn’t spread out over 13 locations like mine, it’s easy to see how inconsistencies and poor habits can creep in. Over the years we’ve created a multi-step plan that got derailed during Covid so this year we’re going back to the basics, starting with assortment, pricing and housekeeping.

Optimise Your Product Assortment and Bring in What Sells

Statistics show we often carry a high percentage of products that have lost their usefulness. In fact, you could very easily draw a line to higher carrying costs and operational inefficiencies with such product.

Our sell-down process includes getting rid of dead inventory, product we call obsolete, if it has not sold in a two-year time period.

Here is a real-world example of how this works:

Total Inventory $7,655,900
Retail value of our obsolete inventory $296,474
Our average store turnover 2.7 times
Cost to replace the bad inventory $148,237*
Improved sales by selling the replacement inventory $800,479
*Example given assumes a 50% margin

Beyond the Cold Hard Facts

This is the factual process; cold hard data gets us to these numbers and doesn’t lie. But there are other ways to determine if you need improvement.

  1. Your gut tells you “I’m seeing these items moved, cleaned,
    ignored, way too much. They might not be good for us”.
  2. Industry trends pivot and after visiting a trade show you
    identify immediate updates that might be useful like new
    popular colors, or consumer purchasing habit changes.
  3. Environmental or jurisdictional laws take effect that impact shopping like a stronger focus on “going green” or as is the case in some of our towns, gas powered outdoor equipment is being outlawed.

We can choose to ignore these trends or hit them head on with resets and elimination.

Excellent visual merchandising is essential.

Empty Space? Now What?

Good retailing means constantly being on the lookout for ways to invigorate the sales floor. Ask yourself the following questions. Better yet, ask your team and your customers so you get the broadest answers possible.

  1. Do we have encroaching competition?
  2. Is that competition new or have they been around for a while?
  3. What is the competition doing that we are not?
  4. What would make us a more interesting shopping option?

To keep our assortment fresh, we complete a minimum of five section resets at each store each year. Most of these are small, maybe 4 to 12 feet in space. But some are considered major resets like the lightbulb department or BBQ grills. With the help of our co-op partner ACE HARDWARE, we use a formula to determine what our increase in sales should be once the section is refreshed.


The first, most basic rule for pricing is to have a strategy and use it. We realised early on that retailers weren’t active enough in changing their prices, they lack a strategy and are leaving margin and money on the table by not updating prices.

Our prices are updated weekly based on the following criteria:

A. Target margin.
We know what margin we expect to see. Margins are impacted by price increases from our vendors or when we add new items to our system. When we stick to a pre-determined margin goal, pricing our items is consistent and profit driving.
B. Competitive analysis.
Research has shown that pricing falls into blind and non-blind categories. There are few (for us, less than 900) items that a consumer or contractor “might” know the price of, so in our store of 25,000 items, we have a lot of wiggle room for pricing.
C. Pricing Tiers.
We operate on a three-tier system that assigns margins of 42%, 45%, 48% to every item in the store.
D. Implement rounding rules.
Take advantage of the opportunities to increase margin without the perception of higher prices. Small, almost imperceptible increments can have a big impact on the bottom line. For example, if you sell 10,000 keys each year at $2.29 and raise the price to $2.59 that incremental $3,000 in revenue is pure profit.

Housekeeping to make sure your store always looks good


Once your strategies are locked in, the final step is making sure it looks good. Let’s face it, a little bit of organised chaos is fine in a hardware store but customers don’t want dust and disarray in their shopping experience.

A key takeaway from this article is – It’s really one big circle of retail life – make sure you have the right product to sell, drive sales and higher profits with the correct pricing metrics, and make sure your space looks good, over and over and over again. After all, wasn’t that the whole reason for the Pterodactyl visit? The next time you’re chatting with a friend in the hardware business, ask him or her to take a good hard look at your operation. Then ask that friend to forget all the fluff before they start talking.

Gina Shaefer

Sometime around 2016 one of my teammates came to me and said,
“You know Gina, this place is known as `Recovery Hardware’ in
the community”. That little phrase jumpstarted a book by the same
name that tells so many beautiful stories of the people that helped grow
our business. If you’d like to read more about them, you can order the
book Recovery Hardware by Gina Schaefer Waterstones.