Hardware Retailing

MAY 2018

Hardware Retailing magazine is the pre-eminent how-to management magazine for small business owners and managers in the home improvement retailing industry.

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May 2018 | HARDWARE RETAILING 165 Opportunities • Repurposing Vacant Stores. In January, U-Haul acquired a vacant Menards store in Indianapolis. U-Haul plans to renovate the building and use it as a self-storage facility, according to uhaul.com. Menards could continue to sell vacant stores to noncompetitors to earn money if stores close. • Capitalizing on E-Commerce. Menards has the financial means to bolster its e-commerce offering in a way smaller retailers cannot. By investing more in e-commerce, the retailer could increasingly reach customers in locations where it does not physically operate brick-and-mortar locations. • Investing in Technology. In 2017, Menards announced plans to build a new distribution center featuring a robotic system to speed up delivery times and cut operating costs. If effective, Menards could replicate its success by renovating existing distribution centers or building new facilities. • Increasing Productivity per Store. Brouwer reports that while all Home Depot, Lowe's and Menards locations are roughly the same size, Menards' stores often earn less per store. By increasing productivity and sales at existing locations, Menards could close the gap. • Adding Distribution Centers. Menards currently has at least 11 distribution centers. The retailer could add facilities where it does not currently have a brick-and-mortar presence to facilitate deliveries and better serve markets outside the company's Midwest base. Threats • Distant Third. In 2017, The Home Depot scored $100 billion in fiscal year sales and Lowe's earned $67 billion. The National Retail Federation estimated Menards saw $10.7 billion in sales in 2016. Menards is in a distant third place among the nation's top three big-box home improvement centers, though it is 16 years older than Home Depot. • Legal Entanglements. Both Menards the company and its president and CEO John Menard have faced several lawsuits over the years covering a wide range of issues, including environmental violations, wage theft and sexual harassment. These legal issues could potentially be costly both financially and in terms of the retailer's public image among employees and customers. • Closing Loopholes. Menards has been able to reduce its taxes by arguing that its stores should be taxed as if they are empty, not as operational businesses with full, diverse inventories. Tax loopholes in several states have allowed Menards and other retailers to diminish their tax burdens, but as states tighten regulations, Menards' costs will also increase. • The Independent Sector. Independent operators, including businesses with Ace Hardware, Do it Best and True Value branding, run successful stores near many Menards locations, and often have reputations for better service and higher quality products.

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