A crisis, the old bromide goes, is a terrible thing to waste. One way not to waste the brutal crisis we’ve experienced over the past year is to learn from organizations that have thrived while their peers have struggled. What did they see that others didn’t see? What did they promise that other couldn’t promise? What did they do that other wouldn’t do?
That’s why I have been learning from an unlikely standout—Ace Hardware, a humble, mainstream brand that has been selling paint, tools, keys, and all kinds of home-related items since 1924. One of the most painful story lines of these uniquely painful times has been the demise of the Main Street retailer. From the shadow of COVID-19-induced shutdowns, to the power of big-box giants like Walmart and Home Depot, to the march of Amazon, a “retail apocalypse” that started a few years ago became an “extinction-level event” for brick-and-mortar stores.
Yet Ace, about as Main Street a brand as there is, with some 5,436 mom-and-pop stores in all 50 states and 70 countries, delivered record growth and profitability in 2020, with same-store sales up 26%, digital revenues up 272% and profits up 126%. Sure, with tens of millions of us spending more time inside than ever, demand for home-renovation and home-preservation supplies has been strong. But even factoring in this supportive dynamic, Ace has been an undeniable star in a deeply troubled field.
So I asked John Venhuizen, a 28-year Ace veteran who has been CEO since 2013, to reflect on the principles and practices behind his company’s performance. What emerged were lessons on motivation, service, and strategy that apply to countless fields beyond retail, and that will be relevant long after this past year is just an awful memory.
The first lesson is about motivation, and how growth on the top line is fueled by passion in the front lines. Venhuizen is brutally honest about the crisis of motivation that afflicts so many organizations, and why leaders need to face up to it. That crisis existed long before COVID-19, but the past year has made it even more urgent. “The vast majority of the people who do the heavy lifting in business are aimless, purposeless, bored, and disengaged,” he says. “They hate their job; they hate their boss; they hate their pay. It breaks your heart, but that’s where leaders have to begin their quest.” This same discord permeates society, he adds, especially now: “Business has a bad brand. Most of the world thinks that business is run by the rich, for the rich, and at the expense of the vulnerable.”
That’s why the first job of leadership in the shadow of COVID-19 is to give colleagues a reason to believe, a cause around which to commit. “Leaders have to paint a picture of the future that creates passion,” Venhuizen says, to “rally people to go somewhere that is better than today.” Being named an essential business in all 50 states created huge challenges for Ace’s 100,000 front-line personnel in terms of safety and stress. But it also reinforced the meaning of their work. This last year “has accentuated our purpose,” the CEO said. “We exist to serve people. If people ever wondered if their work mattered, they don’t have to wonder anymore.”
Another lesson is about service, how in a world driven by technology, customers crave a sense of humanity. What makes the Ace Hardware business model distinctive is that it is a major retailer owned cooperatively by its 5,436 member stores. There are no public shareholders or private-equity investors. In 2020, these stores generated total sales of $20.6 billion, so the average store is a $4-million-a-year small business. What’s more, many of these stores are family owned, anchored in the cities and towns where they operate. This structure lets stores tap the “skill and scale of a globally trusted brand,” Venhuizen says, even as they get “the autonomy of a locally embraced, neighborhood-embedded owner.”
This commitment to local identity is why Venhuizen doesn’t call Ace shoppers customers, he calls them neighbors—a reminder of each store’s presence in its community, and the emotional connections to which they aspire. “We are engaged in the irrational pursuit of amazing service,” he says. “In a world driven by technical, impersonal, faceless interactions, we are betting that human connection and a servant’s heart will stir the soul.”
Venhuizen thinks about customer service as a character test, not just a business test—a test that became decisive during the COVID-19 crisis, and will be just as important after the crisis passes. “We want everyone who walks into one of our stores to feel noticed, welcomed, appreciated,” he says. “We also want them to feel like we solved their problem. Lots of people come into our stores with a problem. They have a leak, or one of their kids put a hole in a wall. When you solve a problem well, you create a degree of emotional attachment that is hard to beat. This is not about robots and drones. It’s about amazing your neighbors.”
There’s a big strategic lesson behind this homespun wisdom, and it may be the most important lesson for the future of Main Street: Physical can beat virtual, and agility can beat scale. According to Venhuizen, 75% of the U.S. population is within 15 minutes of an Ace store, and no two stores stock exactly the same items. His rallying cry is “differentiate or die.” He says Ace gives “irresponsible levels of autonomy to store owners,” who have the “freedom to make local decisions about their people, their operating methods, and most notably their products.”
These attributes—a physical grounding in thousands of neighborhoods, the agility to offer products that meet the unique needs of those neighborhoods—create a “massive strategic advantage” against the muscle and money of the Big Box and Internet giants. Local owners who “live right in their communities” can respond quickly to demand by certain customers (sorry, neighbors) in certain towns for certain products, Venhuizen explains, and they can help with “bulky and obnoxious” products like backyard grills, that can be ordered online and then delivered and assembled by the local store, another way to reinforce personal connections. Even (maybe especially) in an age of e-commerce and automation, “We want to be the most bottom-up company on the face of the earth.”
It’s one thing to see how the giants of Silicon Valley and the titans of Wall Street have prospered in this most painful of years. But sometimes you find the most relevant valuable lessons in the most unexpected places. There is “a real David and Goliath story here,” Venhuizen says. “We are duking it out with some of the best, most well-capitalized companies in human history. We are the underdog. But the world loves the underdog.”
Bill Taylor is the cofounder of Fast Company and the author, most recently, of Simply Brilliant: How Great Organizations Do Ordinary Things in Extraordinary Ways. Follow him on twitter @williamctaylor.