Rona Hardware Store
Rona to double store count in CanadaJohn Caulfield
Buying group will spend $400 million-plus over next several years to become a major retailing force in this country
BOUCHERVILLE, QUEBEC -- Rona, the 440-member buying group that is celebrating its 60th anniversary this year, is about to embark on a major expansion drive whose goal is to more than double the co-op's store count by the end of 2002 and, as a consequence, make Rona a retailing force across Canada.
That expansion will include a major push into the province of Ontario propelled by two large-store formats and a probable acquisition of an existing retail chain. The co-op expects to invest more than $600 million Canadian (more than US$400 million) over the next several years to expand nationwide.
One-third of that investment is expected to be in real estate, which is why Rona will create a real estate subsidiary to handle these transactions. In addition, Rona intends to create a separate entity within its organization that will be focused exclusively on its retail operations.
Those operations this month entered the realm of online selling, as the company put 275 Christmas-related products onto its revamped Web site under a page called "The Gift Shop." If this test is successful, Rona intends to offer all of its warehouse items for sale online next spring.
The company has been taking full advantage of the C$30 million investment that French-based ITM made in December 1997 to acquire 16.7 percent of Rona. That alliance has evolved into the creation of Rona-BMI (short for Bricomarche, ITM's 470-unit home improvement chain in Europe) for the expressed purpose of transacting joint merchandise purchases from vendors worldwide.
Rona's buying leverage is expected to broaden as it gets larger. In Quebec over the next 18 months it intends to open two more L'entrepot warehouse home centers and seven Renovateur Regional home center/warehouse hybrid units. By the end of this rollout Rona projects that it will have 500 stores in Quebec with 6 million square feet of selling space from which it will generate C$l.7 billion in wholesale sales.
(Rona's members operate several different formats, including a conventional home center and hardware-store format, garden centers called Botanix and convenience units calls Rona Express.)
In Ontario, where members currently operate around 45 outlets, Rona expects to open 12 L'entrepots, 15 Renovateur Regionals and expand its traditional store base to 250 over the next 18 months. All told, Rona projects that its dealers will operate 500 stores in Quebec, 250 in Ontario and 250 throughout the rest of Canada by the end of 2002. These outlets would generate C$2.1 billion in wholesale sales for the company and control 15 percent of Canada's total retail home improvement sales, according to company growth targets.
"We can't compete against Home Depot in Ontario [where Depot opened its 50th outlet last month] with only four or five stores and hope things work out," said Rona's chairman, Henri Drouin. "We want to open stores across Ontario so we can enlarge our [dealer] base and enlarge our existing dealers' stores."
Robert Dutton, Rona's president, told its membership during the co-op's buying show in Montreal this month that Rona intended to "consolidate" its stores in smaller markets, meaning that several dealers might close their smaller stores and become joint-venture franchise partners with Rona in a L'entrepot or Renovateur Regional that opens in their respective markets.
Co-owning larger stores
An example of this kind of consolidation can be found in Granby, about an hour's drive north of Montreal, where three local Rona members closed their stores to become co-owners, with Rona, in a 60,000-square-foot Renovateur Regional with an attached 29,000-square-foot drive-through lumberyard, a 60,000-square-foot outside yard and storage area and a 3,500-square-foot enclosed nursery.
This store, which opened Sept. 15, has been producing sales that, on an annualized basis, would be equal to the C$42 million average being generated by a typical L'entrepot unit. Jean-Guy Hebert, Rona's dealer of the year and one of the partners in the Granby regional unit, said his group opened a similar unit in St.-Hyacinthe, Quebec, Nov. 10.
The Renovateur in Granby stocks 36,000 items and employs 120 to 125 workers. More than 20 percent of its selling space is dedicated to seasonal products, which consume a huge area in the front of the store. The Renovateur concept also features a large "boutique" where paint and home decor-related products are displayed in a showroom setting that is accented by paneled signage. This boutique is in stark contrast to the green cantilever racks throughout the rest of the store, in which Hebert said is getting around 35 percent of its sales from lumber and building materials.
Drouin said that Rona had initially intended to expand into Ontario with several different formats, but instead it has decided to use L'entrepot and Renovateur as its growth engines.
Even before announcing its expansion strategy, Rona had been enjoying a robust 1999. Through the nine months ended Sept. 30, Rona's wholesale sales were up 20 percent to $740 million Canadian (US$495.9 million). During that period, the company had opened one L'entrepot and seven regional units, had renovated another 19 stores and had signed 35 new dealer-members. It also completed the move into a new headquarters and distribution center, which led Dutton to state that "I'm quite sure of two things: there is a God, and I never want to relocate again."
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