ACE Hardware’s Kim Lefko on Personalization, Loyalty & Neighborhood Retail

Up today on the Speed of Culture podcast, we are thrilled to be joined by Kim Lefkoe, the Chief Marketing Officer of Ace Hardware, a company dedicated to being the most convenient and helpful hardware store on the planet. Kim, so great seeing you today.

Oh, it's great to be with you. Thank you so much for having us.

Absolutely. So Ace Hardware, when I think of that brand, I think of like sort of like the hometown store. At scale. And in this world where Amazon has become so prevalent and people are going increasingly towards big box retailers, how are you working to reposition the Ace Hardware brand to make sure that it's staying power in this new world?

It's such a great question, and there's so many different consumers in the different segments, what they're looking for. And I think there's two things that we will forever stay true to, and that is this idea of ultimate convenience and ultimate in service. And Ace is ubiquitous in the country. So there are over 5,000 Ace stores across the country. 80% of households are within 15 minutes of an Ace. And how do we leverage that convenience to be there when you need it? Now, at the same time, service has always been come on in and we'll answer any questions that you may have on any home issue that you're working on. But now service and convenience may mean have my order ready for pickup in 5 minutes or 15 minutes, or have that product that I need and want delivered to my front door in 30 minutes. So we're evolving just as what your focus is for your podcast. We're evolving at the speed of change for consumers and what they want. And that's absolutely critical to remain relevant.

Yeah, I mean, when you mention order ahead, you know, and pickup in store, that's known as BOPUS, I learned, buy online, pick up in store. And there's all these new omnichannel approaches that I think came out of COVID where companies companies like yours were really forced to kind of reinvent themselves on the fly, figure out new and innovative ways to give consumers the convenience of retail, but also new safety measures that came along with COVID And now that we're back to an online-offline scenario where people can go into stores, obviously they've adopted new buying habits online coming out of COVID You kind of have to have this mixed approach moving forward to meet the needs of the consumer.

We say that all the time, meet the customer where they want to meet and be able to solve their needs, be helpful, there. And so we're doing it and we're launching some really exciting things this year that I think match that convenience and service, but relevant to today's consumer.

So let's talk about some of those exciting things.

All right, let's do it. The first one that I would highlight is new for us. It's called YardRx, and it's a personal prescription for your yard needs. And if you think about Ace right now, there's so much guesswork that goes into taking care of your yard and your lawn care needs. And you would go in and you talk to one of our red vested heroes and they'd walk you through everything that you need and when you need to apply it or put it down at the perfect season. So what we're doing is we're removing all the guesswork, we're removing the hassle of even needing to come in. You log on to AceHardware.com, enter your address, and just that alone, we can put you in a region that tells us a lot about weather and types. We can look at your grass type, we can look at what products you've purchased in the past, We can look at your lot size and how much product you would need. And we know that there are 3 key applications to green grass, and that is spring, right about now. There's a midsummer time period, and then there's a fall. And what we're doing is we're bundling the products that need to be applied during those 3 seasons, and we're delivering them when you need it, what you need, at the best price guaranteed. And that YardRx, it's revolutionary for us, but also for the industry.

Is that a subscription model for the consumer?

It's a subscription model. So you can get on and you can buy, you can be exposed to all 3 deliveries and set those up so you see what's coming and how much each of those 3 deliveries are. And just like an average cost, we're looking at the 3 bundles together is just under $500. And that is grass, weed control. Sometimes if you're dealing with brown spots or fungus or insect control, all of those products could be complemented inside that bundle as well.

It's really interesting because it's almost like the start of what you can create is almost like the operating system for your home because you're starting with the lawn, but there's no reason why you can't have information about the air conditioner filters or the appliances in the house or whatever it may be. And one of the benefits that your company has is you have first-party data and the more you can collect, especially in the age of AI, you really can start to uncover what the consumer needs even before they need it. Which creates a whole new business model.

And we open that up. So if we know a delivery is coming in March, we'll send you a reminder and open it up and say, is there anything you want to add to this delivery? We can do the same thing in May and the same thing as you head into the fall. And we also can make recommendations based on what we've seen them purchase in the past that may be outside of lawn and garden. And I think we can be the fastest when, like, convenience right now, 15 minutes, the base of the size of our store, you can be in and out pretty quickly. And we know that's a competitive advantage versus other retailers. We also are saying, hey, we'll have your buy online pickup order ready in 15 minutes. You know, today if you're buying from other retailers, retailers are getting longer and longer for those in-store pickup orders. We're getting shorter and shorter. And I think the same thing with the door drop, that we can have it at your door or at your garage door. We would love to someday say we can have it to you in 30 minutes. And so now all of a sudden the products that we have in stock, we can be faster than any other retailer or online player in the market.

Yeah, I mean, you're talking about convenience, you're talking about speed. Another element of which you've alluded to is really personalization. You're gonna understand the lot size, you're gonna understand the overall layout of a consumer's backyard, and you're gonna be able to craft a custom personalized package for them. And the notion of personalization, I think, is going to be one of the big unlocks in this new AI-based era where you're gonna be able to take all these disparate data points and connect them into a story where you're speaking to Joe Smith differently than Jill Johnson based upon what you know about these consumers. As a CMO, I mean, that's sort of a new revelation. I mean, you look back 10, 15, 20 years ago, it was about brand building that even when in the digital era, the dawn of the digital era, it was much about even banner ads and top of funnel. And then we got to a whole wave of performance-based marketing, etc. But this is something a little bit new. How are you evolving to make sure that you have your arms around where the world is headed so you can continue to deploy really interesting activations like Yabba-Rex?

Yeah, it's a— that, that consumer information is really important, but I think looking through the eyes of the consumer, it needs to be relevant in making their life better. And so if we can, if we can use the information to make things more efficient, a better return on energy or return on dollar, And that's the way Ace is approaching that. Like, we protect our consumers' information with high, high integrity. But, you know, examples are, I think our rewards database is potentially one of the largest in all of retail. We have well over 58 million active consumers in that database, and we have their purchase history for many, many years. And so being able to use that information, like you said, with data science and AI to be predictive in, hey, this product's on sale and you bought this last year, we have it, have it ready for you. One of the advancements that we made is we need to make that information accessible and ready when they need it. And so we launched a mobile app, gosh, like 5 years ago and maybe late to the party. But when we launched that mobile app, it's a place where now it's a conduit to anything and everything they need in and around their home. Now, the greatest value too is I have any rewards or benefits or discounts with me in my pocket when I'm in your store. But we're finding our app is sticky. We're getting Ace Rewards customers to transition over and they're shopping 50% more, they're spending $200 more, their overall OSAT score is 400 basis points better than a non-app user, and their requalification year over year is stronger than someone that's not inside the app. That's a really good example of how do you use digital advancements to make your consumer experience better for them.

Yeah, I mean, I'm glad you brought up loyalty. That was actually my next line of questioning was around loyalty, because that's obviously beyond personalization. The other benefit is if you're capturing data and you're offering a value exchange, which it sounds like you're doing to the consumer, and you're really optimizing the consumer experience, which it sounds like you're doing through the app, you kind of have the recipes for success. In that kind of one-on-one customer engagement.

Absolutely. Absolutely. And in using, I would say our biggest advancement right now as we look at Ace Rewards, the app being the biggest, you know, having and getting more customers over to the app. Now, keep in mind, the Ace model is we have 5,000 stores across the country. As we mentioned, those Ace stores mostly are locally owned. And so they're entrepreneurs, they're family-owned businesses. That are handing off to the second, third, fourth generation A's. Now, what we can do on their behalf, yes, we can help buy at better rates so they have good price products, high quality brands inside their store. But we also help them with operating methods to be relevant and efficient in today's world with the changing economy and changing consumer. And so we're working with them saying, I know you love the punch card and the key fob for the rewards program, We need to get minimum 500 customers every year over to the mobile app or more because they're more loyal to you. You have a better line of communication to them. You can send them push notifications and online orders and so on. So marrying up not only the advancement of technology, but how do we get that adoption in 5,000 locally owned stores across the country is a marketing challenge that we have.

Absolutely. So totally makes sense in terms of the ways you're directly engaging consumers. One thing Ace, I believe, has done a great job of over time is telling its story and continuing to build and reinforce the premise of its brand. And obviously for me, at least the consumer, all starts with that song that sticks in your head. So I just want to know, what is the story behind the Ace is the Place with the Helpful Hardware Store song and what gave you guys conviction, how you uncovered it, and how you look at it as part of your future.

It is, yeah. Ace is the place with the Helpful Hardware folks. And yeah, folks, but that is—

You know what doesn't matter? Because I just know Ace is the Place and Helpful Hardware, and that's probably what you want to say.

I know. And that song like sticks with you. I, you know, I, I would say that it, you know, it was, it was created several years ago. We're 100, we just celebrated our 100th anniversary. It's not quite 100 years old, but pretty darn close. And I will say that it is a staple, it's a mainstay. And too often in marketing, you get sick of your own strategy, your own campaign, and you move on before—

100% because you're working there and you hear it all day, but you don't realize that you're battling for the consumer's mindshare with tens of thousands of other messages.

So you shouldn't distract them. So we have a saying inside of marketing and it's adopting, it's getting some legs across the company, and that is consistency is our superpower. And consistency is our superpower that we are going to stay with the jingle. We are going to stay with even just around the block with products in stock from people that you trust like that, that, that slogan, that campaign has got legs and we can't run from it. And so, you know, that's the jingle. Now we made a minor tweak. Ace is the place for the helpful hardware man. And we evolved that to folks, which is relevant and appreciated.

So, I mean, it's crazy 'cause I do think it also kind of taps into the nostalgia of the consumer 'cause it sounds like it's something that would be played in the '50s. Like I'm rewatching Mad Men right now, which is my favorite show ever. And you know, it sounds like something that would be written by Don Draper and Sterling Cooper and their firm. And I think in some ways, the more things change, the more they stay the same. And something that kind of brings you back to a certain place or just is kind of calming It's, that's why I think you wanna replay it in your head. It's sort of timeless.

Yes, I, I agree. I do. I, I love the consistency of it. I love that there's, there's a beautiful heart and soul of the ACE brand. Like we just celebrated 100 years and we have a, a very clear why and purpose. We exist to serve and help others. And in memory, in celebration of our 100th, we traveled across the country and we documented in a small docuseries 100 help— we call them heartware, but they're helpful stories. Employees, store owners living out what it means to serve and help others in their communities and neighborhoods. And when you get to know these store owners and employees and families and you look at all that they're doing besides running a hardware store in their communities, they become the fabric of these local communities across the country. And so there's this essence of there's a heartbeat, iconic, genuine nature of the Ace brand that I think the nod of the jingle fits that so well.

So in terms of continuing to contemporize your approach as well, obviously, you know, you have Gen Z coming in as the future kind of household consumer and the future core shopper at Ace. And then obviously reaching Gen Z, you need to think of mobile first, which you're clearly doing with your loyalty app. But in terms of content, and making sure that you're in the newsfeed and you're staying top of mind. What are some other strategies that you have in creating content to reach this new audience?

Yeah, well, you know, the content that I just shared was for no other purpose than, you know, a docuseries to get to the purpose of the brand. And I know that generation really appreciates that. Like, I want to buy and shop with a place that I can connect to and understand the clarity of those values. And I think people saw that, you know, through the hardware, hardware stories. I also would say it's really important that the digital backbone— it sounds basic, you know, but the fundamentals, you got to get them right, and you got to strive for excellence with the fundamentals of digital. And over the past 5 years, we've invested over $30 million into our digital infrastructure that interfaces with the consumer, and that's AceHardware.com, making sure it's fast and it's frictionless, and we're saying yes to more customers who want product delivered to them in the technology, in the speed at which you can transform to say an A/B test inside a cart or a PDP page or a category landing page or a headline on the homepage. Using that information to make us smart and fast is appreciated by that generation, but also is a value add to anyone who shops AceHardware.com. And that's benefited us. You know, this, this past year, our dot-com business grew 15%. Now, may not sound impressive, but when you compare—

That's very impressive at your scale.

And when you compare it to the likes of our competitors that grew 6 to 8%, we're ecstatic about that. Our app revenue grew by 45% and our site traffic, you know, we had close to half a billion consumers coming to AceHardware.com. All of that, like, you need to be great with the fundamentals. And you need to understand how to genuinely introduce new consumers to the brand. And we're winning with that demographic because they like local, they love people that have expertise and are there to help. And that's what the Ace brand is. When you walk into an Ace store, a red vested hero, their purpose is what can I help you find and what can I help you solve today?

Yeah, that's well put. How much impact does the macro economic landscape— no pun intended— landscape have on your business? So obviously right now we're seeing a record low amount of new home purchases because of rising interest rates and low inventory. Does that have a trickle-down impact to what and how frequently consumers are buying products in your store?

For sure. For sure. You know, I think it was like, you know, the highest point was a 7 million house turnover and we're now down at just over 4 million house turnover. And house turnover benefits on both sides. When you prepare a house to sell, you do a lot of work in the lawn and in repair and painting. And when you buy a house, you, you like undo all the work that was done. I would say a major pivot was made about 8 years ago at Ace. And there was a large portion of the aisles and store space at retail dedicated to electrical and plumbing and heating where you would come in and get the products to do your own electrical work and plumbing work. Well, as the macro change of consumers consumers weren't spending their time doing that. We did, we needed to evolve the product portfolio and the product offering and that shopping experience. And so something that we're doing now that I think plays really well to the way people live and where they want to invest is we just launched a new store format called Elevate. And this Elevate is, we believe at Ace, we can be the preferred destination for power tools, outdoor power equipment, and barbecue, all things barbecue. And so this new store format, when you walk into the store, you're like flanked by these brand category lifestyle shops of power tools, outdoor power equipment, and barbecue and grilling. And we're the only retailer that can do something like this because we're the only national retailer that has all of the established best brands in each one of those respective categories. So like, just to give you an example on grilling, We're the only national retailer that has Big Green Egg, Traeger, Weber, and Blackstone. Like, if you want to shop grilling, come shop our new transformed in-store shopping experience to compare across brands and then see, you know, the suite of products inside the brand that you select. And we have that for outdoor power equipment and power tools. And the cool thing is like, this is a transformation where these product categories are relevant to today's consumer. It's about lifestyle and living and connecting with family in the backyard, for example, and we're seeing really good results. I mean, the— this store format versus its control group is up 12% in POS, in sales. You're not seeing that type of lift in retail today. And overall customer satisfaction, they love it. You know, it's a 200 basis point improvement in OSAT, overall satisfaction. And out of 5,100 stores, I think we'll close out this year close to 500 stores transforming over to this new Elevate store format. So a long, way long answer for your question, but staying relevant to, to today's consumer, but also responding and pivoting when necessary to those macro trends. It was a product move for us several years ago.

And what type of consumer insights, feedback, research, etc., are you getting to give you conviction to dive into an initiative like Elevate?

Yeah, testing. You know, we— I'm a believer. I think especially in the world of marketing, we have this philosophy. It's like test, learn, refine, scale. And you need to be doing that 10% of your time, 10% of your budget. This test and learn is so critical to answer questions because we too often fall in love with maybe our own hypothesis that we've proved. And then the marketer and the senior leaders inside companies need to prevent that from happening. And so we do a lot of test and learn digitally. We get those insights and we bring them over to 30 stores, 20 stores of different, you know, sizes, geographies, regions, density, demand areas. And we test it out and we ask, what if fill-in-the-blank scenario? What could be the positive impact to the business in sales transactions, AOV, retention of a customer. And we look at those metrics and based on the learnings and refinement, we, we scale it out when we feel 90% sure.

And so obviously, I mean, you're clearly innovating at a fast pace at an almost 100-year-old company. I mean, it's very impressive to be able to do because I know it's not easy when there's a lot of tried and true ways. But it sounds like the culture of the organization is one of innovation and it shows with all the new initiatives you guys are running. To switch gears a little bit as we wrap up here, Kim, I'd love to talk about you and your career journey and just looking at your background. You've had long stints at, at Newell Rubbermaid and Weber on your way to your current position as Chief Marketing Officer at Ace Hardware. When you look back at your career journey, what were some of the decisions that you think you made right along the way in terms of areas to focus on, or are there initiatives that you took personally to set yourself up to one day end up in the CMO seat?

Yeah, it's like, gosh, that's a good question. I am old. I am old, Matt. I've got lots and lots of examples.

You're definitely young at heart, Kim. I saw when you graduated, so we're in the same boat.

Okay, well, you and I are old. I would say a couple of pieces of advice that were given to me that I took on and I'm grateful for. One, and they're both visuals. One, someone said, build a really wide base because if you build a wide base, you can climb higher, you know, from a structural engineering perspective. And I did that and it gave me, knowing that that was good advice from someone I trusted, it gave me comfort and confidence to do some lateral moves in my career. And I would encourage others, you know, to think like that. Don't just think what's the obvious upward projection, could you go sideways to build a little bit wider base of experiences that allow you to be more valuable the higher you get in an organization? And then the second, you know, the second piece of advice, it's somewhere along my career and it helped me with a move, was be comfortable leaning into a world that you don't know. I think too often people stay in the same company, in the same place, for the fear of what's on the other side. Absolutely. And I, and I had someone say to me, like, believe in yourself, bet on yourself. And there are 3 things that no one can ever take from you. The first is your relationships. Pour into those like they're gold because the relationships are the ones that will endorse you, reward you, pull you in.

Um, help you in times of transition.

Always, always those relationships. And, and the world is small. You'll be coming back together, working again for sure. Relationships, core into those. The second is results. Like when you get in there, get some points on the board. It can be a layup, it can be a 3-point shot, but just get some points on the board. And then the last one is your reputation and you have a decision of how you show up in your character. And, you know, I made it very— I'm going to have a voice. I am going to be very, very collaborative, but I will operate with high, high integrity and care for the people around me. And I think if you show up with those three things— relationships, results, and your reputation— it makes decision of changing, leaving, finding a culture that fits you. Like, those three things, I would say, describe ACE beautifully. Like, we love to win, we love to compete, and— but we have wonderful relationships and we care a lot about character and integrity. So I think getting that right makes change a little bit easier.

Yeah, I mean, there's so much in there and thanks for sharing that, especially on the side of the network. I think for younger professionals, especially before you have so many family obligations or children, like you should be going to as many events as possible, meeting as many people as possible, because as your career goes on, the people who you knew early in your career are often the ones that you can lean into. And you're right, the world is small and you never really know where people are going to end up. And you always want to just try to be adding as much value as possible because that will have accumulating impact as you go through your journey.

For sure. For sure. I totally agree with that.

So, Kim, this has been such a great discussion. Thanks so much for your candor and sharing all the great work you're doing at ACE. We always end up our interviews here by asking our guests if there's a mantra or saying that kind of defined their career journey. I was just wondering what might come to mind for you.

Yeah, this is a silly one. And I think if you were to ask in my 20s, my 40s, my 50s, that mantra would be different, but You know, right now it's this proverb of above all else, guard your heart because everything you do flows from it. And I think too often we get lost in— it's a selfish world. And this idea of caring and building up the people around us, and maybe it's a generational— like I feel at that time, and it's the culture of Ace, like we pride ourselves in helping our communities, our neighborhoods, our customers, our employees.. And I think my personal mantra marries up really nice with the mission at Ace.

Yeah, absolutely. It's clear you're doing something you love for a brand that you love, and I have no doubt you're going to continue to see nothing but success in the years ahead. So thanks so much for joining us today.

Thanks, Matt, for having me.

Absolutely. On behalf of Suzy and Attaway Keen, thanks again to Kim Lefkowitz, Chief Marketing Officer of Ace Hardware, for joining us today. Be sure to subscribe, rate, and review the Speed of Culture podcast on your favorite podcast platform. Till next time, see you soon, everyone. Take care.