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In this paper the changing structure of the hardware industry is presented as an example of consolidation in retailing. This is a classic example of the "big box" retailers taking market share from small independent neighborhood operations. A unique characteristic of the hardware industry is the presence of powerful retailing cooperatives (co-ops) to support independent hardware stores. Co-ops provide scale economies, and a make wide range of consulting and training support available. An adaptation of the concept of shopping goods and convenience goods is applied to the hardware industry, suggesting a viable role for both large and small competitors. A framework based upon Michael Porter's generic strategies is used to identify options for the smaller independent hardware stores. Then a number of examples of successful strategies practiced by small independent hardware stores are presented These examples, combined with our industry analysis, provide a basis for identifying critical success factors. The ultimate conclusion reached is that by exploiting critical success factors many small independent hardware stores can remain successful.
Introduction
Since the emergence of the "supermarket" in the grocery industry in the 1930's, and K-Mart in the 1960's, independent retailers have been increasingly challenged by chain stores. Economies of scale give chains a clear advantage over the small independent neighborhood stores. In the 1980's, warehouse retailers accelerated this trend. The hardware industry provides an interesting case to study the impact of the warehouse (and other "big-box") retailers upon the small independents.
The structure of the hardware industry, or as defined by the National Retail Hardware Association (NRHA), the Do-It-Yourself (D-I-Y) retail industry, has three segments: hardware stores, home centers, and D-I-Y lumberyards (NRHA web page http://www.nrha.org). The warehouse format home centers, especially industry leader Home Depot, have experienced rapid growth. In this paper, the structure of the D-I-Y retailing industry, and its restructuring and consolidation, will be examined. Home Depot's competitive strength will be reviewed to gain a better understanding of rivalry within the industry. The role of hardware retailing cooperatives in supporting the small independent stores is then discussed.
A simple theoretical framework is presented, using generic strategies, as developed by Porter (1980). The framework is used to consider strategy options available to the small neighborhood hardware store, and to provide a means...