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Ace in race to sell online

Ace Hardware is planning to launch an e-commerce site by the end of the year and is even shopping for a venture capital firm to partner with on the new venture, sources say.

Ace Hardware is planning to launch an e-commerce site by the end of the year and is shopping for a venture capital firm to partner with on the new project, sources said.

The new site, which may be named eHomeSolutions, will sell Ace Hardware home improvement products and services. Sources in the financial community say Ace Hardware plans to spin off the Internet side of the business and eventually take it public. An Ace corporate spokesperson would not comment on the e-commerce initiative, or any plan to partner with a venture capital firm.

The news comes on the heels of Home Depot's announcement this week that it intends to start selling all of its home improvement line via the Web by the middle of next year.

Oak Brook, Illinois-based Ace Hardware is a cooperative consisting of 5,100 independent hardware stores, home centers, and building material retailers that own their own businesses.

The $3.1 billion corporation now runs a content-focused Web site that provides information about the company, news, and a list of regional stores that operate their own Web sites. Though they don't sell from the sites, that may change soon.

In a letter to independent owners sent last month, Ace chief executive Dave Hodnik said the company would start selling items online by the end of the year. In the memo obtained by CNET, Hodnik said, "The venture will be a true partnership ? with Ace retailers."

He also said Ace has assigned a team to work on the project, with a plan to start signing retailers up to participate in online sales at the company's fall meeting in New Orleans.

Mixed reactions from store owners
Several Ace managers and owners interviewed by said they're skeptical about selling online, arguing their businesses are too small to support the new distribution channel. They also questioned how the Web will help boost profits and how business on the corporate site could affect their sales.

"I don't know how they could even pull it off," said Craig Montoya, manager of an Ace store in Concord, California, who said he's sat in on several heated meetings about the Web site issue. "Pricing is a major issue and then you have to have someone online full time at each store. ? Some people may not even have a PC in the store."

Montoya questioned how Ace will get the independent dealers to unite on the issue. "As a corporation, I don't know what they're thinking," he said.

Bill Wygal, a regional owner of four Ace Hardware stores, who is based in Martinez, California, said selling over the Internet could drive more business than he can handle.

"[The question is] if you sold $1,000 worth of stuff, can you handle it internally?" He said the independent stores don't have the "deep pockets" of such well-funded start-ups as online grocer Webvan that enable them to hire more people.

Additionally, Wygal, who also sells boxes for large trucks at two Ace Truckbox stores, said the cost of shipping an average $225 box ordered online to Alaska, for instance, could nearly equal the price tag. Other items are kind of silly to sell online, he said.

"You're not going to buy a set of hinges and wait a week to get them or a gallon of paint," he said. "I just hope [Ace corporate] has it figured out."

Randy Livingston, owner of the Tassajara Valley store in Danville, California, isn't waiting for corporate's plans. On September 1, he is launching an Ace e-commerce site that will sell 60,000 Ace items online.

"People who are hesitant are not visionaries," he said. "They're afraid, but you've got to take risks."

Livingston said running a Web site will enable him to target sales to specific customers, notify them when special orders are in, and better advertise new and sale items. He said he believes the extra costs to ship items and fill orders will be "nominal."

"[More business] is a good problem, not a bad problem," he said.

The home category will boom online, according to Forrester Research. The market research firm expects online sales of appliances and household goods to grow from $100 million last year to $437 million this year, and $5.7 billion by 2003, when it will account for about 7 percent of consumer purchases online.