Home Depot vs Ace- two vastly different ways to sell hardware.

"When you buy from a big box store, nothing happens. When you buy from a small business, a real human fist-pumps alone in a storeroom." Instagram post

"The rise of socialism is why nobody works, nobody gives a damn, 'Just give it to me. Send me money. I don't want to work — I'm too lazy, I'm too fat, I'm too stupid.'" Home Depot founder Bernie Marcus

Not that long ago, most people bought their tools, lawnmowers, and grass seed from their local neighborhood small hardware store. There were thousands of them, and they were generally locally owned and operated.

That all started to change in the 1970's with the advent of the big box stores like Wal-Mart, Target, and K-Mart that were spreading nationwide. Their low prices put many small retailers out of business, and they eventually spread to the hardware space with the introduction of Home Depot in 1978. Home Depot was followed by Lowe's and Menards and the three giants captured well over half of the entire hardware market.

This development has some benefits. The economies of scale that help other big box retailers get lower prices also helps Home Depot. They have expanded into almost all major metropolitan areas and have a wider selection than any smaller hardware store could rd ahandle. And they have a robust website that processes e-commerce efficiently better than any small business could possibly match.

But the rise of Home Depot and its ilk also has many downsides. For starters, employees at these stores are relatively low paid and untrained. Hardware stores are unlike any other retail operation. Shoppers often have questions about what to buy and how to repair something. They often would rely on knowledgeable store personnel to guide them before any purchase. That can't happen if employees don't stick around, because turnover at these stores is much higher than in small businesses. Employees have also complained about understaffing, which adds to the general stress of working for low pay and few benefits.

As with Wal-Mart, many Home Depot employees rely on SNAP benefits and Medicaid to make ends meet, which doesn't attract the professionals who would possess the knowledge that shoppers seek. Helpful employees are harder to find in these big box stores, and the one's that can be found aren't much use for complex questions. For all these reasons, Home Depot has bad ratings for service.(1.5 out of 5 from BBB, 1.8 of 5 from Consumer Affairs)

Thankfully, there has been another option to the big box takeover of the hardware space- cooperative business models. Ace Hardware was founded in 1924 and has continued on for over 100 years as a co-op business. Most Ace Hardware stores are locally owned and operated. They are not a franchise business, but as a co-op each independent owns part of the Ace Corporation and can utilize its name brand, distribution network and collective buying power.

While the prices at Ace Hardware may be slightly higher, they are still profitable thanks to their superior customer service and more knowledgeable staff. Employee and customer loyalty is higher at a co-op store like Ace, even though they are smaller in size and not able to stock nearly the same amount of merchandise. While it may take forever to find what someone wants at a big box store, Ace Hardware customers can find things in mere minutes, and can get actual help from experienced employees.

The model of big box stores is fairly straightforward- all stores are owned by the corporation and all decisions are dictated by them. Profits are concentrated at the top and employees are expendable. Little is invested in local neighborhoods, and more is instead distributed to shareholders.

Cooperatives run differently. Each owner makes his or her own decisions. Profits are kept locally and owners are free to contribute to their community. There are no shares of Ace Hardware owned by billionaires or hedge funds as it isn't publicly traded. Store owners invest in the company and reap the benefits if it does well.

Are co-ops socialist? Not exactly. But their model makes more people happy than the alternative. Home Depot, Lowes, and Menards are able to grow because of huge financial backing in the stock and bond markets, and with low prices and heavy advertising they've put a lot of competitors out of business. But not Ace Hardware, who's doing just fine with over 5600 stores worldwide.

A cautionary tale involves the other cooperative hardware store- True Value. In 2018 True Value was taken over by private equity and the coop was abandoned. The result of that change was a bankruptcy filing in 2024 due to bad sales and heavy debts. In 2024 True Value was acquired by another cooperative business, Do It Best, and has since returned to its roots.

Something to think about the next time you need hardware for your next home project.

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