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Ace History
Ace grows through the decades: General Overview Chartering new territory: 1960-1980 Whereas the 1950s were known for Americans' complacency and easy-come, easy-go lifestyles, the 1960s were known for changes–and Ace Hardware was definitely a product of the times. While the country was embroiled in civil rights issues, Vietnam protests and heightening Cold War tensions, Ace continued to grow. But with this growth came unforeseen challenges. One of the ongoing challenges was the Ace Perpetuation Plan, which proposed all Ace stock be kept within the company and given to Ace dealers at the time of any founders' retirement or death. While simple in theory, the plan was complex when it came time to legally document the terms. So, in 1960, William Stauber convinced Richard Hesse to formalize the plan. Hesse and Stauber had differing views about the percentage of returns to be paid on the stock, delaying the unveiling of the final plan. In 1962 the last details of the plan were outlined, and the terms were presented to dealers. This proposal outlined that the Ace Perpetuation Fund was established to eventually purchase all Ace Hardware Corporation stock and that each dealer would eventually have one vote in the company's control in management, among other things. As Ace grew, the paperwork grew as well, and keeping up with invoices became an arduous task. Art Krausman and Carl Bicking had been looking for an opportunity to convince Hesse to purchase the company's first IBM computer system. Hesse had been hesitant to computerize because he had talked to representatives from other hardware companies who lost large sums of money in technological investments when they failed to master their computer systems. 
By the early 1960s, the invoices were so backed up, the dealers were grumbling and Krausman and Bicking spent evenings and weekends trying to catch up. Exasperated, the pair made another plea to computerize and Hesse reluctantly consented. Thus, Ace began the slow process of automating the company's accounting functions. Daily orders could be processed in one hour as compared to one day when completed manually. Plus, once the inventory was entered into the system, Ace was able to ship merchandise within 24 hours. The decision to purchase the computer system proved worthwhile and helped prepare Ace for even more intense changes. In 1961, after years of negotiating, Ace moved its warehouse and corporate headquarters to Bedford Park, Ill. The 450,000-square-foot warehouse gave the corporation much-needed space for growth. The relocation took several weeks and presented some unique challenges, namely how to transport the company's new IBM computer. The maneuver required the removal of a huge window through which the bulky system was hoisted. The new facility provided an ease of operation never before seen at Ace. It was at this time, in 1963, that Ace began looking to the southern states to increase business. Rumor had it that hardware dealers in the South were dissatisfied with the prices they were paying for merchandise. Ace officers began visiting potential Ace dealerships in Florida and Georgia and found a captive audience, ready to sign on with the Ace name. Word spread quickly across the Southeastern states and hardware dealers began to seek Ace out. With Southeast dealers up and running, Ace began eyeing other territories and the directors believed the company could consider any location west of the Rocky Mountains. High freight charges for transporting merchandise over the mountain range, however, made the move impractical. Then, in 1964, Dick Woodward, an Ace dealer who had closed his store in Kansas and moved to Southern California, announced he wanted to open an Ace store near Los Angeles. Within months, several stores in the Los Angeles area affiliated with Ace. Ace officers were so encouraged by the developments in Southern California, they started to seek out contacts in San Francisco. By the end of the decade, Ace established warehouses in Northern California and Georgia, in accordance with dealer requests, to support this extensive retailer growth. In 1968, Hesse acknowledged the changing atmosphere of the hardware industry. New merchandise techniques and concepts were evolving and new types of merchandise were being brought into stores. Hesse encouraged retailers to expand their solid hardware image by adding new lines of merchandise, such as health and beauty aids, candy and greeting cards. He also emphasized the need for strong Ace identification, expanded inventory, competitive pricing, large sales areas, ample parking, extended store hours and consistent advertising. By then, the IBM computer was paying for itself and the new teletype and data phones at the Bedford Park facility allowed dealers to place orders by phone. Equipped with advanced technology, two new distribution centers and a strong national presence, Ace headed into the 1970s. As the new decade began, the California and Georgia warehouses were making it possible for Ace to service dealers like never before and this gave Hesse a new attitude about long-distance warehousing. Because of this, Ace leased warehouse space near Portland, Ore., and opened a new facility in 1970. Ground was broken for a warehouse in Lincoln, Neb., in 1971. The largest hardware distribution center west of the Mississippi River, the Lincoln facility covered more than seven acres. At this time, Ace was able to attract dealers in nearly all of the 50 states, including Hawaii. Volume was soaring and new stores were affiliating at a rate of nearly 200 per year. Shortly after the construction of the Lincoln warehouse began, William Stauber died following an extended illness and Ace suffered a tremendous loss. Stauber had been a financial godsend to the company, often writing personal checks in the early days just to keep the corporation afloat. Immediately following Stauber's death, an audit was completed to determine the company's worth as stipulated by the Ace Perpetuation Fund Agreement. The total net book value of Ace Hardware Corporation at that time was determined to be more than $10 million. 
Then, in 1973, Richard Hesse, who had planned to remain an active director until his death, resigned as Ace president due to his failing health. Confident of Art Krausman's ability to lead the corporation, Hesse agreed to sell Ace to its retailers for $6 million–less than half its book value. The transition, which made Ace a true retailer-owned cooperative, was complete in 1976. Krausman was a populist committed to getting the dealers involved in the day-to-day operations of their company. He believed that among his first charters would be the establishment of an extended board of dealer-directors, elected by their peers. Uncertain as to how the elected board should be determined, Krausman studied the bylaws of other hardware companies and ultimately decided that the board members, who would serve three-year terms, would represent every size store in the organization. Krausman also believed that the dealers, as stockholders, owned the annual distribution of the company's profits. In April of 1974, the company bylaws were amended to establish distribution of dealer-patronage dividends. In other words, the company would start distributing its profits to the dealers in the form of a dividend payment based on the amount of merchandise the dealer had purchased from Ace in the previous year. By 1975, there was plenty to celebrate. Ace was projecting $450 million in sales. Additional warehouse locations were being investigated, a Toledo warehouse was being built and product lines were broadened. The IBM computer had been upgraded and was creating a revolution in Ace's ordering, pricing and inventory process. To top off all Ace's success, the buying and executive offices were moved to a leased space in an Oak Brook, Ill., office complex. Then, on Oct. 20, 1975, Ace Hardware received a blow to the organization. The industry mourned the loss of Richard Hesse. Hesse left Ace with a legacy of practical business sense, great prosperity and a strong sense of direction for the future. President Art Krausman eulogized his former boss and longtime friend: "His dedication was unswerving and his commitment was total." Ace Hardware spent most of the latter half of the 1970s consumed with expansion across the nation. Dealers were affiliating with Ace at the rate of 450 stores per year, and to keep up with demand, Ace leased a warehouse facility in Dallas, Texas. This expansion made automated ordering a necessity. To improve [P]rofits, [A]nalysis, [C]ontrol and [E]fficiency, the company introduced the first PACE computer system, which utilized retailer-operated minicomputers for ordering merchandise, tracking sales and analyzing purchase results. Just as the 1970s were an exciting time of unhindered expansion, the 1980s would prove to be filled with challenges for the company. From a poor economy to the loss of Art Krausman, the company would cross many hurdles–but not without its fair share of successes. |