2021 Higher Ground Playbook

Ace Hardware's long-term retail growth strategy.

THE VIEW IS WORTH THE CLIMB THE 2021 PLAYBOOK

Superior Financial Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2021 Performance Drivers – Summary of Changes . . . . . . 7 What Is Higher Ground? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Higher Ground – 2021 Performance Driver Summary . . . . 9 Build Your Growth Plan to Higher Ground . . . . . . . . . . . . . . 10 The Retail Analytics Dashboard . . . . . . . . . . . . . . . . . . . . . . . . 11 8/18/80 – The Alternate Path to Pinnacle . . . . . . . . . . . . . . . . 11 Discovery Acceptance & Best Brands . . . . . . . . . . . . . . . . . . 12 Ace In-Stock Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Consumer-Relevant Store . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Overall Customer Satisfaction (OSAT) . . . . . . . . . . . . . . . . . . 18 Training Hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Employee Engagement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Business to Business (B2B) . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Ace Rewards Scan Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Acehardware.com Fulfillment . . . . . . . . . . . . . . . . . . . . . . . . . 26 Table of Contents

When you reach Pinnacle, the view is worth the climb

94%

of Pinnacle Retailers have a RETAIL GROWTH PLAN

PINNACLE RETAILERS…

the training for their people Employee Engagement Scores 5X 90 % PROVIDE EARNED

85 % HAVE AN

Overall Customer SATISFACTION RATING

66% SCAN RATE HAVE A

4 SALES REACH SAW FAMOUS FOR $1,083,584

ACE REWARDS

($364K more than Visionary stores)

(53% higher than Visionary stores)

14.3 % $87,000 in acehardware.com sales AVERAGED HAVE (2X more than Visionary stores)

94 %

ARE

OF TOTAL SALES FROM B2B CUSTOMERS (32% higher than Visionary stores)

“IN STOCK”

Superior Financial Results = higher top line + fatter bottom line + greater return!

‘20 RETAIL PERFORMANCE OF ACHIEVERS Superior Financial Results = higher top line + fatter bottom line + greater return! Superior Financial Results = higher top line + fatter bottom line + greater return! i e + greater eturn! Superior Fina ci l Result = higher top line + fatter bottom line + greater etu n! i Fin ia u ts hi top li e + fatt r o t m

Retail Performance of ‘20 Achievers Retail Performance of ‘20 Achievers etail f m n e of ‘20 chi ve s Retail P rfo mance of ‘20 Achievers

Ace Brande

Ace Branded ce B d Ace Brande

Visionary

Visionary i

Visionary r

FY 2020: JAN – DEC ‘20 vs. LY

FY 2020: FY 2020: JAN – DEC ‘20 vs. LY JAN – DEC ‘20 vs. LY FY 2020: JAN – DEC ‘20 vs. LY FY 2020: J – D C ‘ 0 vs. LY

JAN – DEC ‘20 vs. LY FY 2020: JAN – DEC ‘20 vs. LY FY 020: J – D C ‘ 0 vs. LY FY 2020: JAN – DEC ‘20 vs. LY

FY 2020: FY 2020: JAN – DEC ‘20 vs. LY

JAN – DEC ‘20 vs. LY FY 2020: JAN – DEC ‘20 vs. LY

FY 2020: FY 2020: JAN – DEC ‘20 vs. LY Y 0 : J – D C ‘ 0 vs. LY

FY 2020: JAN – DEC ‘20 vs. LY

FY 2020: FY 2020: JAN – DEC ‘20 vs. LY JAN – DEC ‘20 vs. PY FY 2020: JAN – DEC ‘20 vs. LY Y 20 0: J – D C ‘ 0 vs. LY

2 1 29.1% 11.3% 29.1% 11.3% 27.4% 27.4%

29.1% 11.3% 27.4% 2

29.1% 11.3% 27.4%

Sales

Sales l

Sales

23. %

23.2% .

23.2% 23.2% 8.6% 8.6% 22.3% 22.3%

24.5%

24.5% . 24.5% 8.8% . 8.8% 24.0% . 24.0%

24.5%

27.4%

27.4% . 27.4% 9.7% .7 9.7% 25.7% . 25.7%

27.4%

Trans Tra s Sales GP $’s G ’s Trans GP$s

Trans

8.6%

8.6% .

8.8%

9.7%

GP $’s

22.3%

22.3% .

24.0%

25.7%

© 2020 Ace Hardware Corporation. All Rights Reserved. Proprietary and Confidential © 2020 Ace Hardware Corporation. All Rights Reserved. Proprietary and Confidential. © 2020 Ace Hardware Corporation. All Rights Reserved. Proprietary and Confidential © 2020 Ace Hardware Corporation. Al Rights eserved. Proprietary and Confi ential © 2020 Ace Hardware Co poration. All Rights Reserved. Propri tary and Co fidential

LET’S KEEP CLIMBING TOGETHER

2021 Performance Drivers – Summary of Changes Some minor changes to Higher Ground key performance indicators have been implemented for 2021. All drivers are the same with a few calculation changes and new achievement parameters. Ace Rewards Scan Rate What’s Changing: 1.The Higher Ground Scan Rate metric will now include house accounts in addition to cash transactions 2.The use of courtesy cards will not be counted toward the Scan Rate calculation. This metric will continue to be calculated on a rolling 12-month basis and can be achieved any of the following ways: • Scan the Ace Rewards key fob • Look up the customer by their phone number • Scan the Ace Hardware mobile app on EVERY transaction Why? These enhancements are based on retailer feedback to give credit for house accounts while preventing artificial inflation of overall Scan Rate through courtesy cards. Overall Customer Satisfaction (OSAT) What’s Changing: The minimum survey requirement for Overall Customer Satisfaction (OSAT) increased from 40 to 80 surveys in a rolling 12-month cycle. The score requirements remain the same to reach Platinum or Pinnacle. Why? Higher survey counts mean more meaningful and reliable customer feedback. Employee Engagement What’s Changing: A new 5-survey minimum for Employee Engagement during the month the survey is open to the store is being implemented. The score requirements remain the same to reach Platinum or Pinnacle. Why? Stores that complete Employee Engagement with 5 or more surveys can capture a better rating of the emotional commitment the employees have to the business. Acehardware.com Fulfillment What’s Changing: Two days are added to Acehardware.com Fulfillment. Now you must remain active in BOPIS, BODFS and Assembly every day the store is open in the calendar year 2021. An exception exists allowing a maximum of 12 inactive days when you can turn off any one of the services in My Store. Why? Providing two extra “free” static days per year aligns with the Delivery Day of the Week Exclusion (one static day per week) and Delivery Date Exclusion (now one static day per month). Discovery Acceptance What’s Changing: There is a small calculation change to using QOO from SAP (store ordering system) instead of the nightly transmitted inventory record. Why? This makes the calculation reflect orders shortly after placed instead of waiting until they are close to delivery. Best Brands What’s Changing: This calculation now makes STIHL Elite Dealers exempt from carrying EGO. If you do carry both, you will get credit for both. If you do not carry EGO, it will appear restricted in RAD perspective and will not negatively impact your Best Brands Acceptance percentage. Also new for 2021, stores not approved for the STIHL full line program will no longer be measured against the STIHL BER program. The STIHL full line program will continue to impact Best Brands Acceptance when your market is approved for the full line program.

What Is Higher Ground?

Higher Ground is Ace’s long-term Retail Growth Strategy, lasting from 2020–2024 and taking us through our 100th anniversary. Ace’s continued growth over the next 100 years will come from More and Better Stores, improving the performance of those in existence and opening up more stores to serve our communities.

Pinnacle Performance Retailing (Better Stores) Improve store performance by utilizing prescriptive, store-specific growth plans and Higher Ground performance drivers. With a new, stronger playbook and thousands of retailers committed to growth, we can achieve retail revenue of >$20 billion by 2024. Here is how it works… 3 performance levels: • Visionary – A commitment to growth and desire to climb. • Platinum – Achieving the first-tier store performance level (the climb has begun). • Pinnacle – The top store performance level (the view is best from here). Each level is achieved by hitting 7 of 9 performance drivers. The targets increase between Platinum and Pinnacle and require stronger performance at retail. Pinnacle performance is achieved by hitting a minimum of 7 of 9 Pinnacle targets. Platinum performance is achieved by hitting a minimum of 7 of 9 Platinum targets. (Higher Ground performance drivers and targets on the following page) 8/18/80 – The Alternate Path to Pinnacle Any store achieving both strong financial performance and high customer satisfaction will be recognized as a Pinnacle-performing retailer by reaching or exceeding the following three targets: 8% Earnings Before Interest & Taxes (EBIT) 18% Pre-Tax Return on Equity (ROE) 80% Overall Customer Satisfaction (OSAT)

Accelerate Store Growth (More Stores)

Since the launch of 20/20 Vision in 2013, Ace retailers have opened 408 branch stores. For the first time in Ace history, multi-store retailers make up the majority of Ace owners. Our goal is to open 800 more stores over the next five years. For those who have a vision to open additional stores, we have the tools and resources to help you grow. Getting Started: • Retail investments exist that include inventory incentives and loans to open a new store. • T he Ace Corporate Support Team will assist every step of the way, including application, operational support, marketing and training. • Contact your District Manager or Territory Representative about your interest in opening a new location.

Higher Ground – 2021 Performance Driver Summary

Reach 7 of 9 Platinum targets

Reach 7 of 9 Pinnacle targets

Platinum

Pinnacle

Pinnacle Target

2021 Performance Driver

Platinum Target

Quality 1. Discovery Acceptance & Best Brands

≥ 70% Discovery Acceptance and ≥ 70% eligible Best Brands ≥ 93% Renovation in Last 8 Years or Alt Path: achieve OSAT + Discovery Acceptance + Best Brands 80 surveys minimum in a rolling 12 months and an OSAT Score >=80% ≥ 10 hours Complete at least 5 Employee Engagement Surveys per year and achieve or exceed a 70% engagement score B2B YOY Growth >5% or B2B Sales % to Total >15% ≥ 50% Participate in all three: BOPIS, BODFS, Assembly

≥ 80% Discovery Acceptance and ≥ 80% eligible Best Brands ≥ 95% Renovation in Last 8 Years or Alt Path: achieve OSAT + Discovery Acceptance + Best Brands 80 surveys minimum in a rolling 12 months and an OSAT Score ≥85% ≥ 15 hours Complete at least 5 Employee Engagement Surveys per year and achieve or exceed an 80% engagement score B2B YOY Growth >7% or B2B Sales % to Total >20% ≥ 65% Participate in all three: BOPIS, BODFS, Assembly

2. Ace In-Stock Percentage 3. Consumer-Relevant Store

Service 4. Overall Customer Satisfaction (OSAT)

5. Training Hours (customer-facing assoc.) 6. Employee Engagement

Convenience 7. Business to Business Sales (B2B)

8. Ace Rewards Scan Rate 9. Acehardware.com Fulfillment

Alternate path to Pinnacle = Achieve all three targets: 8% Earnings Before Interest & Taxes (EBIT) 18% Pre-Tax Return on Equity (ROE)

Overall Customer Satisfaction (OSAT)

80%

Build Your Growth Plan to Higher Ground

Our competition continues to raise the bar, and consumer behavior continues to change. It is critical to adapt and elevate performance to drive continued growth. The first part of this process is to build a plan to get there. Every Ace retailer is different, and the Retailer Growth Planning process will allow you to build a specific, prescriptive and flexible growth plan to outline your path up the mountain to Higher Ground.

The Retail Analytics Dashboard houses everything you need to Diagnose , Develop and Deploy your plan. Your Ace Field Team is ready to assist you as you build your growth plan and cast your vision to your team.

Diagnose – Identify opportunities through an assessment of your business • Access the Retail Analytics Dashboard (ACENET > Analytics Dashboard). • R eview the Higher Ground performance drivers, which outline the primary Ace focus areas and growth opportunities within our differentiators of Quality, Service and Convenience. • R eview the Operations tab on the Retail Analytics Dashboard for other operational health metrics to get a better understanding of the state of your business. • Consider any other opportunities for growth, including initiatives local to your store and community. 1

Develop – Build and document your growth plan • O n the Retail Growth Plan tab in the Retail Analytics Dashboard , input your growth targets, plans for new store growth and long-term goals. • A fter determining your largest opportunities for growth through the Diagnose phase, input your focus initiatives in the Action Plan section. • D efine three to five initiatives as priorities and set realistic deadlines. • The template will provide pre-populated action steps when an Ace initiative is selected from a list of options. • Select “Other” if you would like to self-define a local initiative.

3 Deploy – Put your growth plan in motion

• Cast your vision to your team to build consensus and collaboration for higher Employee Engagement. • Review your plan and progress with your team quarterly and modify as needed. • Communicate and celebrate each time a goal is completed. A Higher Ground Progress Report will be emailed monthly, providing Pinnacle Performance status, a snapshot of your operational metrics and elements of your store-specific growth plan.

The Retail Analytics Dashboard

The Retail Analytics Dashboard is a consolidated view of the operational and performance metrics that measure the health and success of your business, all in one place and easily accessible (ACENET > Analytics Dashboard). Operations Tab Looks at the functional areas of your business: Inventory, Marketing/Promotions, People, B2B and Financial. The Key Performance Indicator Progress bars are color coded to tell you how well you are doing in each area and show show opportunities for improvement. You will have visibility to your performance on all nine Higher Ground performance drivers. Performance Tab This contains the major Retail Performance metrics year to date along with a three-year trend, which are

updated daily with the ability to drill down to Department or Merchandise Class to see what is driving increases or decreases. Also available is benchmarking by Peer Group and Territory. Summary Tab A summary of both the Operations and Performance metrics is especially useful for multi-store retailers with the ability to export to Excel or to click through to a specific store. Retail Growth Plan Tab For 2021, a new tab will be created to house your individual store growth strategy and plan for action. For more information, click on the “User Guide” link in the upper left-hand corner of the dashboard, or visit Ace Learning Place and search for Retail Analytics Dashboard.

8/18/80 – The Alternate Path to Pinnacle Any store achieving both strong financial

18% Pre-Tax Return on Equity (ROE) Pre-tax ROE measures the profits made for each dollar from shareholders’ equity. This is a two-part ratio bringing together your income statement and balance sheet where net income is compared to shareholder’s equity, expressed as a percentage. This metric can be calculated at the chain level. ROE = Net Income ÷ Shareholder’s Equity. 80% Overall Customer Satisfaction (OSAT) OSAT measures how satisfied customers are with the overall experience of your store. Customers rate your store on a scale of 1–5. The Pinnacle target for this alternate path is ≥80%, meaning 80% of the time you score 5s.

performance and high customer satisfaction will be recognized as a Pinnacle-performing retailer by reaching or exceeding the following three targets:

EBIT 18% Pre-Tax ROE

80%

OSAT

Pinnacle achievement is based on the prior year’s completed financials of these metrics. 8% Earnings Before Interest & Taxes (EBIT) EBIT, also called operating profits, looks at your business’s profitability by subtracting expenses from revenues. The important thing to keep in mind is that you do not include interest and taxes when calculating EBIT. This metric is calculated at a store level. EBIT = Net Sales – Cost of Goods Sold (COGS) + Patronage Dividends – Total Operating Expenses. EBIT as a % of Net Sales = EBIT ÷ Net Sales.

1 PERFORMANCE DRIVER: Discovery Acceptance & Best Brands

Discovery Acceptance is the percent of recommended planogram SKUs that are carried by a store. Best Brands acceptance is the number of eligible Best Brands that are carried by a store.

Platinum Target: >=70% Discovery Acceptance AND >=70% of Best Brands the store is eligible to carry Pinnacle Target: >=80% Discovery Acceptance AND >=80% of Best Brands the store is eligible to carry Why is Discovery Acceptance important? Maintaining an optimized, differentiated and consumer-relevant product assortment is critical to a store’s ability to fulfill Ace’s Helpful promise.

Stores with > 80% Discovery Acceptance have significantly greater YOY Sales Growth than those with less

4.9%

2.6%

1.4%

0–60%

60–80%

>80%

Discovery Acceptance

Discovery Assortments provide: • Nationally recognized and differentiated brands • The latest innovation and on-trend products • Optimized space productivity • Merchandising strategies that enhance the customer’s shopping experience

Sales Per Store by # of Best Brands Carried

$2,743,470

$2,074,092

$1,659,119

6 or less brands

7–8 brands

9–11 brands

# of Best brands carried # of Best Brands that are Carried (based on stores 8k–12k sq ft )

(stores 8k-12k sq. ft.)

Why are Best Brands important? Offering high-quality, differentiated brands to our customers is critical to our Retail Growth Strategy. Aligned with our Famous for Four strategy, Best Brands continue to fuel significant growth and provide some immunity from discount websites and big-box competitors. When comparing Ace stores of similar size and format, the stores carrying all or most of the Best Brands have significantly higher sales productivity. Take Action Carrying a high number of Discovery SKUs and differentiated Best Brands equates to stronger performance. This combination keeps the store relevant at a time when being fresh and differentiated matters more than ever. To evaluate your Discovery Acceptance opportunity: Check your Discovery Acceptance on the Retail Analytics Dashboard. Click the number to drill down and view which departments offer the biggest opportunity. Run the POG Discovery Acceptance Report (C-MER-F0090) in Ace Data Warehouse to quickly identify categories that need attention; focus on flagship and high-traffic categories first. Review the Discovery Edge Level 3 programs as well as the quarterly Discovery Edge Level 2 programs. Best Brands fuel growth. If you’re not carrying all the Best Brands, start harnessing their power now:

Go to ACENET > Growth Drivers > Famous for Four for more detail on each brand. Follow the necessary steps to bring in any of these brands you don’t currently stock.

How is it measured? Platinum Target: ≥70% Discovery Acceptance AND ≥70% of Best Brands the store is eligible to carry over a rolling 12-month period. Pinnacle Target: ≥80% Discovery Acceptance AND ≥80% of Best Brands the store is eligible to carry over a rolling 12-month period. Discovery Acceptance applies to all Discovery Planograms across all departments.

Best Brands in 2021 Are:

The chart below explains how the Best Brands carried based on eligibility works

Best Brands Carried

9 10 11

11% 22% 33% 44% 56% 67% 78% 89% 10% 20% 30% 40% 50% 60% 70% 80% 9% 18% 27% 36% 45% 55% 64% 73%

n/a n/a n/a

100% 90% 82%

Eligible Best Brands

10 11

91% 100%

100%

Platinum ≥ 70%

Pinnacle ≥ 80%

In-Stock Percentage is the highest-level indicator of your overall inventory management health. It is a measurement of how often you’re meeting your customers’ needs by having the right product in stock when your customers want it. A healthy In-Stock Percentage helps eliminate wasted labor and lost sales. 2 PERFORMANCE DRIVER: Ace In-Stock Percentage

Pinnacle Target

Platinum Target

≥93% In-Stock

≥95% In-Stock

Why is Ace In-Stock Percentage important? Customers expect you to have the product they need, when they need it and in the right quantities. • Consumers frequently switch to competitors if an item is out of stock and associates cannot locate it in a different area of the store. • The opportunity cost of each out in your store is 58 cents a day in lost sales (Ace study). • For the past 10 years, stores that have fully implemented the Ace recommended Minimum Order Points have seen 50% better sales on those items than stores that do not implement the recommended quantities. Your inventory is fed to acehardware.com. Revenue from acehardware.com grew massively in 2020 — growing over 272%. With more customers comparing your quantity on hand to your competitors, it’s more important to be in stock. Ace In-Stock Percentage also helps you identify other operational issues. • Why did you run out of stock on a particular item? • Do you have the right project quantities? • Are you flagging items as store closeout in a timely manner? • Do the items have the correct location codes? Take Action On a weekly basis, access the Ace In-Stock Report through the Retail Analytics Dashboard on ACENET > Analytics Dashboard. Review all A, B and Seasonal items as well as top lost sales opportunities for Cs and Ds. E agle for Windows users should utilize the Mango In-Stock Opportunity metric to strategically increase

quantities of items of which you consistently run out. Implement the Ace recommended Minimum Order Points.

How is it measured?

Pinnacle Target

Platinum Target

≥93% In-Stock

≥95% In-Stock

Percentages are measured over a rolling 12-month time period, and stores need to meet or exceed the target once in a calendar year to achieve Platinum or Pinnacle status.

Contact information: storeoperations@acehardware.com or 630.472.4784

3 PERFORMANCE DRIVER: Consumer-Relevant Store

The Consumer-Relevant Store Performance Driver measures a store’s execution of a renovation to bring both Discovery Acceptance and Best Brands to Platinum/Pinnacle levels within the past eight years. Pinnacle Target: Execution of a store renovation within the past eight years. Why is a Consumer-Relevant Store important? Retail must innovate around three themes: Experience, Convenience and Personalization. Completing a store renovation accomplishes these necessities. The retail industry standards suggest stores should be renovated every five to seven years to remain relevant in the marketplace. Keeping up with the right products, layout, signage and décor

makes the shopping experience more convenient for your customers and more profitable for you.

Stores that have been renovated in the past two years have experienced an average sales increase of 7.2% in the first year following the renovation.

Renovations employ a holistic approach to make sure both merchandise and environment are well thought out, well maintained and well presented. The result is a refreshed store and merchandising plan that optimizes category placement, leverages adjacencies and power aisles, incorporates proper pricing strategies, and increases sales space for Best Brands and local niches.

Take Action T alk to your Ace Field Team member about your vision for a Cornerstone store renovation. Cornerstone is Ace’s new store concept for today and tomorrow. It aims to improve store-level economics, differentiate through experiential retailing, optimize assortment and space utilization, improve operations and fulfill our brand promise of Helpful.

R eview the Return on Investment Calculator and options for store improvement loans with your Ace Field Team member.

How is it measured? Pinnacle Target

To qualify as a Consumer-Relevant Store, a store must have executed a renovation to bring both Discovery Acceptance and Best Brands to Platinum/Pinnacle performance levels and have had it completed within the past eight years. The renovation must include a new store floor plan and/or an Ace-approved merchandising plan to ensure optimal category placement within the new store plan. New stores and conversions automatically qualify. Alternate Path Stores that meet or exceed the Platinum or Pinnacle targets for Overall Customer Satisfaction (OSAT), Discovery Acceptance and Best Brands will have achieved a Consumer-Relevant Store without needing to complete a renovation in the past eight years. This Alternate Path recognizes performance in two key consumer-relevant areas (Place and Product). • P latinum Target: Achieve Platinum levels for all 3 drivers: OSAT + Discovery Acceptance + Best Brands. • P innacle Target: Achieve Pinnacle levels for all 3 drivers: OSAT + Discovery Acceptance + Best Brands.

Platinum

Pinnacle

OSAT

≥ 80%

≥ 85%

Discovery Acceptance

≥ 70%

≥ 80%

Best Brands

≥ 70%

≥ 80%

Contact information: storereno@acehardware.com

4 PERFORMANCE DRIVER: Overall Customer Satisfaction (OSAT)

The Overall Customer Satisfaction Performance Driver is a question on the Customer Engagement Survey that measures how satisfied customers are with their overall experience in your store.

Pinnacle Target

Platinum Target

OSAT Score ≥80%

OSAT Score ≥85%

Why is Overall Customer Satisfaction important? Understanding how satisfied your customers are gives you valuable insight into what you’re doing well and where you have areas of opportunity. Overall Customer Satisfaction is the key component of the larger Customer Engagement Survey. It brings everything about the customer experience together into one simple question:

Please rate your satisfaction with your overall experience at our store.

The eight key drivers of Overall Customer Satisfaction are:

Associate Positive Attitude Associate Assistance Received

Ace Always Delivers on Its Promise

Problem-Free Experience Product Quality

Product Selection

Ease of Finding Products

Speed of Checkout

3.4% YOY Sales by OSAT Score Stores with higher Overall Customer Satisfaction Scores have higher sales. 3.7% 3.0%

1.7%

1.3%

0.2%

70–75

75–80

80–85

>90

<70

85–90

OSAT Score

Take Action Sign up for the Customer Experience Survey (Talk to Ace) program by going to the Customer Insights Enrollment and Maintenance Portal: https://acehardwareregistration.gallup.com/ Visit the Retail Analytics Dashboard and click on Overall Customer Satisfaction to see your score. Use the OSAT Playbook at www.bit.ly/OSAT_Playbook as a best practice guide to identify your opportunities and take action. The OSAT Playbook is also located on the Helpful Experience Dashboard under the Resources tab: https://acehardware.medallia.com/acehardware/ OR on ACENET > Manage My Store > Helpful Experience Programs. Use surveys to recognize employees by sharing positive feedback, posting praise to bulletin boards, etc.

How is it measured?

80 surveys minimum in a rolling 12 months and an OSAT Score ≥80%

80 surveys minimum in a rolling 12 months and an OSAT Score ≥85%

Pinnacle Target

Platinum Target

Overall Customer Satisfaction is scored on a scale of 1–5. The Platinum/Pinnacle targets represent the percentage of customers who rate a store a “5.” For example, your store collects 100 surveys and 90 customers give you a 5 on the overall satisfaction question. Your Overall Customer Satisfaction Score is 90%. Stores must collect a minimum of 80 surveys over a rolling 12 months. Stores must meet or exceed the target once in the calendar year to achieve Platinum or Pinnacle status.

Contact information: storeoperations@acehardware.com or 630.472.4784

5 PERFORMANCE DRIVER: Training Hours

The Training Hours Performance Driver reflects how much time you invest in training and developing your team.

An average of 10 training hours or more

An average of 15 training hours or more

Pinnacle Target

Platinum Target

Why are Training Hours important? Giving our customer-facing associates the training they need to be successful is a fundamental component of our vision to be the best, most helpful hardware stores on the planet.

Proper training also provides a path to increased sales. Stores that train more, sell more.

$ 37.50

Customers who receive assistance spend 56% more (over $13) per transaction.

$ 24.09

Average Ticket Customer Assisted vs Not Assisted

Not Assisted

Assisted

Ace Customer Engagement Data n=259,108

Additional Training Benefits: • A trained, knowledgeable and confident associate becomes someone who solves problems, anticipates needs and makes recommendations for customers to get everything they need in one trip. • Training improves associate retention. 20% of turnover happens in the first 45 days, BUT 69% of associates are likely to stay for three years or more when their onboarding experience is great. *

* Source: O.C. Tanner.An Onboarding Checklist for Success: 6 Engagement Strategies for the First Year. https://www.octanner.com/insights/articles/2018/9/14/an_onboarding_checkl.html

A ppoint a Training Coordinator to assign Learning Plans by Role and keep your team’s profiles up to date on Ace Learning Place. R eview your onboarding process for new associates. Learn more about the prescriptive Passports for Sales Associates and Cashiers, and their implementation, by visiting the Learning Plans by Role information page on Ace Learning Place. Set up your single sign-on in Ace Learning Place by updating your ALP username to match your ACENET username. F or your existing associates, assign the appropriate assessment to take, then build their annual training plan based on the results. S upervisors should use the “Add In-Store Training” option in Ace Learning Place to enter any in-store training. W ant to dig deeper into your training needs? Contact your Professional Retail Services Team at prs@acehardware.com. Take Action Make training part of your everyday activities with the numerous learning experiences available – just 5 minutes of training a day can help you reach your Pinnacle Goal!

Learning Experiences

Professional Retail Services In-store training and workshops

Ace Learning Place Self-directed training

One to Many Group training, vendor training

Practice/Shadowing Learning in the aisle

Mentoring/Coaching Feedback on job performance

How is it measured? • Platinum Target: An average of 10 training hours or more per customer-facing associate during the last 12 months. • Pinnacle Target: An average of 15 training hours or more per customer-facing associate during the last 12 months.

Total training hours for active customer-facing associates Total active customer-facing associates =

Average training hours

Stores must meet or exceed the target once in the calendar year to achieve Platinum or Pinnacle status. Note: “Customer-facing associates” are those who are selected by you in Ace Learning Place. Each role that has the customer-facing field selected will count toward the training hours calculation.

Contact information: acetrain@acehardware.com or 630.990.1682

6 PERFORMANCE DRIVER: Employee Engagement

Sign up for Employee Engagement by going to the Helpful Experience Enrollment and Maintenance Portal: https://acehardwareregistration.gallup.com/ V isit the Retail Analytics Dashboard and click on Employee Engagement to see your score. C ommunicate to associates two weeks before it starts, and keep the survey open long enough for all associates to take the survey. Once you have your results: M eet with your leadership to review your results and develop your action plan by starting with your biggest areas of opportunity. Recommended action plans will be provided based on your results. P resent results to your associates within two weeks; sharing results builds confidence in the process. Focus on the wins your store had, not just the opportunities. U pdate your action plan every month and post in your breakroom. C ommunicate all the achievements and areas of continued focus to your team.

The Employee Engagement Performance Driver is a measurement of the emotional commitment associates have to your store and your goals.

≥70% Engagement Score

≥80% Engagement Score

Pinnacle Target

Platinum Target

Why is Employee Engagement important?

ENGAGED EMPLOYEES MAKE MONEY When associates like where they work and what they do, everything else falls into place. At Ace, when associates are engaged, stores see 22% higher profitability and an 18% improvement in customer retention. Across All Retail: • E ngaged employees have greater productivity than disengaged employees. –Workplace Resource Foundation • H ighly engaged departments within an organization realize 21% greater productivity. –Gallup DISENGAGED EMPLOYEES COSTMONEY Conversely, disengaged employees cost you money. For each $10 hourly associate you lose, it costs nearly $3,400 in productivity, recruiting and training costs. This represents a significant financial impact, considering higher turnover results from a disengaged workforce. With all the data showing the correlation between stronger engagement and better results, it’s imperative to have an accurate measurement of where you stand and what you need to improve. The Employee Engagement Survey measures your associates’ degree of enthusiasm for their work, and dedication to their coworkers and the company. The goal of Employee Engagement is not simply to take a survey and receive a score – it’s specifically designed to help you listen to what your people are telling you and make improvements. Take Action

How is it measured?

Complete at least 5 Employee Engagement Surveys per year and achieve or exceed a 70% engagement score Complete at least 5 Employee Engagement Surveys per year and achieve or exceed an 80% engagement score

Platinum Target

Pinnacle Target

The Employee Engagement score is a percentage determined by the average rating, on a 5-point scale, of all responses to the survey. For example, if the average score for your team was 3.5 out of 5.0, this would be a score of 70%. The survey may be taken multiple times with a minimum of five responses per the survey month, and the highest score will be used. Stores must meet or exceed the target once in the calendar year to achieve Platinum or Pinnacle status.

Contact information: storeoperations@acehardware.com or 630.472.4784

7 PERFORMANCE DRIVER: Business to Business (B2B) The Business to Business Sales Performance Driver measures the year-over-year business customer sales growth OR business customer sales as a percent of total sales.

B2B YOY Growth >5% or Sales % to Total >15%

B2B YOY Growth >7% or Sales % to Total >20%

Pinnacle Target

Platinum Target

CONNECTING LOCAL TO LOCAL Businesses are all around us, and we want to be proactive and take B2B to the next level by building relationships with customers who need a trustworthy partner to provide solutions for their business. Treat your business customers with the same great customer service you provide your DIY customers. Business customers spend twice as much per transaction and shop three times more frequently than DIY customers. B2B also has less seasonality, so sales are more consistent year-round. Stores that have more than 20% of their sales going to business customers (Pinnacle target) are seeing even more spend from their B2B customers.

Average Yearly Visits Per Spend Spend Year

DIY

$29

$266

ALL B2B

$59 $81

$1,772 $3,598

30 44

B2B Over 20%

Whether you are new to B2B or are ready to take it to the next level, Ace has the resources you need Select your path, and leverage your District Manager and B2B Team along the way

Grow relationships with existing business customers

How is it measured?

D ownload the B2B Roadmap from Ace Learning Place under “Business to Business” and take the courses associated with the B2B “Go Time” training. Make B2B part of your store’s culture and operations; segment business customers. Train your staff to engage business customers in store with the Ace Learning Place course: B2B In-Store Experience. Proactively engage business customers and go on outside sales calls; leverage the Ace Learning Place courses. Engage your Ace Field Team member for additional information and sales call support. Take B2B to the next level Watch the video on the ACENET B2B page and leverage resources at: ACENET > Growth Drivers > Business to Business. Learn more about the focus areas of National Accounts and B2B on AH.com with the ALP course: B2B National Accounts and Acehardware.com. Focus on Back to Business reopening supplies with new and existing business customers. Leverage monthly product opportunities, sales collateral and tips with Multifamily Property Management customers. It is important that your business customers are segmented to achieve Platinum/Pinnacle status.

B2B YOY Growth >5% or B2B Sales % to Total >15%

Platinum Target

B2B YOY Growth >7% or B2B Sales % to Total >20%

Pinnacle Target

Percentages are calculated over a rolling 12-month period. Stores must meet or exceed the target once in the calendar year to achieve Platinum or Pinnacle status. Stores must have a minimum of 25 segmented business customers.

Business to Business Team: B2B@acehardware.com or 630.990.8321

Contact information: acerewards@acehardware.com

8 PERFORMANCE DRIVER: Ace Rewards Scan Rate

The Ace Rewards Scan Rate Performance Driver measures what percent of total transactions are from Ace Rewards members. This includes any transaction where an Ace Rewards number is associated.

Why is the Ace Rewards Scan Rate important?

Scan Rate is so important because in order to use your marketing dollars 100% effectively, we need your customers’ transactional data. When your cashiers collect customer data at checkout, they are growing the Ace Rewards customer database. This gives us the ability to market smarter by sending highly targeted promotions to your customers and increasing same-customer sales at your store. • Ace Rewards generated $7.6 billion in same-customer sales in 2020. • Ace Rewards cash customers spend 18% more than non-Ace Rewards cash customers: $30.90 vs. $26.21. • Ace Rewards customers average nine transactions per year. It is critical to understand that if a customer’s transactional data is not captured during checkout, we do not know they ever came in and shopped. This means these customers can go into inactive status, and Ace Rewards will no longer communicate to them through our targeted promotions – even though some of them may be your BEST customers. This would be a huge missed opportunity! In addition, this data helps inform our digital marketing spend, which will be increasing over the next five years. To make that customer data go to work for your store, you must opt in at 100% to all available promotions on the Promotions Grid. This data will flow through very strategic segmentation and turn into highly personalized promotions delivered to the right customers at the right time – with the goal of driving them back to your store. Stores that increased their participation to a 100% opt-in saw a 4% increase in total year-over-year sales.

What is the goal?

Platinum Target

Ace Rewards Scan Rate ≥50%

Pinnacle Target

Ace Rewards Scan Rate ≥65%

As a reminder, Ace Rewards Scan Rate is calculated by dividing the total number of Ace Rewards transactions (cash and house) by the total number of transactions (cash and house). This number is calculated as a rolling 12-month metric. Stores must meet or exceed the target once in the calendar year to achieve Platinum or Pinnacle status. In order to reach your Scan Rate goal, it is important to: Diagnose – Where are you at today? Develop – What is your plan to reach your goal? Deploy – Set your plan in motion!

Take Action Ensure cashiers are asking for Ace Rewards member ID, customer phone number, key fob or mobile app on every transaction. For instructions on how to add House Accounts to Ace Rewards, visit ACENET > Marketing > Ace Rewards Program > Retail Execution Guide > House Accounts. Check your Scan Rate regularly. For Epicor users, run the RLC Report that shows each cashier’s performance in terms of loyalty. Please note: There will be a temporary discrepancy between the RLC Report and Retail Analytics Dashboard until we can add House Accounts and remove courtesy cards. View the Retail Analytics Dashboard to obtain current Scan Rate and view current campaign opt-in percentages. Opt in at 100% to all available promotions on the Promotions Grid in Ace Rewards Maintenance.

Contact information: acerewards@acehardware.com

9 PERFORMANCE DRIVER: Acehardware com Fulfillment

Why is it important to offer these accretive services to our customers on acehardware com? A fast and frictionless experience – wherever and whenever – is now a prerequisite to meet the demands of our neighbors. Customers expect convenient fulfillment options like the ones we offer. As our online customers shop your store, these services allow them to see what’s in stock, your local pricing and how quickly they can get the products they need – picked up or delivered. We’ve meshed Ace’s great physical footprint with our digital assets in a way that allows retailers to bring Helpful more seamlessly to their customers. The true power of these three fulfillment options is how they operate together. One enables another, and the greatest impact comes from combining all three into a collection of hyper-convenient services. BOPIS, BODFS and Assembly help retailers sell more product to more customers and make more money.

The Acehardware.com Fulfillment Performance Driver measures a store’s participation in services on acehardware.com that meet consumer demand – Buy Online, Pick Up In Store (BOPIS); Buy Online, Deliver From Store (BODFS); and Assembly.

Active on all three programs on acehardware.com (BOPIS + BODFS + Assembly)

Pinnacle Target

BOPIS Store Results • More money: >8,600% more e-commerce revenue than those not on the program • More footsteps: >80% of all orders placed on acehardware.com are picked up in store • Incremental sales: >50% of BOPIS orders are fulfilled from RSC

BODFS Store Results • Higher sales: 198% higher sales than non-BODFS stores • Higher tickets: Average order value 3.5x higher than the average acehardware.com order, with and 2x higher average profit per order • Reengagement: 53% of Ace Rewards members come back in store post-purchase an average of 5x after their BODFS order and spend >$43 per transaction

Assembly Stores • Higher tickets: Delivery orders with assembly have 4x higher average order value • More orders: Customers placing orders with Assembly without, go on to place an average of 15% more additional orders post purchase than those who do not choose Assembly • Higher profit: An order with both Assembly & Delivery on it makes, on average, 752% more product margin $ than an average BOPIS order

Sales through June 2019

Take Action C omplete the agreement to participate in BOPIS, BODFS and Assembly (ACENET > Marketing > acehardware.com > BOPIS, BODFS and Assembly) C omplete training located on Ace Learning Place G et the most out of easy and optimized in-store order fulfillment by using the Ace Retailer Mobile Assistant (ACENET > Manage My Store > Retail Technology > Ace Retailer Mobile Assistant) P erformance matters! Strive to validate stock on new BOPIS orders in <1 hour 100% of the time and keep your inventory/In-Stock Accuracy >94%. Keep a performance pulse using the helpful RAD tracking (ACENET > Analytics Dashboard > acehardware.com) U se the Delivery Day of Week Exclusion tool in My Store to set one static day per week to not offer Delivery (this does NOT count against 12 max inactive days) (ACENET> Marketing > acehardware.com > My Store > Fulfillment > Delivery and Assembly) U se the Delivery Date Exclusion tool in My Store to opt out of up to 12 days of your choosing to not offer Delivery (this DOES count against 12 max inactive days) (ACENET > Marketing > acehardware.com > My Store > Fulfillment > Delivery and Assembly)

How is it measured? • Pinnacle Target: Active on all three programs on acehardware.com during the calendar year achieves Pinnacle performance. A Platinum level doesn’t exist within this driver.

Buy Online, Pick Up In Store Buy Online, Deliver From Store Assembly

A store must remain active in all three services every day the store is open in the calendar year 2021. An exception exists allowing a maximum of 12 inactive days where a store can turn off any one of the services in My Store.

Contact information: ecom@acehardware.com

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