Ace Hardware is leveraging customer intelligence to compete with big box stores such as Home Depot and Lowe's and other cooperatives such as TruServ and Do it Best. The Oak Brook, Ill.-based has primarily functioned as a wholesaler in the past — purchasing merchandise in volume and redistributing it to its 5,000 independent stores. Unfortunately, that approach gave it little visibility into retail operations. Now, the company is drawing on a data warehouse to collect and analyze point-of-sale data from stores that agree to share it.

Ace's data warehouse includes information on competitors' prices, regional prices and promotions, enabling the company to optimize pricing approaches to increase profitability. Ace now advises retailers on pricing structures, which can help them raise or lower prices in certain product categories to optimize overall revenue and profit. The company also uses its data warehouse to target mailings at existing customers. Mike Altendorf, Ace's vice president of information technology, says response rates for such campaigns run between 6 percent and 20 percent -- much higher than industry averages between 2-3 percent.