December 13, 2006
BrainTrust Advice 2006: ‘Told You So, Home Depot’
It’s not over, but 2006 has certainly been a busy year for Home Depot.
It continued its aggressive push into the professional services market, even reaching an agreement to purchase an industrial bank (EnerBank USA). The application has been held up by the Federal Deposit Insurance Corporation (FDIC) moratorium on applications.
Home Depot has also sought to build its retail business by pushing beyond its core DIY competency to include other formats (convenience stores, gas and car washes) and product categories (home appliances, auto supplies, online advertising).
RetailWire followed the developments at Home Depot closely over the year and, as is usually the case, its BrainTrust members had a lot to say.
Focus on the consumer
“I think Home Depot should get its head out of the software and into the customer and their needs. Do some customer research. Find out the different segments of computer skills,
tendencies and affinities. Understand that no single solution is going to serve the market. Web portals with application-powered customer service are undoubtedly one of the important
areas to focus on. So is in-store service. Home Depot’s economic model is based on most people finding what they need all by themselves. The level of in-store service is horrible.
If you don’t know what and how, you wander around, lost.” – Don Delzell, Partner, Retail
Advantage
“Many graying boomers avoid Home Depot because their knees and feet can’t take the interminable walking and searching on those concrete floors. Others don’t visit HD because
they can’t tip their heads back far enough to view those itty bitty, up-high product tags through the bottom part of their bifocals. And still others simply can’t lift the larger,
bulkier, heavier items over the lip of the shopping carts. These are bedrock issues, which can’t be patched with technology. Home Depot would be one of the first to stress the
necessity of a strong foundation for construction projects. Why, then, are they not addressing cracks in their own foundation?” – Michael
Banks, Ph.D., Partner-Owner, Select Marketing LLC
Auto supplies
“It seems almost everyone thinks this is a good idea. To quote Randy Owens and Alabama — I’m sure it ‘feels so right.’ But it could well be ‘oh so wrong.’ Do the target demos
match? Of course. Do the target interests match? Maybe. Does the retailer positioning match? NO. HD may pick up the occasional motor oil or spark plug sale, but the guy who is
rebuilding his 1965 Mustang is not going to HD for a rebuilt starter motor. The credibility isn’t there — never mind the selection. This is a marginal move that will force HD
to sacrifice space and inventory that would be better devoted to reinforcing their core position as the place I can find absolutely everything I need for home DIY projects. That’s
why I’m there once a weekend.” – Ben Ball, Senior Vice President, Dechert-Hampe
Home appliances
“Lowe’s showed Home Depot that there was big money in white goods (large appliances). Home Depot has some catching up to do, and it will continue to be handicapped by the mediocre
quality of its salespeople’s performance. Sears is handicapped by two issues: (1) its reputation as a place to buy appliances only if they’re on sale and (2) its salespeople’s
reputation for having high-pressure ‘commission breath.’” – Mark Lilien, Consultant,
Retail Technology Group
Vendors buy ads on homedepot.com
“Home Depot’s on-line ads are very positive development for consumers… Vendors know far more about their products than the typical Home Depot employee. The ads will typically
highlight the feature and benefits of key items and assortments. I’ve always felt that vendors are the missing link in retailing where knowledge often must be transferred to the
shopper prior to purchase. Hopefully, Home Depot will be able to translate this innovation into more effective store-level service with more point of purchase ads through instant
messaging, kiosks, and other new technology.” – Bill Robinson, Senior Executive, QuantiSense
Discussion: Do you think the BrainTrust’s points about Home Depot’s 2006 initiatives were well taken? What advice do you have for Home Depot going into
2007?
Home Depot discussions from the RetailWire archives….
- Nardelli’s Compensation Under Review – RetailWire 9/19/06
- DIY Giants Seek Ways to Build Business – RetailWire 8/23/06
- Home Depot Gets Into Ad Sales – RetailWire 7/19/06
- Home Depot’s New Plan to Get Employee’s ‘Juiced’ for Customer Service –
RetailWire 6/26/06
- Home Depot: The One Stop Home Improvement Shop – RetailWire 5/10/06
- Home Depot Tests Auto Supply Department – RetailWire 4/13/06
- Home Depot and Others Fill in the Appliance Vacuum Left by Sears –
RetailWire 3/23/06
- Home Depot 2010 – RetailWire 1/20/06
- Home Depot Rides the Gray Wave – RetailWire 1/18/06
BrainTrust
Recent Discussions
Discussion Questions
Poll
Anyone here try to do a home project using Home Depot lately? A few years ago you could go there and find everything you needed plus some new ideas. Prices were great too. You felt like all the searching, bad help, forklift dodging, and carrying was worth it because you were discovering new stuff, like a gold miner or something.
Today it’s all the same stuff, the neighborhood hardware store often has better with real help and prices not much different. It’s like someone supplying the local guys got smart. After all, China isn’t a monopoly owned by Home Depot and Wall Mart! Sears is somewhere to the side. At least their stuff is neat and complete.
I’d state first that the housing market as the biggest area to overcome but maybe there’s an underlying problem at Home Depot that’s much bigger — customer service.
There has been a slow but steady stream of complaints over the last couple of years leading to some potential problems. Having taken on the wholesale business plus subbing out contracting work has stretched their ability to keep up with any solutions.
Recently, anecdotal evidence has shown troubles ahead regarding such instances as groups of consumers banding together for boycott-type situations. An area of complaints is a lack of backing up warranties for subcontractor work. Also, grievances have come up about a lack of customer service with their phone help.
Home Depot needs to get back to what they do best. Stick to their base if at all possible and improve service. This is a behemoth of a company so it’ll be interesting to see how they turn the ship.
While the comment above — that Home Depot should return to its tried and true formula — is true, it may not be possible, especially as a public company. Payroll has been cut to a point where the company CAN’T return to that formula, and technology can take you only so far.
It may well be that the rumored equity buy-out is the retailer’s only safe haven. Either that or a change in management, which buys it time to re-build.
Today’s announcement that HD is entering China (via acquisition) as part of a strategic ramp up of international expansion “due to US market store saturation” does not sit well. Declaring the US market saturated when Lowe’s, Tractor Supply and others continue to build new stores in HD markets has a very different — though perhaps unintended — implication.
Having friends at HD headquarters, I hear stories about the daily business happenings that are very surprising. Operations and cost-savings are critical in some areas, yet new experimental efforts come and go that bleed the company (think 10 Crescent Lane) and funds aren’t there for some of the most basic support. Even internal managers feel that the executive team needs to focus on the core business…and re-focus on the customers. The problem is that their opinions are neither empowered or cultivated.
From afar, one would wonder what will happen in the next few years if Home Depot doesn’t get buttoned up. Lowe’s is continuing to innovate and focus on consumer experience and they may eat HD’s lunch if HD doesn’t provide some new leadership approaches to the entire business.
I find it interesting that I can’t find a comment about the Hispanic customer. As US demographics change, but cultural preferences persist (as acculturation occurs pretty slowly, usually), Home Depot (and others) may wish to place greater attention on the unique product needs and shopper styles of emerging population segments.
Home Depot is doing a lot of bold talk in what seems to be intended to distract the stockholders from other issues…such has paying the CEO zillions of dollars and Home Depot wanting to reduce the amount of financial reporting figures. Home Depot is coming up with a lot of new ideas that sound flashy but time will tell if they are actually put into place — and work.
Gimmicks and marketing can’t save Home Depot; only a return to their tried and true formula can help save them from their competition and themselves.
Every new approach that is intended to drive additional business through the new formats (convenience stores, gas and car washes) and product categories (home appliances, auto supplies, online advertising) only serve to take their focus off of fixing their core business.
In my opinion, the year 2007 should be a rebuilding one for HD which means a focus on their core business and customer. That would entail them spending 90% of their energy on improving and enhancing their execution of their core business. While it is prudent to be looking forward, it shouldn’t be at the expense of the core. Therefore HD may want to limit the number of strategic initiatives that they launch, reduce or trash current initiatives that aren’t in “the box” that is their core competency.
Look how Home Depot’s stock compares to Lowe’s:
| Home Depot | Lowe’s | |
| Today | $39 | $31 |
| 1 Year Ago | $42.50 | $34 |
| 2 Yrs Ago | $42.50 | $29 |
| 5 Yrs Ago | $50 | $24 |
Both Home Depot and Lowe’s are probably suffering from the housing bust. Yet during the housing boom, Home Depot’s shares weren’t rewarding either, although Lowe’s shares certainly got more valuable. After all the innovation at Home Depot (auto parts, major appliances, online ads, etc.) investors seem to favor Lowe’s. Maybe it pays to stick to the core business? Or maybe investors believe that Home Depot’s future profit growth will trail Lowe’s.
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Anyone here try to do a home project using Home Depot lately? A few years ago you could go there and find everything you needed plus some new ideas. Prices were great too. You felt like all the searching, bad help, forklift dodging, and carrying was worth it because you were discovering new stuff, like a gold miner or something.
Today it’s all the same stuff, the neighborhood hardware store often has better with real help and prices not much different. It’s like someone supplying the local guys got smart. After all, China isn’t a monopoly owned by Home Depot and Wall Mart! Sears is somewhere to the side. At least their stuff is neat and complete.
I’d state first that the housing market as the biggest area to overcome but maybe there’s an underlying problem at Home Depot that’s much bigger — customer service.
There has been a slow but steady stream of complaints over the last couple of years leading to some potential problems. Having taken on the wholesale business plus subbing out contracting work has stretched their ability to keep up with any solutions.
Recently, anecdotal evidence has shown troubles ahead regarding such instances as groups of consumers banding together for boycott-type situations. An area of complaints is a lack of backing up warranties for subcontractor work. Also, grievances have come up about a lack of customer service with their phone help.
Home Depot needs to get back to what they do best. Stick to their base if at all possible and improve service. This is a behemoth of a company so it’ll be interesting to see how they turn the ship.
While the comment above — that Home Depot should return to its tried and true formula — is true, it may not be possible, especially as a public company. Payroll has been cut to a point where the company CAN’T return to that formula, and technology can take you only so far.
It may well be that the rumored equity buy-out is the retailer’s only safe haven. Either that or a change in management, which buys it time to re-build.
Today’s announcement that HD is entering China (via acquisition) as part of a strategic ramp up of international expansion “due to US market store saturation” does not sit well. Declaring the US market saturated when Lowe’s, Tractor Supply and others continue to build new stores in HD markets has a very different — though perhaps unintended — implication.
Having friends at HD headquarters, I hear stories about the daily business happenings that are very surprising. Operations and cost-savings are critical in some areas, yet new experimental efforts come and go that bleed the company (think 10 Crescent Lane) and funds aren’t there for some of the most basic support. Even internal managers feel that the executive team needs to focus on the core business…and re-focus on the customers. The problem is that their opinions are neither empowered or cultivated.
From afar, one would wonder what will happen in the next few years if Home Depot doesn’t get buttoned up. Lowe’s is continuing to innovate and focus on consumer experience and they may eat HD’s lunch if HD doesn’t provide some new leadership approaches to the entire business.
I find it interesting that I can’t find a comment about the Hispanic customer. As US demographics change, but cultural preferences persist (as acculturation occurs pretty slowly, usually), Home Depot (and others) may wish to place greater attention on the unique product needs and shopper styles of emerging population segments.
Home Depot is doing a lot of bold talk in what seems to be intended to distract the stockholders from other issues…such has paying the CEO zillions of dollars and Home Depot wanting to reduce the amount of financial reporting figures. Home Depot is coming up with a lot of new ideas that sound flashy but time will tell if they are actually put into place — and work.
Gimmicks and marketing can’t save Home Depot; only a return to their tried and true formula can help save them from their competition and themselves.
Every new approach that is intended to drive additional business through the new formats (convenience stores, gas and car washes) and product categories (home appliances, auto supplies, online advertising) only serve to take their focus off of fixing their core business.
In my opinion, the year 2007 should be a rebuilding one for HD which means a focus on their core business and customer. That would entail them spending 90% of their energy on improving and enhancing their execution of their core business. While it is prudent to be looking forward, it shouldn’t be at the expense of the core. Therefore HD may want to limit the number of strategic initiatives that they launch, reduce or trash current initiatives that aren’t in “the box” that is their core competency.
Look how Home Depot’s stock compares to Lowe’s:
Both Home Depot and Lowe’s are probably suffering from the housing bust. Yet during the housing boom, Home Depot’s shares weren’t rewarding either, although Lowe’s shares certainly got more valuable. After all the innovation at Home Depot (auto parts, major appliances, online ads, etc.) investors seem to favor Lowe’s. Maybe it pays to stick to the core business? Or maybe investors believe that Home Depot’s future profit growth will trail Lowe’s.