January 27, 2009
Home Depot Closing Expo Biz, Cutting 7,000 Jobs
Retailing
has always been a tough business and it’s becoming increasingly so for
those workers not high enough up on the management ladder to determine
who stays employed and who gets the pink slip.
Just yesterday,
Home Depot was the latest chain to announce a massive layoff with nearly
7,000, roughly two percent of its workforce, joining a growing list of
former retail workers. Corporate suite employers did not come out of the
cut unscathed with up to 15 people, approximately 10 percent of the company’s
corporate officers, also being given notice.
The home
improvement retailer decided to close its 34 Expo Design Centers along
with five others in California operating under the YardBirds’ banner.
"Exiting our EXPO
business is a difficult decision, particularly given the hard work and
dedication of our associates in that business and the support of our loyal
customers," chairman and chief executive Frank Blake said in a statement.
"At the same time, it is a necessary decision that will strengthen our
core Home Depot business."
According to Mr. Blake,
Expo never reached its goals even during the housing boom that preceded
the current bust. In 2008, the business lost $50 million and this year
the loss was expected to reach $80 million.
David Schick,
managing director at Stifel Nicolaus, praised Home Depot for its
"rational" response to the realities of the marketplace. "We want
to look at companies admitting how bad things are instead of not looking
at it," he told The Atlanta Journal-Constitution.
Discussion Questions:
What do you think of Home Depot’s decision to cut staff and close Expo
and Yardbirds? Was this essentially due to a failing of the Expo concept?
Are there steps short of layoffs that retailers could be taking now to
protect their business or have large job cuts and store closings become
the only rational approach to the challenges posed by current marketplace
conditions?
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I am surprised that this did not happen sooner. The residential market started to crash over a year ago and Home Depot was an obvious victim. That had to make changes. Hopefully these cuts were enough.
“Woulda, shoulda, coulda.” We’ll never know what Expo could have been under the right management. I think the concept was supposed to be “better than Home Depot if you have more money to spend.” Nothing wrong with that. Execution wasn’t there, however, and now the times just aren’t right.
Home Depot shareholders will have to live with the fact that in the years when the company could have made hay, it didn’t…and will have to wait for the next economic upturn to become what it once was and could have been. We all agree the company is headed in the right direction. It’s just late.
The remaining Expo’s are in excellent locations such as the one located in Carlsbad, CA. They will be snapped up. It’s the 1000 boxes coming on the market from Linens N’ Things, Circuit City, etc, that will take a while to absorb.
While Expo’s demise is not entirely surprising, I do not believe it is caused by either a flawed concept nor an additional sign of the dismal retail market. Instead, I suggest that the issues leading to its closure date back several years and are ultimately due to a lack of commitment of the resources necessary to differentiate the store better and truly assure a premium shopping experience.
I congratulate Home Depot for taking a strategic, focused approach to their business: “right-sizing” their brand, locations, and in doing so, boosting morale (and retention?) among surviving store workers by offering them merit pay increases and contributions to 401k plans. How many businesses are thinking about employee morale right now?
This is no surprise. The D-I-Y home improvement sector is overstored, with Lowe’s competing directly with HD in many locations. HD clearly had lagged Lowe’s in too many categories, so scaling back their cost structure makes sense. It still does not, however, address the fact that there’s very likely too many underperforming stores.
Even with the real estate market still suffering, and many homeowners looking to repair and upgrade rather than sell, many of those projects are being put on hold. HD is not immune to the retail downturn.
Here’s yet another corporate blunder being blamed on the economy. Most of the layoffs we’re reading about in the past several weeks and days are related to business units that never worked in the first place. If Expo couldn’t even break even during the best of times of the home building craze how would it ever have done it? Unfortunately, in its wake, many small decor service businesses were drowned by their low prices that were subsidized by the larger corporation. This is one of the reasons why the consumer interest in small local-owned companies is picking up. Thank God.
Home Depot is deciding to focus on its “core business.” Veering away from your core business is not a good strategy so getting back to basics could be a good choice for them.
The Expo concept was strong, but could have been executed with a far greater degree of efficiency. Many functions Expo served were upgraded duplicates of those offered at Home Depot (appliance, cabinets, etc). Others could have been integrated into existing Home Depot Stores.
Operating partners that specialize in certain aspects of home design could have been brought in for knowledge/risk sharing. Overall, it appears Home Depot did not evaluate the sustainability of Expo beyond a booming housing market.
I suppose it is easy for us “experts” to now criticize Home Depot for waiting too long to close Expo and talk about how flawed the Expo concept was in the first place. As I recall, most of us “experts” praised Home Depot when the first Expo stores were opened.
Yes, there were some changes that needed to be made in the Expo concept but Mr. Blake and his management team were spending their time and energy getting rid of some of the companies his predecessor had acquired and fixing the customer service problems at Home Depot. Expo could have been fixed with smaller stores, more knowledgeable people on the floor, more exclusive upscale brands and merchandise along with a much higher level of customer service. Unfortunately, these things were never done and what could have been a very successful business is now going to go away.
Some interesting comments here. Of course, my view is that if you have good management then you will do what is needed to succeed. The Expo concept was fine at a high level, but never adjusted to the market realities and this current one killed them. Meanwhile a typical HD store is not where you would likely get into better goods and styles which was what the vehicle was for. To some extent, this is what has driven BBY on the Magnolia Home Theater side. While originally a concept for a group of standalone stores, it has evolved into in store departments and is evolving again to offer services needed by higher value consumers. The point is that here BBY is innovating and changing (and perhaps most importantly, learning and incorporating the learning). Since HD did not, the concept is getting killed but it is not the concept. It is the execution.
I only visited an Expo store once (or maybe twice) and IIRC the experience was somewhat underwhelming…lots of bronze-cherub-water-fountain type of stuff; but as much as I would like to think/hope that the concept failed for aesthetic reasons, I’m not sure that’s the case. Perhaps “high-end big-box retailer” is really just as implausible as it sounds.
Generally, it doesn’t pay to struggle a long time trying to fix a retail concept. If it doesn’t catch on quickly (which includes profitability) it’s not likely to get fixed after several years and multiple administrations. Expo was never a worthwhile capital allocation. And I suspect that closing the Expo locations, in a few instances, will enhance comp sales trends for some nearby Home Depots and Lowe’s.
Unfortunately, aspirational retailing isn’t going to have an easy time of it in this economy, and retailers will suffer further as unemployment rises. While NRF predicts a 0.5% decline in retail sales, many retailers think this year’s downturn will be considerably larger than that. Look for continued belt-tightening from retailers that sell things people want, but may not need.
Unlike other retail contractions, HD has closed non-core businesses which were admittedly not meeting performance standards in the first place. The actual cuts to core business support functions are not extensive. Without detailed information, it’s impossible to speculate on any of these having a real impact on critical competencies. Eliminating non-core businesses is fantastic business practice during a recession, and one that Best Buy did a few years ago (and maybe continue to do). No matter what is published, struggling operations soak up management time and attention, not to mention cash and other resources better spent focused on the core.
HD has spent the last two years focused on inventory control, albeit with conflicting results. I believe that focus has enabled the company to minimize the inventory risk associated with the downturn. In truth, with the exception of seasonal and non-core categories, HD’s merchandise mix is not anywhere near as great a risk as an apparel, home, or trend related retailer’s mix is. No doubt the housing disaster, coupled with the credit evaporation has been and will continue to have an enormous impact on comp store volume. However, the margin implications of slower sales for HD are different than for other retailers. For HD, we’re looking at slower turns…which do have carrying costs, but none of the other downsides of more seasonal/trend assortments.
Overall, I was surprised to see that HD expects to open 12 new stores. Perhaps there will also be some closings. I have no doubt that HD’s least-profitable locations are as vulnerable to the recession as most retailers, and while high-potential locations may still exist, it probably behooves management to shed the lowest tier as quickly as possible.
While Expo was a great place to be educated from a consumer standpoint, it was never the place to buy and that is evidenced in the fact that it didn’t make money for HD. With only a handful of expos and nearly 2,000 Home Depot stores, exiting Expo is indeed one of the smarter things HD has done in a number of years.
Expo did not differentiate or build the HD brand and, if anything, it gave customers a reason to consider Lowe’s or a more specialized competitor. HD revolutionized D-I-Y home-building and home improvement and Expo did little to further this.
The savings from Expo should be reinvested in improving the core HD customer experience and they will be far better off.
The layoffs at Home Depot are a tough but unsurprising development. First, the Expo concept never took off with enough scale to justify a big national rollout. At the same time, Home Depot’s core business started maturing a few years ago as it faced tougher national competition from Lowe’s. Finally, the economic crisis hits hardest at Home Depot’s concept: Both do-it-yourselfers and home contractors are being squeezed hard by the collapse in home prices and the rising tide of foreclosures. Consumers are simply deferring the sort of high-end improvement project that can drive up Home Depot’s average transaction. If there is any good news to take from the announcement, the slowdown offers Home Depot a chance to rethink its maturing business model in order to recapture market share when the appetite for their goods and services starts to rebound.
The Expo concept was flawed because home décor needs to be treated as a personalized hands-on service intense business.
They are wise to move away from Expo. Bad times often allow companies to make good decisions.
The Expo concept never worked and should have been closed earlier. In my opinion, Home Depot waited too long to make this decision.
With respect to the massive layoffs, there is something wrong with this picture. In difficult times, when people are purchasing new homes at a slower rate, D-I-Y and home repairs should increase, not decrease. If Home Depot is having difficulty during these times, it might indicate that their product mix is incorrect. They might have to reduce their big ticket items, and reduce the floor space that they are giving their white goods, and focus more on the smaller home repair products that can be utilized by people on a limited, fixed income.
In the same period of time, Lowe’s seems to be suffering less, and they seem to better understand what the consumer is looking to purchase. It is another indication that Home Depot is not executing well.
I agree with many of the comments here. Expo was flawed in my opinion in several key areas. First, was service. There were not enough employees in this mammoth building to meet the demand of consumers. Second, it was expensive. While they were aiming for an upscale clientele, they seemed to exclude core Home Depot customers, who tend to be do-it-yourself homeowners in addition to contractors working within a budget. Once the housing market started to crash, the concept was doomed. And lastly, they distanced themselves from the Home Depot brand. As an avid Home Depot customer, I can’t ever recall seeing any cross-marketing highlighting the Expo brand. I can’t say that would have led to more sales, but it couldn’t hurt.
As a former field guy, it is difficult for me to appreciate gutting frontline teams. I do understand the need for cuts and I was a manager for quite some time so scheduling clawbacks happen in any economy. What I do stress is to have a plan in place for those that remain. Motivating and engaging staff during cutbacks is critical to any labor transition.
Circuit City is a great example of not having a plan in place. In Home Depot’s case, Expo was an appendage that never really did well in any market. I hope that HD can do more with less because I believe that do-it-yourself will flourish in this economic environment. Managers and supervisors at the store level will need to get more from their existing teams. Increased interaction and presence from managers will increase productivity and morale which, as we all know, lead to increased profitability.
Let’s go with the cuts, but we need a strong leadership unit in place to take us through the stormy waters ahead.
Seems to me Home Depot was just a sophisticated Ponzi Scheme where they built a large number of stores in markets not big enough to support them during a weak economy. This was to give the impression the company was growing. Then former CEO Robert Nardelli raided the company treasury under the guise of salary and bonus with the full approval of the board of directors. Look for things to only get worse. Home Depot can no longer keep this under the rug and are now being forced to close stores and lay off employees. This has nothing to do with concepts and store formats. To me, those were only props to begin with. Marketplace conditions simply accelerated this scheme being exposed.
Home Depot has moved so far from its solid D-I-Y positioning in trying to cut costs and grow new markets, that the economy and strong competitors continue to take their toll. The new concepts did not communicate a value proposition to either new or current consumers, while existing stores are struggling to re-establish store service levels and quality issues with their Home improvement services. For the millions of D-I-Yers, they need to provide more compelling reasons to shop at HD again and execute well.
The Expo closing was inevitable. They had already closed some units and shuttering the rest of them simply makes sense. Much of the merchandise available from these stores–some of which suffered from just lousy execution–can be melded into Home Depot. Perhaps they can open an “Expo” type section in Home Depot stores to merchandise some upscale lines.
However, even the monied few these days are going to think twice before ordering that $4,000 sink.
As to the cuts in Home Depot, this could be the most dangerous part of the move. Customer service in these stores was virtually non-existent when they were fully staffed, since they cater to contractors. Cutting more labor is really going to cut into the bone. But it’s going to benefit Lowe’s….
These were badly needed cuts several years ago, and this economy only forces HD to focus on their best performing stores and layouts. These cuts and more should be done at HD so that they can deliver on the profits that shareholders expect. HD needs to stay focused on its core business model and ensure that it delivers on an excellent reward for each of its investment dollars that it has placed into action.
I have been to EXPO and never understood it. There was no competitive advantage to it. It had no reason for being within the Home Depot brand. For contractors and D-I-Yers, everything they needed was at Home Depot, costing considerably less. If it was special service, Expo was not a unique expert.
As I read it, the bulk of the job cuts are coming from the closing of the EXPO stores. Hopefully that is right. One of Home Depot’s real strengths in the market place has been their people on the floor. It appears Home Depot is trying to preserve that as a much higher proportion of management is getting cut.
While these times are very difficult for retailers, those retailers who don’t lose their way in reshaping their companies will come out of these depressive times very much stronger.
I agree with David Biernbaum. The Home Depot has a completely different clientele than a design center. I think the Expo would have had a chance in a booming market, but it had too much against it.
First, people were not familiar with the Expo. More advertising was needed to create market awareness. Unfortunately, the market is not supporting marketing dollars at this time.
Secondly, The Home Depot appeals to contractors and individuals who are “fixing up” their current dwellings. I would imagine that that segment of The Home Depot’s business is doing pretty well. People aren’t building houses or moving, so they are fixing what they have. Those people who are doing massive redesign projects are probably working with designers that they are familiar with.
This idea was cooked up by a bunch of extremely successful hardware and lumber guys for whom the aesthetics of finishes and furnishings were probably a foreign language. So as executed, this concept was flawed–there appeared to be no cohesive store marketing or merchandising, just a collection of little fiefdoms where subjective ego-based decisions became the order of the day. If they had been successful, you might have called the departments in each store boutiques, but boutiques imply an aesthetic vision with an exquisitely selected product offering.
The Expo stores were about sheer quantity of choice with little direction and guidance for the customer. Their original store locations were well thought out, but later ones must have been made under duress, because the one in this market was most unlikely for anyone that understood the marketplace.
It was a surprise to learn that even in the tsunami tide for building and remodeling, Expo was losing money. Has a luxury offering in a warehouse setting at full retail pricing ever been successful? (The closest is Costco and they offer “value.”)
The one experience I recall about Expo was that I had to plead for some help. I had to do a complete remodel of my bathroom and they sold Kohler and this German brand so I decided to see their selection. In this gigantic department there was only one salesman for what looked like 20,000 sq. ft. of selling space. I was told that I had to wait, yet the department was deserted. I felt like I was in an episode of Seinfeld; by that time I was laughing. I walked out.
Tough times call for tough measures. The economy is a mess and no one is spending money on high-end renovations. The other areas of Home Depot are performing well as consumers are not buying homes, but repairing what they have. This is The Home Depot’s core business and this is where they should focus. There is no magical “stimulus plan” that we can sign and make everything okay. We have to accept that this world is a roller coaster and putting a band-aid on a broken arm will only make the broken arm worse in the long run. There are no easy answers, just correct decisions. This one was correct for them.
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I am surprised that this did not happen sooner. The residential market started to crash over a year ago and Home Depot was an obvious victim. That had to make changes. Hopefully these cuts were enough.
“Woulda, shoulda, coulda.” We’ll never know what Expo could have been under the right management. I think the concept was supposed to be “better than Home Depot if you have more money to spend.” Nothing wrong with that. Execution wasn’t there, however, and now the times just aren’t right.
Home Depot shareholders will have to live with the fact that in the years when the company could have made hay, it didn’t…and will have to wait for the next economic upturn to become what it once was and could have been. We all agree the company is headed in the right direction. It’s just late.
The remaining Expo’s are in excellent locations such as the one located in Carlsbad, CA. They will be snapped up. It’s the 1000 boxes coming on the market from Linens N’ Things, Circuit City, etc, that will take a while to absorb.
While Expo’s demise is not entirely surprising, I do not believe it is caused by either a flawed concept nor an additional sign of the dismal retail market. Instead, I suggest that the issues leading to its closure date back several years and are ultimately due to a lack of commitment of the resources necessary to differentiate the store better and truly assure a premium shopping experience.
I congratulate Home Depot for taking a strategic, focused approach to their business: “right-sizing” their brand, locations, and in doing so, boosting morale (and retention?) among surviving store workers by offering them merit pay increases and contributions to 401k plans. How many businesses are thinking about employee morale right now?
This is no surprise. The D-I-Y home improvement sector is overstored, with Lowe’s competing directly with HD in many locations. HD clearly had lagged Lowe’s in too many categories, so scaling back their cost structure makes sense. It still does not, however, address the fact that there’s very likely too many underperforming stores.
Even with the real estate market still suffering, and many homeowners looking to repair and upgrade rather than sell, many of those projects are being put on hold. HD is not immune to the retail downturn.
Here’s yet another corporate blunder being blamed on the economy. Most of the layoffs we’re reading about in the past several weeks and days are related to business units that never worked in the first place. If Expo couldn’t even break even during the best of times of the home building craze how would it ever have done it? Unfortunately, in its wake, many small decor service businesses were drowned by their low prices that were subsidized by the larger corporation. This is one of the reasons why the consumer interest in small local-owned companies is picking up. Thank God.
Home Depot is deciding to focus on its “core business.” Veering away from your core business is not a good strategy so getting back to basics could be a good choice for them.
The Expo concept was strong, but could have been executed with a far greater degree of efficiency. Many functions Expo served were upgraded duplicates of those offered at Home Depot (appliance, cabinets, etc). Others could have been integrated into existing Home Depot Stores.
Operating partners that specialize in certain aspects of home design could have been brought in for knowledge/risk sharing. Overall, it appears Home Depot did not evaluate the sustainability of Expo beyond a booming housing market.
I suppose it is easy for us “experts” to now criticize Home Depot for waiting too long to close Expo and talk about how flawed the Expo concept was in the first place. As I recall, most of us “experts” praised Home Depot when the first Expo stores were opened.
Yes, there were some changes that needed to be made in the Expo concept but Mr. Blake and his management team were spending their time and energy getting rid of some of the companies his predecessor had acquired and fixing the customer service problems at Home Depot. Expo could have been fixed with smaller stores, more knowledgeable people on the floor, more exclusive upscale brands and merchandise along with a much higher level of customer service. Unfortunately, these things were never done and what could have been a very successful business is now going to go away.
Some interesting comments here. Of course, my view is that if you have good management then you will do what is needed to succeed. The Expo concept was fine at a high level, but never adjusted to the market realities and this current one killed them. Meanwhile a typical HD store is not where you would likely get into better goods and styles which was what the vehicle was for. To some extent, this is what has driven BBY on the Magnolia Home Theater side. While originally a concept for a group of standalone stores, it has evolved into in store departments and is evolving again to offer services needed by higher value consumers. The point is that here BBY is innovating and changing (and perhaps most importantly, learning and incorporating the learning). Since HD did not, the concept is getting killed but it is not the concept. It is the execution.
I only visited an Expo store once (or maybe twice) and IIRC the experience was somewhat underwhelming…lots of bronze-cherub-water-fountain type of stuff; but as much as I would like to think/hope that the concept failed for aesthetic reasons, I’m not sure that’s the case. Perhaps “high-end big-box retailer” is really just as implausible as it sounds.
Generally, it doesn’t pay to struggle a long time trying to fix a retail concept. If it doesn’t catch on quickly (which includes profitability) it’s not likely to get fixed after several years and multiple administrations. Expo was never a worthwhile capital allocation. And I suspect that closing the Expo locations, in a few instances, will enhance comp sales trends for some nearby Home Depots and Lowe’s.
Unfortunately, aspirational retailing isn’t going to have an easy time of it in this economy, and retailers will suffer further as unemployment rises. While NRF predicts a 0.5% decline in retail sales, many retailers think this year’s downturn will be considerably larger than that. Look for continued belt-tightening from retailers that sell things people want, but may not need.
Unlike other retail contractions, HD has closed non-core businesses which were admittedly not meeting performance standards in the first place. The actual cuts to core business support functions are not extensive. Without detailed information, it’s impossible to speculate on any of these having a real impact on critical competencies. Eliminating non-core businesses is fantastic business practice during a recession, and one that Best Buy did a few years ago (and maybe continue to do). No matter what is published, struggling operations soak up management time and attention, not to mention cash and other resources better spent focused on the core.
HD has spent the last two years focused on inventory control, albeit with conflicting results. I believe that focus has enabled the company to minimize the inventory risk associated with the downturn. In truth, with the exception of seasonal and non-core categories, HD’s merchandise mix is not anywhere near as great a risk as an apparel, home, or trend related retailer’s mix is. No doubt the housing disaster, coupled with the credit evaporation has been and will continue to have an enormous impact on comp store volume. However, the margin implications of slower sales for HD are different than for other retailers. For HD, we’re looking at slower turns…which do have carrying costs, but none of the other downsides of more seasonal/trend assortments.
Overall, I was surprised to see that HD expects to open 12 new stores. Perhaps there will also be some closings. I have no doubt that HD’s least-profitable locations are as vulnerable to the recession as most retailers, and while high-potential locations may still exist, it probably behooves management to shed the lowest tier as quickly as possible.
While Expo was a great place to be educated from a consumer standpoint, it was never the place to buy and that is evidenced in the fact that it didn’t make money for HD. With only a handful of expos and nearly 2,000 Home Depot stores, exiting Expo is indeed one of the smarter things HD has done in a number of years.
Expo did not differentiate or build the HD brand and, if anything, it gave customers a reason to consider Lowe’s or a more specialized competitor. HD revolutionized D-I-Y home-building and home improvement and Expo did little to further this.
The savings from Expo should be reinvested in improving the core HD customer experience and they will be far better off.
The layoffs at Home Depot are a tough but unsurprising development. First, the Expo concept never took off with enough scale to justify a big national rollout. At the same time, Home Depot’s core business started maturing a few years ago as it faced tougher national competition from Lowe’s. Finally, the economic crisis hits hardest at Home Depot’s concept: Both do-it-yourselfers and home contractors are being squeezed hard by the collapse in home prices and the rising tide of foreclosures. Consumers are simply deferring the sort of high-end improvement project that can drive up Home Depot’s average transaction. If there is any good news to take from the announcement, the slowdown offers Home Depot a chance to rethink its maturing business model in order to recapture market share when the appetite for their goods and services starts to rebound.
The Expo concept was flawed because home décor needs to be treated as a personalized hands-on service intense business.
They are wise to move away from Expo. Bad times often allow companies to make good decisions.
The Expo concept never worked and should have been closed earlier. In my opinion, Home Depot waited too long to make this decision.
With respect to the massive layoffs, there is something wrong with this picture. In difficult times, when people are purchasing new homes at a slower rate, D-I-Y and home repairs should increase, not decrease. If Home Depot is having difficulty during these times, it might indicate that their product mix is incorrect. They might have to reduce their big ticket items, and reduce the floor space that they are giving their white goods, and focus more on the smaller home repair products that can be utilized by people on a limited, fixed income.
In the same period of time, Lowe’s seems to be suffering less, and they seem to better understand what the consumer is looking to purchase. It is another indication that Home Depot is not executing well.
I agree with many of the comments here. Expo was flawed in my opinion in several key areas. First, was service. There were not enough employees in this mammoth building to meet the demand of consumers. Second, it was expensive. While they were aiming for an upscale clientele, they seemed to exclude core Home Depot customers, who tend to be do-it-yourself homeowners in addition to contractors working within a budget. Once the housing market started to crash, the concept was doomed. And lastly, they distanced themselves from the Home Depot brand. As an avid Home Depot customer, I can’t ever recall seeing any cross-marketing highlighting the Expo brand. I can’t say that would have led to more sales, but it couldn’t hurt.
As a former field guy, it is difficult for me to appreciate gutting frontline teams. I do understand the need for cuts and I was a manager for quite some time so scheduling clawbacks happen in any economy. What I do stress is to have a plan in place for those that remain. Motivating and engaging staff during cutbacks is critical to any labor transition.
Circuit City is a great example of not having a plan in place. In Home Depot’s case, Expo was an appendage that never really did well in any market. I hope that HD can do more with less because I believe that do-it-yourself will flourish in this economic environment. Managers and supervisors at the store level will need to get more from their existing teams. Increased interaction and presence from managers will increase productivity and morale which, as we all know, lead to increased profitability.
Let’s go with the cuts, but we need a strong leadership unit in place to take us through the stormy waters ahead.
Seems to me Home Depot was just a sophisticated Ponzi Scheme where they built a large number of stores in markets not big enough to support them during a weak economy. This was to give the impression the company was growing. Then former CEO Robert Nardelli raided the company treasury under the guise of salary and bonus with the full approval of the board of directors. Look for things to only get worse. Home Depot can no longer keep this under the rug and are now being forced to close stores and lay off employees. This has nothing to do with concepts and store formats. To me, those were only props to begin with. Marketplace conditions simply accelerated this scheme being exposed.
Home Depot has moved so far from its solid D-I-Y positioning in trying to cut costs and grow new markets, that the economy and strong competitors continue to take their toll. The new concepts did not communicate a value proposition to either new or current consumers, while existing stores are struggling to re-establish store service levels and quality issues with their Home improvement services. For the millions of D-I-Yers, they need to provide more compelling reasons to shop at HD again and execute well.
The Expo closing was inevitable. They had already closed some units and shuttering the rest of them simply makes sense. Much of the merchandise available from these stores–some of which suffered from just lousy execution–can be melded into Home Depot. Perhaps they can open an “Expo” type section in Home Depot stores to merchandise some upscale lines.
However, even the monied few these days are going to think twice before ordering that $4,000 sink.
As to the cuts in Home Depot, this could be the most dangerous part of the move. Customer service in these stores was virtually non-existent when they were fully staffed, since they cater to contractors. Cutting more labor is really going to cut into the bone. But it’s going to benefit Lowe’s….
These were badly needed cuts several years ago, and this economy only forces HD to focus on their best performing stores and layouts. These cuts and more should be done at HD so that they can deliver on the profits that shareholders expect. HD needs to stay focused on its core business model and ensure that it delivers on an excellent reward for each of its investment dollars that it has placed into action.
I have been to EXPO and never understood it. There was no competitive advantage to it. It had no reason for being within the Home Depot brand. For contractors and D-I-Yers, everything they needed was at Home Depot, costing considerably less. If it was special service, Expo was not a unique expert.
As I read it, the bulk of the job cuts are coming from the closing of the EXPO stores. Hopefully that is right. One of Home Depot’s real strengths in the market place has been their people on the floor. It appears Home Depot is trying to preserve that as a much higher proportion of management is getting cut.
While these times are very difficult for retailers, those retailers who don’t lose their way in reshaping their companies will come out of these depressive times very much stronger.
I agree with David Biernbaum. The Home Depot has a completely different clientele than a design center. I think the Expo would have had a chance in a booming market, but it had too much against it.
First, people were not familiar with the Expo. More advertising was needed to create market awareness. Unfortunately, the market is not supporting marketing dollars at this time.
Secondly, The Home Depot appeals to contractors and individuals who are “fixing up” their current dwellings. I would imagine that that segment of The Home Depot’s business is doing pretty well. People aren’t building houses or moving, so they are fixing what they have. Those people who are doing massive redesign projects are probably working with designers that they are familiar with.
This idea was cooked up by a bunch of extremely successful hardware and lumber guys for whom the aesthetics of finishes and furnishings were probably a foreign language. So as executed, this concept was flawed–there appeared to be no cohesive store marketing or merchandising, just a collection of little fiefdoms where subjective ego-based decisions became the order of the day. If they had been successful, you might have called the departments in each store boutiques, but boutiques imply an aesthetic vision with an exquisitely selected product offering.
The Expo stores were about sheer quantity of choice with little direction and guidance for the customer. Their original store locations were well thought out, but later ones must have been made under duress, because the one in this market was most unlikely for anyone that understood the marketplace.
It was a surprise to learn that even in the tsunami tide for building and remodeling, Expo was losing money. Has a luxury offering in a warehouse setting at full retail pricing ever been successful? (The closest is Costco and they offer “value.”)
The one experience I recall about Expo was that I had to plead for some help. I had to do a complete remodel of my bathroom and they sold Kohler and this German brand so I decided to see their selection. In this gigantic department there was only one salesman for what looked like 20,000 sq. ft. of selling space. I was told that I had to wait, yet the department was deserted. I felt like I was in an episode of Seinfeld; by that time I was laughing. I walked out.
Tough times call for tough measures. The economy is a mess and no one is spending money on high-end renovations. The other areas of Home Depot are performing well as consumers are not buying homes, but repairing what they have. This is The Home Depot’s core business and this is where they should focus. There is no magical “stimulus plan” that we can sign and make everything okay. We have to accept that this world is a roller coaster and putting a band-aid on a broken arm will only make the broken arm worse in the long run. There are no easy answers, just correct decisions. This one was correct for them.