May 22, 2007
Home Depot Fuel Plans Get Muddied
Home Depot had grand plans for the company’s gas station/convenience store concept, Home Depot Fuel, under former chief executive Bob Nardelli. The home improvement retailer had its sights set on operating 300 sites by 2010. Now, those plans are in question as the man hired by Mr. Nardelli to run Home Dept Fuel, Jim Stoddart, has seen his position eliminated with portions of his duties going to other executives within the company.
Under Mr. Stoddart, Home Depot has opened four Fuel locations with two others currently under construction. The units are located in the parking lot of Home Depot stores.
Tony Wilbert, a spokesperson for Home Depot, told The Atlanta Journal-Constitution, “They’re doing relatively well right now, but we need a little more time to assess whether they’re driving traffic to the big box.”
Whether they are driving business to the big box appears to be the critical issue for current CEO Frank Blake who has moved away from Mr. Nardelli’s strategy of diversification to focus the organization on its core DIY retailing business.
Discussion Questions: Should Home Depot pull the plug on Home Depot Fuel or push on with the concept? Can it fulfill a mandate to drive traffic to the big box by enticing consumers to fuel up and buy convenience store items as part of the same trip?
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Home Depot Fuel may generate traffic to its location for those looking to fill up their tanks. Expecting that consumers will make an impulsive decision to then enter the main store is a stretch. The likelihood is people planning on a trip to Home Depot will stop and get gas while they are there because it is convenient. Conversely, those coming into the lot with the main intent of getting gas, should they go into Home Depot, were planning on doing so anyway.
The sales here will be incremental to Home Depot’s core business. The company has to decide if it is worth the effort. At this juncture, there are at least as many reasons to take a pass on the g/c-store concept as there are to stay with it.
I think they should keep it. Advertise on the back of the gas receipts for discounts on Home Depot products.
Like other retailers the appeal of fuel stations to drive traffic seems quite logical for Home Depot especially when you sell to professional contractors who often drive larger vehicles and buy a lot of fuel coming to your stores almost on a daily basis. To offer a fuel program in conjunction with contractor discounts and centralized/monthly billing seems to be a perfect combination…I wonder if a six store test is large enough to get a good read??? I think it’s way too early to pull the plug on this effort!
I believe this will be a win win for Home Depot. They are really catering to the needs of contractors. They must make sure to realize two additional items: convenience store selection and the future of hydrogen/electric charging.
This is a great opportunity for the nation’s second largest retailer to better attract consumers as they continue to transition to a full fledged retailer capable of competing with Wal-Mart. Offering gasoline is such a great opportunity to better attract customers that HD might not appeal to. This will keep their customers purchacing one more product (gas) from them and incrementally increase their gross revenues with little overhead. Best yet, HD can build off of this business and bring some of these customers into the store whom might not have had a desire to come into the store.
Unless Home Depot is giving people a reason to purchase gas at their stations (convenience and lower prices) they are not likely to be any more popular than any other station. This is not a good climate to be trying to start a business offering low priced gasoline. If they can’t do that, then no one will be going to those stations as a destination so they don’t have the opportunity to drive business at Home Depot.
Home Depot should not attempt to use c-stores to drive traffic in their stores, rather they should use their stores to drive c-store traffic. Additionally, they should not attempt to run c-stores themselves, rather they should outsource the project to a third-party company. With the right controls, they could brand the c-stores under the Home Depot banner but not have to worry about any of the day-to-day activities.
It’s important for Home Depot to focus on their core business but, at the same time, there’s nothing wrong about taking some of their existing real estate that is not being fully optimized and gain some revenue from it.
David has a good point: gas is a commodity, but Home Depot has an opportunity to differentiate itself, and create a LOT of goodwill, by becoming a player in creating the infrastructure necessary for alternative fuels to take hold. They might start with the new “clean diesel” fuels that can use existing infrastructure and are likely to hit our market soon, and are likely to appeal to the commercial patrons they already see. But if they build these outlets with future distribution of other alternative fuels in mind, they’ll have a leadership position in an increasingly important part of our economy.
I think I would be leery of rolling out new fuel stations right now. We might just be on the brink of changing the kinds of cars we have, the way they are powered, and the type of fuel used. Perhaps Home Depot should look at getting into the ethanol, propane, vegetable oil and other alternative fuels. Imagine if they had that at all their stores. No more hunting down special gas stations because drivers would naturally associate Home Depot with the new fuels.
My vote — leave gasoline to c-stores, clubs and, oh yeah, gas stations. Home Depot is a destination stop, building in an expensive “convenience” feature won’t help sales significantly enough to offset the cost and headaches.
Living in Atlanta and being a retail person, I’m watching talent drop out of Home Depot at an alarming pace. There are some serious internal challenges going down over there and a need for some renewed leadership. Although I applaud the creativity of testing this, I also have to wonder why they are testing new initiatives when there’s so much to do within the store.
There are so many other gas station/convenience store combos in America. Home Depot might be better off focusing on their core business. If they found an unusually high payback from adding gas station/convenience stores to their conventional locations, they might be better off making an alliance deal with a well-run pre-existing gas/convenience store chain.
Every “little bit” helps in retailing these days. I’d suggest Home Depot continue Home Depot Fuel in their plans. Like Kroger, Cub and other retailers, Home Depot could offer cents off coupons for gasoline with every $10 or more HD purchase. That would have lots of added customer appeal these days.
Dave makes a very good point about alternate fuels but they are still off in the future – perhaps way off. In the meantime, the opportunity to capture more dollar from today’s “high ticket” gasoline sales at the top of HD’s P&L is a potentially available benefit and it’s in addition to being an added link to serving HD customers’ varied needs.
The Home Depot Fuel station up my way is always packed and no tie-in incentives are even offered — yet.
I believe Home Depot has it backwards. The Fuel stores are not bringing customers to the Big Box the Big Box is bringing customers to the Fuel stores. I think it is a great concept.
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Home Depot Fuel may generate traffic to its location for those looking to fill up their tanks. Expecting that consumers will make an impulsive decision to then enter the main store is a stretch. The likelihood is people planning on a trip to Home Depot will stop and get gas while they are there because it is convenient. Conversely, those coming into the lot with the main intent of getting gas, should they go into Home Depot, were planning on doing so anyway.
The sales here will be incremental to Home Depot’s core business. The company has to decide if it is worth the effort. At this juncture, there are at least as many reasons to take a pass on the g/c-store concept as there are to stay with it.
I think they should keep it. Advertise on the back of the gas receipts for discounts on Home Depot products.
Like other retailers the appeal of fuel stations to drive traffic seems quite logical for Home Depot especially when you sell to professional contractors who often drive larger vehicles and buy a lot of fuel coming to your stores almost on a daily basis. To offer a fuel program in conjunction with contractor discounts and centralized/monthly billing seems to be a perfect combination…I wonder if a six store test is large enough to get a good read??? I think it’s way too early to pull the plug on this effort!
I believe this will be a win win for Home Depot. They are really catering to the needs of contractors. They must make sure to realize two additional items: convenience store selection and the future of hydrogen/electric charging.
This is a great opportunity for the nation’s second largest retailer to better attract consumers as they continue to transition to a full fledged retailer capable of competing with Wal-Mart. Offering gasoline is such a great opportunity to better attract customers that HD might not appeal to. This will keep their customers purchacing one more product (gas) from them and incrementally increase their gross revenues with little overhead. Best yet, HD can build off of this business and bring some of these customers into the store whom might not have had a desire to come into the store.
Unless Home Depot is giving people a reason to purchase gas at their stations (convenience and lower prices) they are not likely to be any more popular than any other station. This is not a good climate to be trying to start a business offering low priced gasoline. If they can’t do that, then no one will be going to those stations as a destination so they don’t have the opportunity to drive business at Home Depot.
Home Depot should not attempt to use c-stores to drive traffic in their stores, rather they should use their stores to drive c-store traffic. Additionally, they should not attempt to run c-stores themselves, rather they should outsource the project to a third-party company. With the right controls, they could brand the c-stores under the Home Depot banner but not have to worry about any of the day-to-day activities.
It’s important for Home Depot to focus on their core business but, at the same time, there’s nothing wrong about taking some of their existing real estate that is not being fully optimized and gain some revenue from it.
David has a good point: gas is a commodity, but Home Depot has an opportunity to differentiate itself, and create a LOT of goodwill, by becoming a player in creating the infrastructure necessary for alternative fuels to take hold. They might start with the new “clean diesel” fuels that can use existing infrastructure and are likely to hit our market soon, and are likely to appeal to the commercial patrons they already see. But if they build these outlets with future distribution of other alternative fuels in mind, they’ll have a leadership position in an increasingly important part of our economy.
I think I would be leery of rolling out new fuel stations right now. We might just be on the brink of changing the kinds of cars we have, the way they are powered, and the type of fuel used. Perhaps Home Depot should look at getting into the ethanol, propane, vegetable oil and other alternative fuels. Imagine if they had that at all their stores. No more hunting down special gas stations because drivers would naturally associate Home Depot with the new fuels.
My vote — leave gasoline to c-stores, clubs and, oh yeah, gas stations. Home Depot is a destination stop, building in an expensive “convenience” feature won’t help sales significantly enough to offset the cost and headaches.
Living in Atlanta and being a retail person, I’m watching talent drop out of Home Depot at an alarming pace. There are some serious internal challenges going down over there and a need for some renewed leadership. Although I applaud the creativity of testing this, I also have to wonder why they are testing new initiatives when there’s so much to do within the store.
There are so many other gas station/convenience store combos in America. Home Depot might be better off focusing on their core business. If they found an unusually high payback from adding gas station/convenience stores to their conventional locations, they might be better off making an alliance deal with a well-run pre-existing gas/convenience store chain.
Every “little bit” helps in retailing these days. I’d suggest Home Depot continue Home Depot Fuel in their plans. Like Kroger, Cub and other retailers, Home Depot could offer cents off coupons for gasoline with every $10 or more HD purchase. That would have lots of added customer appeal these days.
Dave makes a very good point about alternate fuels but they are still off in the future – perhaps way off. In the meantime, the opportunity to capture more dollar from today’s “high ticket” gasoline sales at the top of HD’s P&L is a potentially available benefit and it’s in addition to being an added link to serving HD customers’ varied needs.
The Home Depot Fuel station up my way is always packed and no tie-in incentives are even offered — yet.
I believe Home Depot has it backwards. The Fuel stores are not bringing customers to the Big Box the Big Box is bringing customers to the Fuel stores. I think it is a great concept.