Home Depot 2011 Insights From Its Investor And Analyst Conference
Online tools, 2011 expectations and the one economic indicator The Home Depot will be looking to in the next year.
December 20, 2010
The Home Depot shared a look into 2011 plans and forecasting during its December Investor and Analyst Conference. Here's a look at how the big box retailer is feeling about 2011 and how it plans to get to know its customers even better.
2011 Changes. The Home Depot projects a sales increase in the 2.0 to 2.5 percent range for 2011.
The chain plans to add 10 new stores in 2011: seven in Mexico, two in the United States and one in Canada.
Economic Indicators. GDP is the economic indicator that The Home Depot will look to in 2011 for forecasting sales, replacing the new square footage housing turnover number. "It used to be a good indicator, but today it's not that relevant," said Carol Tome, CFO and executive vice president. She said foreclosures and home prices aren't good indicators either, as they're not major drivers of sales. The current age of housing stock isn't a sales predictor, but an indicator of the type of spend that The Home Depot can expect. "Housing's grip on the economy is as loose as it's been in the last 60 years," Tome said.
Supply Chain Update. What defines a competitive advantage in distribution? Superior in-stock rates, better inventory management, lower logistics costs and improved service to stores, said Mark Holifield, Home Depot's VP of supply chain. The development of Rapid Deployment Centers (RDCs) have helped the Home Depot move towards those goals.
RDCs are docking facilities that focus on flow-through distribution, where merchandise is never moved into storage. Holifield says 86 percent of stores are now stocked through RDCs and that will increase to 100 percent by the end of 2011. These facilities provide the inventory management of a distribution center with the cost advantages of flow-through distribution.
Interconnected Retail. The idea behind this concept is that consumers conduct research online, even with mobile devices, before going into the store to shop. The Home Depot will work to encourage customers to download the Home Depot mobile app, which provides the ability to shop and use an interactive tool box, which includes in-store maps, how-to videos and the ability to purchase and check gift card balances.
The concept of using the Internet to make the sale will also be reflected in a digital version of the manila folder that many home renovators use when working on a project. Customers will be able to post pictures of their kitchen, chat with a designer, save ideas and designs and share them with friends, and then pay for the remodel either in-store or online.
Understanding The Consumer. The Home Depot is making progress toward analyzing customers in a more in-depth manner than ever before, says Matt Carey, CIO and Executive Vice President. He said that the box store has historically analyzed and segmented customers at a high level, but wants to further understand the needs of the customer base.
"We don't want to just know if you're a contractor," he said. "We want to know if you're a roofer with fewer than five employees." Having these kinds of analytics on customers will help The Home Depot with customer and labor forecasting.
Historically, 50 percent of Home Depot shoppers have been female. Martha Stewart line of products helps the customer coordinate designs, and the Home Depot is seeing good results from the line.