Do You Know HD?

You may think you know Home Depot, but do you really?

I only ask that because I thought I did – only to find out a few new juicy tidbits about the mega-retailer during a Retail Forward Webinar recently. And why should it matter? Because Depot is looking to diversify its offerings, hire more qualified employees, cater to more female customers and improve its layout and displays to inspire customers. For independent retailers, that’s dangerous, because that’s their bread and butter.

But The Home Depot is looking at significantly slowing market share growth, so it has to compensate by thoroughly servicing the customers it does attract.

The Retail Forward Webinar put Home Depot’s place in the home improvement market in perspective with the other major boxes – Lowe’s, Wal-Mart and Sears.

Depot’s sales are nearly twice that of Lowe’s, which trails a distant second in the race for home improvement customers. Wal-Mart, however, takes over the No. 2 spot when broken down into lawn and garden specifics. So Lowe’s isn’t even second in the chain, it’s Wal-Mart, a surprising fact for many independent retailers. 

Reinventing Orange

Home Depot’s market share in the home improvement channel is flatlining at around 21.7 percent, and is projected to only grow to 22.7 percent by 2010, according to Steve Spiwak, the author of a Retail Forward exclusive report called Home Depot 2010.

Spiwak led the Webinar and highlighted changes Depot is making to attract a more diverse customer base and expand its offerings beyond just products to counteract the effect of that flatlining market share. According to Spiwak, here are a few of Depot’s current and future plans for evolution:

? Changing store layout and signage to create a more pleasing and easy-to-shop atmosphere.

? Offering new services, such as installation and a wholesale distribution division (called HD Supply, whose sales grew 159 percent in the third quarter 2006 – that’s right, 159 percent).

? Appealing to women with more vignettes and new products.

? A good/better/best system of pricing that encourages buying up, rather than only offering the lowest end version of a product. This pricing system is expected to occur in all aspects of the store, including the live goods.

? Tapping into the financial comfort of its Baby Boomer customers – a Home Depot customer is more likely than a Lowe’s customer to pull in a six-figure income, according to Retail Forward’s studies.

? Increasing the amount of exclusive brands and providing more selection among those products.

? Locating in densely populated urban areas, as well as building stores on much smaller footprints in rural areas.

? Employing people with more training and background skills.

? Expanding internationally.  

Opportunities And Threats

During the beginning of CEO Bob Nardelli’s tenure, the focus was less on what customers could see and more on backroom efficiencies in supply chain and sourcing. Now, however, Depot is going to turn a well-trained eye on what customers experience on a daily basis – customer service, product mix, display and layout to improve its relationship with consumers.

And let’s talk about those consumers for a second. It’s obvious the majority are men, and don’t expect Depot to forego its sponsorship of ESPN’s College Gameday anytime soon. But do expect to see more female-focused advertising and changes in the store to appeal to women.

For growers servicing The Home Depot, this could mean more pull-through marketing to help promote the products (Depot’s looking at more vignettes to attract women) and better product packaging.

For growers servicing independent garden centers, the competition is toughening up even more, so you’ll be tasked with finding new solutions to give independents a unique product.

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