The Home Depot: A Company Review and Analysis

Jessica Bourassa

Econ 110

June 24, 2012

The Home Depot

A Company Review and Analysis

"You can do it, we can help." To this day, many people can identify the home improvement company, out of the many, who owns that statement. It is interesting to compare The Home Depot to equivalent home improvement retailers; these stores would be places like Ace Hardware, Lowes and even Sears. The Home Depot was founded in 1978 by Bernie Marcus and Arthur Blank, these two men, along with Ken Langone (an investment banker) and Pat Farrah (a merchandising "guru") with the vision of a "one-stop shopping for the do-it-yourselfer" (History). The first store, housing around 25,000 SKUs in about 60,000 square feet, dwarfed nearly every competitor out there competing for business within the Atlanta area in 1979. At the time it looked more like a warehouse, with boxes piling high on shelves and concrete floors, with much less product in it then now.

The mission was to offer the best customer service within the industry, "guiding customers through projects such as laying tile, changing a fill valve or handling a power tool" (History). As part of the many store associates duties, they are required to complete rigorous product knowledge training, the same learning as the very first employees had undergone when the first stores opened, as well as newer training relative to the going green movement and newer technology. The Home Depot had changed quite a bit from previous years; their learning systems, programs and clinics for both customers and associates have gone through intensive revising. The 25,000 different products that once filled the doors of The Home Depot, has grown several times housing just 25,000 different SKUs alone in the hardware department. Since 1989, when The Home Depot opened its 100th store, since 1994 when The Home Depot opened its first store in Aikenhead, Canada, in 2001 when The Home Depot opened its doors in Mexico, and stretching it's hand most recently in 2006 to China, The Home Depot has developed "strategic product alliances" with "industry-leading manufacturers" such as Ryobi tools, RIGID tools, BEHR paint, LG appliances, Toro and Cub Cadet lawn equipment, to better deliver the most exclusive products in the industry. With 18 different departments, from a marvelous outside housed garden center to a dedicated Interior Décor Design Center, The Home Depot has come a long way in development and research of new technology and products; The Home Depot certainly sets the bar high for "innovative merchandise for the do-it-yourselfer and the professional contractor" (History).

One thing has remain steady though: Customer Service. The "Bill of Rights" a proper name for the mantra at Home Depot, entitles the customer to the "right assortment, quantities and price along with trained associates on the sales floor who want to take care of customers" (History). The desire to do "whatever it takes" cultivates a relationship with customers, going above and beyond, rather than just completing a transaction. Mr. Marcus says it best when he says "At the end of the day, we're in the people business." Over the several decades we see his philosophy shine through the associates and teams at The Home Depot, giving a new twist and defining "bleeding orange" (The Home Depot). They say they "are the world's largest home improvement specialty retailer with stores in all 50 states, the District of Columbia, Puerto Rico, US Virgin Islands, 10 Canadian provinces, Mexico and China" (Corporate). To say that is a lot, especially coming from a company that started out with just a dream from two men who had close to nothing. What has made it possible has been the decisions made by Bernie Markus and Arthur Blank. By keeping the original philosophy of putting customers first, and if anything building on that, they were able to create this monster of a company, assisting home owners, contractors, renters, and everyone in between.

The Home Depot is incredible. The remarkable home improvement chain possesses over 2,000 stores across the United States, Canada, Mexico and now China. Quantifiably, The Home Depot is the largest home improvement chain in the industry, coming in at a high of $73.41 billion, holding a total of 25.94%(DJUSHI) of the US Dow Jones Home Improvement market (Ranked as #1). Its closest competitor, Lowe's - another huge home improvement retail chain, comes in at only $31.60 billion ($41.81 billion less than THD), holding a mere 11.17% (14.77% less than THD) (Ranked as #2) (DJUSHI) of the US Dow Jones Home Improvement market (DJUSHI). Interestingly enough, the US Dow Jones Home Improvement market does not limit itself to only those stores that provide access to lumber, hardware and major appliances, rather it encompasses a wide variety of stores. This diversity among home improvement competitors, including Kingfisher 3.48% (#3) (DJUSHI), Pier 1 Imports 0.5% (#4) (DJUSHI), Ethan Allen Interiors 0.22% (#5) (DJUSHI), Haverty Furniture Cos Inc. 0.09% (#6) (DJUSHI), and Profire Energy Inc. 0.02% (#7) (DJUSHI), creates a much larger competitor field for The Home Depot (Hiri).

Possessing roughly a quarter of the Us Dow Jones Home Improvement market, The Home Depot has a great influence over presiding competitive companies. The Home Depot sells nearly everything that a consumer needs to build a home, offering products and services to end consumers as well as professional builders, tradesmen and repairmen. Even though The Home Depot is still vulnerable to the US housing market fluctuations, their international operations in North America as well as China provide a small buffer to the exposure of the domestic US market. The Home Depot caters to a variety of customers; the Do-it-yourselfers (DIY), Do-if-for-me (DIFM) and the professional customers. The Home Depot appeals to the DIYs or home owners who wish to tackle their own home improvement projects without the aid of professionals by providing excellent customer service, educational services and demonstrations, and DIY books. By employing certified professionals of their own and providing installation services and tool rentals, The Home Depot aids DIFMs, those customers who are in the process of remodeling their homes, purchasing materials and are hiring professionals to install them. Finally, The Home Depot is a major hub for professionals, such as contractors and repairmen, with ensured quality materials, delivery services, extended credit programs and a convenient tool rental (LOW vs. HD).

Composing the rest of the US Dow Jones Housing Improvement market, small hardware