A Case Study: Home Depot – Success or Failure
Home Depot: A Company Review – Success or Failure
For over 30 years, Home Depot has been included in the landscape of our towns and cities. It has been considered one of the first big box stores to affect the way the goods were sold and the way Americans shop. Home Depot has been an example of a successful company selling more for less and allowing customers to succeed in do-it-yourself projects. However, the time has changed and now the once a very profitable company is struggling to beat the competition and change the image of being the non-customer oriented company.
The Home Depot was founded in 1978 by Bernie Marcus and Arthur Blank. The two friends who got fired from a small home improvement store decided to build their own store. With a help from investment banker Ken Longone and Pat Farrah who specialized in product knowledge, the store for one stop shopping for do-it yourself person was born. They opened the first two Home Depot stores on June 22, 1979, in Atlanta, Georgia. The Home Depot was a dream store for any person who loved to do own projects. It had a wide range of products and provided great customer service. The well trained associates offered support to the customers through various projects, helped with the know-how and product knowledge. Home Depot invented new ways for the home improvement industry to attract the customers by offering free clinics, demonstration of various tools and empowered the customers to do-it-yourself projects. People, who never tried to fix things in their home, could do it.
According to the company web site (Home Depot Corporate Web Site, 2009), the founders of Home Depot, Bernie and Arthur believed that “The customer has a bill of rights at The Home Depot, and this entitles the customer to the right assortment, quantities and price, along with trained associates who want to take care of customers.” The owners of Home Depot were very much customer and employee oriented. They knew that by taking care of the employees, they will create a good work environment for them to take care of the customers. This simple vision to take care of the customers was the way to prosperity and success of Home Depot. In 1981, the company went public on NASDAQ and not long after that moved to New York Stock Exchange. The stock prices grew as the investors and analysts were writing positive ratings. The growth of the company was tremendous. Home Depot was building big box stores everywhere. The signature orange color of the store meant good prices, wide range of products and great customer services. The sales were good and stockholders were very happy.
The successful beginnings were the foundation for growth and company dominance in the market. Because the Home Depot was the biggest customer to many suppliers, they could forge strong relationships with other companies and get better prices for the products. Today, based on the latest updates on the company web site (Home Depot Corporate Web Site, 2009), the Home Depot has “1,973 stores in the U.S. and the territories of Puerto Rico, U.S Virgin Islands, Guam, 178 stores in Canada, 12 stores in China and 75 stores in Mexico.” The “orange box” as Home Depot is sometimes called, employs over 300,000 associates and is the second largest retailer in the U.S.
Home Depot store inventory consists of up to 40,000 different products to include building materials, home improvement supplies, appliances and lawn and garden products for any type of project. The inventory changes as the new products arrive on the market. The specific product selection changes based on the customers’ needs and on the area they live. The snow blowers will not be offered in Georgia or Florida stores. The stores offer also different types of services to include home services, pro customer, free how-to clinics, and children’s workshops. The Home Depot is involved in the community services, taking social responsibility to very high level. It is important to know that even in the difficult economic situation, Home Depot still supports a great deal of community efforts. At the Home Depot, the current management focuses on making sure that they support community they have stores and provide help when disaster strikes. The company works with United Way, Salvation Army, community leaders and other organizations to help people in distress. Home Depot is always first when disaster happens. The company offers national grants to schools and communities. Home Depot sponsors sports events like NASCAR and soccer teams.
On the environmental record, (Cut Your Footprint, 2007) evaluated the Home Depot Company green profile and the overall ratings were 3.5/5 while the Wal-Mart was evaluated as 3.3/5. The company promotes green products and services and works with environmental groups to create a green work environment. Home Depot sells products supportive of sustainable forestry and clean water. They also sell eco friendly pesticides, natural garden products and eliminated sales of lumber coming from the endangered forests.
Years 2007 and 2008 were very difficult years. The sagging economy, pressure from competition and demands from stockholders for better results has put a great deal of pressure on the Home Depot. The once powerful and dominating Home Depot started to fall apart. Customers were not happy, sales were lower, and the stock prices went down. The crumbling housing market contributed to the straggle of Home Depot to compete with Lowe’s and other home improvement stores. The lower sales and not meeting the market expectations were compensated by cuts in the stuff. Scott Burns, in his article “Home Depot Shafting Shoppers” (Burns, 2007) said that “by cutting back on employees, the home-improvement retailer is putting the screws to the people it needs most: its customers.” This online article opened the door to thousands of readers who posted messages about time wasted at Home Depot stores. Readers were telling Home Depot to return to its roots, to better serve customers as they are ones who keep the stores surviving. Frank Blake, the new CEO for Home Depot posted his response:
- I’ve read a number of the postings on the MSN message board (unfortunately, there were a lot of them), and we’ve dispatched a dedicated task force — working directly with me — that is ready and willing to address each and every issue raised on this board. There’s no way I can express how sorry I am for all of the stories you shared. I recognize that many of you were loyal and dedicated shoppers of The Home Depot. And we let you down. That’s unacceptable. Customers are our company’s lifeblood — and the sole reason we have been able to build such a successful company is because of your support. The only way we’re going to continue to be successful is by regaining your trust and confidence, and we will do that. (MSN Money, 2007)
A founder of the company, Bernie Marcus as cited on the company web site, (Home Depot Corporate Web Site, 2009) said “in his book Built from Scratch (2001)… At the end of day, we are in the people business.” Few years ago, going to the Home Depot store was a fun trip for the whole family. The associates would ask questions and offered help if you needed some assistance. In 2007, it was hard to find anyone to help, there were only few cash registers opened and the lines were long. The once a great customer service was gone. The hired employees were college kids who had no idea about plumbing, building or even gardening. The older guy who helped to pick the right pipe for the sprinklers was gone and with him the great Home Depot went away. Now, for Home Depot to beat the competition and regain the dominance in the home improvement industry is to do better in customer service and take care of the employees. The Home Depot Company still has a great deal of things to improve: add more cashiers, hire more competent sales and the ‘handy Andy’ type of associates. The customers, who once loved Home Depot, hope for better and faster service, more quality products and lower prices. Recent good news came from the stock market where according to the article in MSN Money Central, (MSN Money, 2009) “the Home Depot had better profit results than Lowe’s.”
The Home Depot CFO, Carol Tome, has been “Renovating Home Depot.” (Colvin, 2009) The very clever title for the article from the Fortune Magazine, leads us to the great interview Fortune’s Geoff Colvin had with Home Depot’s CFO. Carol Tome stresses the importance of what is the core plan for any business: customers and employees are first. She also explains that “when homeowners buy foreclosed houses, there is always some work to be done.” (Tome, 2009) New owners usually need to clean the house, paint and fix bigger and smaller things. CFO Carol Tome (Tome, 2009) said in the same interview: “We see a real opportunity there.” The main focus of Home Depot is customer service and employees who provide that service to the customers. The company can “win a customer by experience, making sure that service is there and the products are there at the right price.” (Tome, 2009) Wall Street analysts and finance gurus know that for Home Depot and other big companies like Lowe’s, the road to full recovery is long. The housing and construction market needs to bounce back and customers need to feel safe enough to start spending money. This is a good time for big corporations to review their plans for expansions, for new ways of attracting customers.
Home Depot will survive current difficult times and will be stronger and managed smarter. It will take few more years to become the best on the market again. Recent good changes implemented by Home Depot management generated positive response from the market analysts. Credit Suisse analyst “reaffirmed his bullish view and raised his estimates on Home Depot, noting that HD’s U.S. quarterly same-store sales, while down 8.5% company-wide and down 6.9% in the U.S., beat Lowe’s for the first time in memory.” (Balter, 2009)
Although, the signs of Home Depot turnaround are showing the improvement, only time will show if the customers are willing to restore the confidence in the Home Depot and come back to its aisles. Only customers will tell if the Home Depot is a success of failure. The two original owners are not participating in the life of the company anymore. They do not service on the board of directors. It would be good to hear from them if they think that their Home Depot was a success or a failure. Bernie Marcus, as cited on the company web page (Home Depot Corporate Web Site, 2009), once said to the associates about customer service, “Do whatever it takes. It is your business, your division, your market, your store, your aisle and your customer.”
References
Balter, S. (2009). Fortune Magazine. Retrieved September 10, 2009, from Fortune Magazine: https://fortune.cnn.com
Burns, S. (2007). Retrieved September 10, 2009, from MSN Money: htttp:moneycentral.com
Colvin, G. (2009, August). CNN Money. Retrieved September 10, 2009, from CNN Money: http://money.cnn.com
Cut Your Footprint. (2007). Retrieved Septemeber 10, 2009, from Cutyourfootprint: http://www.cutyourfootprint.com/companyprofiles/home-depot.asp
Home Depot Corporate Web Site. (2009). Retrieved September 10, 2009, from Home Depot Corporate Web Site: htttp://corporate.homedepot.com.
MSN Money. (2007, March 07). Retrieved September 10, 2009, from htttp://articles.moneycentral.msn.com
MSN Money. (2009). Retrieved from http://moneycentral.msn.com
Tome, C. (2009, August 18). CNN Money. Retrieved September 10, 2009, from CNN Money: http://money.cnn.com