Retail

Home Depot Goes Pro

Late winter into spring is typically the season of discontent for retailers.

The lights are down, the holidays are conclusively over just about everywhere and the rampant spirit of generosity that drives people to run their checking accounts into the red has been replaced by a feeling of forced fiscal responsibility.

And early 2016 has been difficult, even by the season’s standards. The holidays were weaker than expected, Wall Street has rapidly lost faith in everything, it seems, China’s no longer an invincible growth engine and foot traffic’s in freefall. And, to put a cherry on the cake, the weather just won’t cooperate. With temperatures flipping from blizzard to balmy and back within days, all across the country, shoppers are just swearing off apparel until summer.

A long way of saying that a doomy and gloomy outlook in retail this day isn’t much of a story.

Good cheer, enthusiasm and optimism, on the other hand, represents something of a change of pace — unless, of course, it comes from Amazon (arguably, the source of everyone else’s doom and gloom).

Enter Home Depot, who, unlike the rest of retail, is gearing up for its own personal holiday season while you read.

When one works in home improvement, the most wonderful time of the year isn’t in November but in late February into March.

Consumers, trapped by the cold, have been staring down the interiors of their houses and found them lacking. They see their grey, frozen yards and think fondly of flowers and vegetable gardens. And they do one of two things: they call contractors and landscapers, or they decide to DIY it and post every step of the great home improvement project on Pinterest and Instagram.

“I think we may be the only people in America excited for early March, since spring is our Christmas every year and we are expecting it to be a very bright season,” noted a Home Depot spokesperson.

Optimism that is founded, she notes, not just in a can-do attitude but based on the knowledge of what it sells and a big vision for expanding the base of who it sells to.

 

The Hiring Rush Is On

Home Depot’s annual hiring spree is officially on, too, as the store is looking to swell its rosters by more than 80,000 sales associates.

“There’s no better time to join our team than spring, whether you’re a college student, recent grad or a veteran hoping to build a career, a retiree who wants a fun job or anyone who simply enjoys home improvement,” Tim Crow, HR EVP, noted in a release.

The hiring push will add, on average, 40 t0 45 new employees to each of the store’s 2,000 locations nationwide, though those numbers will vary some depending on actual store locations.

Consumers were indeed spending like it was 2006 last year when it came to home improvements. Home Depot enjoyed a very good year when others in retail were left struggling. Its same-store sales jumped almost 6 percent.

Home Depot also projects total sales of approximately $101 billion for the year. That’s a lotta lumber.

“The improvements in the housing market are moving our customers back into the mindset of treating their homes like an investment, as opposed to a liability they have to spend into. We’ve seen that reflected in our in-store activity levels.”

About half of the 80,000 or so seasonal employees will be transitioned to permanent work and hires will be made across departments.

Home Depot, it seems, is doing a lot of what it always had done and has benefited greatly from economic conditions that make what it does more relevant to more consumers. But in the face of its success, the firm is not standing idly by, not willing to rest on its laurels. It is, in fact, looking to reform its customer base through expansion.

Home Depot wants to sell to the professional contractors that currently only make up about 4 percent of its customer base but 35 percent of sales.

 

Going Pro

Professional customers — the general contractors, landscapers, plumbers, interior designers and carpenters that spend their Saturdays wandering Home Depot’s aisles — are the opportunity the retailer needs to tap going forward, according to J.T. Rieves, Home Depot’s VP of pro business. Moving that needle up, even incrementally, can deliver drastic changes to the bottom line.

“We spend a lot of time trying to show people how compelling the pro opportunity is. [CFO Carol Tome] has stated publicly: If we get the average Home Depot pro customer to come three more times a year, that’s over a billion dollars a year in additional revenue. Or, if I get each pro to spend $5 more in the store, that’s another $1.2 billion,” Rieves said.

Yes, pennies grow into dollars.

Rieves notes that Home Depot has made progress there but that 4 percent figure also indicates there is much to be done.

“I think we all would say that we are the convenience store for the pro. It’s a fabulous business, but in my opinion, it should offend us that the number one reason pros shop us is convenience and location. My goal is to move the perception from the convenience store of the pro to the destination store of the pro. Let’s demonstrate to them why they shouldn’t leave us and go elsewhere. Our paint is just as highly regarded; our pricing is just as good. And we have other things in the store that we can do for you,” Rieves added.

More importantly, Rieves notes, Home Depot has scale, money and opportunity to expand its offerings beyond the paints, lumber and merchandise itself and into how the professional who want them access them. That has meant a big focus on digital upgrades in the past few years and a way to provide professional building customers a sort of material flexibility that would be hard to match without a store network as large as Home Depot’s.

“Whether it’s the Home Depot app, whether it’s buy online and pick up in store and let us pull your order, there are other opportunities: the Home Depot quote center and the ability for us to do truss packages. On and on goes the list, and all of those are things that I’m not sure people realize that we provide,” Rieves noted.

The competencies were not native to Home Depot; Rieves noted that realizing the professional consumer may well be the future of the big box home improvement retailer pushed the company into the market for acquisition. What it came back with was Florida-based Interline Brands, which provides a powerful boost to the MRO [maintenance, repair and operations] business.

“They bring same-day or next-day delivery, high fill rates and a service model that they do really well. Why not partner with the guys who do MRO better than anybody? That’s exactly what we’ve done,” Rieves noted. “[Professional clients] went elsewhere because it wasn’t a core competency of ours. Now, it is, because we just acquired it. We have some work to do to make those two businesses work perfectly in tandem.”

That work will not be easy, and those pros will need convincing.

But the team at Home Depot remains an island of optimism in a sea of discontent, as sales are growing and it has its plan of attack laid out.

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