Home Depot: transforming a world leader

The Home Depot, the world’s largest home center chain, ended 2014 with sales of more than $83 billion — growth that reflects changes to the company’s business strategies.

For example, the 2014 comp-store sales increase of 5.3 percent shows the results of Home Depot’s rededication to customer service made by Frank Blake, the now-retired CEO. Blake was succeeded recently by Craig Menear, a Home Depot veteran.

Under Blake and now under Menear, the company is transforming the way it operates.

When founded by Bernie Marcus and Arthur Blank in the late 1970s, products were shipped directly from manufacturer to retail locations, bypassing the need for distribution centers, even though other retailing giants, like Wal-Mart, used distribution centers to feed their stores.

Today, Home Depot is copying the Wal-Mart system, and owns or leases 162 warehouses and distribution centers of various sizes and types, totaling 42.5 million square feet. Improvements in technology now enable the company to keep the stores stocked with fewer outs and better turns.

But that isn’t the only major change in Home Depot’s strategy. The chain has made a major commitment to online sales in order to offer consumers access to a wider range of products than can be found in its warehouse-stores. Last year, its nearly $4 billion in online sales accounted for 4.5 percent of total sales. Online sales increased 36 percent in 2014, outpacing brick-and-mortar store sales growth.

Home Depot’s online selling offers customers multiple ways to buy: buy online and pick up in store; buy online and ship to store; and buy online and have product delivered from a local store. About 40 percent of items sold online were picked up in local stores.

The company’s distribution centers serve different functions geared to product sizes and characteristics. The company has 34 bulk distribution centers, 21 stocking distribution centers in the U.S., Canada and Mexico, and 10 specialty distribution centers in the U.S. and Canada.

The company now also operates 18 Rapid Deployment Centers in the U.S. and one in Canada. A second Canadian distribution center will open in 2015.

The company also uses four transload facilities near ocean ports, which are operated by third parties, to handle imported merchandise.

In 2014, Home Depot opened one new story in Canada and six in Mexico. The company ended with year with 1,977 stores in the U.S., 181 in Canada and 111 in Mexico.

Financially, the company continues impressive performance, generating $6.3 billion in earnings, a net profit of 7.6 percent, up from 6.8 percent a year ago. Average sales increased slightly to $57.86, but the number of transactions increased 3.5 percent.

Source : Bob Vereen - Hardware Retailing
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