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Introduction of the retailer
The Home Depot is America’s largest retailer of home improvement products and services. Its main headquarters are located in Greater Atlanta, Georgia. Since the year 1978, when the Home Depot was founded, the company has shown the annual phenomenal growth rates, estimated at approximately 30%. The strategy of expanding into multiple geographic locations and increasing the variety of products has played an important role in the company’s growth and success.
Furthermore, Home Depot offered innovative services, targeting upscale homeowners. For example, the visitors can use computer-aided design technology for not only selecting the best-suitable products but also carefully planning the repairing operations.
A typical Home Depot store encloses the space of approximately 105, 000 square feet with an additional garden area of around 24, 000 square feet. The two locations visited for this report are:
- 980 3rd Avenue, New York – visited on March 16, 2012;
- 280 Mulberry Street, New York – visited on March 18, 2012.
The type of retailer by retail mix is a big box store. The type of retailer by ownership is a corporate chain. According to the 2010 annual report, the net sales for the year 2010 were estimated at $ 67, 997 which are larger as compared to the sales in the year 2009 ($ 66, 176), but lower than the sales in the year 2008 ($71, 288) (The Home Depot Inc., Annual Report 2010). The major competitor of the Home Depot on the national level is Lowe’s Companies Inc. On the global level, the direct and indirect competitors of the Home Depot include Wolseley plc., CCA Global Partners, Inc., and Menard, Inc.
The variety and assortment offered by the Home Depot include a wide range of building materials, products for lawns and gardens, and several services. On average, the Home Depot stores offer their customers from 30,000 to 40,000 products. The Home Depot operates in specialty stores offering only a specific group of products and services.
Strategy of the retailer
The target market of the Home Depot includes three primary customer groups, namely the Do-It-Yourself (DIY) customers, who purchase products and complete the building operations in their houses by themselves, the Do-It-for-Me customers, who buy the materials and hire independent contractors for completing the projects in their homes, and the professional customers who are the third-party contractors, repairmen, and tradesmen, who buy the home improvement products for business purposes.
The main elements of the retail mix include the location, merchandise assortment, pricing, communication mix, store design, display, and customer service. First, a convenient store finder tool is offered by the corporate website, so that anyone accessing it can find the store in his/her location. Moreover, the stores can be found both in the city centers and the suburban areas, because the expansion of the stores into different places was one of the important principles of the marketing strategy adopted by the company.
As to the merchandise assortment, the managers at Home Depot pay special attention to the innovative products and the products meeting the goal of “aggressive pricing” which they believe can help them achieve product excitement in the customers and have a positive impact upon the sales. Importantly, all products are divided into four main groups, such as “leadership”, “commodity”, “core” and “emerging”. This classification is used by marketers in planning the display of the products in the sales zones. Taking into account the fact that the target audience of the Home Depot ranges from the upscale to the low-earning homeowners, this principle affects the pricing policies at the company.
Along with aggressive pricing strategies, the company offers high-quality and expensive products. Regarding the element of the communication mix, it can be stated that Home Depot pays proper attention to effective communication with customers using online, radio, TV, and street advertising. Also, when entering any of the stores (or even accessing the website of the company), consumers receive plenty of information on special offers and discounts which can grab their interest and even lead to unplanned purchases.
A good example of customer loyalty programs offered by the Home Depot is to use a discount of up to 70% on overstock lighting and fan products when ordering any of these products online. This effective e-marketing strategy can bring new consumers and quickly spread using a positive word of mouth, contributing to the positive image of the company.
An example of the fashion merchandise category offered by the Home Depot is Lifesmart Infrared Corner sauna sold at $ 2,199.000 (the shipping price is included), which is not necessary for completing the repairing operations in the bathroom but can be attractive for the upscale consumers. An example of staple merchandise is American Standard Bathroom Sink in white priced at $ 178.39 which is a mandatory element of any bathroom and is affordable for different groups of consumers.
Recommendations for the retailer
Notwithstanding the phenomenal growth rates enjoyed by the Home Depot and substantial annual revenues, the downturn tendencies have been observed in the company’s profits within recent years. Furthermore, the aggressive strategies used by the company’s competitors pose a question concerning the need for further improvements in the Home Depot.
The whole home-improvement sector is highly dependent upon the housing market and has been in deep crisis within the past three years. Even though the Home Depot management took precautionary measures to prepare the company for the crisis, the collapse in the housing market hurt the company’s revenues (“Lowe’s and Home Depot”). The main strategies used by the Home Depot included the simplification of operations, improved customer service, and more emphasis put upon the cooperation with consumers.
However, further improvements are needed in the sphere of customer-retailer cooperation and individual approach to consumers and their needs. Another significant issue that should be addressed by Home Depot is the growing interest of the power tools in consumers. Therefore, Home Depot can consider the opportunities of the further expansion of this category of home improvement products which are popular among different categories of consumers.
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As to the opportunities of growth, which have always been an important aspect of Home Depot’s policies, with the current state of affairs in the market sector, the company can consider the advantages of mergers and acquisitions along with the further cooperation with the third-party contractors offering their services to the Do-It-for-Me category of consumers.
Taking into account the current success of the Home Depot and the continuing crisis in the housing market and the home-improvement sector respectively, it can be concluded that the wise strategies are needed for improving the situation in the company. The main issues which should be addressed by the improvement strategies include improved retailer-consumer cooperation and reconsideration of the growth strategies.
“Lowe’s and Home Depot: Home-Improvement Sector Dampened by Weak Housing Market.” International Business Times. 2011. Web.
The Home Depot, Inc. Annual Report 2010. n.d. Web.