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Saturation

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By agoldenlady
February 10, 2003

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Here is a little personal insight on the subject.

Those who have been on this board with me know that I am a previous 9-year veteran of HD who resigned to pursue other interests about one year ago. I had the opportunity to open 8 stores in 3 different markets. My comments are as follows:

When I joined HD in 1993, opening a brand new market in Portland, OR the store was the 277th HD. It was at a time (post 1990) that HD stock was not experiencing stellar growth. The word from the "experts" was the HD had saturated the market and could not sustain their current growth and at best could build 400 to 500 stores. Time has proven that was bunk. And for those of us who bought stock then, we were rewarded many times over.

I saw HD build stores that appeared to have no common sense spent on locating them. It turned out that when the rest of the development came to the area, within 2 or 3 years, HD had cemented a loyal following and the store was extremely busy and profitable. In the "development" stage of the store, many good employees were trained and promoted and their abilities grew with the sales volume of the store. Labor graphs were such that new stores received additional hours to make this happen and there were enough "veterans" in each store to ensure the level of talent increased through shoulder-to-shoulder training. I will not go into the current labor discussions, there has been enough posted on that.

I saw Home Depot keep out Lowe's and other major competitors, i.e. Eagle which was later bought out by Lowe's, by buying the market with enough stores that everyone else stayed out. It is a fact that having another HD as your competitor instead of a Lowe's or Menards makes better business sense. It is the same strategy Menard's (local Midwest chain) has employed to keep its market share and keep HD and Lowe's at bay. It was great to have stores that you could always get a transfer from, in order to help out a customer or to be able to allocate large orders with high minimum quantities so that you could stay in stock.

Home Depot has, or at least had, some of the best real estate planners in the business and the locations show it. Also the real estate they have "banked" with options and/or direct purchase will ensure this continues.

Do I now believe that HD has reached a saturation point. Flat out NO. There are many markets clamoring for HD and these smaller markets are less expensive to get into, have a better (and often) less expensive work force to staff from and have customers who have been traveling 50 to 100 miles to get to a Home Depot, where possible. When I worked in the nearest Home Depot to the Oregon Coast (50 miles inland) it was not uncommon for people to come and spend the whole day shopping at HD for themselves and friends, bringing their own or renting a box truck and filling it with every imaginable home-improvement item. There were also 2 local hardware stores owners who came and purchased from HD and resold it at a profit in their own stores. They did this because the pricing they could get from their "co-op" and/or jobbers were higher than HD's.

What I do believe is that Home Depot needs to concentrate on its core business and produce variations of it that apply to the market the store is in. I hope that the "centralization" guru, Bob Nardelli, and the non-retail upper echelon he has brought in, realize that what sells in San Diego will automatically sell in Poughkeepsie (SP?). And that selling an electronic coffee pot is not going to bring in your core customers, but not having something like Zircon electronic (laser) tape measure will cause them to shop elsewhere. (This was my personal experience when I tried to get my DH one for his birthday just last week. Menards and my local Ace Hardware both stocked them, so once again :( I was forced to spend my money ($43.00) elsewhere.

If Cash is King in a tough economic environment then Customer Service is the Queen and you need them both to continue to populate.

JMHO..

Agoldenlady


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