Home Depot is the largest home center chain operating in 2,244 stores throughout the U.S., Mexico, Canada, and China. Home Depot is considered to be the largest retailer of home improved goods, construction products and services in the world. It was founded by Bernie Marcus and Arthur Blank in Atlanta in 1979. The Home Depot’s proposition was to build home-improvement warehouses, larger than any of their competitors’ facilities.
The store inventory consists of about 40,000 different kinds of building materials, home improvement supplies, appliances and lawn and garden products for the needs of various projects. The Home Depot stores are always equipped with goods that are confined to a small area to match that area’s specific market needs.
www.homedepot.com is ranked on position 418 within .com and has 5,399 back links. The Site was launched at Tuesday, 04 August 1992.
ORGANIZATION STRUCTURE
BUSINESS MODEL
Homedepot.com follows the B2C i.e. Business to consumer model. In B2C transactions, online transactions are made between businesses and individual consumers. B2C E-Commerce involves electronic retailing or e-tailing. At homedepot.com customers can browse catalogs when they want, place an order and the product of service will be delivered directly to them. It is an online version of the store where customers can shop any hour of day and night without leaving their home and office. The revenue model followed by homedepot.com is sales of goods.
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Within the e-tailer the type of model used by homedepot.com is Clicks and bricks. It is a business strategy or business model in e-commerce by which homedepot attempts to integrate both online and physical presences. This model makes it far easier for a homedepot.com to establish an online presence than it is for a start-up company to employ a successful pure dot.com strategy. By using this model homedepot developed certain advantages, such as:
Leveraging their core competency.
Multiplying existing supplier networks & distribution channels.
A lower cost of capital.
THE MARKETPLACE
The Home Depot has more than 1950 places across the United States, China, Canada and Mexico. Home depot stores have an average area of about 105,000 square feet and around 23,000 square feet of area outside of greenery. Inventory consists of different kinds of building materials, home improvement supplies, appliances and lawn and garden products for all of your project needs.
The Home Depot’s retail stores offer skilled customers, like person who can repair and remodel particular services. Through committed service provider desks in more than 1,900 stores, skilled customers have right to use the loyalty programs, a pro bid room to handle large customer orders with volume discounts, directship programs, credit programs and other specialty sales initiatives.
Home Depot operates under four different business segments:
MARKET STRATEGY
The strategic factors that helped in the growth and popularity of home depot are related to quality of product, its price, advertising for the products, store capacity, competitors, and customer’s independency and happiness. Good quality products are offered by Home Depot like garden supplies, lawn & installation services & home improvement products, for these products are offered too.
Home Depot introduced a trial product store format that presented approx. 32,000 more square feet of selling area, due to which the selection of products and services broadened, also it provided with a more appropriate layout than the long-established stores. Collection of complementary product categories via stores that were designed based on a design centre, which facilitated Home Depot in storing more than 40k products in a year.
New stores were brought closer to existing ones by Home Depot via a clustering strategy. An advantage was created by following this strategy via increasing the blockage of entry to competitors & reducing rush in the current stores. This strategy also permitted the organisation to enlarge its advertising & distribution expenses along a greater store area.
Customer Cultivation is regarded as one of the prime strategies implemented by Home Depot. It is the consequence of the prerequisite of elevated qualified and in-store clinics, supportive, professional clinics and employees.
An additional approach is centering on widespread announcement. Two years ago, Home Depot spent 895 million dollars on advertisements which accounts for 9.5 % more than its 2007 spending of 817 million dollars. Widespread advertisements provided Home Depot with a personal potential not in favor of remaining companies in the same industry.
CUSTOMER VALUE PROPOSITION
Customer value proposition consists of the sum total of benefits which the firm promises a customer will receive in return for the customer’s associated payment. Customer value proposition is specifically targeted to attract new potential customers instead of employees, partners or supplies. It is a statement that is designed to convince customers that one particular product or service will add more value or better solve a problem than others in its competitive set. home depot provides a broad selection of quality products and services.
Home Depot has the widest range of products, which are rated below rival market. They hire trades professionals so that the customer gets “expert advice.” Because of the technical support and better customer service the store has shown results which are unmatched in the business.
As it is said, it is the good incident that brings the customer once more and it’s the word of mouth that brings other new customers, hence, customer satisfaction is one of the most important policy followed by company.
Home depot selects very customer friendly oriented people. To improve the customer experience following steps is taken up by the company:
Stores are getting modernize so that the perception of home depot is improved before the customer.
In order to improve the customer service, a 24 hour hotline is being introduced.
In order to improve customer service at Home Depot stores a new employee incentive program has been developed.
REVENUE MODEL
Estimated 20,068,000 visits over last 30 days. This Google Page Rank 7/10 website has a Traffic Estimate rank of 288.
homedepot.com is worth $3,759,165. This makes homedepot.com the 93 most valuable site on Stimator.com.
Home Depot’s first quarter in 2010 is $725 million, up from $514 million a year earlier.
Net sales for the period increased 4.3% to $16.9 billion. Similar store sales increased 4.8% company-wide for the period.
COMPETITORS
In the home improvement industry the main competitor of home depot is Lowe’s Companies (LOW). Home Depot leads in terms of sales revenue which is $66.2 billion and that of Lowe’s is $47.2 billion. Other competitors of home depot are Home Improvement Stores, Sears, Menard Inc., True Value Company.
Home Depot also faces competition from smaller independent stores. Builders First Source (BLDR), a company that manufactures structural and related building products for new construction. The advantage which Home Depot has against the smaller competitors is that in case of an economic downfall, it will be prevailing and thus taking back the old customers which were attracted to these small competitors earlier.
C:UserscompaqDesktopmenard.jpg C:UserscompaqDesktoplowes.jpg
COMPARITIVE ADVANTAGE
Home Depot is financially better placed than Sears and Lowe’s. Home Depot maintains its strong price positioning and improves customer service and product quality. Because of this reason home depot enjoys a competitive edge over Sears and lowe’s.
The second competitive advantage for home depot is Menard’s products are perceived to be lower in quality than those of Home Depot even when the price for both are similar. For the Quality of the products that it carries, Menard’s should not want to increase the price of its products.
Another property that gives homedepot the competitive edge is differentiation. Home Depot has product differentiation as well as image differentiation. This provides a competitive edge over both Lowe’s and Sears.
The Home Depot has essentially identified its two main market segments:
The do-it-yourself (DIY) home improvement consumer and
The professional business customer.
CONCLUSION
We have seen that how a b2c site (homedepot.com) operates. What is the business model behind the operation of home depot? It has helped customer to do shopping for the desired product by sitting at home/office and making payment on delivery by credit/debit card.
The home depot is the market leader in the segment of home improvement retailing, much ahead of its competitors. The main reason of its competitive advantage is good quality, lowest prices and customer satisfaction.
APPENDIX
TABLE 1
DIRECT COMPETITOR COMPARISON
homedepot
Low
PVT1
PVT2
Industry
Market Cap:
47.47B
30.17B
N/A
N/A
30.17B
Employees:
193,370
166,000
40,3001
3,0002
166.00K
Quarterly Rev Growth
4.30%
4.70%
N/A
N/A
2.90%
Revenue
66.86B
47.78B
7.90B1
2.01B2
47.78B
Gross Margin
33.75%
34.80%
N/A
N/A
34.80%
EBITDA
6.73B
4.98B
N/A
N/A
4.98B
Operating Margin
7.38%
6.81%
N/A
N/A
7.47%
Net Income
2.83B
1.78B
N/A
64.20M2
N/A
LOW = Lowe’s Companies Inc.
Pvt1 = Menard, Inc. (privately held)
Pvt2 = True Value Company (privately held)
Industry = Home Improvement Stores
1 = As of 2009 2 = As of 2008
TABLE 2: Comparison of Major Warehouse Format Home Centers’ Store Attributes
Attribute/Company HomeDepot HechingerHQ Builders SquareHomebase
Store Count 174 30 144 73
Square Feet/Unit(000) 94 86 84 113
Sales/Square Foot $348.00 $224.00 $171.80 $169.90
FIG1 DAILY TRAFFIC TREND FOR homedepot.com
FIG2 UNIQUE VISITORS FOR homedepot.com
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