Home Depot Changing Its Focus
By Kevin Reinert on 28 Feb 2007 at 09:25 am
In a surprising announcement, Frank Blake, the new CEO of Home Depot, says the company may shut down business operations with business contractors. Instead, Blake says the home improvement store giant will focus more on serving its retail customers.
Why change from the strategies championed by former CEO Bob Nardelli? Simple – it’s all about margin. Analysts say the Home Depot Supply Business offered such a low financial return for the company that it had become a distraction for its real bread and butter, the retail business. Home Depot’s wholesale distribution woes appear to have two causes. In the short run, there’s a slowed-down housing market and in the long term, strong competition from Lowe’s has kept prices too low to be profitable.
Basic business courses have long taught that if you lower prices you can make it up in volume. However, successful businesses have discovered that it’s not a game of volume; it’s a game of margin. Home Depot’s margins (profits) are in retail not in wholesale distribution, and Frank Blake’s strategic move, while appearing strange to some, may just be what the company needs to stay number one in the marketplace.
And by the way, don’t feel too bad for Home Depot if they do sell off its wholesale distribution business. Estimates of its worth range from $5 to $7.5 billion.
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All this hoopla about one man coming into the captains’ chair. Now that he is here, it’s business as usual. While it’s true no one expected any dramatic change still there was a feeling that there would be some ground breaking. While Mr. Blake has restored some of the old initiatives that worked well under Bernie and Arthur such as merit badges. Still this does nothing to change the status quo. Yes the stores are hiring alot of part timers, who are young and inexperienced at ten dollars an hour. which only adds a strain to existing employees who are by all accounts already burnt out in terms of over work. Let me cut this short while i can go on and on, the facts remain Nothing has changed. I guess it’s politics as usual. Oh and if anyone wants to know why Home Depot refuses to release a diversity report it’s because they are trying to build up it’s minority hirings as we speak.