Jun 16, 2020 in Economics Essays

Home Depot Retail Strategy

Home Depot is currently one of the most successful retailers in the world. The company operates 2,244 stores in the US, Mexico, Canada, and China. Home Depot is the biggest retailer of home improvement equipment, construction items, and related services. The company was established by Bernie Marcus and Arthur Blank in Atlanta in 1979.

In the home retail industry, the main competitor of Home Depot is Lowe’s Companies (LOW). Other competitors are Home Improvement Stores, Sears, Menard Inc., and True Value Company. Moreover, Home Depot confronts rivalry from small stores, such as Builders FirstSource (BLDR), an organization that produces auxiliary and other building goods (Caplinger, 2016). Home Depot tries to ensure that it retains its customers in case of any unpredictable occurrences.

Home Depot’s present retail strategy is wide differentiation focused on cost leadership. From this perspective, the organization’s underlying strategy is low cost policy. Differentiation involves offering better special goods or services than other home retailers, particularly Lowe’s. Home Depot tries to do its best to satisfy the needs of its customers (Caplinger, 2016). Home Depot’s target market consists of homeowners and contractual workers, as well as those interested in DIY crates for their homes. The company observed that focusing on the protection of certain popular items worked best for them, which allowed it to gain a positive reputation among potential clients (Annual Report, 2015).

The Marketing mix of Home Depot

Product

The company offers a wide range of building materials, home improvement supplies, and grass and garden related items. Besides, it offers particular items for expert contractual workers.

Price

Home Depot offers reduced prices through its online Savings Center, where it sells items at a 20% discount. In addition, the company offers “unique purchases” costs on certain machines; for example. It offers 25% rebates on Washer and Dryer sets and 20% discounts on Water and Ice Refrigerators (Bomey, 2016).

Place 

Home Depot has stores in the USA, in Mexico, Canada, and China.

Promotion 

In 2008, Home Depot advertised its “New Low Prices” special offer, thus reducing the prices of more than 1000 items. The company showcased extraordinary offers through email pamphlets, do it without anyone's help workshops, and garden clubs. 

SWAT Analysis

Strengths

Home Depot is financially stronger than Sears and Lowe’s, and it provides excellent customer services and item quality. As a result, the company has a competitive edge over Sears and Lowe’s. The second competitive advantage of Home Depot is the fact that Menard’s items are seen to be lower in quality than those of Home Depot, especially taking into consideration that the prices for their products are the same. For the quality of the items that it conveys, Menard’s ought not to raise the price for its items (Bomey, 2016).

Another Home Depot’s competitive advantage is differentiation. Home Depot has item differentiation and picture differentiation, which gives it an edge over Lowe’s and Sears. Home Depot has distinguished its two principle showcase fragments: the do-it-without anyone else’s help (DIY) home change purchaser and the expert business client. 

Weaknesses

On the other hand, Home Depot and its competitors, such as Lowe’s, have close relations with suppliers. This condition debilitates providers from working with contending firms. For instance, Home Depot’s suppliers abstain from working with Lowe’s because of losing business with Home Depot. This impediment in the production network is a shortcoming since a few brands are not accessible in the organization’s stores (Ziobro, 2016). Likewise, Home Depot is feeble on the grounds that it is to a great extent reliant on the US companies, thus making the organization helpless against downturns of the US economy (Ichitelle, 2009).

Opportunities

The logical growth opportunities for the company are mainly based on business expansion. This is an important concern, particularly in light of the fact that the organization deals with foreign markets as well. Furthermore, Home Depot has a chance to expand its business, for example, through extra acquisitions of firms in other industries or markets.

Threats

Competitors, such as Lowe’s, pose the principle threat to Home Depot’s market strength. In addition, the organization confronts the danger of substitutes, which incorporate home retail goods accessible from general stock retailers like Wal-Mart. Moreover, many online retailers now offer a wide assortment of similar home details (Ziobro, 2016). Furthermore, any lull in the US economy is a noteworthy risk, because most of Home Depot’s incomes come from the US market. 

Net Sales

In 2015, the company’s net sales increased by 6.4% ($88.5 billion) compared to the 2014 figures ($83.2 billion). The 2015 expansion in net sales mirrors the effect of positive equivalent store deals driven by expanded customer exchanges and normal ticket development, halfway counterbalanced by weight from the fortifying US dollar. Besides, in 2015, store deals expanded by 5.6% (Annual Report, 2015).

The positive comparable store deals in 2015 reflect various components, including the execution of the company’s key activities, an enhanced US home change market, and expansive development of stores. The majority of specializations posted positive tantamount store deals in 2015. Equivalent store deals associated with Tools, Appliances, Plumbing, Décor, Lighting, Indoor Garden, Building Materials, and Hardware item classes exceeded the company’s normal performance in 2015. 

Net Profit

According to Home Depot’s 2015 Annual Report, in 2015, the company’s net profit expanded by 6.6% ($30.3) compared to the 2014 figures ($28.4 billion). Net profit as a percent of net sales, or gross net revenue, was 34.2% in financial year 2015, compared to the 34.1% net profit in 2014. The expansion in gross net revenue in 2015 reflects profits by the company’s inventory network driven by lower fuel costs and expanded efficiency, incompletely balance by an adjustment in the blend of items sold and the acquisition of Interline, which had a lower net revenue. Operating income expanded by 12.5% (to $11.8 billion) in 2015, compared to $10.5 billion in fiscal 2014. Operating income as a percent of net sales constituted 13.3% in 2015, contrasted with 12.6% in fiscal 2014 (Home Depot 2015 Annual Report, 2015).

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Income

Home Depot’s deals income constitutes $66.2 billion, while Lowe’s deals income is $47.2 billion. In addition, store sales at Lowe’s, Home Depot’s closest competitor, rose by 7.1% in 2015. At Williams-Sonoma (WSM), the other Home Depot’s key competitor, same-store deals rose by 5.1% in the quarter ending on February 1, 2015. Home Depot has low stock costs, and the company is number one in the business, number two in retail, and it earned 4 million dollars in premium a year ago. Lowe’s paid out 180 million dollars in premium a year ago, and it is number two in the business, number fourteen in retail, and has noteworthy stock costs (Bomey, 2016)

Home Depot is a financially stable organization, and it performs well compared to its rivals. The company’s financial future is promising because it has a major market share. In view of current business conditions and the potential development opportunity confronting Home Depot, the main issue will keep on growing at a sound rate over the opposition sooner rather than later (Caplinger, 2016). In addition, the generally low levels of obligation, somewhat more extensive edges, and lower costs make Home Depot an alluring venture in the long run.

Conclusion

Home Depot is the market pioneer in the fragment of home improvement supplies retailing, and it performs much better than its rivals. The fundamental reasons of its success are quality products, reasonable prices, and consumer loyalty. The numbers that have been exhibited in this review indicate that this company has a good financial positions and a promissing future in the home enhancement industry. Besides, rivalry is useful for a retailer, and even better for a customer.

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