Home Depot builds on pros
Here’s the compelling math behind The Home Depot’s effort to embrace the pro customer: Pros account for 4% of total Home Depot customers and 30% of total Home Depot sales.
Clearly, these are customers that the world’s largest home improvement retailer wants to impress. The Home Depot has known for years the importance of its pro customer, but something’s different at Home Depot these days, and the difference begins with three little words: “First for Pro.”
As VP – Pro for the Home Depot, J.T. Rieves is one of the key figures in laying the foundation for growth, and he’s a big believer in the First for Pro initiative. “We asked, ‘What do pros really want?’ And for years, the answer really hasn’t changed,” he told Home Channel News during a store tour in Atlanta in the shadow of the company’s headquarters, aka Store Support Center. “It’s been: ‘I want to get in and get out fast. I want you to have great prices. I want you to know who I am.’ We took all those things and created a plan.”
The initiative can be described by its individual parts. Pro customers receive Pro Account Reps (PARs) to serve as a single point of contact. They receive volume pricing, job-site delivery and advance order pulling. And varieties of commercial credit — either revolving or a simple commercial account due in full each month — are available to them through the pro desk.
If that sounds like a traditional lumberyard as opposed to a DIY warehouse, Rieves doesn’t mind at all. Because he believes traditional lumberyards represent an opportunity for market-share growth. The Home Depot knows its pro customers are shopping in many other places, and the retailer is getting just a small portion of the pro customer’s wallet. The new approach is going to move the company’s focus to more of a direct one-on-one with traditional lumberyards. Why? Because if you’re going to get market share, that’s where you’re going to get it.
“We’re saying, ‘Those guys are key competitors, whether it’s the way they price, or the way they use credit, or get you in and out fast, or have coffee for their customers.’ It’s all of those things,” Rieves said. “To grow business today, you’re going to have to take it from somebody else, and it isn’t other retailers as much as it is folks in lumberyards, plumbing supply, electrical supply house.”
The Home Depot has its work cut out for it. A survey from The Farnsworth Group found builders or remodelers view LBM dealers as their primary source for purchasing materials 70% of the time. Warehouse home centers are a primary source for about one-third of remodelers and only 12% of builders (based on a 2010 survey of 400 independent builders/remodelers).
Into this equation, First for Pro was launched in May. Rieves, who was moved from regional VP of the Southeast to VP – Pro in August 2010, shared some First for Pro highlights with Home Channel News at store No. 121 in Atlanta.
• Power hours
The pressure is on the pro side of the store to be ready and accessible during the morning rush. That means getting the store employees away from their behind-the-desk task and engaged with customers. In fact, some of the tasks behind the desk have been removed entirely to encourage customer engagement.
“From 8 to 12, we’re focused on one thing: the people in the building,” Rieves said.
• Dedicated loaders
Many pro customers bring their own assistants to help load trucks with building materials. Under First for Pro, dedicated loaders in orange aprons do the work.
“What we’re saying now is we have somebody here during the most important times of the day, and they’ll help you load your truck so you can get back to your site and get back to work.”
• The First Phone
Technology plays a role in the First for Pro’s emphasis on speed. The handheld device called The First Phone is equipped with multiple functions, including line busting. It even has an attachment than can perform credit card transactions away from the checkout. “It demonstrates to our pro customer that we’re going to try to get you out of here quickly, which they said is extremely important to them.”
• Paint for pros
Rieves describes the pro painter as “an opportunity for us.”
Research showed that about 90% of all pro paint is sold in independent paint stores. So the challenge for Home Depot is to find out what makes that independent paint store so popular, and to bring that to Home Depot. The answer includes product, pricing and people. The company recently unveiled its Kilz Pro-X line, which works with Behr and Glidden to create a good-better-best offering for the pro. There are discounts for large purchases, just like a paint store. Home Depot in most markets can deliver large orders of paint.
“A lot of the painters that we’re talking to today, they buy stuff to apply paint from us, but they don’t buy the paint. And we just have to crack that code.”
How’s it working? CFO Carol Tomé offered this during the company’s third-quarter conference call: She said transactions on the pro side of the business were down, but the ticket was up significantly. “So, the pro who’s shopping with us is more sticky, and is buying more with us.”
If the customer wants Home Depot to imitate a convenience store, Home Depot is going to operate like a convenience store, Rieves said. But it has its sights on a bigger role and a bigger share of spending for this big-ticket customer.
“If the customer wants us to be a convenience store, then we owe that to them and we haven’t really done that in the past,” he said. “In the future, as they consider other opportunities, our goal is to create such a compelling shopping experience that there would be no reason for you to try anywhere else.”
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Industry Dashboard for Dec. 5, 2011
All three of the Consumer Watch metrics are heading in the right direction — unemployment, consumer confidence and gas prices. Elsewhere, stocks are all over the board again.
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Energy tax credits about to expire
Tax credits for energy efficiency home improvements like insulation, replacement windows, and upgraded HVAC systems will end on Dec. 31, and Congress has not yet renewed them for 2012.
This warning from the Alliance to Save Energy gives homeowners less than a month to take advantage of as much as $500 in tax credits on their 2011 federal tax returns.
The specific home improvements that qualify for tax credits fall into a number of categories: Exterior windows; skylights and storm windows; insulation; exterior doors; roofs; storm doors; and products to seal air leaks, such as caulking, weather stripping and foam sealants; highly efficient heating and cooling equipment, including central air conditioners, heat pumps, furnaces, boilers, water heaters and biomass (e.g. corn) stoves.
Each product category also must meet specific energy efficiency requirements, which are spelled out on the Alliance’s tax credits Web page.
Percentage and/or dollar limits on particular energy-efficient upgrades include:
• 10% of the cost of insulation and sealing materials, exterior doors and roofs.
• 10% of the cost, up to $200, of exterior windows or skylights.
• Up to $300 for electric heat pump water heaters, electric heat pumps, central air conditioners, biomass stoves and natural gas, propane or oil water heaters.
• Up to $50 for advanced main air circulating fans.
• Up to $150 for natural gas, propane or oil furnace or hot water boilers.
The Alliance to Save Energy is a coalition of business, government, environmental and consumer leaders who promote the efficient and clean use of energy worldwide to benefit consumers, the environment, the economy and national security.
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I hope the government can continue to support the energy tax credits, and continue to give out tax incentives from 2012 onwards. People need that incentive to carry on their energy saving actions, and I know that a lot of them need that monetary help when it comes to implementing various upgrades to make their homes energy efficient. Christopher - stoett
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I believe that the tax credits have been helpful for our industry and have benefited both the industry and the consumer. However with the Federal Government on track to financial ruin we have to stop with the Government's involvement. If our industry is to grow it has to be by demand and the ability for consumers to pay. The Federal Government simply does not have the money to support these credits. On the industry side of this equation it is imperative that it stand on it's own to build a sound economic future versus creating a false economy with Government funding! If we in the industry continue to rely on Government Funded Programs the industry will never rebound to a sound economic status.