How Home Depot aced the competition
BUILT FROM SCRATCH by Bernie Marcus and Arthur Blank Times Business 332 pp., $24.95Skip to next paragraph
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The day that Home Depot opened its first hardware superstores in 1979 brought an unusual crisis. In anticipation of the big event, the well-meaning managers of one Atlanta store had the floors scrubbed.
This flies in the face of the whole concept, which is for the stores to look and feel like working warehouses. So forklift operators were called in and ordered to skid around corners, stomp on brakes, and basically scuff up the floors.
This revealing anecdote, and many like it, is shared in "Built from Scratch: How a Couple of Regular Guys Grew the Home Depot from Nothing to $30 Billion."
The story is told by the two entrepreneurs credited with revolutionizing home-improvement retailing, Bernie Marcus and Arthur Blank. They tell their story to business writer Bob Andelman.
The company started with four stores and now has 822, including some in South America, and shows no signs of stopping.
As if to answer criticism that its stores are too large, Home Depot is opening four smallish Villager's Hardware test stores in New Jersey, beginning this week in East Brunswick; plans exist to increase the number of interior-design showrooms called EXPO Design Centers from nine to 200; and by the year 2002 Home Depot expects to have a total of 1,600 full-size and design stores.
And how successful is the company on the open market?
Since its stock went public in 1981, the price per share has increased astronomically, according to yet another new book chronicling the Home Depot story, Chris Roush's "Inside Home Depot: How One Company Revolutionized an Industry Through the Relentless Pursuit of Growth" (McGraw-Hill, 266 pp., $24.95).
Roush's account sheds light on the questionable firing of Marcus and Blank by the management of Handy Dan Home Improvement Centers in California. The parent company claimed that Marcus and Blank had been involved in a fund to pay employees not to join the union, but this was never proved. Whatever really happened, the episode helped light a fire under these out-of-box thinkers with big-box ideas.
As anyone who has set foot in a Home Depot store knows, they are huge, usually 120,000 to 130,000 square feet, with merchandise stacked to the often bird-populated rafters (will there be a Home Depot Field Guide?).
The idea is to so overwhelm customers with the variety and quantity of merchandise that they will "virtually smell a bargain." Buying direct from manufacturers, cutting out middlemen and warehouses, is a big plus when it comes to waging price warfare against the competition.
Scooping up a truckload of 3,000 fireplace screens is the kind of coup Home Depot prides itself on. The screens, normally priced at $139 each, were purchased for $33 each and marked up just $2. Even in Atlanta, where the company is based, the screens sold like hotcakes.
In "Built From Scratch," Marcus and Blank identify hourly wage "associates," or salespeople, as the real heroes. Many were recruited from the construction trades into Home Depot's orange-aproned army.
Their main job is to "cultivate the customer." By coaching and educating do-it-yourselfers, partly through in-store instructional clinics, customers multiply and sales soar.