What will The Company Store do for Home Depot?

Discussion
Photo: The Company Store
Jan 03, 2018
Tom Ryan

Extending its position as the one-stop solution for the home, Home Depot acquired The Company Store, the online seller of bedding, bath and related categories. Terms were not disclosed.

Since 1911, The Company Store has been manufacturing down and bedding essentials in its own factory in La Crosse, WI and primarily sells through its catalog and online. The five stores it operates weren’t included in the purchase. The seller was Hanover Direct.

“The acquisition of The Company Store provides product development and sourcing capabilities to help us expand our online decor business into broader categories across the entire home,” Home Depot’s CEO Craig Menear said in a statement.

According to Credit Suisse, décor -oriented merchandise such as flooring, lighting and window treatments account for approximately 25 percent of Home Depot’s sales, but décor alone makes up only three percent.

“Our quick analysis highlights The Company Store’s different customer base, including heavier skew to females, higher income and older, overall most comparable to Bed Bath & Beyond,” wrote Credit Suisse analyst Seth Sigman in a note, according to USA Today.

At its Investor and Analyst Conference on December 6, Ted Decker, EVP of merchandising, said Home Depot’s early success with décor items started with Christmas trees and holiday decorations and has led to items around Halloween, summer outdoor living and household organization.

The acquisition is also expected to help Home Depot more closely link its stores with online services and home delivery.

Online accounts for 6.4 percent of Home Depot’s sales, about double Lowe’s levels, and has contributed 20 percent of the company’s total growth. More importantly, Home Depot expects to surpass 1.8 billion digital visits this year, rivaling its physical store transactions. Sixty percent of all sales in-store or online are influenced by a digital visit, 45 percent of online orders are picked up in stores and 85 percent of online returns are completed in stores.

Said Mr. Menear at the meeting, “Customers are moving online to begin the shopping experience in this space, and we will invest to connect our services business to the digital world.”

DISCUSSION QUESTIONS: In what ways do you see Home Depot benefitting from its acquisition of The Company Store? To what extent should Home Depot broaden its décor offerings? What will the deal mean for Home Depot’s competitors?

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"In time Home Depot could feature an in-store selection of bedding products as well. "

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12 Comments on "What will The Company Store do for Home Depot?"


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Bob Amster
BrainTrust

In concept, such an acquisition helps to broaden the customer base and takes the customer from home improvement to finishing with home décor. I’m not so sure that The Company Store is the right target.

Adrian Weidmann
BrainTrust

This is an interesting acquisition for Home Depot. While I understand and follow the logic of the acquisition and its rationale, I wonder if it extends beyond the bounds of Home Depot’s value proposition. I recently helped my son through extensive remodeling of his first home. Almost everything was purchased through Home Depot. There were a number of key items — fashion, plumbing, hardware and decor that he specifically went to great lengths to find online. When I asked why, he stated that he, “didn’t want his house to look like a Home Depot showroom.” I wonder if others will feel the same.

Art Suriano
BrainTrust

I see this as a smart investment for Home Depot. They will be able to offer customers an enormous selection and variety of home bedding products making them more competitive with Bed, Bath & Beyond as well as others. Home Depot is wise to see how expanding online opportunities helps their business grow because of the many customers using the online experience before coming to the store, even if it’s just to pick up a purchased item. Getting customers to go to the store will always add sales because of impulse buying. So this is a good move for Home Depot. In time Home Depot could feature an in-store selection of bedding products as well. Those already in the game such as Bed, Bath & Beyond and Macy’s will take notice as Home Depot will be cutting into their space. But that’s the new norm today which makes competition intense. As Home Depot gets into their competitors’ space, those competitors will expand into other competitors’ territory as well.

Neil Saunders
BrainTrust

Home Depot has always been somewhat weak on the soft side of home improvement. Relatively, Lowe’s is stronger and has used subsidiaries like The Mine to good effect.

This move signals Home Depot is getting serious about decor and home decoration. This is a sensible move given the company’s saturation in harder categories.

An online-based approach via a subsidiary is a sensible route – if only because Home Depot cannot afford to dilute its brand image as a focused DIY specialist.

Lee Kent
BrainTrust

Adding decor to your DIY project is the logical next step however, is this the right move for Home Depot? I suppose if they merchandise it right, certain pieces make a lot of sense. Re-doing a bedroom, you need a bed. I guess I would ask, what type of DIY projects are more prevalent for Home Depot? My guess is that bedrooms are not so much. Could this be a good starting point for Home Depot to take on decor? Maybe. My 2 cents says, maybe not.

Sky Rota
BrainTrust
14 days 6 hours ago

Is Home Depot going to start carrying bedding? Because I don’t see my mom going to Home Depot to get a duvet cover. My mom actually shops at The Company Store online and likes the quality of their items but doesn’t love their limited selection.

I assume Home Depot is trying to acquire broader offerings just to block Amazon from buying them. It seems like everyone is running scared and buying up things to block Amazon. Sometimes you should focus on being fantastic at what you already have and people will need you and want to come to your store because you are the best! Sadly no one helps you at Home Depot and my family hates going there, so this is just a reach for them and in my opinion not a good acquisition.

Joy Chen
BrainTrust

This acquisition will strengthen Home Depot’s online presence and expand their share of home products by offering more decor. Competition in this space will need to continuously improve its online presence and provide convenience in order to be a viable player in this category.

Seth Nagle
BrainTrust

Consumers love convenience but also selection and, as Adrian mentioned, no one wants their home to look like a showroom floor. By providing just the right amount of variety online shoppers can stick to one website and one shipping fee when they are remodeling a room.

Sterling Hawkins
BrainTrust

The concept makes sense. The execution in acquiring The Company Store is a stretch and it will take some work to cross-pollinate such different customer bases. Nonetheless, there are definitely some areas of opportunity to leverage in this deal. I think the competition will wait and see how this is received before making any moves.

Cristian Grossmann
BrainTrust

This acquisition seems like the logical next step for Home Depot. Consumers want convenience, and what is more convenient than remodeling the master bedroom and also being able to purchase the decor? Online retail has been rapidly taking over brick and mortar purchasing so adding more online offerings is necessary to scale further.

Georganne Bender
Guest

Come see the softer side of … Home Depot?

Yes, Home Depot is selling more home decor items in-store, but they are housed in a warehouse environment, displayed on cold metal fixtures. There’s no visual to its visual merchandising.

Product from The Company Store is high-end and expensive, and it’s more than just bedding. The retailer also offers gifts and apparel and things for pets – not what consumers expect to find at your typical Home Depot. This acquisition does, however, make sense online from a cross-merchandising aspect. And if Home Depot decides to bring these goods in-store I am sure it will rise to the occasion. It will have to because The Company Store customers will demand it.

Karen McNeely
Guest

I’m confused. There’s no mention of Home Depot’s Home Decorator’s Collection division. I agree Home Depot has potential growth in this category. Why not just used the Home Decorator’s Collection to achieve it?

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Braintrust
"In time Home Depot could feature an in-store selection of bedding products as well. "

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