Home Depot Rides the Gray Wave

Discussion
Jan 18, 2006
Rick Moss

By Rick Moss


Acknowledging the National Retail Federation’s 2006 outlook calling for a cooling off in the housing boom to 4.7 percent growth from last year’s 6.1 percent, Home Depot CEO Robert
Nardelli expressed confidence in the spending power of baby boomers to keep the DIY market churning.


Addressing a standing room only “Super Session” at the NRF’s annual convention in Manhattan yesterday morning, Nardelli predicted that “as homes get older, consumers will move
from discretionary spending to refurbishing of homes.”


“On a macro level we are always sensitive to the economy and to interest rates but if you drilled down we’re also focused on change. Change is the only constant in our business.
We have to (constantly) address the evolving preferences of our customers,” Nardelli was quoted as saying in a CNN/Money article this morning.


How does Home Depot plan to mine the boomer segment as sales to contractors potentially slow? Among the strategies mentioned by Nardelli were technological advances, those claims
backed from the dais by John Chambers, president and chief executive of Cisco Systems, which is assisting the chain with systems upgrades.


Home Depot currently lays out $500 million to $600 million per year on technology, a large portion of which goes Cisco for website, in-store kiosk development and much that will
occur in-between.


Highlighting the tech partnership with Cisco, Nardelli demonstrated how a customer could design a deck via the Home Depot website, creating a three-dimensional rendering, including
material and tools lists. Carrying the lists to the store on paper or PDA, the customer could also use an RFID-enabled cellphone that would trigger a greeting on the store monitors,
call up a store map on a kiosk yielding the location of products needed, and alert a store associate who would be waiting to answer questions.


Nardelli also saw growth potential for his company in the maturing ethnic market and what he identified as “do-it-for-me” services, a particularly important enhancement to cater
to the needs of older customers.


“The service market is a $110 billion market and we see it as another major trend,” he said. “We average 1.3 billion in-store transactions we want to equal this out of stores.”


Moderator’s Comment: How do you see the next 3 years for the D-I-Y channel? Will Robert Nardelli’s strategies to appeal more strongly to aging baby boomers
keep the momentum going while housing starts slow?

Rick Moss – Moderator


Please practice The RetailWire Golden Rule when submitting your comments.

Join the Discussion!

11 Comments on "Home Depot Rides the Gray Wave"


Sort by:   newest | oldest | most voted
Al McClain
Guest
Al McClain
15 years 1 month ago

The session yesterday was impressive and well received. As a guy who has to hire a contractor to change a light bulb, I was really impressed by the end-to-end solution offered where a consumer can plan a project on the web, actually get a status report of his/her projects presented via an interactive screen when they arrive at the store, and even get consultation from Home Depot experts in remote locations via video phones.

Not all pieces of this puzzle are in place yet, but the direction this is going is seemingly to enable non-handy types like myself to do more complicated projects themselves, and perhaps motivate customers to try renovations and upgrades they would not have considered before. The only thing that didn’t appeal to me was the idea of a retina scan at checkout to expedite payment – the camera was just a little too “big brother” like for my taste.

Don Delzell
Guest
Don Delzell
15 years 1 month ago
I love Nardelli’s vision. But RFID enabled cell phones transmitting downloaded materials requirements generated from a 3D rendering of a deck? What percentage of the market in the next 3 – 5 years is going to be THAT technologically enabled and skilled? I’m not betting on a large segment. The graying of America is real. The building boom decline is real. Good for Home Depot for realizing what is real. Good for them for accurately determining that existing home improvement will be the largest driving force in the next time period. Of course, I believe, this is a cyclical pattern and probably didn’t take a PhD to prognosticate. I think Home Depot should get it’s head out of the software and into the customer and their needs. Do some customer research. Find out the different segments of computer skills, tendencies and affinities. Understand that no single solution is going to serve the market. Web portals with application powered customer service is undoubtedly one of the important areas to focus. So is in-store service. Home Depot’s… Read more »
Stephan Kouzomis
Guest
Stephan Kouzomis
15 years 1 month ago

First, it is a misconception that Boomers are the only Generation fueling the housing market. Remember, X and Y Generations are making more than we Boomers were at the same age level.

Importantly, don’t discount the business and office building insurgence. Many combination, condo and office units are being built. Home Depot executives are too smart to not notice this business. And, acquisitions are still on the table for HD!

Hmmmmmmmmmm

Dan Raftery
Guest
15 years 1 month ago
This is two stories. First, the “slowdown” in housing starts is a little misleading. The forecast of 4.7% growth remains healthy. Building materials have been in tight supply for several years, not only due to new home construction. This may be a good thing for contractors and their customers. Secondly, boomers have been entering a different lifestage for several years and the D-I-Y industry has benefited from it. I don’t know the catchy phrase for this stage, but it involves a lot of projects around the house to accommodate changes in socialization. Grown kids return for “visits,” grandkids run around, then go home and neighborhood parties occur more frequently. I built a “man cave” last winter and I know several other boomers on the same path. So, handy boomers love going to DIY stores and can spend hours browsing the aisles. But what about the not-so-handy? My wife won’t set foot in Home Depot because it’s too overwhelming for her. The answer for these people (not my wife though) is a handyman contractor. The smart… Read more »
Bernice Hurst
Guest
15 years 1 month ago
There are more questions here than answers and an awful lot of suppositions. Here’s one for Al to start with – do you really think all these clever help devices are actually going to teach you how to change that lightbulb? And, if they do, would you then go on to changing a plug (something we have to do in England every now and then) or a fuse or the odd bit of re-wiring? My own first reaction to the concept of D-I-Y amongst aging people is that they are far more likely to call in a professional than to learn a new skill. Or even to call in a friend who already has the skill. I’m all in favour of lifetime learning, and know that there are various things around the house that I could do if I set my mind to it but I honestly don’t feel the least bit inclined to spend my time in that way. How often, after all, are D-I-Y skills likely to be useful after the first time… Read more »
Camille P. Schuster, PhD.
Guest
15 years 1 month ago

Testing new technology, developing new applications, taking a risk with innovation are exactly the kinds of things retailers need to do to succeed in the future. However, I do agree with one of the previous comments that Home Depot needs to keep testing the ideas with real consumers to determine which ideas have the best chance for success. Using technology to help consumers visualize the end result of projects is wonderful – not everyone has the ability to do that. Using retinal technology during checkout may put more customers off than is necessary. Home Depot is to be applauded for pushing forward with innovations. If consumers feel comfortable with and are excited by the innovations, this approach to technology will be very successful for Home Depot.

Mark Lilien
Guest
15 years 1 month ago
Home Depot’s strategy to expand by using outside home improvement contractors will continue to power excellent growth. The return on investment is excellent, since Home Depot makes no capital investment, they just take a percentage of the sales. They don’t need to recruit, hire, train or supervise the employees, either. All they need to do is expand the offerings into more categories. For example, they install replacement windows but they don’t build garages. They don’t yet offer general handyman services by the hour. But they will. Home Depot’s alliance with the AARP gives it prime position with 30 million active people over age 50. It’s too bad they didn’t start Angie’s List (www.angieslist.com) which is a terrific, quickly expanding, peer-to-peer evaluation and referral network for people who need to hire contractors. Perhaps Home Depot would be afraid to alienate some of their contractor customers, but the need for contractor evaluation is enormous. Contractor complaints are right up there with complaints about used car salespeople, funeral directors and other bad-reputation businesses. As for its use of… Read more »
M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
15 years 1 month ago

Many graying boomers avoid Home Depot because their knees and feet can’t take the interminable walking and searching on those concrete floors. Others don’t visit HD because they can’t tip their heads back far enough to view those itty bitty, up-high product tags through the bottom part of their bifocals. And still others simply can’t lift the larger, bulkier, heavier items over the lip of the shopping carts.

These are bedrock issues which can’t be patched with technology. (Even Wal-Mart acknowledges the problems associated with miles of aisles and hard-to-read shelf tags.) Home Depot would be one of the first to stress the necessity of a strong foundation for construction projects. Why, then, are they not addressing cracks in their own foundation?

Jerry Gelsomino
Guest
15 years 1 month ago
I heard all the high-tech pitches during the NRF and a personal reality still comes back to my mind. I have siblings that are well into the retirement portion of their lives. And while they spend all sorts of time searching for things to learn and buy on the internet, I can never reach them on the phone because they are using dial-up, on their only phone line. The reason… anything else costs too much and that is not how they want to spend their fixed retirement income. All these next technologies require people to be more tech savvy, but if the cost of the infrastructure is more than they want to pay, what good is it? Finally, as I review my own current expenses each month, I am beginning to think about the day I retire, or at least become not as aggressive with my attempt to earn a living. What expenses will I continue to want to carry? Will I want a phone service that allows me unlimited international calling plans? Will I… Read more »
Bill Clarke
Guest
Bill Clarke
15 years 1 month ago

The concept of riding the Gray Wave is great. The problem facing Home Depot is that their installation model needs to be fixed. As a homeowner and customer of Home Depot, we have contracted for five significant home improvement projects that required installations services. Every one of the five installations was screwed up and the installation crew pointed their finger at Home Depot. The people in the store pointed their finger at the installer. We were caught in the middle of a turf issue. If Home Depot is ever going to capitalize on the opportunity, they must find a way to fix accountability from sale through installation and post-sale follow-up. They claim that they do, but 5-for-5 is powerful evidence to the contrary.

Lillian Reiter
Guest
Lillian Reiter
12 years 3 months ago

I completely agree with M. Jericho Banks. If Home Depot is really interested in the dollars spent by the over-60 crowd, why have they replaced all the check-out clerks with auto scanners?

wpDiscuz

Take Our Instant Poll

Will Home Depot’s strategies to use technology to heighten the chain’s baby boomer appeal keep the momentum going while housing starts slow?

View Results

Loading ... Loading ...