The Home Depot is planning (conservatively, it says) to be a $100 billion retailer in 2018 – growing by $13 billion, or the equivalent of 357 stores, without any major change of its footprint.
Where’s growth going to come from? A lot of it from the pro customer, who currently makes up only 4% of Home Depot’s customers, but account for about 35% of total sales. Clearly, this is a customer with clout.
Leading the charge to get closer to this customer is J.T. Rieves, Home Depot’s VP of pro business. And in a recent interview, he expressed confidence in the retailer’s ability to answer the bell. One reason: the acquisition of Jacksonville, Florida-based distributor Interline Brands provides a powerful boost to the MRO business. Another reason: Home Depot is already interacting with a ton of pros on a daily basis.
Rieves spoke with HBSDealer during the recent International Builders’ Show in Las Vegas. Here are some of his edited comments on key topics.
The potential of the pro business:
"We spend a lot of time trying to show people how compelling the pro opportunity is. [CFO Carol Tome] has stated publicly, if you get the average Home Depot pro customer to come three more times a year, that's over a billion dollars a year in additional revenue. Or if I get each pro to spend $5 more in the store, that's another $1.2 billion."
If I just get pros to come a little more often because they see us in a slightly different way. Or if we get them to buy a little more because they realize we do something that they didn't perhaps realize that we did, those are both billion-dollar opportunity. That's the wonderful scale that we have."
On becoming a destination for the pro:
“I think we all would say that we are the convenience store for the pro. It's a fabulous business, but in my opinion, it should offend us that the number one reason pros shop us is convenience and location. My goal is to move the perception from the convenience store of the pro to the destination store of the pro. Let's demonstrate to them why they shouldn't leave us and go elsewhere. Our paint is just as highly regarded, our pricing is just as good. And we have other things in the store that we can do for you."
On adding value:
“I tell people all the time, give me two minutes, and I can save you 15 minutes. And some pro's will say, “absolutely,” and some will say "I don't have 2 minutes.
"Whether it's the Home Depot app, whether it's buy online and pick up in store and let us pull your order, there are other opportunities: the Home Depot quote center, and the ability for us to do truss packages. On and on goes the list, and all of those are things that I'm not sure people realize that we provide.”
On Interline Brands:
Culturally, [Interline’s people] are a perfect fit for us. They bring same day or next day delivery, high fill rates, and a service model that they do really well. Why not partner with the guys who do MRO better than anybody? That's exactly what we've done. So I do think it's a game changer.
For example, now I can talk to many of our pros that remodel apartment complexes. In the past, they would spend all of their remodeling spend with us, but the minute that they hand this business over and it becomes a rental facility, they pivot that [MRO] spending somewhere else.
"They went elsewhere because it wasn’t a core competency of ours. Now it is, because we just acquired it.We have some work to do to make those two businesses work perfectly in tandem. But if you just said to the pro, ‘I'm going to bring two people to the table, Home Depot and Interline,’ then that's a much better conversation than ‘Home Depot and Home Depot trying to act like Interline.’"
On new construction vs. remodeling:
“New construction is an area that we don't really do well. It's a different time line of business, a different method of operation. We recognized that and dialed that back in a little bit as we focus on the renovator and remodeler. Instead of trying to be everything to everybody, let's admit that there some businesses that we don’t play well in, and there are other businesses where we can really help and we can be really good at it.”