Home Depot’s Expansion: Opening Four New Distribution Centers to Enhance Network Efficiency

Home Depot’s

Home Depot’s announced Thursday that it will be opening four new distribution centers as it seeks to earn more sales from remodelers, contractors and other home professionals.
The company plans to open the new distribution centers in Detroit, Los Angeles, San Antonio and Toronto throughout the first half of the year. Essentially, these facilities carry the large size, extensive variety and entire orders of products professionals need, such as lumber, shingles and insulation, and then delivers it to a job site .
The average size of each facility is about 500,000 square feet, an estimated five times larger than the average Home Depot store .
The expansion of the distribution centers serves as part of a years long company strategy adopted to appeal pros who handle bigger and more extensive projects, such as a major renovation or kitchen remodel. Home Depot has opened 14 similar distribution hubs to cater to pros in big cities. The first one was launched in Dallas in 2020.
Home Depot gets about half of its total sales from pros and the other half from do-it-yourself customers and it appeals them by for example selling paints to homeowners who need to paint their houses.
Meanwhile, acquiring even more of pros’ organization is coming to be more important as Home Depot looks for to go back to growth and browses a boost prices environment that has currently reduced real estate turnover and reduced the interest in Do It Yourself fixings and also renovations. Total sales dropped by 3% in the last amidst the pandemic, as clients took on fewer projects after the lockdown. Having factored in the added week, supervisors claim they anticipate total sales to increase about 1% in this financial year. Comparable sales are forecasted to drop about 1%, excluding the added week.
According to Chip Devine, Home Depot’s senior vice president of outside sales, managing the company’s pro business, the numbers could be better than analysts think, thanks to pro customers. They may seem steadier and bigger DIY customers, and they need more specialized sales people and services, so they don’t jump between retailers or to Home Depot’s competitor. As Devine told CNBC, “We interact with them five times a week. That relationship over time, you become a partner to their business, and that is easier than capturing the elusive consumer.
Do-it-yourself clients have provided a lesser group to close. In recent quarters, fewer discretionary acquisitions had been rendered and smaller home projects had been taken into account. Transactions valued at over $1,000, namely big-ticket transactions, fell by nearly 7% in the fourth quarter relative to the year-earlier time. This is just one downside. On the other side, Devine highlighted, specialist who take on more complicated projects have historically treated Home Depot as a general store where they are only willing to sell a few items. As Home Depot adds the tools needed to handle pros’ full deals, the firm has substantial space to expand, Devine said.
Other things that Home Depot is doing include an expansion of other parts of its business to support pros, such as a pilot program in which pro customers have trade credit, meaning Home Depot underwrites a large order and does not charge the pro customer until it is delivered — a standard in the industry, Devine said.
The retailer also made its sales force to the pros, being expanded and is adding digital and personalized features, such as tools for managing complicated orders and its program of loyalty, which offers advantages.
On CNBC, CEO Ted Decker said that expanding the pro business was one of the three big goals for the year, along with building new stores and offering a more seamless customer experience.
He noted that retailers are making very strategic choices about technology, only employing and investing in technology that delivers value for the intended outcome of the retailer. He said some retailers were developing their e-commerce application while others were bringing the technology in house. “Nobody is sitting on their hands. They are all doing something,” he said, adding that they could use the information in their person allocation and loyalty schemes.