How you'll benefit from Home Depot's move

BY BOB MIODONSKI PUBLISHER AND EDITORIAL DIRECTOR WILL YOU SEE better service from your local wholesalers as a result of The Home Depot's blockbuster purchase of wholesaling giant Hughes Supply? John A. Stegeman, president and CEO of even bigger Ferguson Enterprises, thinks so. He told us that that Home Depot's acquisition of Hughes Supply is an opportunity for small wholesalers to prosper by staying

BY BOB MIODONSKI
PUBLISHER AND EDITORIAL DIRECTOR

WILL YOU SEE better service from your local wholesalers as a result of The Home Depot's blockbuster purchase of wholesaling giant Hughes Supply?

John A. Stegeman, president and CEO of even bigger Ferguson Enterprises, thinks so. He told us that that Home Depot's acquisition of Hughes Supply is an opportunity for small wholesalers to prosper by staying the course, staying close to their customers and providing impeccable service to contractors.

If your supply house already is giving you that level of service, you have every reason to continue to support your local wholesaler. We know that these types of distributors do business in different parts of the country because you've told us about several of them.

We also are aware of other wholesalers that have not kept up with modern technology, do little to market the products that they inventory and take your business for granted. These are companies that likely will feel the heat of Home Depot's bold move into the wholesale channel.

Home Depot is taking over a company that operates more than 500 branches in 40 states. The addition of Hughes to The Home Depot Supply division more than doubles the size of that division with combined sales this year expected to be $12 billion. Plumbing-and-heating contractors will contribute to that sum.

Home Depot has been after your business for years. It started at least as far back as the early 1990s when Home Depot opened dedicated "pro counters" within their big-box retail stores to cater to the needs of professional contractors. It didn't hurt that Home Depot stayed open during evenings and on weekends and made credit card purchases easy — conveniences that most local wholesalers were unwilling to do for you at the time.

Next came Home Depot's " Pro Stores" that opened in a few locations exclusively for the business of professional contractors. These got a boost in 1999 when Home Depot acquired wellrun, regional wholesaler Apex Supply in its own hometown of Atlanta. A short time later, the Home Depot Supply division came into existence to serve your needs along with those of other construction professionals.

The reasons Home Depot wants your business are easy to understand. Stegeman notes that Home Depot had solidified its market share in the retail side of the business and the only way to generate growth for its shareholders is on the professional side.

Home Depot CEO Robert Nardelli said five years ago that the do-it-yourself generation on which his company was built had transformed into the do-it-for-me generation. The home-improvement market would continue to grow, he explained, but homeowners would hire professional contractors to do the work that they used to do themselves. Home Depot needs your business to reach its ambitious growth objectives.

The problem is that Home Depot has not been as successful as it needs to be in getting your business up to this point. It appears to do much better among smaller contractors who can buy many items for a single job in one trip through the store aisles, but it has not provided the service that larger contractors expect and frequently receive from their wholesalers. Take a look at our Power Tool Study in this issue, and you'll see that our readers are much more likely to buy their tools from an industrial supply house and plumbing wholesaler than at retail — 60% (combined) for distributors vs. 25% for retailers.

In addition, many contractors always have been wary about doing business with Home Depot. First, the retailer has maintained an installed sales program that contractors frequently see as a direct competitor. Second, Home Depot runs those Sunday newspaper ads with prices low enough to force many contractors to justify their own prices to customers. Home Depot's stated goal, nevertheless, is to transform the professional wholesale channel as it did the D-I-Y market. While Home Depot should not be underestimated, the only way that it will achieve market transformation is if wholesalers already doing business with you allow it to do so.

Companies are competing for your business, and they should be stepping up their game so they get it. You can't help but benefit by making sure that you get the level of service from your suppliers that you deserve.