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Home Depot’s Target Market and Customer Base

Phalguni Soni

Investing in Home Improvements: Your Guide to Home Depot (Part 4 of 21)

(Continued from Part 3)

Who are Home Depot’s customers?

Home Depot (HD) primarily caters to three types of customers:

  • Do-it-yourself customers such as home owners (ITB) (XHB). These customers buy products and install them themselves using online or in-store resources.
  • Do-it-for-me customers include those looking for third parties to provide installation services. HD provides several installation services including flooring, cabinets, countertops, water heaters, and sheds. The company also provides in-house consulting and installation services.
  • Professional customers include contractors, builders, traders, interior designers, and renovators, among others.

Customer-friendly approach

Home Depot’s (HD) “whatever it takes” philosophy of customer service has been one of its unique selling propositions since inception. HD’s founders, Bernie Marcus and Arthur Blank, believe that “the customer has a bill of rights at The Home Depot.”

The company believes in providing the customer with the appropriate product assortment and quantities at the right price. It also believes in having trained employees on hand to help customers make appropriate choices. In fiscal 2014 ending February 1, 2014, the company achieved its target of dedicating 60% store labor hours to “customer-facing” activities.

Customer initiatives

HD invests considerable sums in providing a superior customer experience. It has broadened the product range available to consumers (XLY) through its online channel. Currently, 30,000 to 40,000 products are available in-store. In contrast, the online selection exceeds 700,000.

Expansion in key categories such as appliances resulted in double-digit growth in the product segment in fiscal 2014.

A larger product selection also enables the company to provide product customization. Professional customers can access inventory information at multiple stores, for example.

HD has also upped its omni-channel capabilities. Products can be ordered online and picked up in store. More on omni-channel initiatives in Part 9 of our series.

Home Depot (HD) and its peers Lowe’s (LOW) and Bed Bath & Beyond (BBBY) combine to make up 10.2% and 9.6% of the portfolio holdings of the Consumer Discretionary Select Sector SPDR Fund (XLY) and the SPDR S&P Homebuilders ETF (XHB), respectively.

Continue to Part 5

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