The Home Depot – Arthur Blank and Bernie Marcus Success Factors

Famous quote

“We believed from the beginning that if we brought the customer quality merchandise at the right price and provided excellent service, we could change retail in the United States. Today, we are the model for what retail should be.”

Starting the business

In the late 1970s, Bernie Marcus and Arthur Blank were working at a chain of home centers in Southern California called Handy Dan when Siegfried S. Sigoloff, known for shedding top management at companies he bought, bought the company. Daylin Inc., Handy. The parent company of Dan. Since Handy Dan was profitable, Marcus and Blank were confident that their jobs were safe. But they were wrong. False charges were brought against the two alleging that they had allowed a subordinate to open an account and use funds to fight a union at Handy Dan stores in San Jose.

However, before being laid off, Marcus and Blank had been working to find profitable ways to discount them at one of their Handy Dan locations. They noted that as items were lowered, volume increased and costs, as a percentage of sales, fell. By the time they lost their jobs, they had been planning to roll out their discovery at other outlets, but were now free to start building their own chain of domestic centers nationwide. They planned to develop a store where product selection was excellent and prices were kept as low as possible, and where knowledgeable, knowledgeable, and helpful customer service representatives would provide the best service available.

The company started in suburban Atlanta with money from a New York investment firm. They stocked the shelves of their first two stores with 18,000 different products, from paint supplies to specialized repair tools, cut prices as much as they could, and hired and trained staff themselves. On opening day, they gave their kids a stack of $ 1 bills to hand out to customers to thank them for shopping at the store, but at the end of the day, there was still money left and the kids were in the parking lot. many use the money to try to convince people to come in and take a look.

They were both dejected and dejected. Marcus remembers that “[his] wife wouldn’t let him [him] shave for days. She did not want to [him] have a razor in [his] hands. “

Building an Empire

A few days after the grand opening, a customer returned with a token of her gratitude, a bag of okra for Marcus, for the positive experience of shopping at The Home Depot. Although he didn’t like the okra, it was a turning point and word of mouth began to spread.

Money was still tight (employees were stacking empty cardboard boxes and cans of paint on the top shelves to make the stores appear fuller with products than they actually were), but since the first two stores were doing well, Blank and Marcus decided to open two more, this time in the Miami area. Two more Miami stores followed two months later. On November 22, 1981, the company went public and investments and profits skyrocketed. The chain expanded and profitability far exceeded expectations. Originally projected at $ 9 million in sales per store, average sales exceeded $ 17 million. Before 1990, 118 Home Depots were making $ 2.7 billion in sales.

In less than two decades, by 1999, The Home Depot had become the world’s largest distributor of home improvement supplies. In addition, it has become an international retailer with stores in Canada and South America and will continue to expand. Blank insists that the fundamental principles of his company, although it has grown so much, “were founded in those early years and have never changed. Our prices were low then, and still are today. And our service was excellent then and still.” is today. “

Core values ​​and company secrets

Marcus and Blank, as stated in their book “Built From Scratch,” attribute their success to eight core values:

– Give excellent customer service.

– Take care of your people

– Develop an entrepreneurial spirit.

– Respect all people.

– Do the right thing; don’t just do it right.

– Give back to the community as an integral part of doing business.

– Take care of your shareholders.

– Establish strong relationships with associates, customers, suppliers, and communities.

Home Depot’s success can also be seen in how it has encouraged its customers to do it themselves. Home Depot salespeople are hired for their knowledge and understanding of home repairs and can direct clients to the equipment they may need for a given project. Short hands-on training classes are also offered in their stores to teach various aspects of repair and remodeling.

Blank and Marcus go on “road trips” and show up unannounced at their stores. They say the experience is good for them because they are continually learning from their associates, that marketing strategies have changed due to these opportunities to learn from those on the floor who know more about the products and deal directly with customers.

Additionally, Blank and Marcus operate according to the “running scared” management method, where 90% of their meetings are about problems, how to overcome competitive approaches, products that are in demand, and what customers do not find in their stores. stores. Its long-standing goal is to continually work to improve today’s standards. And it has certainly worked for them so far.