The Home Depot – Arthur Blank and Bernie Marcus Success Factors
famous quote
“We believed from the beginning that if we brought customers quality merchandise at the right price and excellent service, we could change retail in America. Today, we are the model of 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 getting rid of top management at the companies he bought, bought Daylin Inc., Handy Dan’s parent company. Since Handy Dan was profitable, Marcus and Blank were sure their jobs were safe. But they were wrong. False charges were filed against the two alleging 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 they were laid off, Marcus and Blank had been working on finding profitable ways to discount at one of their Handy Dan locations. They noted that as items were marked down, volume increased and costs, as a percentage of sales, decreased. At the time they lost their jobs, they had planned to roll out their discovery to other outlets, but now they were free to start building their own national chain of home centers. They planned to develop a store where product selection was excellent and prices were kept as low as possible, and where trained, knowledgeable and helpful customer service representatives provided 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 painting 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 over and the kids were out in the parking lot. . using the money to try to convince people to come in and take a look.
They were both downcast and dejected. Marcus remembers that”[his] wife would not leave [him] shave for days. she did not want [him] have a knife in [his] hands.”
building an empire
A few days after the grand opening, a customer returned with a token of his gratitude, a bag of okra for Marcus, for the positive experience of shopping at The Home Depot. Although he didn’t like okra, it was a turning point and word of mouth began to spread.
Money was still tight (employees were stacking empty cardboard boxes and paint cans on the top shelves to make the stores look more full of products than they really 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 stores in Miami 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 generated $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 products. Additionally, it has become an international retailer with stores in Canada and South America and will continue to expand. Blank insists that the core principles of his company, though it has grown so large, “were laid in those early years and have never changed. Our prices were low then, and they still are today. And our service was great then and is still great.” today.”
Core values and company secrets
Marcus and Blank, as stated in their book “Built From Scratch,” attribute their success to eight core values:
– Provide excellent customer service.
– Take care of your people
– Develop the entrepreneurial spirit.
– Respect all people.
– Do the right thing; don’t just do things right.
– Giving back to the community as an integral part of doing business.
– Take care of your shareholders.
– Build 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 repair and can direct customers to the equipment they may need for a given project. Short hands-on training classes are also offered at 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 because of these opportunities to learn from those on the floor who know more about the products and deal directly with customers.
In addition, Blank and Marcus operate according to the “run scared” management method, where 90% of their meetings deal with problems, how to beat competitive approaches, products that are in demand, and what customers don’t find in their products. stores. Its long-standing goal is to continually work to improve current standards. And it has certainly worked for them so far.