Home Depot Explores Majap Expansion In Pilot Stores
By Alan Wolf -- TWICE, 3/27/2006
Atlanta — The Home Depot has expanded its major appliance departments in test stores in anticipation of possible additions to its white goods brand assortment, a store executive told analysts last week.
Speaking at a Merrill Lynch Retailing Leaders Conference, Tom Taylor, Home Depot's merchandising and marketing executive VP, said the new initiatives, along with other recent category improvements, could help make the company the market share leader in majaps.
“I look at appliances like I look at carpets,” he said. “We didn't enter carpets until 1993 — now we're the largest seller in the world. Appliances can be no different.”
Indeed, the home improvement chain quickly catapulted to the No. 3 position in white-goods retailing, behind Sears and Lowe's, after only entering the category in 2002. At the time, Taylor said, appliances were relegated to “a dark aisle across from water heaters. The model didn't work.”
Since then, Home Depot relocated its assortment of GE and Maytag majaps to a front-of-the-store showroom format to create a more “compelling shopping experience,” and last year added LG appliances and dedicated department salespeople to the mix.
Taylor said that customer acceptance of the LG line demonstrated the consumer's willingness to step up and spend more for added features and benefits.
While the company is pleased with its white-goods performance, “We're still scratching the surface,” Taylor said. “We're in our infancy and there's lots of opportunity.” There's also lots of room for improvement in Home Depot's white-goods draw rate and relatively low conversion rate, he conceded (see table).
To boost both, the company is looking at adding additional brands and more floor space to accommodate them. “We're looking, we're talking, we're speaking to other companies,” Taylor said. “It's possible in the future that we will have more brands.”
Forging relationships with new appliance vendors has also assumed greater urgency with the pending acquisition of Maytag, a core Home Depot supplier, by Whirlpool, a major supplier to archrival Lowe's.
In anticipation of a bigger brand roster, the company has “some pilots underway where we increase space and are monitoring results,” Taylor said. A system-wide expansion would be challenging and lengthy, he acknowledged, but could yield higher conversion rates even without bringing in additional brands.
Close rates will also improve as the chain's fledgling appliance salespeople gain greater experience, he said.
Home Depot's Majap Metrics| 2002 | 2005 | ||
| Market Share | Sears | 38.7% | 34.1% |
| Lowe's | 12.8 | 15.8 | |
| Home Depot | 5.5 | 9.7 | |
| Best Buy | 6.2 | 6.2 | |
| Draw Rate | Sears | 59.6% | 53.2% |
| Lowe's | 22.2 | 28.7 | |
| Home Depot | 15.2 | 24.2 | |
| Best Buy | 16.8 | 15.1 | |
| Close Rate | Sears | 64.9% | 64.1% |
| Lowe's | 57.8 | 55.1 | |
| Home Depot | 35.9 | 39.9 | |
| Best Buy | 36.8 | 40.7 | |
| Average Retail | Sears | $548 | $589 |
| Lowe's | $455 | $530 | |
| Home Depot | $463 | $549 | |
| Best Buy | $485 | $588 | |
| Source: The Home Depot and The Stevenson Company © TWICE 2006 | |||
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