The Home Depot is known as the home of “more saving, more doing,” and is widely recognized as a leader in materials and equipment for personal home and property improvement. Sales for tools, lumber, hardware, paint, appliances, and more drive waves of customers into its stores every day.
Let’s look at the strengths, weaknesses, opportunities, and threats this company faces.
1. It is the largest retailer in the market.
The Home Depot is, quite simply, the leader in home improvement. It is a well-established player in the market with a powerful brand reputation, consistently providing everything needed for work ranging from weekend projects to full-scale builds. It is the chosen retailer for contractors and casual users alike.
The Home Depot is the largest home improvement retailer in the world. (Statista)
2. The company is highly profitable.
From stocks to sales, The Home Depot is quite profitable. Many products are sold at a competitive profit margin, putting more and more money into The Home Depot’s pockets while still providing excellent value to customers.
Net income margins for The Home Depot increased from 8.4% to 10.9%. (Forbes)
3. The Home Depot offers great value for the money.
Customers continue to take advantage of these good values. Brands offered by The Home Depot are seen as reliable and trustworthy, and its proprietary “private label” brands are hallmarks of quality for many casual and professional home improvement enthusiasts. What’s more, some customers will exclusively shop those brands across the entire product line due to their brand loyalty.
Home improvement sales in the United States reached $453.8 billion. (Statista)
4. It boasts a wide variety of products.
The Home Depot offers nearly everything a homeowner or tradesman could want. From lumber to paint, landscaping to power tools, lighting to paint, as well as a wide selection of hardware and parts, customers can find whatever they need for minor fixes to new constructions.
The Home Depot performed 1.75 million online transactions. (Statista)
5. Employees provide excellent customer service.
If a customer does not know where to find something or has a question on the proper use or application of a given product, they can simply look for an “orange vest” roaming the store. The Home Depot employees are friendly and knowledgeable and can share their expertise as needed (especially those who work in a specialty department).
Global revenues for home improvement and do-it-yourself work reached more than $740 billion. (Statista)
6. It is increasingly focused on e-commerce.
The Home Depot has relied heavily on online sales to fuel its expansive growth. Some major purchases are more convenient to perform online, and the trend for online shopping continues to dominate commerce in general. The Home Depot has worked hard to crack the code on how to reach this all-too-important segment of customers.
The Home Depot did $13.4 billion in e-commerce sales business. (Statista)
7. Online purchases are a major driver.
Not only is online sales a major component of its business plan, but a particular (and relatively new) trend is leading the charge in recent years. The sales process is known in the industry as BOPIS (buy online, pickup in-store) has become increasingly popular for busy shoppers who can have their selections purchased and ready for them when they arrive, saving them time.
The ability for customers to buy online and pick up in the store accounts for 40% of The Home Depot’s online transactions. (Digital Commerce 360)
8. The customer base is very loyal.
Many who shop at The Home Depot are dedicated repeat visitors who are intensely loyal to the store. They will shop in nearly every department, watching closely for sales and new products. They know the layout of their store by heart, and are frequently working on projects that require a trip to their favorite hardware store. Plus, some products are found exclusively at The Home Depot.
The Home Depot has a brand value of $52.9 billion. (Statista)
1. It is located almost exclusively in the United States.
Despite having a handful of stores in Canada and Mexico, the vast majority of The Home Depot’s storefront locations are based solely in the United States. This lack of worldwide diversity means that any shift in the U.S. market could dramatically affect its bottom line. Expanding into worldwide markets through an increased physical presence will be key to alleviating this worry.
The Home Depot operates nearly 2300 stores around the globe. (Statista)
2. Its infrastructure needs updating.
Changes in online shopping have required a significant change in the company’s technological infrastructure. Although it is hitting its stride now, the company struggled initially to keep up with the times.
The Home Depot commands 48.4 million monthly website visitors. (Statista)
3. It adopted e-commerce later than competitors.
Even though online sales are a major element of its sales portfolio, The Home Depot was slower to adopt this selling tactic than its competitors. This allowed others to establish themselves in the digital space, forcing The Home Depot to play “catch up.”
The Home Depot online customer transactions increased 33% from 2011 to 2020. (Statista)
4. The supply chain is limited due to competition.
Some suppliers, particularly for raw goods like lumber and hardware, will refrain from selling to multiple vendors to avoid penalties for doing so. For example, those that sell to Lowe’s may not be as likely to sell to The Home Depot as well to avoid affecting their own bottom line, which can lead to a lack of supply in some areas.
The Home Depot has been ranked one of the top 50 most valuable companies in the world. (Forbes)
1. It could expand its offerings in home décor.
A growing aspect of home improvement is décor, and The Home Depot would be wise to capitalize on this trend. Paint alone will not complete the design aesthetic of a room, and while it does offer design choices in departments like lighting, flooring, and cabinetry, it could expand its offerings in other aspects of interior design to capture other valuable customer segments.
The Home Depot was founded in 1978 and employs more than 415,000 people. (Forbes)
2. It could continue to increase its online sales.
More and more customers are shopping online, with some moving exclusively to the digital space. What’s more, the convenience of shopping online then picking up from the local store saves time and money in a number of ways, and this trend will likely continue to increase in the coming years. The Home Depot could continue to drive customers to make similar online purchases and offer new and innovative ways to do so.
The Home Depot struggled with the early adoption of online sales. (Reuters)
3. The company could expand beyond North America.
While The Home Depot has all but guaranteed its foothold in the United States, it could expand in other parts of the world. It could begin by solidifying its presence in other parts of North America or take advantage of emerging markets by becoming the first or largest entrant. This would give The Home Depot new geographies in which to become leaders in home improvement sales.
The Home Depot achieved $132.1 billion in global net sales in 2020. (Statista)
4. It could acquire other struggling brands.
The Home Depot recently acquired The Company Store in 2017, a company that specialized in interior design products. It could continue to purchase and integrate brands and stores that may either be struggling and need additional infrastructure support to remain viable, or it could choose brands that would give it the opportunity to grow into new market segments. Both strategies would lead to increased revenues and market share.
The Home Depot does 17% of total online sales in the United States. (Statista)
1. Market competition remains intense.
In many cities, the locations of The Home Depot and Lowe’s retailers are relatively close to each other, and competition from other smaller chains and local shops remains fierce – especially in the online space, where massive conglomerates like Amazon are spreading into more and more segments. Brand loyalty and reputation will not be enough to keep it on top of the competition; it will need to constantly and consistently find new ways to maintain and expand its customer base in order to keep its rankings secure.
Lowes and Amazon are chief rivals for The Home Depot. (Forbes)
2. Pricing deflation could become problematic.
When prices for raw material decrease, most companies pass those savings along to the consumer as part of general market demand. Recent decreases in lumber prices caused a similar drop in revenues for that product line at The Home Depot over the past few years, which contributed to lower profits. Similar fluctuations or decreases could significantly affect the bottom line.
Lumber accounted for 18% of The Home Depot’s revenue. (Market Watch)
3. Strikes can happen when you have employees.
As with any major company that works with labor unions as part of its employee base, The Home Depot is susceptible to strikes or other stoppages with the labor force. Strikes typically lead to halting production and distribution, which affects the presence of products on shelves and in warehouses, which in turn leads to lower sales. Maintaining positive relations with employees will be key in this area.
Mexican workers sought a 20% raise in a strike against The Home Depot. (Mexico Daily News)
The Home Depot is an established leader in home improvement, with a wide range of brands and products to serve all customer needs, plus a reliable brand image that stands for quality and convenience. However, competition and early struggles with online sales have hampered its ability to grow faster than it has. It does have some opportunities for more advanced growth, but still faces threats from stiff competition and typical supply chain problems. By overcoming its weaknesses and preventing threats from external factors, and continuing to capitalize on more positive aspects, it can continue to help its customers with their home improvement needs.
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