New growth arena

Home Depot and Lowe’s together own about one-third of America’s US $ 263 bn DIY market. The market for installed sales and services is estimated to be worth another US $ 200 bn, which gives both companies the potential for further sustained growth. Together the two chains operate more than 2 500 units and run the risk of fighting each other for market share or cannibalising existing stores as they open additional units in key markets.
Home Depot especially, having opened big boxes for 25 years, must find new ways to keep increasing its same-store sales. Under the leadership of Bob Nardelli, it is making serious efforts to generate installed sales. The company has been dabbling in this field for a decade, but on a hit-and-miss basis so far.
Both Home Depot and Lowe's advertise installed sales and services in their circulars.
There is a new awareness of the growth potential inherent in offering a range of installed services. Through signs and brochures in its stores the company is now actively recruiting tradespeople, teaching its employees how to solicit business and aggressively advertising its services.
The idea is for tradespeople to benefit from cooperating with the retailer, since they will be paid by Home Depot even if the customer does not pay for the work performed. This eliminates any credit risk and they get their money promptly, something of an unusual situation for small business people. There is also the prospect of steady work. What is more, Home Depot undertakes all the preliminary work and inspects the finished job, provides general liability insurance, workmen’s compensation insurance where required, and vehicle insurance. Each sub-contractor is scrutinised by Home Depot before becoming an accredited service provider for the company in order to ensure professional work and satisfied customers.
It seems the right time for both Home Depot and Lowe’s to focus on installed sales, because many families consist of two wage-earners who have little time or inclination for DIY projects. There is also a belief that customers who are willing to upgrade to bigger and better products and projects may be reluctant to tackle the work themselves for fear of failure. Turning it over to a contractor not only saves their time but also eliminates that fear of failure. And dealing with one of the DIY giants brings with it the certainty that the customer can go back to the store to complain if he is not satisfied with the finished work. This eliminates the fear that…