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strategy and business
 / Autumn 2007 / Issue 48(originally published by Booz & Company)


See for Yourself

The EVP of merchandising has responsibility for all decisions related to merchandising products in Home Depot’s 2,100 retail stores. These decisions include which brands to carry, prices, and how to present and promote the products. Effectiveness in Taylor’s group was critical to generating the company’s sales and profitability.

When Taylor took over the chief merchandising role in 2005, he began meeting with his team of merchants, who make buying decisions for the entire chain, to understand both their near-term plans and their long-term strategies for profitably growing product lines. He quickly realized that many of his team members used a considerable amount of data in decision making, but they did not really understand how the consumers and store associates interfaced with the products inside a busy, 100,000-square-foot warehouse that averaged more than 10,000 customer transactions each week. Taylor decided his group needed to see for themselves, so he began to host weekly “store walks.” Each week, one manager had an opportunity to discuss his or her department’s product lines in the aisles of a Home Depot store. Taylor invited the division presidents and other field leaders to attend these walks as well so that they could bring their cross-functional perspectives to every discussion.

Taylor had a better understanding of the stores than anyone. He was one of the longest-serving as­sociates in the company, having been with Home Depot since shortly after its founding in 1978. He had risen from part-time associate to executive vice president of all U.S. stores prior to his appointment as merchandising EVP. So when Taylor began to host the new store walks, he was in a comfortable environment.

On one of the early walks, the merchant responsible for vacuum cleaners was given the opportunity to talk about his category. After a thorough discussion of the “Good, Better, Best” positioning of the nine models of vacuum cleaners carried in the stores, Taylor turned his attention to a complementary product — carpet stain remover. Taylor asked a simple question of the unsuspecting merchant: “If you were a new hourly associate here on a busy Saturday afternoon and a customer asked you which carpet cleaner she should use to remove a pet stain from her carpet, what would you recommend and why?” The merchant looked down the aisle and saw 26 products to remove carpet stains, seven of which specifically claimed to be best at removing pet stains. Some of these products carried the same brand as the vacuum cleaners being displayed, others carried the brands of some of the top cleaning products of the stores, and the remainder consisted of brands specializing in carpet cleaning. Reading the product labels, the associate and customer would find competing claims made by the product manufacturers with no supporting evidence. All of those present thus recognized that they needed to rationalize stock keeping units (SKUs) toward a better customer experience. No set of data could have made that point so well inside the sterile confines of a meeting room.

Go to a Home Depot store today and you will find only 12 carpet cleaners, and each of these is clearly positioned as the one best suited to a particular deep-cleaning vacuum machine. And that’s just one product. The Home Depot merchandising group no longer sits at headquarters making decisions far from the action. They now go to the front lines to see what is happening and think about their decisions from a customer’s perspective.

Making It Personal
Thomas Jonathan “Stonewall” Jackson, a general of the Confederate Army in the U.S. Civil War, ranks among the most gifted tactical commanders in American military history. Though he fought on the losing side, his reputation was such that, almost 150 years later, West Point cadets still study the brilliant leadership of this alumnus. Stories of Jackson portray a personal commitment to firsthand observation. Jackson’s visit to the front lines be­fore the Battle of Fredericksburg allowed for some last-minute tactical adjustments that stopped the Union Army’s campaign to take the Confederate capital of Richmond in 1862.

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