What you’ll learn:
Did you know 90% of the US population lives within a 10-mile radius of a Home Depot? In today’s episode your host shares key takeaways from the 2019 Home Depot Vendor Summit. Listen in, HD is a powerhouse player to help grow online sales.
About our guest:
Luke Peters, President and CEO of Retail Band, has 17 years of sales and product development experience in the home appliance space. A self-made entrepreneur and founder of 5 companies, Luke is skilled at taking a product from concept and bringing it to high-volume sales at Home Depot, Lowes, Walmart, and Amazon. Retail Band, Luke’s new venture, is a r-Commerce agency that works with brands to manage and accelerate online business through retailer platforms. He is also your host of the Page One Podcast, a twice-weekly Podcast featuring interviews with thought leaders on topics ranging from channel strategy, tariffs, influencer marketing, product launches, and eCommerce growth on big box retail sites.
Key takeaways from this episode:
- Home Depot Stats: stock valuation, quarterly earnings, net profit margins, business model – 1:50
- CEOs’ instore sales tactics and HD top customer – 3:32
- Diversity Luncheon: HD’s networking event, training opportunities, what diversity means – 5:03
- HD’S push towards brand partnership – 5:29
- New Geotargeting for vendors – 6:15
- Avoid channel conflict on HD – 6:43
- Investing in HD team product training – 7:27
- Bring your team: compliancy, operations, marketing, sales, and supply chain insights – 8:45
- HD culture and PNL focus – 10:41
- New 2020 HD Marketing Solutions: Sponsored Advertising, Dynamic Marketing, SKU enrichment – 13:09
- HD is a key company to invest in (expand your reach beyond just Amazon) – 17:26
- Act now: HD’s marketing and advertising is underutilized, low barrier to entry – 18:10
- Develop a relationship with your Merchant – 18:16
Speaker 1: Welcome to the Page One Podcast, a weekly podcast featuring a variety of guests and thought leaders on topics ranging from channel strategies to tariffs, influencer marketing, best in class product launches, and all the details about how to accelerate your eCommerce sales with the big box retailers or what we call r-commerce. Now here’s your host, Luke Peters.
Luke Peters: Thank you for joining me on the Page One Podcast. This is the podcast where we focus on consumer product industry and really the only podcast covering online sales in big box retailers. So today’s a special solo cast on a recent HD vendor summit. So the Home Depot Vendor Summit that occurs in late October. I was fortunate enough to attend this and this is the 40th anniversary. And I’m just going to give an update on what I thought about the vendor summit, what I learned and hopefully for those of you that didn’t attend, you’re going to gain some insights. And if you did attend, you can just see the things that I learned or my takeaways from the marketing side of Home Depot and the things they’re offering there and the culture and also just different aspects of why you should bring more of your team to this vendor summit, which I didn’t do this year so I won’t make that mistake next year.
Luke Peters: So why don’t we just jump into this short solo cast, probably going to be under 10 minutes and hopefully I can provide some value for you guys who sell into Home Depot. And also hopefully, if you’re not currently selling into Home Depot, you’re going to kind of see why they’ve gotten an amazing story and why you want to be selling with Home Depot and partnering with them. So the first thing, let’s just start out at the beginning. Night one, you get to listen to all the top executives from Home Depot. And again, it was just a great opportunity and a privilege for me to be able to attend this. And they pass out awards and they talk about kind of what Home Depot’s focus is on.
Luke Peters: And a couple of things that you can easily find out on the internet, but it’s just great for you to realize is that the stock is up this year. I mean, it started this year in 2019 around 180 and here we’re talking in early November and it is now 237 and they’re just killing it. Net profit margins at Home Depot are at about 11%. I mean, why do I point that out? Because there’s other online or there’s other big box retailers or even other online retailers that don’t even come close to that profit margin. So it’s really interesting to understand how Home Depot runs their company, how they focus on net profits above 10%. I mean that’s going to play into the pricing that all of their partners have and the pricing they’re going to need I guess to achieve those. So that’s just a good number to understand.
Luke Peters: One of the key things, I posted this on my LinkedIn account and I’ll try to put this into the podcast or into a blog, but it’s an image I have from their main presentation about how they track dollars sold per foot and how that’s been going up every year since the 2008 recession. And how in just the last year, I mean it’s been taking up every single year and just to last year that increase basically amounted to $4 billion in sales. So you’ll see on the graphic, but generally what I’m saying is that how this number just keeps tracking up, 200, 300, well above $300 per square foot per store. So it’s a number they focus on and I guess what that means to you is if you’re in store, and literally I heard this from a lot of CEOs at the conference, that they’re spending so much time in store when they are in store, they’re spending so much time understanding how their products doing in store, going to the stores weekly, talking to the merchants at the store. So there’s just a maniacal focus at Home Depot to increase sales per square foot.
Luke Peters: Another interesting thing is that the pro business is more than 50% of their sales. So understanding that, how that fits into your business. Definitely when we look at online sales, a lot of them are shipping to store, like 50%. It’s a huge and I always wonder why? I would just rather have the products show up at my house but there’s obviously a big incentive and a reason why customers are doing that. And just thinking about who your end customer might be. It may not be a household, it might be a pro customer and how Home Depot is really catering to those pro customers and how that’s an important metric and I’m sure something that the stock analysts look to see if Home Depot is growing that component of the business.
Luke Peters: Okay, so that was from kind of night one and just some themes that came in. And then on day two and three is the supplier summit. So day two basically actually and into day three there’s a big opportunity for networking and a lot of training and learnings that go on because there’s these seminars where Home Depot’s talking about merchandising and advertising and supply chain and gain lots of insights and kind of see the cutting edge of what Home Depot’s focused on, but maybe not what all of the brands actually know. So I’ll kind of go through a couple of those things.
Luke Peters: So first before on day one I was fortunate enough to be invited to a diversity luncheon. It’s really an amazing event. If you ever get an opportunity to go, make sure you say yes and go. Lots of diverse companies and smaller businesses in the room and you get to sit with a bunch of high level Home Depot executives and they’re really kind of display the partnership and the different way of thinking that Home Depot has. A couple of takeaways there is that Home Depot really does support a diverse company both in their employees and in their suppliers. And literally, I thought this was just an amazing comment. I guess we’ll see how this plays out at year end if we have to renegotiate some of our allowances and backends with Home Depot. But it was interesting they said that our checkbook is their checkbook, meaning they want us to also be profitable.
Luke Peters: Obviously they have to make money and Home Depot really drives and pushes for that net profit margin I talked about earlier. But I just think that other retailers, maybe a really big one that you guys might know would never make that comment. But with Home Depot, they really are focused and want to partner with the brands kind of in a way that even Wayfair talks. So I just thought that was a really positive message for them to say that. And obviously it doesn’t mean they’re going to be unprofitable, but they want to partner. And that’s a pretty cool quote that our checkbook is their checkbook.
Luke Peters: Companies also found out this at the diversity of lunch, a lot of companies are really winning by geo-targeting. Now these are for in store companies and maybe they’re not in every Home Depot store or they’re in certain geographies and they’re really winning with social and geo-targeting social. And I’m sure they can use Facebook, but I’m talking about even some of the other social channels. So I thought that was an interesting call out because I know probably 99% of companies are not taking advantage of that.
Luke Peters: And this is just an operations thing that kind of came out. And the only reason I bring this up is because it’s not obvious. To some people it is obvious and to others it wasn’t. But that if you choose to field destroy your products, that there’s an option to eliminate HD from taking and reselling the product maybe as a blem. And I know this is obvious to some, but it definitely wasn’t obvious to everybody. And I guess what I mean by this is if your product is being returned and you want to avoid channel conflict or you want to avoid that product ending up on an eBay, in the portal you’re able to make that decision that the product will be totally destroyed and not sent back to be sold as a blemish or some backend channel that can then cause channel conflict to you.
Luke Peters: And, again, kind of like I mentioned earlier, and this is just from the diversity luncheon, it was just a common theme is that the CEOs of the successful in store, when they’re successfully selling in store, they’re out at the stores every single week. They’re there talking to the merchants, they’re seeing how the products doing, they’re even asking customers why they bought or why they didn’t buy. So I just thought that inquisitiveness and dedication was really interesting. And even to top that off is that they’re sending out teams to train. There’s a huge investment in training the HD team to understand what their product is so that they kind of get a leg up on the competition. And that was a common theme from the successful companies. And I know it’s a big investment and if you’re going to stores, you probably just mostly have time to go to local stores because you can imagine how many stores there are. By the way, there is 90% of the US population is within 10 miles of a home Depot store. Just think about that. That’s a just an incredible factor right there.
Luke Peters: So those are a lot of the key things I got from the diversity luncheon along with great networking. Just met some, some great people, some great people close to me here kind of in the SoCal area. Met the top merchant in appliances, which some of my team had met but I hadn’t personally met. And so just a great event overall and great networking at the diversity luncheon. Okay.
Luke Peters: And next what I wanted to talk about is just the next comment, bring your team when you go to this event. So when I was invited, I thought it was a CEO only event. And I think the reason was that I was invited to the diversity of luncheon, but I didn’t understand at the whole Home Depot supplier conference that obviously we could have brought more of the team, which is like most of the other companies did. And here’s a couple of reasons. So the networking is going to be amazing. You’re going to see the Home Depot merchants that you’re going to be working along. Those are the obvious things. But here’s the things that really stood out for me, there’s so much to learn from a compliance, a marketing and a supply chain side.
Luke Peters: So when you go here, your team can really learn. I mean you could probably go as deep as you can and bring ops people, not just your sales team. Because I was able to meet with key folks from Home Depot on AR collections, on compliance, on supply chain, and I learned so much about the contract, the things that we should be doing and not doing, how to collect on short shipments, why we’re receiving some short shipments and hint, that’s because if you’re back ordering a PO and the PO, if you ship it too late, you can’t ACE in the original PO and the receiving team at the Home Depot DFCS is not going to have a PO to relate to when your product comes in. It’s as simple as that.
Luke Peters: And we were getting hit on this a couple of times because we thought we could back-order PLs and we were told literally that we could by some folks internally on the HD team. So we’re getting the approval to do it. But the point is kind of getting deep into the ops there. But the point is that you can go to this thing and learn and talk to the people who are making these decisions and they’re just awesome people and I’ll kind of get into that later. And, again, so just think of your whole team, Ars, compliance, supply chain, all of those areas that in this world of tariffs and if you can save a percent or two or three, stop making mistakes or lean out or understand how to better work with HD. I mean it’s worth it 1000%. Along with that all the top portal support.
Luke Peters: Another thing I wanted to talk about is the HD culture. And I know most top companies, they’re there for a reason, they have amazing cultures. But I just really wanted to point out that I think companies have different kinds of amazing cultures. Some companies, they have an amazing culture because they’re just intense and they’re not often the nicest people to work with but maybe they’re the smartest and they’re just going to win at that PNL. Which going off on a tangent doesn’t create a good vendor-company relationship. And some companies are like that because it’s, they’re all into win, but they still have a great culture because they create a team that’s really focused around winning. And so for them, I guess, they do create a great culture.
Luke Peters: Home Depot is different. I mean, the people are so nice. They’re so smart though. I am going to talk about this later on about why Home Depot’s a company to partner with in the future because they’re going the right direction. I mean, they’re hiring every bit the smartest people you’re going to meet. But at the same time, they build this amazing culture, diverse culture where they care about their partners. But at the end of the day, they got to win as well and so it’s very unique how they do it. Their term merchant, I mean they’re merchant first. Everybody there is a merchant, that’s kind of what they’re passionate about being. They do care about their suppliers and brands just I said, unlike most other large companies. And the people who are working for HD, they’re all in, they love HD. There’s long tenures there, they move around. You can see how people have grown within the company. And when you think about this company, it’s not as old as you might think. And this is a 40-year-old company, it’s not an 80-year-old company and it’s just amazing to where they’ve gotten in that somewhat short time.
Luke Peters: And the other thing that really stands out, which I know is obvious for most of the big companies, but for whatever reason I think they have a better grasp at it, is that they’re really incentivized and focused on their PNL’s. I don’t know what that means. I don’t know how to kind of give you guys more of a concrete answer, but I’m just saying compared to other big box retailers, whether it’s better systems that HD has built in on the back end, whether it’s better, I don’t know from an accounting and finance standpoint, whether their platform is easier to quantify these things or whether it’s just a culture thing from the top, they really have built a bottom line focus and I think that kind of shows in that net profit of 11% and the results that they’re turning. And everybody at the team is focused that way. I mean, PNL it just seems to be in the back of mind of everybody at HD so be aware, make sure they’re making their money and you’re making your money. But I’m really impressed by the HD culture.
Luke Peters: Moving on to marketing. So I spent some time in a marketing seminar, it was marketing and then merchandising. And I just wanted to go through a couple of things that really stood out. And I know from a retail band stand point and also other topics I’ve talked to on the Page One Podcast we’ve done talked about actually had talked about the Home Depot move, the recent move to promote IQ. Talked about Wayfair and their sponsored ad platform. And we’ve talked about Amazon and theirs. And so here is just a little bit more detail on marketing. And I think it’s just a couple of episodes ago that I talked about their move from Criteo to promote IQ. That is HD’s move.
Luke Peters: And so now I got to see some case studies and also learn that the sponsored ad platform is just one component of the HD marketing. There’s other options that I’ll quickly go over. And one of the things that stood out is that this is the time to get involved with HD. There’s still not a lot of people using it. You could tell by their case study. The case study I think that they showed was quick-set locks. The numbers weren’t that huge for a company as substantial as HD so I could tell just by looking at the volume numbers that… I mean it it’s a great case study and beautifully done, but my point is that they’re not working off huge numbers yet. They’re going to be in the future and this is probably a result of the sponsored ads shown at the bottom of the page and also a result that there just isn’t a ton of awareness built in.
Luke Peters: You can also work with HD on something called Dynamic Media. This is basically retargeting. We haven’t tried this option, but it looks like a really good option that these are separate teams you’d be working with. You’d deposit money into an account and whatever you want to test out, 10, 20, 30,000 and just go on their dynamic retargeting. These will be that shop your product, they go on to HD and they leave. Okay, so they had the intent to go to your product, for whatever reason they left. They go out on the internet somewhere else and HD now has the ability to retarget this customer and bring it back to your product. My guess, you’ll probably return a lower row as than sponsored ads, but we’ll find out. But I still think it’s going to be positive. It’s cool that they’re offering it. And that was kind of a key component of the seminar.
Luke Peters: Skew enrichment. I thought this is really interesting. So HD’s partnering with a studio in China. So you can literally send your product from your factory in China to this studio, have all of your photos, creatives done. And think about what that means if that’s getting done. A lot of times, by the way, factories can do this for you as you know, but sometimes they don’t really have the best folks to really understand the marketing that you’re going to need on your end. So here it sounds like HD has a partnership with a factory that is kind of this is what they do or the studio that this is what they do. So it’s going to save you, it’s going to, I guess let you launch products quicker because by the time that product hits shore over here, you’ve already got all the creative stuff well ahead of the product getting here. Now this is really good for big product. I know with with smaller products you’re able to kind of air freight it over, but just think of the larger products and how hard it is to get all the creatives done and the time of inventory sitting in warehouses while you’re doing that. So I thought that was pretty cool and you can check with your merchant on that.
Luke Peters: Right now another comment, sponsored ads are, they’re showing at the bottom of the page. We’re talking November 2019 right now and it was mentioned that they’re going to start moving up higher in the ranks. So, again, this was a newer initiative from Home Depot. This is going to drive a lot more volume. There was talk about if your CPC was high enough on your sponsored ad that you would then gain the eighth ranking, the eight spot in the ranking. So these are all things that we’re going to test out. I thought it was really interesting and just kind of getting into the weeds, but kind of, I guess you could look at who you’re competing with and where you’re ranking and then understanding your CPC and finding a way to move it up with the various ways that you’re able to do that and see if you can bump into that number eight spot like they talked about.
Luke Peters: So great, great conference and meeting overall, I learned a lot. I actually spent a ton of time in the backend fixing some, just some compliance things and learning about some compliance things that we could better here at NewAir. And also now my team is a lot more educated on that as well after a lot of back and forth and a lot of great contacts that we met and the people are just so helpful.
Luke Peters: But here’s my key takeaways. So while we all think that Amazon is so far ahead of everybody else digitally, I was really impressed with what HD is doing. And I know they’re trying to get to this one portal and the one portal really isn’t one portal with Amazon. So they’re not where Amazon is on the portal. But wow, HD is a powerhouse. I mean, they own this niche that they’re in. I know Amazon and Granger and other companies are kind of coming at them, but, but they’re really a powerhouse in this niche. And they’re really strong with their pro customers and they’re really thoughtful and progressive on kind of how they’re thinking and growing things in the future. So that was one key takeaway.
Luke Peters: The other one is that, as I said previously in the previous podcast that HD advertising and marketing is still totally under utilized. Get on it now while you can. Next takeaway is if you have a problem with your account, and I know this could be obvious, but maybe it’s not and if you can’t get something done, then you just, you need to get yourself involved with your merchant and the other people at Home Depot. And I’m just saying this from the point of view that sometimes your team might hit a brick wall, but you as a leader, if you get involved, these folks really are usually wanting to work with you. So that was just to take away I had from the event. And if you’re not seeing that, then maybe best to attend the event because it seems that everybody’s really collaborative at the event when you get to meet with him in person. People at HD want to help their vendors. They repeatedly said that so I’ll definitely use that next time I’m trying to work through a deal that we feel isn’t too fair on our end. But, again, just win-win. Great people over there.
Luke Peters: And kind of aligning with the first takeaway I said, but this is the last one is that HD is growing, they’re profitable and they’re investing online. And I know it’s kind of repetitive and it’s what I said earlier, but they’re moving the right direction. You’re looking for key companies to align with outside of the obvious, outside of Amazon. HD is going to be one of those key companies. And, again, I know people who are selling through them are ready. This might be obvious, but from my experience there’s two areas that aren’t obvious. It’s number one is people are selling online with HD, but they’re not taking total advantage of everything HD is offering. So that’s a big miss. And number two is people that are all in with Amazon as an example, but they’re not with HD and so they’re missing the boat even more. And just my takeaway is that HD is moving the right direction. They’re really investing online and in their team and in the core areas and they’re not going… They’re not diluting themselves and going into categories that they’re not going to win in. And so if you’re in their categories, you want to align with them and grow with this amazing company.
Luke Peters: So that’s it on this short solo cast and update on the HD supplier conference. Hope you guys can all attend next year. If you do, find me on LinkedIn, I’d love to connect with you and I just want to thank everybody for listening to this week’s episode of the Page One Podcast. Please leave a review on iTunes that really helps me and the podcast. And if you need help growing in your big box online stores or product launches, VR influencer marketing platform, find me on LinkedIn, ask. I’d love to help you guys. We can provide a free audit on your business and no pressure, we’ll just show you if we can help you and sometimes we can, sometimes we can’t. We’ll honestly put everything together and show you what we can do via Cool Deck and you’ll gain some as well. You can find me on LinkedIn or firstname.lastname@example.org. Take care and we’ll see you next time.
Speaker 1: Thanks for listening to the Page One Podcast with Luke Peters. If you like our show and want to know more, check out our other segments. Also, please help us out by leaving us a rating on iTunes. Want to learn more about our commerce? Check out www.retailband.com to get more great tips and tricks on how to accelerate your eCommerce sales with the big box retailers.
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