Home Depot is currently the world’s largest home improvement retail company, with over 2,300 stores. Of course, operating such a successful business over many years requires consistent and innovative practices.
Having attained a strong brand name in the home improvement and retail company, one might ask, what’s Home Depot’s business model? I wondered about the same thing and researched the matter in-depth. Here’s what I found out!
What Is Home Depot’s Business Model In 2022?
Home Depot’s business model involves providing services and products revolving around home improvement needs such as appliances, patio furniture, and construction products and tools as of 2022. The company runs 1,000’s of brick-and-mortar stores and has expanded with acquisitions of online companies that help improve the company’s online presence. That said, a larger online presence has helped Home Depot expand.
If you want to get more information on Home Depot’s business model, the strategies, how Home Depot makes profits, and much more, keep reading!
How Does Home Depot’s Business Model Work?
Home Depot’s business model of retailing home improvement needs runs through 1,000’s of stores and acquiring online platforms where customers can buy items.
As a leading home improvement retailer, Home Depot’s primary goal is to offer customers a wide variety of merchandise at low prices and highly trained staff to assist customers during shopping.
Currently, Home Depot sells over one million products on online platforms, with approximately 2,300 stores spread across the US, Mexico, and Canada.
Also, while Home Depot is primarily a brick-and-mortar retailer, it promotes online sales of some of its products through acquisitions of online companies with a track record of solid customer service.
Further, below are some of Home Depot’s acquisitions:
Compact Power Equipment Inc.
Compact Power Equipment Inc. is an equipment rental and maintenance service company that Home Depot acquired in 2017.
Through the company’s acquisition, Compact Power Equipment Inc. supplies equipment rentals to more than 1,000 Home Depot stores spread across the US and Canada.
That said, this acquisition by Home Depot strengthened the company’s services and offerings to professional business customers.
The Company Store
The Company Store is an online retailer of home décor and textile products that Home Depot acquired in 2017.
Further, the company is primarily known for selling quilts, sheets, home décor, and selected clothing online.
In its acquisition, Home Depot didn’t acquire its five retail stores and used the online platforms, which strengthened Home Depot’s online footprint.
Interline Brands Inc.
Acquired in 2015 by Home Depot, Interline Brands Inc. is a distributor and direct marketer of building products.
With that, the company provides repair, maintenance, and operation products to maintenance professionals, contractors, hardware stores, and other customers residing in the US, Canada, and Puerto Rico.
Ultimately, this acquisition immediately bolstered Home Depot’s sales and services to maintenance repair businesses and professional contractors by increasing capabilities and distribution networks.
Blinds.com is an online window coverings retailer that Home Depot acquired in 2014.
With that, the company sells window coverings online and offers consultations via live chats and face-to-face videos.
Further, acquired at a period when the window covering market was on the rise, Blind.com’s acquisition strengthened Home Depot’s online presence.
Redbeacon is an online home improvement service company that provides online search directories of local business listings, including the reviews and ratings by screened and approved home contractors.
Using this site, customers could get several quotations and schedule appointments with local professionals, improving Home Depot’s presence on online platforms.
Additionally, Redbeacon’s parent company is currently Pro Referral.
HD Supply is a wholesale distributor of MRO products (Maintenance, Repair, and Operations).
That said, the company was initially founded as Maintenance Warehouse, renamed Home Depot Supply after its first acquisition, and later renamed HD Supply.
In 2007, Home Depot sold HD Supply but later reacquired the company in 2020.
During this time, the company became the leading distributor of MRO products, with 44 distribution centers in the US and Canada.
As a result, the acquisition intensified Home Depot’s business with contractors and other professional customers who prefer specialty suppliers.
What Is Home Depot’s Business Strategy?
Home Depot combines broad differentiation and the cost leadership strategy to gain more customers with minimal costs on the products.
With that, broad differentiation as the primary generic strategy provides outstanding products and services as the company’s main competitive advantage.
With the broad differentiation strategic plan, Home Depot delivers a wide array of products and maintains high-quality services offered by field experts.
Additionally, Home Depot uses the cost leadership strategy to emphasize “Everyday Low Prices” for more customer conversion.
Further, the cost leadership strategy helps the company devise more avenues for cost minimization. This way, the company can offer high-quality products at affordable prices.
Also, other strategies that support Home Depot’s business model include the following:
Home Depot heavily relies on market development to increase the company’s profitability. That said, this strategy aims at establishing the company’s presence in new market segments.
Further, Home Depot establishes market development through acquisitions of new firms to achieve a successful market entry.
With the continuous acquisition of the firm, Home Depot manages to establish a strong market presence that sells the brand name in the long run.
Home Depot also uses the product development strategy to promote its products and service.
With that, this strategy helps attract more customers since consumers always yearn to try out new products.
Moreover, the product development strategy helps the company’s broad differentiation plans due to an expansion of the company’s product mix.
Home Depot utilizes market penetration by devising methods of attracting new customers within the existing markets.
For instance, the company introduces special offers and discount sales to attract new customers in its current market.
Also, Home Depot couples up market penetration strategies with cost leadership strategies to offer a wide variety of products and services at affordable prices.
How Does Home Depot Make A Profit?
Home Depot makes profits by focusing on meeting the needs of professional contractors and providing customized services to “Do It Yourself” & “Do It For Me” customers.
Also, Home Depot gives customers access to knowledgeable staff who guide people on how to utilize different products and tools.
Therefore, this strategy increases customer loyalty and retention and helps the company gain more profits.
In addition to this, Home Depot expands its territories by acquiring online companies that broaden its niche.
This way, it can meet diverse customer needs who approach the company for a wide array of items.
Home Depot uses the retail business model to supply home improvement products and services to its customers.
Further, the company operates in brick-and-mortar stores and uses acquisitions of online companies to increase its online presence.