The Founding of Home Depot: Background information when reading Abundance

The Founding of Home Depot

This article relates to Abundance

As he passes the lumber and rounds into a lane full of bagged cement, the logic behind the division of inventory dawns on him. The contractors' half of the store holds all the fundamental elements for building a home, all of which later get concealed by the ornaments for sale on the other side, all the paints, light fixtures, moldings, carpets.

—Henry, inside a Home Depot in Abundance

In 1978, Handy Dan Home Improvement's president and chairman of the board Bernie Marcus and CFO Arthur Blank were fired by the chain's new ownership. Not the kind to brood too long, they soon came up with a business plan to improve upon what Handy Dan offered to customers. 30,000 to 40,000 square feet for selling products? Child's play. How about a 60,000-square foot warehouse space offering a lot more choices for those who want to better their homes? The mom-and-pop stores of the day had limited selections of merchandise geared more toward the professional contractor than the average homeowner who might not need as much work done for a simple change in, say, their bathroom.

Marcus and Blank got the capital they needed to make this happen from investor Ken Langone and then sought out a suitable location to begin their vision. They found it in Atlanta through a deal with JCPenney, which offered the duo the opportunity to lease spaces that had previously housed the company's Treasure Island discount stores. The only hiccup at first was that they had to spread their capital between two locations, and according to Langone, there wasn't enough money for inventory. So Pat Farrah, another co-founder responsible for merchandising, asked suppliers to send empty boxes with their labels. With those boxes placed on 20-foot high shelves, customers were led to believe that Home Depot had a lot of merchandise. Meanwhile, Bernie Marcus stationed himself outside the stores holding single dollar bills, offering one to each customer if they would go inside and look around. Enthusiasm for the store and its concept grew, and Home Depot began to find its footing.

One-stop shopping was what the company hoped to offer — a place where customers could easily find a faucet for their master bathroom and the tools to install it. And the four founders achieved this, not only with their products and competitive prices, but also employees ("associates") who learned everything possible about the business and the products available so they could better help customers know the difference between an Allen wrench and a Crescent wrench. Marcus and Blank also encouraged their associates to speak their minds and suggest ideas to make Home Depot even better.

According to Jennifer Wyatt, Home Depot's historian and archivist, an early investor named Marjorie Buckley came up with the idea for the name after she and her husband drove past a train depot that had become a restaurant. Marcus and Blank took to the down-home name, and for the store's signature color, they worked with Canadian branding designer Don Watt, who thought an orange theme would work best, symbolizing energy and value, and bright enough to capture the potential customer's eye.

Today, the average Home Depot store is 100,000-square feet, and the company employs over 400,000 people working in more than 2,200 stores in three countries. As described in the quote above from Abundance, the store's layout generally has separate areas designed to meet the needs of contractors working on large-scale projects and consumers seeking a single tool or a few gallons of paint. Home Depot has done well during the pandemic, with its revenue up 23% in the third quarter of 2020 compared to the previous year (representing $33.54 billion). While a lot of companies have seen flagging sales due to a decrease in consumer demand, many people have sought to make their home environment more comfortable during lockdown and turned to Home Depot for the needed supplies.

Bernie Marcus and Arthur Blank, courtesy of Home Depot

Filed under Cultural Curiosities

This article relates to Abundance. It first ran in the March 17, 2021 issue of BookBrowse Recommends.