Home Depot has spent years cultivating a customer base of baby boomers who relish the challenge and potential cost savings of renovating their own kitchen or tackling a bathroom repair.
But now, the big-box retailer says it must adapt for a key change among its core customers: These days, when it comes to home improvement, executives say baby boomers are less interested in do-it-yourself and more about do-it-for-me.
At a Tuesday conference with investors, executives said they will be ramping up their focus on catering to the professional contractor — whether they are an independent handyman or a small or midsize business — as older homeowners tire of taking on home-improvement projects themselves.
“Their expectations of the Home Depot are changing,” said Marc Powers, the chain’s executive vice president of U.S. stores. “Now, people like me have less time and less energy to do it myself like the Home Depot taught us to do. Now, I want someone to do it for me.”
DIY-happy baby boomers have been a critically important demographic for Home Depot, the fourth-largest retailer in the United States and one of few major chains that have consistently delivered robust quarterly sales growth in the past two years. The company said Tuesday that a majority of its non-professional customers are baby boomers, even as millennials now outnumber that generation. (A majority of Home Depot’s shoppers are also homeowners, and about a quarter of them have incomes of more than $100,000 a year.)
With home prices climbing, and given that about 63 percent of the housing stock in the United States is more than 30 years old, Home Depot executives said they believe these boomers will still want to invest in improving their homes. But catering to them will increasingly be a different proposition.
It will mean being smarter about wooing the professionals who boomers might hire to do these jobs for them.
“We serve all kinds of pros, but generally acted more like a 7-Eleven to the larger ones,” said Bill Lennie, executive vice president of outside sales and service, in the investor presentation.
In other words, the chain has been more of a destination for a quick fill-in trip than for a major purchase. Now, it will be working to adapt its merchandise assortment and the order fulfillment capabilities for the needs of this type of customer.
Meanwhile, Home Depot is also trying to better connect with large-scale property managers, the ones who manage apartment buildings and condominium communities. As part of that effort, it spent $1.6 billion earlier this year to acquire Interline, a distributor and direct marketer of maintenance and repair products.
The Interline acquisition was also meant to better position Home Depot to capitalize on another trend in the housing landscape: Many millennials who are not yet embracing homeownership and are opting to live in multifamily housing.
Home Depot says it is confident that millennials will eventually take the plunge and buy a home, and that when they do, its research has found they will have the do-it-yourself ethos that their parents had in their younger years. For now, though, executives said they typically see millennial customers spring for items such as paint and window treatments — the kinds of things that can spruce up a home without violating a rental agreement.
To connect with those customers, Home Depot is also looking to beef up its digital business, which today accounts for only 5.1 percent of its total sales. As with many of its bricks-and-mortar counterparts, the chain is racing to open fulfillment centers so it can get orders to customers more quickly, and has moved to offer a much wider range of merchandise online than it can fit in its stores. It is also shifting its advertising strategy, with plans to spend more on digital marketing this year than on print and television.
Overall, it seems that the cautious consumer mind-set that has been a drag for so many retailers has actually been something of a tail wind for Home Depot. Shoppers have been resisting impulse buys and, instead, have been putting their dollars toward planned, carefully researched purchases. You can see that in Home Depot’s latest earnings results, when it saw a 7.8 percent increase in transactions totaling more than $900, thanks to purchases of items such as appliances, roofing products and countertops. The company said Tuesday that it has seen an increase in big-ticket purchases since the second quarter of 2011.
The company’s recently strong sales have helped push its stock up more than 27 percent so far this year.
As it laid out its strategy for the next several years, Home Depot also reaffirmed for investors its earnings outlook for 2015 and announced a long-term revenue target of $101 billion in 2018. That’s the equivalent, chief executive Craig Menear said, of adding 357 Home Depot stores, and yet executives don’t plan to grow the retailer’s footprint much. The chain, which operates stores in Canada and Mexico, said it is not considering further international expansion, and said it does not plan to experiment with adding small-format or other alternative brick-and-mortar layouts to its fleet of 2,273 stores. Instead, the company plans to expand sales by making its existing stores more productive and by ringing up more purchases online.