Swot analysis of Home Depot Inc. Home Depot Inc. is an American home improvement retail company. Pat Farrah, Ron Brill, Arthur Blank, and Bernard Marcus were the founders of Home Depot, and they laid the foundation of the company on February 06, 1978. The headquarter of the retail company is in Cobb County, Georgia.
The Home Depot’s main products and services are;
- Tools & Equipment,
- Building Material & Hardware,
- Flooring, fixtures,
- Garden & Lawn,
According to an estimate, the annual revenue of Home Depot in 2022 was 157.291 billion dollars, and it has amplified by 6.49%. Out of which, the net income of the home improvement retail company was 17.095 billion dollars, and it has increased by 7.26%. The company has employed roundabout 490,800 employees to manage its operations.
The Home Depot’s top competitors are;
- Best Buy,
- Lowe’s Companies,
- Kingfisher PLC,
- Ace Hardware,
- 84 Lumber,
- JC Penny.
Today, we’ll discuss swot analysis of Home Depot. It’s going to analyze the internal strengths and weaknesses, external opportunities, and potential threats to the home improvement retail company. Here’s the swot analysis of Home Depot as follows;
Strengths of Home Depot
According to an estimate by Fortune 500, Home Depot ranks at the 18th position of Fortune 500 companies. The market value of the home improvement retail company is 347,324 million dollars.
Home Depot isn’t only following the concept of CSR (corporate social responsibility), but the retail brand has also adopted eco-friendly practices in order to target environmentally conscious customers. For instance, the company offers customers a choice whether they’d like to buy power-efficient and eco-friendly tools or others.
Loyal Customer Database
The home improvement furnishing company has established a strong database of loyal customers through its customer-focused operations. The brand offers excellent customer service and value for money. That’s why customers visit the company’s stores repetitively because they know that they would get the required product to meet their needs.
One of the main reasons behind the success of the company is keeping and retaining its skillful high performing employees. The furnishing company has established the reputation of taking care of its employees in the best possible way. In fact, the company pays the college fee of its employees if they want to pursue their education further.
Approximately 6% of the company’s sales came from its online store in 2019. However, the retail brand is very well aware of the digital transformation age and the significance of online shopping trends. That’s why the company is putting more focus on the growth of its e-commerce store.
BOPIS (buy online and pick in-store) is a very effective strategy of Home Depot, and it’s in line with the company’s e-commerce project. Roundabout 40% of the company’s orders come online. This strategy has played a significant role in amplifying the company’s profitability.
Home Depot promotes the creativity of its customers and acknowledges their ideas. In fact, the company has created a culture of providing the best customer service, and the brand’s focus is always on increasing the customer experience.
Home Depot offers a vast variety of products and services to customers ranging from furniture, fasteners, fixture, material, construction, and tools. Customers could receive all types of furnishing and home improvement products and services in one place.
Value for Money
It doesn’t matter whatever product or service you’re offering, customers always want the best value in return for money. The company is very cautious about matching the service with money, and that’s why the company has launched a Match and Beat Program. However, this program allows customers to compare the price with other retailers while shopping from Home Depot; and the company offers them a 10% discount relevant to the competitors.
Home Depot is the largest home improvement and furnishing Retail Company in terms of size and business. Economies of scale offer the company a unique competitive edge over competitors. In fact, the company has the resources to defend its market share from its competitors.
Weaknesses of Home Depot
E-Commerce Late Adopted
The pandemic has significantly amplified online shopping trends, and established e-commerce platforms took advantage of it to a great extent. Even though Home Depot has an online store, it’s not well equipped as its competitors.
Home Depot terminated the contract of an employee that requested a disability break. The retail company has no other choice but to settle the case for a hundred thousand dollars. The whole incident and lawsuit brought a negative reputation to the company.
The overall system and infrastructure of Home Depot are getting old according to the changing market trends and requirements of customers. In fact, 10 billion dollars of the company’s investment has failed because of the old system and aging infrastructure.
Limited Geographical Diversity
Home Depot has a network of more than 2200 retail stores across the North American market, roundabout 125 stores in Mexico, and 180 in Canada. Both the Canadian and the US markets have reached maturity and saturation. However, the Mexican market is unstable. The company should expand its operations across the world.
Opportunities available to Home Depot
The company offers only products/services in the category of furnishing and home improvements. The retail brand should consider expanding its product portfolio and offering other items like apparel or food to target more customers.
Speaking of expansion, the easiest way to expand a company’s portfolio is by acquiring other brands. Home Depot has got a lot of resources to acquire other young and new brands, and it would allow the company to expand its operations.
Home Depot’s expansion project in China failed very badly, and the company had no other choice but to pull back. For successful market expansion, the company should make an alliance with the local suppliers and distributors and other new growing brands; and use their experience to its advantage.
Online shopping trends have been increasing for the past few years. Home Depot should focus on further developing its online store in order to increase traffic and sale. Online shopping has a lot of growth potential in the next few years.
North American Market
The home furnishing brand has a bigger network in North American countries and the company is overly relying on that market for profitability. The company should expand its market into other developing countries that have got growth potential.
Threats Home Depot has to face
The bargaining power of employees has increased to a great extent by following the USMCA. The employees in Mexico demanded a 20% increment on their salaries, and the other employees want the same thing. It could result in strikes and a shortage of skilled workforce.
The pandemic has caused a recession in the global economy. Many people lost their jobs due to lockdown and shutdown of the business. The purchasing power of customers dropped to a great extent. The whole scenario would impact the company by lowering its revenue and profitability.
Amazon and Lowe’s are the main competitors of Home Depot, and their growth rate is bridging the gap. It’s worrisome news to the company. The retail company should take some necessary measures to deal with the whole situation.
Conclusion: Home Depot SWOT Analysis
After an in-depth study of the swot analysis of Home Depot; we’ve realized that the company is the largest retail brand in North American countries. The company should focus on its strengths to expand its market, and work on its weakness to deal with the competition and other issues.
Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.