Market Update

First printed in Checkout Magazine   

US DIY retailer opens c-stores

Tesco isn’t the only operator to spot an opportunity to open convenience stores in the USA. The Home Depot, the world’s largest DIY retailer, is getting in on the act, reports Bob Vereen

Cash incentive for The Home Depot card holders

It’s B&Q’s American role model, and now it’s opening convenience stores. The Home Depot, the world’s largest home improvement retailer, operating more than 1,500 stores across North America, is using spare capacity in its store’s car parks to find out if it too can sell what the US population count as convenience: “food and gasoline”.

At four Home Depot locations surrounding Nashville, Tennessee, the company has opened forecourt shops, selling petrol and a selection of packaged and ready-to-eat food items such as hot dogs, sausages and sandwiches.

However, these stores, trading as The Home Depot Fuel, are nothing like the existing outlets that offer food or petrol in the US market.

To begin with they are vastly different from the traditional parking lot-style gas stations which are typically operated by Wal-Mart and where a customer walks up to a 15sq ft building, asks for cigarettes or perhaps a snack bar, or simply pays for petrol and goes.

Equally, they are nothing like the modern US convenience store, which is a substantial business in its own right, racking up not only petrol sales but offering a broad range of products including newspapers and magazines, hot coffee, soft drinks, confectionery plus health and beauty products.

The Home Depot’s test stores are completely different. Its offer is limited to the snacks, sweets, food and drink products that consumers and tradesmen may want to consume immediately, or have later while on the job.

As a result, the stores are smaller, cleaner, easier to shop and, more importantly, easier to manage than conventional US convenience stores. Furthermore, they’re really well designed, inside and out.

The interiors feature wide, angled aisles and no unnecessary clutter.

The aisles lead to checkouts at the back of the store, encouraging full exposure to its impulse inventory of confectionery and snacks.

The angled aisles and low fixtures also discourage shoplifting because store personnel can keep the entire small sales floor under surveillance.

The stores also feature the very latest in coffee, cappuccino and cold drink dispensing machines – putt-ing them on a par with Starbucks – and this really makes them different from the older traditional, convenience stores, which offer just “coffee”.

Outside, the bright, dramatic graphics are another feature that set these stores apart from conventional convenience stores. They make the stores far more attractive and emphasise the lack of clutter.

As for price – The Home Depot Fuel stores shave a penny off prices charged by nearby petrol stations, but holders of The Home Depot credit card are given the chance to save an extra three cents a gallon.

It’s not a new ruse, but it adds to the idea that The Home Depot’s version of the parking lot convenience store might generate more sales and provide more convenience than those run by Wal-Mart or other US supermarkets.

* Founded in 1978 in Atlanta, Georgia, The Home Depot is the world’s largest home improvement retailer. The company operates more than 1,800 warehouse-style stores located throughout the United States (including the territories of Puerto Rico and the Virgin Islands), Canada and Mexico.

Its new convenience stores are just one more example of the diversification efforts ceo Bob Nardelli is introducing to the business. When he took over five years ago, he quickly realised the company was nearing saturation in its conventional store format.

Nardelli has already announced plans to enter some smaller market locations. If The Home Depot can generate a reasonable sales volume from these new Fuel stores, the units could be profitable. Not all of the retailer’s store locations would justify the addition of a convenience store, however, but even adding 500 to 1,000 would bring welcome incremental business to the company.

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