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home depot Paul Raines Presentation

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Paul Raines discusses Home Depot's focus on store operations and customers. Key points include: 1) Home Depot has made multi-year investments to improve labor standards, launch an "Aprons on the Floor" program, and focus on foundational improvements like maintenance and store standards. 2) The company is focusing on two customer segments - professional contractors and multicultural customers - through programs like product knowledge certification for associates, understanding each group's purchasing patterns, and targeted marketing. 3) Initiatives like daytime freight, call center closures, and a new merchandising team have helped exceed Home Depot's $180 million goal in operating cost reductions to reinvest in labor.

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Paul Raines EVP - U.S. Stores 2008 Investor & Analyst Conference Store Operations
2 Store Operations Commitment to Service: Multi-year investment to reach our labor standards Aprons on the Floor Foundational investments Home Services Understanding Our Customers – Focusing on Two Segments: Pro Multicultural
3 Labor Standards History 1979: Home Depot invented engineered labor standards for home improvement 1990s: Store Operations systematically gathered data in the form of validation studies 2006-2007: Launched comprehensive effort to apply engineered time studies across all departments & volumes 1979 2005 2006 & 2007 Invented engineered labor standards Started conducting new time studies Comprehensive effort to set a new labor standard Validation studies 1990s
4 Labor Studies Conducted 1,200 hours of labor studies Studies encompassed stores throughout the U.S. with different volumes Example: Plumbing Weekly Task Allocation Balance Between Service and TaskingBalance Between Service and Tasking Stock/Returns 4.4% Meetings 4.3% Training 4.6% Admin/General Tasks 8.4% Reports 4.9% Safety 7.4% Dept Maintenance 13.7% Customer Service 52.3%
5 Labor Standards Future State Other Operating Expense Labor Total Operating Expense Reduce Operating Cost to Invest in LaborReduce Operating Cost to Invest in Labor
6 Aprons on the Floor Key Initiatives Description Day Freight HRM Restructure Call Centers Merchandising Execution Team Shifted 121 hours per week from nights to days in 1,100+ stores Realigned the HR field structure to a district-level support model Closed 3 U.S. call centers Replaced third party service teams with new in-house Merchandising Execution Team (MET) for seasonal resets Will Exceed 2008 Goal of $180MWill Exceed 2008 Goal of $180M $ Day Freight HRM Restructure Call Centers
7 Incentive: Hourly rate increase as a result of becoming certified (new associates only) Incentive: One time bonus upon completion of the following: (1) Core Department certification guide, or (2) The two adjacent department PK Certification Guides Assessment, Skills and Knowledge in: Customer service skills Product knowledge down to the merchandising class level Department services (cutting keys, blinds, special services, etc.) Home Services PK Certified PK Expert Training: Product Knowledge Certification
8 Associate Tenure Continues to Increase, with Store Managers Averaging 9.9 Years Associate Tenure Continues to Increase, with Store Managers Averaging 9.9 Years Attrition and Tenure Voluntary Attrition (U.S. Only) Source: HRIS 1.6% 2.0% 2.4% 2.8% 3.2% 3.6% 4.0% 4.4% 4.8% 5.2% Feb Mar Apr May June July Aug Sept Oct Nov Dec Jan VoluntaryAttrition% 2006 2007 2008
9 Foundational Investments: Maintenance Since implementing Programmatic Approach to Maintenance, we have: Restriped all parking lots Spiffed and polished 898 floors Installed T5 lighting in more than 99% stores Touched over 1,800 U.S. Stores
10 Foundational Investments: Store Standards Launched in Fall 2007 Creates a consistent shopping experience – clean and wide open aisles for customers to easily navigate Touches the entire store – parking lots, entrance/ exits, aisles, receiving, etc. Ongoing governance and sharing of best practices 2006 2007 2008 7.30 7.50 7.70 7.90 8.10 8.30 Mean(1-10scale) Feb Mar Apr MayJun Jul Aug Sep Oct NovDec Jan Voice of the Customer “Clear and Uncluttered”
11 Home Services Strategy Improved quality and continued focus on execution − 35% reduction in complaints per transaction − Improved Voice-of-the-Customer results from 8.1 in Q1 2006 to 8.5 in Q1 2008 Rationalized or exited programs − Home Elevation, Awnings, Home Security, Storm Rooms, Cleary Buildings, Putting Greens, Pergolas, Artificial Turf, Irrigation, Smart Home, Whole House Fan, Mailboxes, Lock and Hardware and Sump Pump Replacement Integrated with Operations and Merchandising − Aligned with stores − Blended view of product and install − Collaborative strategy with merchants Simplifying the Experience for Our CustomersSimplifying the Experience for Our Customers
12 Understanding Customers: Pro Customer Opportunity Only 27.5% of Our Professional Customers Use One of Our “Pro” Services Only 27.5% of Our Professional Customers Use One of Our “Pro” Services Source: 2007 survey of Dunnhumby, Pro Team tracking reports, MaPS survey Percent of HD Customers and Sales 100% Pro 30.9% DIY 69.1% Other 72.5% Home Depot Credit Card % of Customers Pro Sales 0 20 40 60 80 Pro Desk Managed Accounts 27.5%
13 Customer Insight: Dunnhumby Leading provider of retail customer insights Results based on performance - Tesco – 15 years of strong performance - Kroger – 18 quarters of strong performance Created a Pro model leveraging years of HD data and Dunnhumby analytics To Better Understand Our CustomersTo Better Understand Our Customers
14 Understanding the Pro Model the behavior of Pros using all of our sources - Home Depot Credit Cards - Managed Accounts - SIC Segmentation - VOC Survey Identified behavior of known Pros and model this behavior against customer base Flagged all customers as Pros or Consumers Understand product category
15 Driving value from our Pro customers 25% Associated Department Sales – Average Per Pro RelevantRelevant 100%Power Rank of 4 Core Metrics Associated Store Sales – Average Per Pro $ Pro Sales Pro Penetration Core Metric 25% 25% 25% Weight“R” ReturnReturn ResultsResults ReachReach Answering the “4 R’s” will Determine if Products are Driving Value from Our Pro Answering the “4 R’s” will Determine if Products are Driving Value from Our Pro
16 Identify How Pros Spend High HighLow Leadership SKUs Purchased frequently by Pros Highpercentageof Prostotalspend Product X Product Y Leadership SKU: Purchased Frequently and High % of Total Pro Spend Leadership SKU: Purchased Frequently and High % of Total Pro Spend
17 Hispanic Customers: Population is growing at 3.8% (general market population growing at 1%) 14% of households will be Hispanic by 2010 Hispanic purchasing power is increasing at a rate faster than population growth at 5.7% − Buying power expected to surpass $1 trillion by 2010 20% of home ownership growth for the next 15 years will come from Hispanic population Understanding Customers: Multicultural Marketing Source: U.S. Census Bureau
19 Understanding Customers: Multicultural Marketing What have we done? Bilingual staffing goals Bilingual signage Created a cross-functional team Targeted marketing and merchandising programs What are we seeing? 86% Hispanic unaided brand awareness 34% Hispanic share of wallet Puedes Hacerlo. Podemos Ayudarte. (You can do it. We can help.) Puedes Hacerlo. Podemos Ayudarte. (You can do it. We can help.)

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home depot Paul Raines Presentation

  • 1. Paul Raines EVP - U.S. Stores 2008 Investor & Analyst Conference Store Operations
  • 2. 2 Store Operations Commitment to Service: Multi-year investment to reach our labor standards Aprons on the Floor Foundational investments Home Services Understanding Our Customers – Focusing on Two Segments: Pro Multicultural
  • 3. 3 Labor Standards History 1979: Home Depot invented engineered labor standards for home improvement 1990s: Store Operations systematically gathered data in the form of validation studies 2006-2007: Launched comprehensive effort to apply engineered time studies across all departments & volumes 1979 2005 2006 & 2007 Invented engineered labor standards Started conducting new time studies Comprehensive effort to set a new labor standard Validation studies 1990s
  • 4. 4 Labor Studies Conducted 1,200 hours of labor studies Studies encompassed stores throughout the U.S. with different volumes Example: Plumbing Weekly Task Allocation Balance Between Service and TaskingBalance Between Service and Tasking Stock/Returns 4.4% Meetings 4.3% Training 4.6% Admin/General Tasks 8.4% Reports 4.9% Safety 7.4% Dept Maintenance 13.7% Customer Service 52.3%
  • 5. 5 Labor Standards Future State Other Operating Expense Labor Total Operating Expense Reduce Operating Cost to Invest in LaborReduce Operating Cost to Invest in Labor
  • 6. 6 Aprons on the Floor Key Initiatives Description Day Freight HRM Restructure Call Centers Merchandising Execution Team Shifted 121 hours per week from nights to days in 1,100+ stores Realigned the HR field structure to a district-level support model Closed 3 U.S. call centers Replaced third party service teams with new in-house Merchandising Execution Team (MET) for seasonal resets Will Exceed 2008 Goal of $180MWill Exceed 2008 Goal of $180M $ Day Freight HRM Restructure Call Centers
  • 7. 7 Incentive: Hourly rate increase as a result of becoming certified (new associates only) Incentive: One time bonus upon completion of the following: (1) Core Department certification guide, or (2) The two adjacent department PK Certification Guides Assessment, Skills and Knowledge in: Customer service skills Product knowledge down to the merchandising class level Department services (cutting keys, blinds, special services, etc.) Home Services PK Certified PK Expert Training: Product Knowledge Certification
  • 8. 8 Associate Tenure Continues to Increase, with Store Managers Averaging 9.9 Years Associate Tenure Continues to Increase, with Store Managers Averaging 9.9 Years Attrition and Tenure Voluntary Attrition (U.S. Only) Source: HRIS 1.6% 2.0% 2.4% 2.8% 3.2% 3.6% 4.0% 4.4% 4.8% 5.2% Feb Mar Apr May June July Aug Sept Oct Nov Dec Jan VoluntaryAttrition% 2006 2007 2008
  • 9. 9 Foundational Investments: Maintenance Since implementing Programmatic Approach to Maintenance, we have: Restriped all parking lots Spiffed and polished 898 floors Installed T5 lighting in more than 99% stores Touched over 1,800 U.S. Stores
  • 10. 10 Foundational Investments: Store Standards Launched in Fall 2007 Creates a consistent shopping experience – clean and wide open aisles for customers to easily navigate Touches the entire store – parking lots, entrance/ exits, aisles, receiving, etc. Ongoing governance and sharing of best practices 2006 2007 2008 7.30 7.50 7.70 7.90 8.10 8.30 Mean(1-10scale) Feb Mar Apr MayJun Jul Aug Sep Oct NovDec Jan Voice of the Customer “Clear and Uncluttered”
  • 11. 11 Home Services Strategy Improved quality and continued focus on execution − 35% reduction in complaints per transaction − Improved Voice-of-the-Customer results from 8.1 in Q1 2006 to 8.5 in Q1 2008 Rationalized or exited programs − Home Elevation, Awnings, Home Security, Storm Rooms, Cleary Buildings, Putting Greens, Pergolas, Artificial Turf, Irrigation, Smart Home, Whole House Fan, Mailboxes, Lock and Hardware and Sump Pump Replacement Integrated with Operations and Merchandising − Aligned with stores − Blended view of product and install − Collaborative strategy with merchants Simplifying the Experience for Our CustomersSimplifying the Experience for Our Customers
  • 12. 12 Understanding Customers: Pro Customer Opportunity Only 27.5% of Our Professional Customers Use One of Our “Pro” Services Only 27.5% of Our Professional Customers Use One of Our “Pro” Services Source: 2007 survey of Dunnhumby, Pro Team tracking reports, MaPS survey Percent of HD Customers and Sales 100% Pro 30.9% DIY 69.1% Other 72.5% Home Depot Credit Card % of Customers Pro Sales 0 20 40 60 80 Pro Desk Managed Accounts 27.5%
  • 13. 13 Customer Insight: Dunnhumby Leading provider of retail customer insights Results based on performance - Tesco – 15 years of strong performance - Kroger – 18 quarters of strong performance Created a Pro model leveraging years of HD data and Dunnhumby analytics To Better Understand Our CustomersTo Better Understand Our Customers
  • 14. 14 Understanding the Pro Model the behavior of Pros using all of our sources - Home Depot Credit Cards - Managed Accounts - SIC Segmentation - VOC Survey Identified behavior of known Pros and model this behavior against customer base Flagged all customers as Pros or Consumers Understand product category
  • 15. 15 Driving value from our Pro customers 25% Associated Department Sales – Average Per Pro RelevantRelevant 100%Power Rank of 4 Core Metrics Associated Store Sales – Average Per Pro $ Pro Sales Pro Penetration Core Metric 25% 25% 25% Weight“R” ReturnReturn ResultsResults ReachReach Answering the “4 R’s” will Determine if Products are Driving Value from Our Pro Answering the “4 R’s” will Determine if Products are Driving Value from Our Pro
  • 16. 16 Identify How Pros Spend High HighLow Leadership SKUs Purchased frequently by Pros Highpercentageof Prostotalspend Product X Product Y Leadership SKU: Purchased Frequently and High % of Total Pro Spend Leadership SKU: Purchased Frequently and High % of Total Pro Spend
  • 17. 17 Hispanic Customers: Population is growing at 3.8% (general market population growing at 1%) 14% of households will be Hispanic by 2010 Hispanic purchasing power is increasing at a rate faster than population growth at 5.7% − Buying power expected to surpass $1 trillion by 2010 20% of home ownership growth for the next 15 years will come from Hispanic population Understanding Customers: Multicultural Marketing Source: U.S. Census Bureau
  • 18. 19 Understanding Customers: Multicultural Marketing What have we done? Bilingual staffing goals Bilingual signage Created a cross-functional team Targeted marketing and merchandising programs What are we seeing? 86% Hispanic unaided brand awareness 34% Hispanic share of wallet Puedes Hacerlo. Podemos Ayudarte. (You can do it. We can help.) Puedes Hacerlo. Podemos Ayudarte. (You can do it. We can help.)