Cementing the lead role in innovative DIY: Home Depot John Costello, cmo

DSN Retailing Today, Sept 6, 2004 by Debbie Howell

Making Home Depot stand out as the home improvement industry's top retail brand is John Costello's focus, maybe even obsession." As evp of merchandising and marketing, Costello takes this task to heart, supported by a long and solid career in retailing and marketing that already has yielded results at Depot.

Joining the company in November 2002 as cmo, Costello took on the added responsibility of merchandising last August. He came to Home Depot after serving as cmo at Yahoo! and has more than 25 years of experience in consumer goods, retailing and technology industries.

As a senior vp at Sears from 1993 to 1998, Costello helped develop the "Softer Side of Sears" advertising campaign. Other companies at which he held top-level positions include Procter & Gamble, Pepsi-Cola, AutoNation, Nielsen Marketing Research and MVP.com.

With rival Lowe's often credited for its sales gains and innovative merchandising targeting women, Home Depot had been on the defensive in recent years. But now the gloves are off, and Depot is once more gaining respect for trend-setting merchandising that's delivering strong gains in both sales and earnings.

In its second quarter ended Aug. 1, comparable-store sales grew 4.8% and net earnings rose 25%. The average ticket increased 8.2% to $54.73. This continued a pattern from the first quarter, when comps jumped 7.7% and earnings improved 26%.

"We focus on what our customers want. We continuously monitor customer preferences and market data, and we build our assortments and allocate shelf space based on that information. We also continue to offer our customers new, innovative and distinctive products," Costello told DSN Retailing Today last month.

"Innovative" and "distinctive" may be common buzzwords used in merchandising, but at Home Depot, these ideals are truly a priority. While national brands make up 80% of Depot's mix, exclusive brands such as John Deere, Lithonia Lighting and Ralph Lauren paint and proprietary brands including Ridgid, Ryobi and Hampton Bay continue to grow in importance, serving to differentiate Home Depot from its rivals.

This past year, Home Depot intensified its focus on exclusive lines. The Ridgid pro-oriented power tool line, introduced in October, was expanded to the related categories air compressors and tool storage. Hampton Bay, a proprietary brand in ceiling fans and lighting, debuted in patio furniture this year, while the new exclusive brand Veranda Decking was introduced in the outdoor-living category.

While growing its brand portfolio, Home Depot continued to update its stores, expanding both appliance and decor-related departments. The Designplace concept, which groups decor-related departments, rolled out last year under the company's store-remodeling program. The section adds softer visual merchandising, more project displays and seating in a direct outreach to the female shopper.

"Designplace continues to deliver strong sales performance, with particular strength in countertops and in-stock and special-order kitchens. We continue to explore new ways to innovate Designplace so it stays fresh and exciting for every customer," Costello told DSN Retailing Today.

Appliances, meanwhile, have been added to most stores and have received strong customer response. Costello said appliance comps grew by double digits in the second quarter. Depot is currently rolling out new exclusive appliance lines that include GE Adora, Hotpoint Metallic series and the value-positioned American line, he added.

In a break from its traditional no-frills warehouse-merchandising approach, Home Depot is now using a variety of fixtures and incorporating more point-of-purchase information, such as its Color Solutions paint program. The focus on specific customer segments or product categories drills down even deeper with Depot's specialty concepts, including Expo Design Center, Home Depot Supply, The Floor Store and Home Depot Landscape Supply. In each case, the retailer excels at offering the best products and services with the most appropriate merchandising for that niche.

"Our goal is to improve the overall shopping experience for all of our customer segments and to drive home the message that Home Depot can deliver on his or her vision for the home," Costello said.