Category of the Year

Home Channel News, Jan 10, 2000

In the January/February 2000 issue of "HGTV Ideas," the magazine for Home & Garden Television, Lowe's took four full-page ads. One, on the back cover, promoted a Delta table saw. But the other three promoted window treatments, decorative lighting and Olympic-brand paint.

One of the few alterations that Home Depot made to the product mix of its second Villager's Hardware store (see story, page 21) was to beef up its lighting department by adding higher-grade lamps.

That the home improvement industry's two largest dealers are as focused as they are on showcasing HOME DECOR products speaks volumes about the rising status of home decor as a growth category.

Sears chairman Art Martinez said as much during the October opening of his company's second Great Indoors home decor and furnishings outlet, at which he said that the format would be Sears' growth engine as it rolls out 150 Great Indoors over the next five to eight years.

Home decor emerged last year as the industry's hottest marketing hook, both in stores and online. Six months after it went up on the internet, the online window treatment retailer Blindsgalore.com was serving 500 customers a day as visits increased 20 percent per week. Another Web site, GoodHome.com, in September added a service called iDecorate that allows users to mix and match furniture, wallcovering and window treatments.

One of the more anticipated new concepts in the home decor field will open this year, when former Depot executive Jim Inglis debuts his Dekor format that, he promises, will target a female shopper that is being "underserved" by current competitors.

The large chains are muscling their way into this sector in a more aggressive fashion. Home Depot's executives told shareholders that the company's expansion of its Expo Design Centers would exceed the 200 units initially planned, with Depot's chairman suggesting the number may eventually be "in the thousands [of units]." The Atlanta-based dealer also tailored its warehouse home center format in four new stores so that project-oriented, decor-focused departments -- kitchens and bath, millwork, lighting and flooring -- were moved to the stores' periphery and set up as quieter showrooms.

What's ironic about these moves toward home decor is that companies already specializing in this category have been erratic in their profitability. Scotty's wound up acquiring the home decor inventory from leased departments in its stores managed by Frankel's, which went bankrupt. Restoration Hardware and Garden Ridge each lost nearly $7 million in the first nine months of 1999. There has been significant vertical integration in the paint-store sector, with suppliers PPG Industries and Benjamin Moore each acquiring paint dealers.

On the other hand, Bed Bath & Beyond's profit rose 33 percent through the six months ended Aug.28, and the company has aggressive growth plans for the remainder of its fiscal year. And Sherwin-Williams' financial performance in 1999 would have been a lot soggier had it not been for its paint stores, which through nine months increased their sales 5.7 percent.