Home Depot CEO: Internet biggest challenge

Housing market getting better



ROSWELL, Ga. – The future looks good for Atlanta-based The Home Depot, said Chief Executive Officer Frank Blake, but there are significant challenges to keep it that way.

Blake spoke Jan. 24 to members of the Roswell Rotary Club about his company and how he saw the coming years.

In his six years as CEO, Blake has turned a lagging home supply chain into a profitable, nimble retail giant even in the midst of the worst housing crisis the country has ever seen. He attributes his success to four key areas – taking care of employees, restructuring the supply chain, investing in customer service and investing in IT.

The Home Depot employs roughly 20,000 people in the Atlanta area alone. They are expanding their footprint by adding a call center in Kennesaw.

For a home supply store, the housing slump of the past few years has been catastrophic. Blake is proud of the fact his company has emerged from it stronger than ever.

“As a country, we’ve been through an amazingly difficult time in the housing market,” he said. “For housing, it’s been worse than it was during the Great Depression. We’re proud of the fact that, with the housing demand in 2011, we grew profitably.”

The centers of the housing crisis – Florida, Arizona and California – are improving, albeit slowly. And that means more people buying goods in the stores.

“While it may not come roaring back, at least we’re in a healing mode.”

The most significant challenge facing the company, he said, was the threat of losing sales to Internet companies.

“Retail is a detail-oriented business,” he said. “You need the right amount of product in the right store at the right price.”

Technology coupled with a slick supply chain can take advantage of demand in a way that previous years could not. The trick is competing with companies that skip the store and deliver straight to the customer.

From mom-and-pop stores, to the early 1900s’ Woolworth’s and Sears, to big box stores such as Walmart, retail has grown bigger and bigger. Now, he said, online sales have the capacity to kill retailers if they do not find a way to adapt and draw customers away from their computers.

“The Internet will have an enormous impact on the brick-and-mortar retailers,” he said. “A third of all retailers will be wiped out because of dot-com competition.”

Part of the reason for this is the lack of an online sales tax. Retailers such as Amazon have traditionally been able to sell goods without adding state sales tax because they are not physically located within the state. For those states that have changed that, online retailers have been slow to adopt it.

Georgia’s online sales tax went into effect at the beginning of the year, and Amazon has yet to implement it.

“We are concerned about a level playing field,” he said.

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