Do-it-yourself
Do-it-for-me
Presented by
Edmund Davis
Mary Ann Horton
Narender Mendiratta
Shamsuddin Pattharwala
HBI : Case Analysis
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Research methodology
Recommendations
Drivers behind the concept
Outlook of Home Furnishing industry
Customer identification and market
positioning
• How should HBI proceed
Research Methodology
• The HomeBase case
• Library databases, periodicals, articles and
analyst opinions
• HomeBase, Home Depot, House2Home
store visits
• Web sites of HBI and competitors
Recommendations for HBI
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Proceed with House2Home concept
Create a leading brand name
Build strong customer relationships
Establish a strong e-commerce presence
Home Improvement Industry
• $165 billion industry
• Cyclical and sensitive in nature
• Industry S&P index in 2001 fell by 30.8%
vs. 8 % decline in overall S&P 500 index
• S &P industry survey predicts sluggish sales
HBI VS INDUSTRY
PERCENTAGE
30
20
10
0
GROWTH %
ROE %
ROA %
OPERATING
MARGIN %
-10
INDUSTRY
HBI
HBI vs. HD
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HOMEBASE
Product differentiation
Uncompetitive prices
High cost of sales, low
SGA expenses
State of the art MIS
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HOME DEPOT
Customer satisfaction
Competitive prices
Low cost of sales,
high SGA expenses
$200 million
investment in IT per
year
HomeBase Current Scenario
Market leaders?
NO
Market challengers?
NO
Niche marketers?
NO
What should
HomeBase do?
HBI’s options
• Improve market position in current industry
• Sell and close down- retire
• Exit and shift industry
Identified Industry
Home Furnishing Industry
“DO IT FOR ME”
Home Furnishing Industry
Overview
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$125 billion industry
Highly fragmented
Less cyclical
7% growth rate since 1970
S & P’s industry survey predictions:
10% growth rate, more than that of retail
industry due to concentration of upper-income
professionals
Porter 5 Forces:
Home Furnishings
1. Barriers to entry: high- capital intensive
2. Bargaining power of suppliers: high
3. Bargaining power of buyers: high
4. Substitutes: many in fragmented industries
5. Industry rivalry: competitive
House2Home SWOT
• Weaknesses
– Poor brand image of HBI
– Inexperience in new market
– Poor bond rating
• Threats
– Large retailers diversifying product offerings
– Turndown in economy
House2Home SWOT
• Strengths
– Extensive retail supply chain
– Experience in the retail industry
– Management commitment to the new strategy
• Opportunities
– Fragmented nature of home furnishing industry
– Home furnishing market projected
growth(10%) more than overall retail growth
– High product margin in home furnishing(40%)
The Winning Strategy
Utilize experience in retail in the
highly fragmented home furnishing
industry
Who is the customer?
• Female shoppers, 35-54, middle to uppermiddle income level
• Like to decorate their homes
• Like to make purchasing decisions but
prefer to leave installation to professionals
• Part of dual income families
• Avid Internet users
What does the customer value?
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Time
Convenience
Family
Home
Home Furnishings Positioning Map
High Quality Products and Services
 HD Expo
 House2Home
 Target
 Wal-Mart
 K-Mart
 Ikea
 Pier 1
 Bed, Bath & Beyond
 Linens n’ Things
Sears JC Penney
High Price
Product
• 4 categories: Outdoor living, indoor living,
home décor, and seasonal goods
• Offer deep and wide selection
• Provide more value added services on the
line of custom installation, silk flower and
balloon arrangements
• Additional product offerings based on
customer demand( wish list)
Price
• Both designer label and value brands at
different price levels
• Core products priced significantly lower to
drive repeat traffic
• More pricing schemes similar to gift
registry services
Place
• Conversions of HomeBase stores only in
appropriate western markets
• Expand in mild climates with mean
household income $50,000 +
• Potential Markets: Northern Virginia,
Atlanta, Georgia and Austin, Texas
• E-commerce: delivery and pick-up,
customer service, advice
Promotion
• Creating a “buzz” about unique concept
• Magazines: Martha Stewart Living, O – The
Oprah Magazine, Regional lifestyle
• Radio: Morning and Evening rush hours
• Web: Oxygen sites, Food Network, Better
Homes and Gardens
• TV: Lifetime, other family and educational
programming
How HBI Should Proceed
• Convert HomeBase stores only in those
markets with appropriate demographics
• Invest in the e-commerce infrastructure to
maintain a strong Internet presence
• Open additional stores in western market
• Expand in new markets
Conclusion
HBI can become a leader in market share
with the House2Home concept by
positioning as value and quality leader in
terms of product offerings and price
positioning in high margin industry