Exclusive interview: Home Depot’s Annette Verschuren

TORONTO — Wanna do business with Home Depot in Asia? Better get the boss’s name right, then. Wen Shi Rui. That’s how you say Annette Verschuren’s name in Mandarin. Wen Shi Rui. Translated, it means "warmth, poetry, and wisdom". Once again, faithful reader, you heard it here first. Verschuren, who built Home Depot Canada into one of the country’s leading home improvement retailers, is taking her merchandising and operations skills to Beijing to head up the Asian division. Home Depot recently bought up The Home Way, a chain of 12 stores in six Chinese cities. To ensure successful expansion there, however, Verschuren had to build her teams — both in China and in Canada. That’s why she spent several months wooing Home Depot China’s new president, Yves Chen. "We worked since September to land him. He ran 64 hypermarchés and had great success at Carrefour. What’s neat about him is his international perspective, having worked for Carrefour in France as well." His first language is Mandarin, second is French, and third is English, she notes. "I’m a big believer in country leadership." China, she points out, is a very old and very sophisticated culture, which tends to be underestimated by Westerners. She expects to have positive results because so many of the people on her team are Chinese. In fact, Home Depot’s strategy of using local talent has already helped the company integrate into new cultures, as evinced by its success in Mexico and — with Verschuren herself at the helm — Canada. Verschuren wants to start at the store floor level with the Home Way locations, by improving the merchandise mix and making the store experience more positive. She says Home Depot has to offer a more manageable environment, which will include increased customer service — and she wants the installed piece to work. "The trick is to do the integration now and decide what Home Depot will look like in China, and go forward with an aggressive growth plan." For starters, she says, the model being used by B&Q, Home Depot’s only Western-based competitor there, is just too big. Those stores (B&Q has 58 stores in 26 cities in China) weigh in at 160,000 square feet. They are not yet making money, she adds. On the home front, she has been shoring up her team to manage Canada while she shuttles back and forth between Toronto, Beijing and Atlanta (she spends six or seven days out of every month in Asia). Harry Taylor is the vice-president brought up from the U.S. to take over a diverse portfolio, one that in the U.S. would have vps for each duty. Here, however, Taylor personally manages real estate, operations, construction, asset protection and logistics. "I want him to leverage all these divisions to work together more closely," says Verschuren. Will the Asia venture be a replay of her moonlighting stint running Expo Design Centers for Home Depot a couple of years ago? No way, says Verschuren. "At Expo, I was spread too thin; I had 23 direct reports then." Having Taylor on board gives her someone she "can really rely on." In the process, she has reduced her direct reports in Canada to seven. Nor does she have any plans to move to Asia. "That was not part of the deal," she says. (Next week: part 2 of the Amazing Hardlines Exclusive Interview with Annette Verschuren!)

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Home Hardware’s partnership with Aeroplan takes off

ST. JACOB’S, Ont. — Not to be left behind in the race to shore up market share in the face of Lowe’s much-anticipated entry into the Canadian marketplace, Home Hardware continues to launch new marketing initiatives to build customer loyalty. In the past few years, it has introduced a gift card program, beefed up its private label line, enlisted garden guru Mark Cullen and expanded its green product line. Now the company has launched a partnership with Aeroplan, making it the only home improvement retailer in Canada to offer Aeroplan to its customers. Under the partnership, customers at any Home Hardware, Home Building Centre, Home Hardware Building Centre and Home Furniture store can accumulate points that can be redeemed either for travel or for Home Hardware Gift Cards. "We’re excited that customers who already travel a lot and don’t want to redeem points for that will be able to use them for the purchase of Home Hardware décor and renovation products," says Rob Wallace, promotional events manager for Home Hardware. Contractor customers at Home stores will now have the choice of participating in the Top-Notch loyalty program for pro customers, under which they can redeem points from purchases for products, or the Aeroplan program. "It’s going to be attractive to a variety of customers," says Wallace, "and gives us another tool for attracting a strong customer base."

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Home Depot maps out recovery plan

ATLANTA — Significant investment in its retail stores, its products and its people is the centrepiece of Home Depot’s plan to recapture and expand its dominant position in the retail home improvement market. In a Feb. 28 web cast that might prove to be one of the most important in the company’s 28-year history, Home Depot’s chairman and CEO Frank Blake, along with key members of his senior management team, laid out where Home Depot would focus its attention and money over the next four years. In essence, the plan calls for a return to Home Depot’s retail roots, and could be seen as a rejection of the diversification strategy that former chairman Bob Nardelli had pursued. Blake placed his company’s new objectives within the context of a slumping housing industry that is not likely to rebound until the latter part of 2007, at the earliest. The downturn would continue to tamp down the retailer’s profitability, as Home Depot projects that its sales in 2007 would be flat and its earnings per share would be off by between 4% and 9%. Home Depot intends to invest $2.2 billion in its business in 2007, including:

• $260 million in merchandise resets, as well as new pricing and sourcing initiatives;
• $275 million in logistics, including forecasting and distribution. Between 2007 and 2010, the company will spend $900 million on logistics and $500 million on technology;
• $360 million to recruit trade specialists to work in its stores, something that distinguished Home Depot from its competitors in the 1980s;
• $415 million on programs to encourage more pro customers to shop in its stores, including volume discounts and direct shipments to jobsites (details about which were not disclosed); and
• $865 million to maintain and improve its stores’ physical plant.  By 2010, 87% of Depot’s stores will be at least five years old, so the company has redoubled its efforts to stave off their deterioration.

Home Depot plans to open 115 new stores in 2007, and 300 - 400 units between now and 2010, at which point 25% of its stores will be located outside of the United States. Carol Tome, Home Depot’s CFO, said the company wants to buy the 13% of its 2,163 existing stores it currently leases. Blake added, somewhat cryptically, that his company is working on new store formats "every day", even though only days earlier, Home Depot announced it would close its experimental Floor Stores. Blake said acquisitions aren’t a priority for Home Depot right now, although the day before the presentation the company did announce the acquisition of GSI General Materials division of Waukesha, Wis.-based Geo-Synthetics, Inc. (see Companies in the News). Home Depot projects that HD Supply will generate 15% of its revenue in 2007, from 12% in 2006 — if it holds onto this business unit, as the company is exploring options that could include a spin-off or a sale of HD Supply. In fact, the day after its presentation, the Financial Times of London reported that three teams of private equity firms were considering bids for HD Supply, which could fetch $11 billion. The newspaper said Blackstone, Kohlberg Kravis Roberts, Leonard Green Partners and Texas Pacific Group comprise one consortium; while Bain Capital, Carlyle and Clayton Dubilier & Rice have also teamed up, as have Thomas H. Lee Partners, Goldman Sachs and CCMP.

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CMHC to rethink presence at International Builders Show

ORLANDO — For the first time ever, the Canadian Mortgage and Housing Corp. had a presence at the Canadian Pavilion at the International Builders Show held here last month. The move was designed to give Canadian companies a higher profile at the show, explains Rita Patlan, senior trade consultant for CMHC International. "This was the first time that we had booth space. Usually we go to support clients who are at the show, but we’ve never had a physical presence," says Patlan. The CHMC booth in the Canadian Pavilion, in which 35 companies participated, offered 20-minute timeslots for product launches, installation how-to seminars and product-knowledge demonstrations. But competing with other retail giants, such as Lowe’s and Home Depot, proved to be a formidable task. "It’s not easy to compete with other players who have humungous exhibits that take up a lot of space and make a lot of noise," says Patlan. "Some of the exhibits went almost 40 feet up in the air. It’s hard to have an effect in that kind of environment." As a result of this year’s experience, the CMHC will rethink its strategy for presence at next year’s show. Overall, Canadian presence at the show was down, from 165 companies in 2006 to 136 in 2007. Robert Gryson of the Canadian Export Development Corp., which helped organize the Canadian pavilion, thinks there are several reasons for the drop. "Some companies didn’t go back because they just felt the show wasn’t tailored to their needs — they weren’t meeting the people they wanted to meet." As well, he says, the strong presence of representatives from the Eastern U.S. at the event dampened the enthusiasm of Western-based companies who felt the audience was too regional. The downturn of the housing and construction may have been a further reason for numbers to drop, says Gryson. Another factor, he adds, was location. "I think people are tired of Orlando. When the show moves to Las Vegas in 2009, I think you can expect to see a big come-back."

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