Caso 7_Home Depot

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Senior Lecturer Jose B. Alvarez, Visiting Assistant Professor Zeynep Ton, MIT Sloan School of Management, and Research Associate Ryan 
Johnson of the Global Research Group, prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not 
intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. 
 
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J O S E B . A L V A R E Z 
Z E Y N E P T O N 
R Y A N J O H N S O N 
Home Depot and Interconnected Retail 
 
In November 2011, just days before the holiday shopping rush, the senior leadership team of The 
Home Depot, Inc., (Home Depot), the world’s largest home improvement chain, discussed how best 
to navigate the new interconnected world of retail. Founded in Atlanta, Georgia in 1978 by Bernie 
Marcus and Arthur Blank, Home Depot opened its first stores in 1979 and grew rapidly and 
successfully for two decades. But by 1999 performance had waned and shareholders and investors 
urged a leadership transition. In late 2000, Bob Nardelli was named CEO, inheriting an organization 
that was decentralized and lacked discipline. In response, Home Depot’s leadership focused on 
centralization, standardization, and performance metrics. However, by late 2006 customer service 
and employee satisfaction had plummeted, and Home Depot had lost market share to rival Lowe’s. 
Many felt the focus on profits and performance management distracted associates from delivering 
top customer service and hurt the bottom line. 
In 2007, Frank Blake, Home Depot’s then-vice chairman of the board of directors and executive 
vice president of business development and corporate operations, was named CEO. Blake and his 
senior leadership team led the firm through a global recession and revitalized the firm’s once central 
culture of customer service. While Blake’s tenure saw a decline in sales attributable to the global 
recession, it was marked by gains in market share, strong alignment across business units, and 
improvements in information technology (IT) systems, merchandising, supply chain and operations, 
as well as renewed employee excitement. 
By 2011, Home Depot had been restored to stable yet modest growth, but much was left to be 
done and new challenges loomed. (See Exhibits 1, 2, 3, 4 and 5 for Home Depot performance data, 
income statement and balance sheet, corporate fact sheet, senior leadership bios, and organizational 
charts.) Retailers across the board faced a rapidly changing environment with the growing acceptance 
of on-line retailing that empowered customers by providing greater price transparency and more 
options. Marketing channels and communication touch points continued to shift. Home Depot’s 
leadership grappled with the challenges of operating in an interconnected world, how best to 
leverage Home Depot’s brick-and-mortar success in the new environment, and continuing to build 
and sustain lasting emotional connections with customers. 
The Early Years 
After being fired from executive positions at Handy Dan Home Improvement Centers in the late 
1970s, Marcus and Blank dreamt of creating a store that would offer “one-stop shopping for the do-it-
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512-036 Home Depot and Interconnected Retail 
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yourselfer.”1 Marcus and Blank envisioned large format stores mimicking warehouses that staffed 
knowledgeable experts to assist customers in home improvement projects.2 Partnering with 
investment banker Ken Langone and merchandiser Pat Farrah, the team raised capital and opened 
their first two stores in Atlanta.3 The initial stores were approximately 60,000 sq. ft. each, and had 
over 25,000 stock keeping units (SKUs), much larger and more comprehensive than the competition’s 
at the time.4 Products included lumber, doors, windows, masonry supplies, cabinets, countertops, 
patio furniture, hardware, tools, plumbing supplies, electrical supplies, lawn and garden products, 
paint, and appliances.5 
Throughout the 1980s, Home Depot helped to popularize and facilitate a growing interest in do-it-
yourself (DIY) home improvement. DIY customers were typically home owners who, after 
purchasing the products and tools necessary, built, repaired and renovated part of their own homes. 
In addition to DIY customers, Home Depot targeted professional customers (pros), who were 
typically local general contractors, electricians, plumbers, carpenters and other tradesmen. Pros made 
up a small percentage of customers but a significant portion of volume and revenues, spending more 
per trip on average and visiting stores more frequently than DIY customers. 
From 1979 to 1999, Home Depot developed a reputation for its customer service, entrepreneurial 
spirit, and rapid growth. The founders adopted an inverted pyramid organizational model, Carol 
Tomé chief financial officer and executive vice president of corporate services remembered, “When I 
started in 1995 it was very clear that corporate was at the bottom of the pyramid and our stores, store 
associates and customers were at the top. We were here to support the stores.” (See Exhibit 6 for the 
inverted pyramid and Home Depot’s values.) Furthermore, Marcus and Blank regularly visited stores 
and were revered by store associates who knew them as Bernie and Arthur. Their book, Built From 
Scratch, was considered “the bible” by many in the firm, Tomé recalled, “Our people would have 
followed Bernie and Arthur off the cliff.” 
Home Depot’s largest competitor was Lowe’s. Founded in 1921, Lowe’s grew steadily, largely on 
sales to pros, and went public in 1979.6 In 1980, as the housing market slowed and profits suffered, 
Lowe’s embarked on a massive store redesign aimed to make stores friendly for DIY customers. By 
1982 DIY customers made up half of Lowe’s customers.7 The redesign of existing stores kept Lowe’s 
committed to a smaller store format throughout the 1980s. Eventually Lowe’s moved to large-format 
warehouse stores, opening more than 140 stores in the 1990s.8 
Customer Service 
Marcus and Blank had immediately emphasized customer service. The founders felt Home Depot 
was in the “people business” and preached a “whatever it takes” customer service mentality focused 
on building relationships with the customer rather than simply completing a sale.9 Home Depot 
associates held workshops and clinics on projects such as roofing, laying tile, or wallpapering, and 
provided one-on-one personalized service during the shopping experience. Store associates were 
largely full-time personnel, often with a background in home improvement. They were committed, 
productive and knowledgeable enough to deliver a high level of customer service,10 but the full-time 
profile could limit scheduling flexibility and efficiency. Training was largely informal but intensive; 
company leaders, including Marcus and Farrah, taught customer service and merchandising and 
associates were encouraged to use and understand tools and products. 
Home Depot associates consistently outscored the competition on customer service and product 
knowledge surveys. Marvin Ellison, executive vice president of U.S. stores, remembered his first 
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Home Depot and Interconnected Retail 512-036 
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shopping visit as a customer to a Florida Home Depot. At the time, he was working for the retailer 
Target and needed a faucet: 
I took my old faucet with me to make sure I got the right size and color. An associate 
approached me and asked, “Can I help you.” I told him what I was looking for and he asked 
what was wrong with the faucet I had. I told him it was leaking and showed him where and he 
said, “You don’t need a new faucet.” Next thing I knew he opened up a box, took out a part, 
put it on my faucet and said, “Here you go.” When I asked how much I owed he said, 
“Nothing, just come back and see me next time.” From a retail perspective I’m sitting there 
thinking, this guy created shrink1; he has to take a markdown, I’m going through all the 
negative things in my head. But to him it was, “you don’t owe me anything but next time you 
need anything for your home, remember me and come back and see me again.” Not only did I 
do that, but I told the story over and over and over again. I’m still telling it 20 years later. 
Entrepreneurial Spirit 
The founders wanted their entrepreneurial spirit to shine across the organization. As a result, 
stores were largely autonomous and store managers had nearly complete control over 
merchandising, displays, promotions, employee wages, store operations and vendor management.11 
Given their autonomy and independence, store managers and associates took pride in their stores, 
and thought of them as a part of the local community rather than as part of a chain retailer. All hiring, 
firing and promotions at the store level were left to the store manager’s discretion. Corporate 
headquarters provided centralized administrative support, including legal, finance, and the planning 
and development of new stores. If stores felt directives or plans from headquarters were wrong or 
burdensome, they were encouraged to send them back or ignore them. 
Merchandising was decentralized, broken into nine regional purchasing offices. These offices 
handled approximately 25% of the product ordering for stores. The other 75% was handled in the 
store itself, with orders based on store managers’ knowledge and intuition about the local market and 
placed directly with vendors who delivered to the store. The firm never developed a national supply 
chain or logistics because each store acted as an individual buyer and receiver for most items. The 
founders supported decentralization, believing that meeting local needs drove sales as much as 15% 
to 20%.12 While decentralization ensured stores met each local market’s needs, it also meant Home 
Depot could not capitalize on its potential buying and bargaining power as a national concern. 
Nationwide in-store deals were rare, and even when they were agreed upon at corporate 
headquarters, they were often ignored by local store managers. Product mix, store experience and 
displays differed from store to store. “In the early days it was an entirely entrepreneurial culture,” 
one senior leader recalled. “In other words, the stores just basically did whatever they felt they 
needed to do to drive sales at the local level.” 
Rapid Growth 
By 1999, with revenues of $40 billion, Home Depot was the fastest growing retailer in the world. It 
also became the youngest retailer to hit revenue milestones of $50 billion, $60 billion, and $70 
billion.13 Growth was largely fueled by new store openings. Tomé remembered, “From 1995 to 1999 
we were on this incredible growth platform. At one point during my career we were opening a new 
store every 48 hours. It was all about serving the stores and opening up square footage just as fast as 
we could.” She recalled the positive atmosphere, “By 1999, basically, we could do no wrong, 
 
1 Shrink was a measure of the loss of merchandise in a retail store through theft, damage, or misrouting. It represented the 
difference between ordered inventory and actual inventory on-hand plus sold inventory. 
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2020.
512-036 Home Depot and Interconnected Retail 
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everything we touched seemed to turn to gold. We were trading at a 70 price-to-earnings ratio (p/e) 
and were the darlings of Wall Street. We’d go into a shareholder meeting and people would applaud 
and cry because we created so much wealth, not only for our associates but for so many people. It 
was an incredible time.” 
Cracks Begin to Show 
Despite rapid and profitable growth, by the late 1990s shareholders and board members worried 
about the firm’s further growth without centralization and standardization. Analysts noted that the 
firm lacked the discipline of other big box chains and that the company’s vaunted customer service 
had begun to slip. Insiders agreed.14 Marc Powers, senior vice president of operations, noted that 
Lowe’s seized on this opportunity: “We had a competitor that came in that we should have crushed, 
but because we were so disorganized it grew and started to put pressure on us because it could 
execute, had all the infrastructure, had the foundation, and were out-executing us.” 
In October 2000 Home Depot missed its earnings target of $0.31 per share by more than $0.03 per 
share, “a big miss,” according to Tomé—and Home Depot’s stock price dropped 28% in one day as a 
result. She recalled, “I was sitting in Arthur Blank’s office on the phone with one of our largest 
shareholders and they were screaming at us. Arthur kept saying it was going to be okay but I was 
thinking this is not going to be okay and it wasn’t. We had a fabulous culture but we had grown so 
quickly and without a lot of infrastructure, without systems.” 
Shifting Leadership and Strategy 
In December 2000, citing a need for better efficiency, better use of resources and more operational 
discipline, the board hired Bob Nardelli as CEO of Home Depot. Home Depot’s leadership developed 
a three-part strategy: extend the business into new lines; expand into new markets and new customer 
segments; and drive efficiency, eliminate waste, and ensure safe, clean stores in existing operations.15 
To expand globally, Home Depot pushed into Mexico. Hoping to grow sales to pros and diversify 
Home Depot’s portfolio, in 2004, a wholesale building supplies business was started, Home Depot 
Supply (HD Supply), through a series of acquisitions and investments. HD Supply targeted pros as 
well as large real estate developers, maintenance staff, industrial contractors and construction crews. 
HD Supply grew quickly, and became a $12 billion business by 2006. To support HD Supply, Home 
Depot pulled back store growth, adjusting down from opening 180 new stores a year to 100. 
Centralizing Merchandising 
In an effort to centralize merchandizing, Home Depot closed nine existing regional merchandising 
offices and hired 12 merchandising vice presidents to work out of the Atlanta headquarters. 
Centralized merchandising leveraged Home Depot’s purchasing power and enabled the firm to 
arrange exclusive deals and negotiate better pricing and terms across the board, including extending 
payment terms, all of which contributed to the firm’s bottom line. 
Home Depot hoped centralization would improve ordering and reduce inventory inefficiencies at 
the store level. However, the company lacked the infrastructure needed to support centralization. 
Merchants had no specific data about store sales or customer preferences and were forced to order 
the same product for all stores nationally. Executive Vice President of Merchandising Craig Menear, 
then a Home Depot merchant, remembered, “Those were some trying times. We hadn’t made the 
investments in systems to make it easyfor the merchants to manage in that environment. We had 
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2020.
Home Depot and Interconnected Retail 512-036 
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lawn tractors sitting in Phoenix, Arizona. There isn’t a whole lot of grass in Phoenix. There were some 
real challenges.” 
Purchasing centralization created new requirements of the supply chain. Home Depot had a small 
network of warehouses to which centralized orders were shipped. However, the warehouses lacked 
automation, and receiving and tracking software, leaving room for human error, inefficiency, and 
significant inventory issues, which often left stores overstocked, or out-of-stock on key products. 
Centralization was also unpopular at the store level. Store managers were resistant to giving up 
control and wary of having a product mix that was not locally tailored. One senior executive recalled, 
“When the centralization came in, it took away the store manager’s freedom, and basically said, 
‘We’re going to tell you exactly what your store looks like from Atlanta. We are going to send you a 
merchandising action plan to follow to the letter and you have no flexibility.’” 
Efforts to Improve Operations 
Improving labor productivity To improve labor productivity, Home Depot looked to 
standardization and technology. In-store logistics activities, from the moment merchandise arrived at 
the store until its sale, were standardized. Additionally, over $1 billion was invested in IT initiatives. 
Stores were equipped with point-of-sale terminals with touch screens, allowing associates to find un-
barcoded items faster. Over 1,000 self-checkout registers were installed in more than 800 stores to 
drive faster, more accurate check-out, and cordless scan guns were introduced in all stores. However, 
the software running behind this hardware was outdated and lacked flexibility. Additionally, store 
servers were not linked to headquarters or to a central database, limiting company-wide access to 
data. While analysts applauded the investments, few inside the company, both at the store level and 
at headquarters, saw real benefit from them. Many systems and software packages fell short of their 
promised impact due to mismanaged rollouts, lack of user training, and misaligned fit with in-store 
needs. “At one point they unveiled a $150 million custom order management system,” Powers 
remembered, “but all it let us do was manage carpet installs.” 
Metrics To drive productivity, store managers were assessed on 30 metrics and all associates 
were ranked on four performance metrics: financial; operational; customer; and people skills. 
However, communication around metrics was unclear; store managers often misunderstood the 
motives behind them, leading to unforeseen inefficiencies. Associates complained of being 
overwhelmed with paperwork, analysis, and metrics to track, claiming these took up most of their 
time and kept them from providing top quality service. Ellison agreed, “I can’t believe our service 
was as good as it was based on all the tasks that we had our associates focused on that had absolutely 
nothing to do with service. We couldn’t take care of the customer because we had so many other 
things to worry about.” 
Metrics also became a focus in merchandising. One metric that was stressed at a corporate level 
was average ticket, or the average amount of each purchase. While trying to increase this metric 
made sense in theory, over time, a laser focus on this drove merchants to only stock higher-end 
products, which drove up average ticket numbers but decreased overall purchases. 
Human Resources On the personnel front, Home Depot increased the number of part-time 
employees, to allow for more flexibility in scheduling and coverage, and to gain significant cost 
savings. With few operating standards, however, training part-time employees became very difficult. 
In the past, long tenured employees trained new employees in the “Home Depot Way.” One store 
manager commented, “We built the entire company around the idea that a customer could come in 
and ask us how to do anything—fix a toilet, build a deck, whatever—and we’d tell them how to do it. 
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512-036 Home Depot and Interconnected Retail 
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Now we’ve got kids who don’t even know what the products look like.”16 Staffing levels were 
reduced at the stores, dropping the number of full-time employees (FTEs). By December 2002, 22 of 
Home Depot’s 29 top-rated store managers had left.17 Between 2001 and 2006, 98% of the top 170 
positions at Home Depot turned over, with more than half of the replacements coming from outside 
the company.18 
Performance From 2000 to 2005, profitability improved but customer service began to suffer. 
In 2005 Home Depot was the lowest ranked major U.S. retailer in the University of Michigan’s annual 
American Customer Satisfaction Index. It was 11 points behind Lowe’s and three points behind 
Kmart (see Exhibit 7). One analyst said of Home Depot, “They’ve got people in there working for less 
money and are less knowledgeable and less experienced. It’s all about profitability at the cost of 
serving the customer.”19 Ellison recalled a watershed moment that revealed the underlying issues: 
When I started with the company I was devastated that I didn’t find that service culture 
that I loved so much. When I became a division president I pledged to call every customer 
back when there was an email or a complaint and follow up personally with them. I remember 
having a conversation with a customer who had tried to return a lawnmower but had been 
refused by the associate and the store manager. I had a conference call with the manager, and 
asked, “Just tell me why you didn’t take care of the customer, what prohibited you from doing 
the right thing the Home Depot Way.” Then the manager asked me the fateful question, “Are 
you aware of the power equipment return report that comes out each Monday.” I said “I have 
no idea what you are talking about.” And she said, “We get it every single Monday and if we 
accept power equipment returns, we are on this list and we get a call from the district manager 
and he challenges us because he does not want to be on this list because it is a negative metric.” 
Right then I realized the issue was about us, the company, not the associates. 
Consistent with the decline in customer service, same store sales declined. Although the company 
had an average annual sales growth rate of 12%, growth was largely fueled by HD Supply. Tomé 
commented, “In the core retail business, we were losing serious market share, at the height of the 
housing market. We had taken our eye off the core retail business and we lost our focus in a bunch of 
different ways—from a customer’s advocate for value or from a service perspective.” 
At the same time, Lowe’s had gained market share and grew sales at 19% annually between 2000 
and 2007, without a foray into wholesale distribution. Home Depot’s share price fell slightly over the 
same period, while Lowe’s share price rose more than 200% (see Exhibits 8, 9 and 10). 
Onlookers commented that Home Depot seemed to lose its way, miscalculating the importance of 
customer service and especially the need to ensure that store associates had customer service as their 
top priority. Tim Crow, executive vice president of human resources, commented, “Some of it came 
down to the difference between manufacturing and retail philosophies. In manufacturing, with 
enough focus and processes like Six-Sigma and lean, and enough time focused on an issue, you can 
eliminate almost any flaw. With retail, you wake up every morning and hope that 300,000 other 
peoplewoke up that morning on the right side of the bed and that when they put on the orange 
apron2 they feel good about the place, because they will create the brand image for us that day.” 
 
2 The orange apron was part of the uniform that in-store associates wore at Home Depot. 
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Home Depot and Interconnected Retail 512-036 
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Blake Takes the Reins 
In January 2007 Home Depot’s board of directors replaced Nardelli with Blake. Reactions to the 
announcement were mixed: many inside the company had not met him and Wall Street questioned 
the wisdom of hiring a first-time CEO with little previous retail experience. 
On the second day of his tenure, Blake addressed the company in a speech broadcast to all Home 
Depot stores. He pulled out a copy of “Built from Scratch,” the founders’ book about Home Depot 
and read a passage describing their commitment to an entrepreneurial culture and top notch 
customer service. Blake told associates he was reinstating the inverted pyramid with, “associates and 
customers at the top, and me as CEO at the bottom.”20 Tomé remembered Blake’s first weeks, “He 
immediately met with Bernie, he immediately met with Arthur, he just spread his wings out and said 
‘I don’t know anything but I’m going to learn,’ and he did. He was brilliant in his leadership in that 
he spent his time in the stores.” 
Blake immediately established himself as humble, modest, intelligent and diplomatic. He rarely 
granted interviews, rarely spoke publicly and quickly garnered a reputation for listening and being 
sincere. Ellison said: 
There is not a week that goes by that Frank does not have lunch, dinner or breakfast with a 
group of hourly associates somewhere in the country. His intent is not to walk out of the 
session with a list of concerns or issues that he is going to hand out to his leadership team. He 
wants to understand what associates see as important, what resonates with them, how they 
view the world, and make sure those things connect with the strategic vision at headquarters. 
Blake sought a pay cut for himself and instituted rules that made it hard for him to receive raises. 
He replaced many of the top executives and filled open spots with retail veterans. Blake began to 
build authentic credibility with all company associates, something Tomé saw as crucial, “Our people 
will follow Frank off the cliff just like they would have followed Bernie and Arthur off the cliff. In this 
industry, if you don’t have the associates with you, you are toast.” 
Blake’s Vision 
Blake immediately made clear that he was set on improving the customer service in Home Depot 
stores, “We set the standard for customer service in home improvement retail, if not in all of retail. 
That is the legacy of Home Depot, and what I think will define my tenure. Also, we’ve got to be a 
place where our associates are proud to work.”21 He also urged his executive team to step back and 
examine where foundational retail building blocks were missing. He set simple, big picture goals of 
catching up in IT, merchandising, supply chain and store operations, and returned the local feel to 
Home Depot stores. Blake relied on operations to refocus on the customer and to make it clear to the 
associates that their job, first and foremost, was to serve the customer. 
Tomé commented on Home Depot’s growth strategy, “Once we understood that growth would 
no longer be defined by square footage we started investing in other parts of our business, like 
systems, IT, supply chain and our people. We started to focus on increasing sales per square foot, 
getting more out of what we’ve already got.” Blake was committed to rebuilding store experience, 
regaining customers’ trust and appreciation, and returning Home Depot to positive growth. Home 
Depot also sought growth through an increased presence in Mexico and China, and through 
increased forays into installation, repair, contracting and maintenance work. 
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512-036 Home Depot and Interconnected Retail 
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Within his first three months, Blake put HD Supply, which accounted for nearly 15% of revenue, 
up for sale. Tomé explained “HD Supply initially had some linkage back to our core because we had 
a common vendor base but then we bought into areas where we didn’t have those synergies. For 
example, we bought a waterworks company that sold huge pipes and fire hydrants, things you just 
don’t find in our stores. It worked under the wholesale distribution umbrella, but in terms of linking 
back to our core it was hard to piece that together.” HD Supply sold for $8.5 billion, a price criticized 
at the time, but it allowed Home Depot to refocus on its core retail business. 
Reinvestment in Hard Times 
In 2007 the U.S. housing market began to stagnate and Home Depot’s sales showed signs of 
weakness. Its stock price fell from $40 per share in July 2007 to less than $25 per share by the end of 
the year, and year-over-year retail sales declined by 2.1%, with same store sales down 6.7%.22 With 
the collapse of the housing market, a global financial crisis and the beginning of a recession in the 
U.S., 2008 was no kinder to Home Depot. Sales declined 7.8%, with same store sales down 8.7%. The 
firm closed 15 underperforming stores and scrapped plans to open 50 new stores. 
In his annual letter to shareholders, Blake acknowledged that 2008 had been a hard year and 2009 
was likely to be tough as well. He again turned to history as his guide, writing, “The Home Depot 
was founded in 1979 when the U.S. was in the middle of a recession. Our values—taking care of our 
customers and taking care of our associates—speak even more powerfully in difficult times.”23 Home 
Depot continued to support its associates, increased its pay-out of success sharing checks to 
associates more than three-fold to over $88 million in success sharing checks to associates, adding 
additional merit pay increases and bonuses and maintaining a 401k retirement plan match. Blake 
wrote, “It is a source of pride that we can take care of associates in economically difficult times like 
these […] Taking care of our associates is an important part of taking care of our customers.”24 Blake 
saw the downturn as an opportunity for Home Depot, “It’s easier for everyone to understand the 
need for change when things are tough and the risks are lower.”25 During the downturn Home Depot 
invested over $3 billion in IT systems, merchandising tools and supply chain to improve stores, 
customer service and customer experience. 
Operations 
In 2008, Blake promoted Ellison to run Home Depot’s U.S. stores. Ellison focused on three key 
goals; top customer service, stocked shelves, and clean stores. Simultaneously the operations team set 
out to simplify store operations by eliminating tasks and develop tools and training that associates 
needed to achieve these three key goals. 
60/40 initiative In 2008, Home Depot determined that only 45% of store hourly payroll time 
was allocated to service and selling, while 55% was focused on tasking—doing reports, stocking 
shelves, and dealing with requests from headquarters. The goal of the 60/40 initiative was to flip that 
ratio, dedicating 60% of associate time to customer service and 40% on necessary in-store tasks. To 
help associates meet the 60/40 goal, Home Depot’s operations team took to the stores, listening to 
associates to understand what tasks could be eliminated. Ellison commented, “We stripped 
everything away from the stores that took them away from the customers. We killed over 200 reports. 
We reorganizedand redesigned job descriptions and we made it virtually impossible for people in 
the stores not to understand that customer service was the most important thing. Service became the 
number one measure.” The effort was also supported by IT and systems developments and increased 
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2020.
Home Depot and Interconnected Retail 512-036 
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centralization of inventory and distribution, which saved time in stores. By 2011, the ratio had 
reached 50/50 and more tasks were being eliminated each month. 
Home Depot instituted “power hours” from 10:00 a.m. to 2:00 p.m. on weekdays and all day on 
weekends (the times when stores experienced their greatest customer traffic). During “power hours”, 
regardless of an associate’s role, their only job was helping customers. To improve customer service 
the operations team also focused on making sure customers found and purchased what they were 
looking for by having stocked shelves, and clean, safe, easy to navigate stores. 
Learning The learning team was challenged to make part-time, non-career path associates 
experts in the products and projects that Home Depot sold. The firm had over 300,000 associates 
many of which were part-time hourly workers. Tom Spahr, vice president of learning, commented: 
What makes our business so difficult and exciting from a customer service standpoint is 
that you don’t come to Home Depot to buy just a thing; you are buying a dream, doing 
something to your home. So it’s not just, “Here let me take you over to the aisle and here’s the 
item,” but it’s “Let’s spend the next 30 minutes together talking about all the parts, pieces and 
tools you need and how to use the tools and the techniques you need to do this project.” It can 
be scary sometimes as an associate if you are dealing with plumbing, or electrical; you may not 
have the expertise and you don’t want to say the wrong thing. 
To help drive product knowledge, the learning team facilitated distance learning, where product 
and project experts worked with associates in certain departments to become experts on all the 
different products and projects a customer might want. The sessions included 16,000 associates in 
2011 and were broadcast live via webinars, which allowed participants to chat and ask questions via 
computer or on the phone. (See Exhibit 11 for more detail on learning programs and initiatives.) 
At Blake’s request, every associate in the company, starting with the CEO, received position-
specific customer service training. Over 300,000 associates were trained in 10 weeks. Spahr 
commented, “In the past we had tons of customer service programs, we were talking about service 
and we were training service, but behavior wasn’t changing because associates had all these reports 
and metrics they were chasing, so service remained on the bottom of the list. The 60/40 initiative and 
our investments in IT, merchandising and supply chain to support the stores, was instrumental in 
making our learning programs a success by taking tasks out of the store.” 
Merchandising 
In merchandising, Home Depot looked to centralize with more nuance, building definitions for 
product categories and developing the tools and systems necessary to ensure regionalization of 
product mix. The merchandising team created a portfolio strategy in which it defined the roles that 
different product categories played in the store. The roles were: destination—categories that you 
stand for as a business; core—categories that help complete projects and increase average ticket; 
traffic—products that attracted customers to stores; impulse—products that help drive average ticket; 
and emerging—categories that reflected a new business line. Menear explained, “These definitions 
then drive your assortment decisions, your marketing decisions, your pricing decisions and your 
product allocation.” 
The merchandising team also began to address regionalization. Home Depot created an 
assortment management tool that clustered products and stores based on customer purchasing 
patterns and inventory turnover, ensuring that a store in Phoenix would not order a lawn tractor. 
Ellison commented: 
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2020.
512-036 Home Depot and Interconnected Retail 
10 
We decided to create a hybrid of the early entrepreneurial culture and centralization. Now 
we tell the stores that we will dictate 70% of your merchandising, but once they have reached 
that 70% we encourage them to go above and beyond at the local level to further drive sales. 
The beauty of that is that it creates the eclectic Home Depot feel that is hard for the competitor 
to replicate and hard for us to create from Atlanta. Our store managers understand the local 
communities and local philosophy well and can make their Home Depot feel like the local 
hardware store. At the same time we ensure that we are consistent on the efforts and events 
that matter most across the whole company. 
To support regionalization, Home Depot merchants had to have their finger on the pulse of the 
departments and regions across the company. Home Depot developed a weekly business review, 
which brought together a cross functional team that met within a specific merchandising department. 
Menear explained, “The hardware department would sit and you’d have the merchants, the finance 
team, the inventory planning and replenishment team, and the marketing team all together doing a 
weekly business review in terms of what was actually happening inside of the business, what was 
working well, and what wasn’t working well. This got us into a weekly cadence of running the 
business from a centralized location in a much more detailed and nuanced fashion.” 
Supply chain Mark Holifield, the senior vice president of supply chain, characterized Home 
Depot’s supply chain challenges when he arrived at the end of 2006, “The first week I got here I 
learned that we were $1 billion over budget in inventory. At the same time we had a lot of out-of-
stocks; 37,000 people had the ability to order product from suppliers and 75% of the SKUs were being 
sent directly from suppliers to stores. Associates were burdened with supply chain tasks.” Hollifield 
worked on two initiatives to reduce logistics costs and increase in-stock levels with less inventory. 
The first initiative was to increase central distribution by building rapid deployment centers 
(RDCs). The RDCs—warehouses that were strategically placed in different regions around the 
country—aggregated merchandise for 100 to 130 stores and distributed to the stores as needed. This 
allowed Home Depot to take advantage of scale and remove vendor minimums for individual stores. 
The RDCs allowed Home Depot to better manage spike sales, or high quantity sales of one item, often 
driven by large purchases by professionals. The firm invested $250 million to design, build and open 
19 RDCs across the U.S., which took three years, from January 2007 to January 2011. By 2011, central 
distribution penetration was up to 75% of SKUs. 
The second initiative was to build an effective central inventory management tool that would give 
merchants and supply chain managers at headquarters the ability to closely track the needs of each 
individual store and ensure products were being delivered on time. The central inventory 
management system allowed for more effective forecasting, automatic replenishment of product, and 
enabled central distribution to better serve stores and ensure they had product on shelves. By 2011, 
the central inventory management system was used for over 85% of store SKUs. 
IT 
In 2008, Blake hired Matt Carey as executive vice president andchief information officer. Carey 
quickly brought Cara Kinsey, a former colleague, on board as the senior vice president of IT. Carey 
and Kinsey brought with them over 20 years of experience in retail IT, mostly from Wal-Mart. When 
the two landed at Home Depot, they sensed a cultural distrust of the IT group. They also realized that 
Home Depot was decades behind its competitors in terms of systems, hardware and software. Carey 
remembered, “Six months into the job Cara and I sat down and compared the Home Depot systems 
to the Wal-Mart systems we were familiar with. The conclusion of that exercise was that we [Home 
This document is authorized for use only in Jorge Tarzij?n M.'s PRE-2019 Direcci?n de Empresas y Estrategia - 2 at Pontificia Universidad Catolica Chile (PUC-Chile) from Aug 2019 to Jan 
2020.
Home Depot and Interconnected Retail 512-036 
11 
Depot] were about where they [Wal-Mart] was in 1991. So basically we built a roadmap to get from 
1991 to 2007 in five years. There was low-hanging fruit but there was a ton of work to do.” (See 
Exhibit 12 for the tape measure slide.) He added, “It’s amazing that the company got as big as it was 
as fast as it did, without the technology most firms use to scale. It says a lot about the people. You 
realize you just can’t get in their way. You have to empower them.” 
One of the biggest challenges the new IT team faced was buy-in and support from the associate 
and management level. Believing that system designers needed to understand Home Depot’s day-to-
day operations, Carey sent his team to the stores. “Our folks all work in the stores,” he said. “We 
require them to be a store floor sales associate before they start a design for a new product. We have a 
formula that says credibility = empathy + track record.” One example of IT improvement developed 
in partnership with the operations team and associates on the floor was the First Phone. The First 
Phone was a mobile device given to store associates combining the functionality of six tools into one: 
phone, walkie-talkie, mobile register, rapid register, inventory management and business analytics. 
(See Exhibit 13 for details on the First Phone.) Additionally, the IT team worked to make the 
implementation speed and training reasonable, Kinsey explained, “I think that previously they tried 
to do everything at once, - now we are feeding things a little bit at a time, instead of big bang.” 
Early Results 
Reflecting on systems, IT, and people investments, Ellison noted, “Numbers don’t turn around 
overnight. You are basically depositing into an investment that you hope will pay off long term. 
Frank [Blake] allowed us to do this. He didn’t look at the numbers every week and say you better 
show me something in the next month or I’m going to kill this stuff. He bought into it 100%. He said, 
‘I believe to my core this is the right thing to do. We are going to have to stick with it.’” 
Eventually, key customer service indicators started to swing in the positive direction. There was 
modest but steady sales growth, increased customer transactions, improved market share, and 
improved gross margin as percentage of sales. Ellison recalled, “The first positive result that started 
to show up was that the internal Voice of the Customer (VOC) 3 survey started to go up and we 
started to sustain the higher number. Then we saw customer transactions go up in 2010 and that’s 
when we knew we were on to something. Every time we rolled out another phase of training, a few 
months later you would see the numbers go up. We were able to identify a clear correlation.” An 
important indicator in the VOC score was the net promoter score (NPS)4, which increased 450 basis 
points in 2010 and had risen to over 73% from a low of 52.9% in 2008. Home Depot’s 2011 score in the 
University of Michigan American Customer Satisfaction Index rose to 75, equivalent to its 2001 score 
and up significantly from its low of 67 in 2007. (See Exhibit 7.) 
Changing Home Improvement Landscape 
While Home Depot was working on its cultural and operational transformation, the retailing 
landscape in general, and home improvement retail in particular, was changing. 
 
3 VOC stood for "Voice of the Customer" and was the metric by which Home Depot measured its own customer service 
offerings, and was based on customer satisfaction surveys on a scale of 1 to 10. 
4 Net promoter score calculations took the percentage of customers who are promoters—loyal enthusiasts who will keep 
buying and refer others—and subtracts the percentage who are detractors, unhappy customers who can damage your brand 
and impede growth through negative word-of-mouth. 
This document is authorized for use only in Jorge Tarzij?n M.'s PRE-2019 Direcci?n de Empresas y Estrategia - 2 at Pontificia Universidad Catolica Chile (PUC-Chile) from Aug 2019 to Jan 
2020.
512-036 Home Depot and Interconnected Retail 
12 
Home improvement industry In the early 2000s, home improvement was one of the highest 
performing retail sectors in the U.S. and hit its peak in 2006, with industry sales eclipsing $300 
billion.26 With the global recession in 2008 and the dramatically deflated real estate bubble, sales 
retracted to $255 billion in 2009 before stabilizing at $264 billion in 2010.27 In 2011, the housing market 
remained highly stressed and private fixed residential investment (PFRI) as a percent of GDP was at a 
sixty year low of 2.2%.28 (See Exhibit 14 for PFRI over time.) But analysts were optimistic about the 
future. Positive demographic trends, including the aging of homes and the retirement of baby 
boomers, would likely lead to increased home improvement expenditures; analysts projected market 
growth to $344 billion by 2015.29 
Growth of online retail In 1999 Amazon announced its intention to sell approximately 6,000 
home improvement goods.30 The move targeted both contractors and DIY customers. From 2000 to 
2010, Amazon and other e-commerce competitors continued to expand their offerings and grew 
market share in the home improvement space. (See Exhibit 15 for trends in online retail.) Tomé 
commented, “Of course we talk about Lowe’s as a competitor but the competitor we are really 
petrified of is Amazon. We are constantly thinking about what will be our points of differentiation.” 
Some large retailers had struggled to integrate stores with their Internet offerings and failed to adjust 
to the new retail environment, leading to their demise. Inconsistencies in pricing, service and 
inventory from the website to the store caused headaches for both in-store employees and customers. 
Almost every large retailer was reevaluating their business models in light of these developments. 
New technologies Smartphones, which allowed customers to check prices, compare similar 
products and immediately purchase an item from another company, all from inside the store, offered 
new opportunities for shoppers and new concerns for brick-and-mortar retailers.31 Applications 
(apps) for phones offered quick price transparency and vast choices; in 2011 46% of American adults 
had downloaded an app to assist their shopping.32 Smartphone apps also served as a marketing tool; 
retailers could offer both in-store coupons, and coupons tailored specifically for the individual. 
Additionally, social networking programs such as Twitter and Facebook, along with other digital 
marketing routes, offered traditional businesses a new marketing channel to reach customers. 
Smaller formats Smaller home improvement retailers, such as Ace Hardware and True Value 
Hardware, also seemed poised to compete. These firms had small-format stores and close interaction 
with customers. They quickly changed product offerings, displays, layouts and marketing based on 
customer preferences.33 Recognizing the advantages of small-format stores some big box retailers 
announced plans to open small-format stores, including Walmart.34The Road Ahead 
The senior leadership team felt that Home Depot had rebounded from a slip in performance and 
from the global economic recession as a stronger, more focused and better aligned firm. Menear 
commented, “What we have demonstrated and what we have learned is how to get aligned behind 
something organizationally and when we do that it is pretty spectacular. But this is a journey and 
there’s not an endpoint. How many retailers our size have made it past 40 years? There are not many. 
You have to continue to evolve and change with your customer base as they change.” 
But the reality for Home Depot was that there was little growth, if any, in their industry. The firm 
also had $25 billion of hard assets on the balance sheet and over 300,000 people, “You’ve got to figure 
out how to leverage those assets to create a competitive advantage,” Carey commented. Home 
Depot’s leadership felt that its competitive advantage could come from interconnected retail. Tomé 
commented, “We’ve got to be there to serve the customer when, where and how they want to be 
This document is authorized for use only in Jorge Tarzij?n M.'s PRE-2019 Direcci?n de Empresas y Estrategia - 2 at Pontificia Universidad Catolica Chile (PUC-Chile) from Aug 2019 to Jan 
2020.
Home Depot and Interconnected Retail 512-036 
13 
served.” In order to do this, Home Depot set out to stitch its online business together with its stores 
and its associates, creating one interconnected, aligned company. 
Interconnected Retail 
Hal Lawton, president of online, had a large role to play in the emergence of Home Depot as an 
online presence and in the interconnectedness of its business. Lawton, whose group was rapidly 
growing, had hired his entire leadership team externally for a total of 80 external hires in 2011 alone. 
Lawton felt there were two battles to be won in e-commerce. The first was in offerings: who has the 
nicest website, the slickest app, the best digital marketing, and the largest presence in social media. 
The second was cultural integration and alignment: how well the online part of a retail business 
worked with the rest of the business to appear as, or become, a united front. Lawton explained: 
There is a lot of stuff that we need to catch up on and make improvements on but the thing 
I think we are the leader on is cultural integration. We give the stores credit for all the online 
sales in their local area. Merchants are the same way, they are responsible for the store and 
online. Then we have an online merchant that supports the merchant team. This online 
merchant is responsible for the very fringe stuff, the accessories on the patio furniture that will 
never be stocked in the store, and maybe custom-made patio furniture that we couldn’t have 
offered before. But they are a tight-knit team, complimenting each other. 
Lawton saw this kind of synchronization across its brick and mortar stores and online operations 
throughout the business units, IT, marketing, and even in the supply chain. He said: 
Holifield and I work together on online supply chain and it is a great yin and yang. He’s 
thinking about it from an operational efficiency point of view, whereas I come from more of a 
sales point of view. We strike a good balance across all the departments, everyone is looping 
each other in, brainstorming together, getting on the same page. I think other big retailers 
struggle with this. Some are more marketing oriented with their e-commerce side; while others 
are more centralized, basically their online group operates as a separate business unit, whereas 
we are trying to play it more down the middle. 
Home Depot had five direct fulfillment distribution centers that sent products direct to online 
customers. Holifield saw a need to continue to build a network of direct fulfillment distribution 
centers in order to better serve the online customer. Other online supply chain issues—such as how to 
handle items that had a low value-to-weight ratio such as dirt, as well as small and inexpensive items 
such as screws and nails—continued to challenge the team. Additionally, while solutions such as 
Fed-Ex and UPS existed for delivering small parcel items, bulkier items that required a larger truck, 
such as washers and dryers, countertops, and kitchen cabinets required more creativity and new 
solutions. 
Understanding the customer Home Depot’s leadership felt they needed to continue to build 
an understanding of the customer, Tomé commented, “We have had a pretty significant shift in 
spend to digital marketing. Everything is changing; how consumers research, how they shop, what 
type of emotional connection they want.” Home Depot had previously worked with customer insight 
firm dunnhumby but because Home Depot saw value in owning its own customer data the firm 
brought its customer database and analytics in-house and began to develop tools that could give it 
more understanding and actionable data around the differences in customer behavior. Key 
differentiation points included the pros vs. the DIY-ers, demographics, age, region, and zip code. (See 
Exhibit 16.) Home Depot’s leadership recognized that knowing, understanding and communicating 
more effectively with the customer was crucial, but also realized that Home Depot needed to stay 
This document is authorized for use only in Jorge Tarzij?n M.'s PRE-2019 Direcci?n de Empresas y Estrategia - 2 at Pontificia Universidad Catolica Chile (PUC-Chile) from Aug 2019 to Jan 
2020.
512-036 Home Depot and Interconnected Retail 
14 
focused on where growth and sales would come from and not get too caught up in the digital hype; 
“All of us are focused on Gen-Yers, Facebook, Twitter, and wondering how do we talk to those 
folks,” Tomé said, “But the people who really matter are the baby boomers. That is where the growth 
is, the money is with them. How are you going to take care of the baby boomers, especially when 
they don’t DIY anymore because they are too tired, too busy and too old? Maybe they hire someone 
to do it for them? How do we do that?” 
Being a destination Home Depot strove to be the destination for customers thinking about, 
planning or starting projects, whether that was in the store or online. Lawton commented, “If a 
customer is looking for anything related to home improvement online—products, how-to’s, plans, 
products lists—why wouldn’t they look at Home Depot first?” In order to become a reliable online 
resource, the firm selected a team of experienced and knowledgeable in-store associates and created 
an online forum for home improvement on its HomeDepot.com website. Lawton explained, “We put 
them [associates] through training on how to blog, how to do videos, how to create links back to the 
site and we give them a flip-cam to produce a little lesson and answer video. They spend real time on 
there [the website] and get very descriptive in their answers.” This type of effort, under a less 
interconnected model, would be hard to fund and support; Lawton explained he was willing to 
invest his budget dollars because the executive team was aligned around long term goals and 
understood the impact, “If we were viewing online offerings from a singular business lens, we 
wouldn’t be able to do that. There are expenses in my profit and loss statement that I have in there 
that support the greater good. IT is a part of the store experience for the customer and we can’t look 
at it in a disconnected way.” 
Category shift Home Depot was also constantly evaluating what products were being bought 
online and what products were sold in stores. Menear and Lawton felt that understanding these 
trends would help them to have both better online offerings and better space allocation, floor layout 
and product mix in the store. Menear explained, “We’ll look at how the trends in online purchasing 
affects our portfolio strategy and what we need to shift in the store. The customers are going to shop 
when, where and how they want and we haveto be positioned to be able to do that. We need to stay 
ahead of that and move with that and not become, candidly, a showroom for retail, which is a danger 
and what you see happening to some companies in retail today.” Similar to the product categories 
they created to better understand in-store merchandising, Home Depot began to create a category 
map of products shopped and purchased online. (See Exhibit 17.) Lawton explained: 
Based on this category map we should carry every single item in maintenance and repair in 
the store, if possible. If we don’t have it, our in-store associate needs to know how to get it to 
the customer quickly, whether it is ordering it for them online or educating them that we have 
an endless assortment online. Same thing in the complex projects side, you have to have great 
customer service. A lot of the project work starts online, but then migrates to the store and we 
need to be seamless at connecting that. The associate should be able to pull up their project 
work in the store, and be able to communicate back online after the customer leaves. 
The online team also worked to localize on-line offerings in concert with the merchandising 
teams’ effort to add a more localized assortment. Lawton explained, “The price you see in the store is 
the price you see online. If you go to JCPenny or Wal-Mart they explicitly say we have an online price 
and we have a store price. What we do is when you come on the website we sniff your IP address and 
map you to the closest store based on your IP address.” Home Depot hoped this strategy would 
avoid channel conflict and reinforce Home Depot’s everyday value. This also was important for 
associates, making sure that in-store associates had confidence that they were offering the best price 
and were not being contradicted by their own website. 
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2020.
Home Depot and Interconnected Retail 512-036 
15 
Building the Future 
The leadership team was aligned, confident and inspired, Tomé commented, “If we are aligned, 
nothing can stop us. We can do a lot with people power, bring us together and say take this hill and 
we’ll take the hill.” However, there was still much work to be done. The company had only just 
climbed back to the level of customer satisfaction that it enjoyed in 1999 and an entirely new class of 
competitors had entered the market and changed the expectations customers had of retailers, 
especially relative to assortment, pricing and service. Powers commented, “We’ve worked awful 
hard to get back to average but now we have to keep going. We can’t get complacent, we have to 
challenge each other, we have to be paranoid, and we need to maintain a sense of urgency.” 
The question of how to navigate the world of interconnected retail was on the minds of Home 
Depot’s executive team. How could Home Depot best translate brick and mortar success to 
interconnected retail? How would they grow market share in the interconnected environment? How 
could they move fast and stay flexible while ensuring that the firm’s 300,000 associates were 
motivated and believed in the company? What systems, training, and people would they need in 
place to stay ahead? How could the senior leadership team preserve and enhance Home Depot’s 
culture as they led the company through these tumultuous times? 
 
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2020.
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This document is authorized for use only in Jorge Tarzij?n M.'s PRE-2019 Direcci?n de Empresas y Estrategia - 2 at Pontificia Universidad Catolica Chile (PUC-Chile) from Aug 2019 to Jan 
2020.
5
12
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2020.
512-036 Home Depot and Interconnected Retail 
18 
Exhibit 3 Corporate Fact Sheet (FY End 2011) 
The Home Depot® is the world's largest home improvement specialty retailer, with more than 
2,200 retail stores in the United States (including Puerto Rico, the U.S. Virgin Islands and the territory 
of Guam), Canada, Mexico and China. The Home Depot’s stock is traded on the New York Stock 
Exchange (NYSE: HD) and is included in the Dow Jones industrial average and Standard & Poor's 
500 index. 
 Incorporation: June 29, 1978 
 First Store: June 22, 1979 in Atlanta, Ga. 
 Headquarters: Atlanta Store Support Center, 2455 Paces Ferry Road, Atlanta, GA 30339 
 The Home Depot retail stores: 2,252, including 1,974 stores in the U.S. and the territories of 
Puerto Rico, U.S Virgin Islands, Guam, 180 stores in Canada, 7 stores in China and 91 stores in 
Mexico 
 Associates: more than 300,000 
 Fortune 500 rank: No. 30 in the U.S. (As of May 2011) 
 World’s largest home improvement retailer 
 An average store in 2011 measured 105,000 square feet and carried approximately 40,000 
SKUs. 
Home Depot Flagship Store Layout – Store #121 
 
Source: Company documents. 
Notes: Store layouts for all Home Depot stores are available at HomeDepot.com. 
 
This document is authorized for use only in Jorge Tarzij?n M.'s PRE-2019 Direcci?n de Empresas y Estrategia - 2 at Pontificia Universidad Catolica Chile (PUC-Chile) from Aug 2019 to Jan 
2020.
Home Depot and Interconnected Retail 512-036 
19 
Exhibit 4 Senior Leadership Bios 
Frank Blake Blake was the chairman and CEO of Home Depot. Prior to his appointment to 
that position in 2007, he served as vice chairman of the board of directors and executive vice 
president of the Company. He joined Home Depot in 2002 as executive vice president, business 
development and corporate operations, and was responsible for real estate, store construction, credit 
services, strategic business development, growth initiatives, call centers and the Home Services 
business. 
Blake previously served as deputy secretary for the U.S. Department of Energy (DOE), a role 
similar to that of chief operating officer in the private sector. There, he was a leader in departmental 
policy decisions and managed the DOE’s annual $19 billion budget. Prior to that, Blake served in a 
variety of executive roles at GE. As senior vice president, corporate business development, he led all 
business development efforts, including worldwide mergers, acquisitions, dispositions and 
identification of strategic growth opportunities. As GE Power Systems’ head of business 
development, he played a key role in expanding that business into new technology and global 
marketplaces. He also held the position of general counsel at GE Power Systems. Frank’s public 
sector experience also includes having served as general counsel for the U.S. Environmental 
Protection Agency (EPA), deputy counsel to Vice President George Bush and law clerk to Justice John 
Paul Stevens of the U.S. Supreme Court. 
Carol B. Tomé Tomé was the chief financial officer, serving since May 2001 and was named 
executive vice president of corporate services in January 2007. She provided leadership in the areas of 
real estate, store construction, financial services, strategic business development, and growth 
initiatives. Her corporate finance duties included financial reporting, financial planning and analysis, 
financial operations, divisional finance, internal audit, investor relations, treasury, and tax. 
Tomé joined Home Depot in 1995. Prior to that, she was vice president and treasurer of 
Riverwood International Corporation. Tomé began her career as a commercial lender with United 
Bank of Denver (which later became Wells Fargo) and then spent several years as director of banking 
for the Johns-Manville Corporation. In 2003, Tomé joined the UPS board of directors and served as 
chair of the audit committee. In January 2008, she joined the board of the Federal Reserve Bank of 
Atlanta and served as chair of the board. Carol was recognized with the 2009 Lettie Pate Whitehead 
Evans award by BDN Network and the 2009 CFO of the Year award by the CFO Roundtable. She 
ranked 16th in Forbes magazine’s 2008 list of the World’s 100 Most Powerful Women and was 
included in The Wall Street Journal’s list of 50 Women to Watch in 2007. 
Marvin Ellison Ellison was the executive vice president of U.S. stores for Home Depot, 
responsible for driving alignment and execution across the company’s retail divisions and overseeing 
operations of more than 1,972 stores in the U.S., Guam, Puerto Rico and the U.S. Virgin Islands. 
Ellison had nearly 30 years of retail experience and served in a variety of operational roles at 
Home Depot since joining the Company in 2002. Before his promotion to executive vice president of 
U.S. stores in August of 2008, Ellison was president of the Northern Division of Home Depot. He was 
responsible for the sales and operations of more than 650 stores in 21 Midwest and Northeastern 
states and led a team of more than 110,000 associates. Previously, Ellison served as senior vice 
president of global logistics for the company. Prior to his role in global logistics, Ellison was the vice 
president of loss prevention. Before joining Home Depot, Ellison spent 15 years with Target in a 
variety of operational roles. 
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2020.
512-036 Home Depot and Interconnected Retail 
20 
Craig Menear Menear was the executive vice president of merchandising for Home Depot. In 
addition to being responsible for all merchandising departments, services and strategy, Menear 
oversaw the supply chain network, global sourcing and vendor management. He was also 
responsible for the company’s marketing and online business activities. 
Previously, Menear held several positions of increasing responsibility at the company, including 
senior vice president merchandising of hardlines, merchandising vice president of hardware, 
merchandising vice president of the Southwest Division and divisional merchandise manager of the 
Southwest Division. Menear had 28 years of experience in the retail and hardware home 
improvement industry. Prior to joining Home Depot in 1997, Menear held various merchandising 
positions within the retail industry with companies such as IKEA, Builders Emporium, Grace Home 
Centers and Montgomery Ward, as well as operating an independent retail business. 
Matt Carey Carey was executive vice president and chief information officer for Home Depot. 
He was responsible for all aspects of the information technology infrastructure, including 
communication networks and retail systems across the company’s 2,000-plus stores and store support 
centers in the U.S., Canada, Mexico and China. Carey was also responsible for the company’s IT 
strategy, including the development and execution of technologies used in stores, online and in the 
supply chain. 
Before joining Home Depot in 2008, Carey served as senior vice president and chief technology 
officerat eBay. Prior to joining eBay in 2006, Carey spent more than 20 years with Wal-Mart, where 
he was senior vice president and chief technology officer. During his tenure at Wal-Mart, he managed 
the rollout of the wireless RF infrastructure, had responsibility for the company's Mainframe Large 
Systems and Data Warehouse, and led the implementation and integration of Walmart.com, 
Samsclub.com and the grocery home delivery business in the U.K. 
Hal Lawton Lawton was president of online for Home Depot. Lawton was responsible for 
integrating the company’s online sales channel with existing merchandising efforts. He also oversaw 
the expansion of online presence, as both a selling channel and an information source for customers 
to find product and project knowledge. 
Lawton joined Home Depot in 2005 as a director of strategic development and was later promoted 
to vice president of finance for the merchandising organization. He was named to the newly created 
position of president of online in September of 2009. Before joining Home Depot, Lawton was an 
associate principal at McKinsey & Co. and a process engineer at Champion International Corp. 
Tim Crow Crow was executive vice president of human resources for Home Depot. He 
oversaw all aspects of human resource management for the Company’s more than 300,000 associates. 
Crow and the human resources leadership team continually evolved strategies to create a best-in-
class organization to support the company’s associates. Previously, Crow was senior vice president of 
organization, talent and performance systems. Before joining Home Depot in 2002, Crow served as 
senior vice president of human resources at Kmart. In that role, he was responsible for all store, 
distribution center and corporate human resources support. 
Prior to joining Kmart, Crow spent almost 20 years with Sears, Roebuck & Co (Sears). During his 
tenure at Sears, he held key roles in the controller, risk management and accounting policy areas. 
When he left Sears, Crow was vice president of human resources for Sears’ 55,000-employee 
Automotive Group. 
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2020.
Home Depot and Interconnected Retail 512-036 
21 
Cara Kinzey As senior vice president of information technology for Home Depot Kinzey was 
responsible for leading the IT technology for more than 2,000 stores across the U.S. Kinzey also was 
responsible for IT support for the company’s field operations and corporate services. 
Before joining Home Depot in 2008, Kinzey served as senior vice president of information 
technology at RadioShack. Her responsibilities included leading the IT strategy, infrastructure, 
application development and managing the operating and capital expense budgets. Kinzey was a 26-
year veteran in the retail industry. She began her career as a cashier at Wal-Mart and later moved into 
the internal audit division. During her Wal-Mart tenure, Kinzey held the positions of vice president 
for store, specialty and treasury systems; vice president for human resources, finance and corporate 
systems; and vice president for membership, member services and credit for Sam’s Club. Kinzey was 
a key leader in developing the strategy and implementing Wal-Mart’s software infrastructure 
changes. 
Mark Holifield Holifield was senior vice president of supply chain. He was responsible for 
the company's logistics, distribution, delivery, transportation, and inventory planning and 
replenishment operations. Holifield joined the company in 2006 and had more than 30 years of 
experience in fast-paced, high-volume retail supply chain management. Prior to Home Depot, he 
served as executive vice president of supply chain management at Office Depot, where he was 
responsible for the successful operation of all aspects of its global supply chain. During his 12 years at 
Office Depot, Holifield held various roles of increasing responsibility, including senior vice president 
of supply chain management, vice president of transportation and logistics, and director of traffic and 
transportation. 
Prior to Office Depot, Holifield was director of consulting projects at Dallas Systems Corporation. 
Mark served as traffic manager for Frito-Lay North America Inc., and earlier worked at H.E. Butt 
Grocery Company in distribution operations. 
Marc Powers Powers was the senior vice president of operations for Home Depot. Powers 
oversaw the daily operation activities, including asset protection and building services, for more than 
1,950 stores in the U.S., Guam, Puerto Rico and the U.S. Virgin Islands. 
Powers previously served as regional vice president of operations for Home Depot Southeast 
region, handling operation activities for nearly 200 stores in Florida, Alabama, southern Georgia and 
southern South Carolina. From 1997 to 2000, he served as regional vice president of the Northern 
Division and as district manager for the Southern Division in Jacksonville and Miami, Fla. Prior to 
this, he was promoted to store manager while working at a Northern Division store. Powers began 
his career with Home Depot as a sales associate in 1986. 
Source: Home Depot Website, Our Leadership, https://corporate.homedepot.com/OurCompany/Leadership/Pages/ 
default.aspx, accessed January 2012. 
 
This document is authorized for use only in Jorge Tarzij?n M.'s PRE-2019 Direcci?n de Empresas y Estrategia - 2 at Pontificia Universidad Catolica Chile (PUC-Chile) from Aug 2019 to Jan 
2020.
512-036 Home Depot and Interconnected Retail 
22 
Exhibit 5 Home Depot Stores Organizational Chart 
 
 
 
 
Source: Company documents. 
 
This document is authorized for use only in Jorge Tarzij?n M.'s PRE-2019 Direcci?n de Empresas y Estrategia - 2 at Pontificia Universidad Catolica Chile (PUC-Chile) from Aug 2019 to Jan 
2020.
Home Depot and Interconnected Retail 512-036 
23 
Exhibit 6 Home Depot Inverted Pyramid and Core Values 
 
The Home Depot Values 
 Taking care of our people: The key to our success is treating people well. We do this by 
encouraging associates to speak up and take risks, by recognizing and rewarding good 
performance and by leading and developing people so they may grow. 
 Giving back to our communities: An important part of the fabric of The Home Depot is 
giving our time, talents, energy and resources to worthwhile causes in our communities and 
society. 
 Doing the right thing: We exercise good judgment by "doing the right thing" instead of just 
"doing things right." We strive to understand the impact of our decisions, and we accept 
responsibility for our actions. 
 Excellent customer service: Along with our quality products, service, price and selection, we 
must go the extra mile to give customers knowledgeable advice about merchandise and to 
help them use those products to their maximum benefit. 
 Creating shareholder value: The investors who provide the capital necessary to allow our 
company to grow need and expect a return on their investment. We are committed to 
providing it. 
 Building strong relationships: Strong relationships are built on trust, honesty and integrity. 
We listen and respond to the needs of customers, associates, communities and vendors, 
treating them as partners. 
 Entrepreneurial spirit: The Home Depot associates are encouraged to initiate creative and 
innovative ways of serving our customers and improving the business and to spread best 
practices throughout the company. 
 Respect for all people: In order to remain successful, our associates must work in an 
environment of mutual respect, free of discrimination and harassment where each associate is 
regarded as a part of The Home Depot team. 
Source: Home Depot website, https://corporate.homedepot.com/en_US/Corporate/Public_Relations/ 
Online_Press_Kit/Docs/THDValuesandInvertedPyramid-3-7-07.pdf, accessedDecember 2011. 
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2020.
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This document is authorized for use only in Jorge Tarzij?n M.'s PRE-2019 Direcci?n de Empresas y Estrategia - 2 at Pontificia Universidad Catolica Chile (PUC-Chile) from Aug 2019 to Jan 
2020.
Home Depot and Interconnected Retail 512-036 
25 
Exhibit 8 Home Depot, Lowe’s Stock Price Indexed and S&P 500 Index (1998-2011) 
 
Source: Thomson Reuters Financial, accessed January 2012. 
 
Exhibit 9 Home Channel Sales by Retailer, 2004-2008 
 2004 2006 2008 
Store Name 
Sales 
($ million) Share (%) 
Sales 
($ million) Share (%) 
Sales 
($ million) Share (%) 
 
Home Depot 73,094 19.9 90,837 21.5 71,288 21.9 
Lowe's 36,460 9.9 46,900 11.1 48,200 14.8 
Wal-Mart 19,200 5.2 23,300 5.5 26,000 7.9 
Sears 11,400 3.1 11,500 2.7 8,900 2.7 
CCA Global Partners 8,700 2.4 9,600 2.3 10,100 3.1 
Menards 7,000 1.9 8,000 1.9 8,100 2.4 
Pro-Build 4,050 1.1 5,800 1.4 4,400 1.3 
Stock Bldg. Supply 3,580 1 5,305 1.3 3,471 1 
Sherwin-Williams 3,977 1.1 5,260 1.3 4,834 1.4 
84 Lumber 3,490 1 3,920 1 2,100 0.6 
 
Total of Top 10 170,951 46.6 210,422 50 187,393 57.5 
All other 195,548 53.4 211,578 50 138,177 42.5 
Total 366,499 100 422,000 100 325,570 100 
 
Source: Home Channel News/Mintel. 
Note: Data for 2010 not available. 
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This document is authorized for use only in Jorge Tarzij?n M.'s PRE-2019 Direcci?n de Empresas y Estrategia - 2 at Pontificia Universidad Catolica Chile (PUC-Chile) from Aug 2019 to Jan 
2020.
512-036 Home Depot and Interconnected Retail 
26 
Exhibit 10 Comparison of Market Capitalization, 1998-2011 in $USD 
 
Source: Thomson Reuters Financial, accessed January 2012. 
 
Exhibit 11 Details on Learning and Training Initiatives 
FIRST training In March 2009 Home Depot rolled out a new training program, FIRST. Rather 
than offer a broad overarching training, FIRST distinctly outlined what excellent customer service 
looked like for each position. For example, for a cashier the steps were Find, Inquire, Respect, Solve 
and Thank. The training included drill down sessions into the different steps. One example was the 
training around “solve.” The learning team would visit a store, pick a department, pick the top two 
or three customer projects in that department and offer associates hands-on training. This included 
finding the right tools and accessories and then performing the project. Another example was 
“inquire” which involved sending a mock customer with a shopping list through the aisle. The 
trainee’s task was to figure out the customer’s project from the list and help the customer locate those 
products and any others that they may have left off the list. 
HD University Home Depot also instituted an assistant and store manager training program 
called HD University. Attempting to recreate the days when company leaders trained managers, HD 
University flew store managers and assistant store managers to headquarters. HD University had 
eight trainers, all former store managers with an average of 17 years Home Depot tenure. There was 
buy-in from the very top; Ellison spent an hour with the group each week talking customer service. 
Blake also visited with the managers for an hour, speaking with them about their concerns, asking 
them pointed questions and getting to know them. One such visit was scheduled for a quarterly 
earnings day; Spahr recalled, “It is quarterly earnings, Frank has to talk to analysts all day, and I’m 
thinking, no way we see Frank today at HD University, but sure enough 4:00 PM he walks in. On 
earnings day, the most important thing to Frank was to spend time with 35 store managers.” 
Source: Casewriter research. 
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Home Depot
Lowe's
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2020.
Home Depot and Interconnected Retail 512-036 
27 
Exhibit 12 IT Tape Measure Slides from 2007 
 
 
 
This document is authorized for use only in Jorge Tarzij?n M.'s PRE-2019 Direcci?n de Empresas y Estrategia - 2 at Pontificia Universidad Catolica Chile (PUC-Chile) from Aug 2019 to Jan 
2020.
512-036 Home Depot and Interconnected Retail 
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Exhibit 12 (continued) 
 
 
Source: Company documents. 
 
This document is authorized for use only in Jorge Tarzij?n M.'s PRE-2019 Direcci?n de Empresas y Estrategia - 2 at Pontificia Universidad Catolica Chile (PUC-Chile) from Aug 2019 to Jan 
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Home Depot and Interconnected Retail 512-036 
29 
Exhibit 13 Details on the First Phone 
The First Phone was rolled out in concert with the operations team and tested in Seattle with 
associates giving feedback on ease of use and design. Originally the device was envisioned only as a 
mobile register that would help cut down lines, however, as IT proved its ability to deliver and 
associates expressed additional needs, more functionality was developed. 
First Phone helped associates serve the customer and manage the store more effectively. It enabled 
associates to do price checks, look up SKUs and product availability, obtain product location, scan 
purchases and take payment from anywhere in the store. Store managers and assistant managers 
used the device to make sure their inventory was in order and to plan for events or seasonality. 
Additionally, it allowed them to track sales from the departmentlevel down to SKU level, and 
compare those sales in real time to other stores and districts. Carey explained, “First Phone lets you 
know at a store level what is selling and to do something about it, or know what’s not selling and do 
something about that.” 
One store manager explained, “I am constantly learning about my store from First Phone. I have 
fewer reports to do and more information. Corporate says we save 40 hours a week because of First 
Phone. That is really conservative; I think it is way more than that. Same with shrink, we save a ton of 
money on shrink; we know where product is and how to find it now. We have information at our 
fingertips and can make decisions faster. This saves me and my associates time and we have more 
hours back on the floor to serve the customer.” 
Source: Casewriter research. 
 
 
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512-036 Home Depot and Interconnected Retail 
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Exhibit 14 Private Fixed Residential Investment as a percent of GDP, 1940-2010. 
 
 
Source: Federal Reserve Economic Data, Federal Reserve Bank of St. Louis, http://research.stlouisfed.org/, accessed 
December 2011. 
 
Exhibit 15 Trends in Online Hardware and Tool Retailing Revenue 
 Revenue $ million Growth % 
2000 1,297.70 N/A 
2001 1,715.40 32.2 
2002 2,016.00 17.5 
2003 2,308.00 14.5 
2004 2,673.80 15.8 
2005 3,140.90 17.5 
2006 3,520.00 12.1 
2007 3,925.10 11.5 
2008 4,297.80 9.5 
2009 4,309.00 0.3 
2010 4,937.00 14.6 
2011 5,248.40 6.3 
2012 5,718.40 9 
2013 6,181.90 8.1 
2014 6,664.10 7.8 
2015 7,270.90 9.1 
2016 8,097.30 11.4 
2017 9,159.10 13.1 
2018 10,305.30 12.5 
Source: Adapted from “Online Hardware and Tool Sales in the U.S. 2012, IBISWorld Industry Report OD5074, January 2012, 
accessed March 2012. 
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2020.
Home Depot and Interconnected Retail 512-036 
31 
Exhibit 16 Home Depot Customer Demographics 
The Home Depot stores serve three primary customer groups: 
 Do-It-Yourself ("D-I-Y") Customers: These customers are typically home owners who 
purchase products and complete their own projects and installations. 
 Do-It-For-Me ("D-I-F-M") Customers: These customers are typically home owners who 
purchase materials themselves and hire third parties to complete the project or installation. 
We arrange for the installation of a variety of The Home Depot products through qualified 
independent contractors. 
 Professional Customers: These customers are primarily professional remodelers, general 
contractors, repairmen, small business owners and tradesmen. In many stores, we offer a 
variety of programs to these customers, including delivery and will-call services, dedicated 
staff and expanded credit programs, all of which we believe increase sales to these customers. 
Source: Home Depot 2010 Annual Report, http://www.homedepotar.com/, accessed March 2012. 
 
Exhibit 17 Home Depot Online Sales Category Map 
 
 
Source: Company documents. 
Note: This category map served as a visual representation of what percentage of what types of home improvement products 
were shopped for online and also bought online. Additional items that did not have a presence online but were sold 
in Home Depot stores include concrete, dirt, lumber, plants, trees, and flowers. 
High Assortment Items
-Patio -Lighting
Big Ticket National Brands
-Appliances -Grills
-Power tools -Tractors
Complex Projects
-Kitchens
-Doors
-Countertops
Maintenance & Repair Items
-Paint
-Plumbing Parts
-Electrical
-Gloves
10%
30% 60%% shopped online
%
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t 
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20%
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%
 b
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512-036 Home Depot and Interconnected Retail 
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Endnotes 
 
1 The Home Depot, Inc., “Our History,” The Home Depot, Inc., company website, 
https://corporate.homedepot.com/wps/portal/History, accessed December 2011. 
2 The Home Depot, Inc., “Our History,” The Home Depot, Inc., company website, 
https://corporate.homedepot.com/wps/portal/History, accessed December 2011. 
3 The Home Depot, Inc., “Our History,” The Home Depot, Inc., company website, 
https://corporate.homedepot.com/wps/portal/History, accessed December 2011. 
4 The Home Depot, Inc., “Our History,” The Home Depot, Inc., company website, 
https://corporate.homedepot.com/wps/portal/History, accessed December 2011. 
5 Home Centers and Hardware Stores Products, Operations and Technology, via First Research, accessed 
December 2011. 
6 Lowe’s Companies Inc. Company Description, Hoover’s, Inc., www.hoovers.com, accessed January 2012. 
7 Lowe’s Companies Inc. Company Description, Hoover’s, Inc., www.hoovers.com, accessed January 2012. 
8 Lowe’s Companies Inc. Company Description, Hoover’s, Inc., www.hoovers.com, accessed January 2012. 
9 The Home Depot, Inc., “Our History,” The Home Depot, Inc., company website, 
https://corporate.homedepot.com/wps/portal/History, accessed December 2011. 
10 William A. Julian and Deidre Bane, “Home Depot,” Equity Research, Credit Suisse First Boston, February 
25, 2000, via Thomson One, accessed December 2011. 
11 Brian Grow, “Renovating Home Depot” BusinessWeek, March 6, 2006, http://www.business 
week.com/magazine/content/06_10/b3974001.htm, accessed December 2011. 
12 Dan Mores, “Under Renovation: A Hardware Chain struggles to Adjust to a New Blueprint,” The Wall 
Street Journal, January 17, 2003, via Factiva, accessed December 2011. 
13 The Home Depot, Inc., “Our History,” The Home Depot, Inc., company website, 
https://corporate.homedepot.com/wps/portal/History, accessed December 2011. 
14 Vanessa L. Facenda, “Cowboy Culture/GE Mentality: Bob Nardelli is trying to centralize operations and 
rein in Home Depot’s undisciplined past without losing the entrepreneurial spirit in the field,” Retail 
Merchandiser, August 1, 2002, via Factiva, accessed December 2011. 
15 Zeynep Ton and Catherine Ross, “The Home Depot, Inc.,” HBS No. 608-093 (Boston: Harvard Business 
School Publishing, 2009), p 5. 
16 Patti Bond, “Nardelli Changing Culutre,” Atlanta Journal-Constitution, December 8, 2002, via Factiva, 
accessed December 2011. 
17 Patti Bond, “Nardelli Changing Culutre,” Atlanta Journal-Constitution, December 8, 2002, via Factiva, 
accessed December 2011. 
18 Brian Grow et al. “Out at Home Depot: Behind the flameout of controversial CEO Bob Nardelli,” 
BusinessWeek, January 15, 2007, http://www.businessweek.com/print/magazine/content/07_03/b401 
7001.htm?chan=gl, accessed December 2011. 
19 Debbie Howell, “Nardelli nears five-year mark with riveting record,” DSN Retailing Today, May 9, 2005, 
via Factiva, accessed December 2011. 
20 Patti Bond, “Home Depot boss takes page from founders’ book,” Atlanta Journal-Constitution, February 25, 
2007, p F1, F8. 
This document is authorized for use only in Jorge Tarzij?n M.'s PRE-2019 Direcci?n de Empresas y Estrategia - 2 at Pontificia Universidad Catolica Chile (PUC-Chile) from Aug 2019 to Jan 
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Home Depot and Interconnected Retail 512-036 
33 
 
21 Patti Bond, “Customer service ‘will define my tenure’,” Atlanta Journal-Constitution, September 22, 2007, p. 
1, 5. 
22 2007 Annual Report http://media.corporate-ir.net/media_files/irol/63/63646/ar_2007.pdf, accessed 
December 2011. 
23 Home Depot 2008 Annual Report, http://ir.homedepot.com/phoenix.zhtml?c=63646&p=irol-
reportsAnnual, accessed December 2011. 
24 Home Depot 2008 Annual Report, http://ir.homedepot.com/phoenix.zhtml?c=63646&p=irol-
reportsAnnual, accessed December 2011.25 Ann Zimmerman, “Home Depot Chief Renovates,” The Wall Street Journal, June 5, 2008, p. B1, B2. 
26 Sub-Industry Summary: Home Improvement Retail Standard & Poor’s NetAdvantage, accessed December 
2011. 
27 Sub-Industry Summary: Home Improvement Retail Standard & Poor’s NetAdvantage, accessed December 
2011. 
28 Federal Reserve Economic Data, Federal Reserve Bank of St. Louis, http://research.stlouisfed.org/, 
accessed December 2011. 
29 Sub-Industry Summary: Home Improvement Retail Standard & Poor’s NetAdvantage, accessed December 
2011. 
30 Saul Hansell, “Amazon Further Expands Its Retail Reach, The New York Times, November 10, 1999, 
http://www.nytimes.com/1999/11/10/business/amazon-further-expands-its-retail-reach.html, accessed 
December 2011. 
31 Michael Farrell, “Smartphone apps dealing stores a hard hand,” The Boston Globe, December 17, 2011, 
http://www.bostonglobe.com/metro/2011/12/17/smartphone-apps-dealing-stores-hard-
hand/ESP3w585ybOErNSsnv5IuL/story.html, accessed January 2012. 
32 Michael Farrell, “Smartphone apps dealing stores a hard hand,” The Boston Globe, December 17, 2011, 
http://www.bostonglobe.com/metro/2011/12/17/smartphone-apps-dealing-stores-hard-
hand/ESP3w585ybOErNSsnv5IuL/story.html, accessed January 2012. 
33 Alonso Martinez, Carlos Navarro, and Thomas Ripsam, “Big Impact in a Small Format A New Wave in 
Retail,” Booz & Company, 2007, http://www.booz.com/media/uploads/Big_Impact_in_a_Small_Format.pdf, 
accessed January 2012. 
34 Alonso Martinez, Carlos Navarro, and Thomas Ripsam, “Big Impact in a Small Format A New Wave in 
Retail,” Booz & Company, 2007, http://www.booz.com/media/uploads/Big_Impact_in_a_Small_Format.pdf, 
accessed January 2012. 
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2020.