The Home Depot
Helping Investors Scale & Optimize in Every Market
By Carole VanSickle Ellis
If we have learned nothing else from the COVID-19 global pandemic and its aftermath, we have confirmed that absolutely nothing will slow real estate investors down for long. In fact, less than two years after the declaration of a national lockdown in March 2020, real estate investors were responsible for just under 9% of all real estate purchase transactions nationwide. Today, that number is still higher than 8%.
As the national market continues to stratify and become increasingly regional in nature, real estate investors continue to grapple with volatile economies and the unprecedented acceleration and deceleration of industry trends all while staying focused on generating and optimizing returns. Those dual goals of optimization and wealth generation, said John Gordon, director of national accounts at Home Depot, are where his company’s core competencies are shoring up investor efforts regardless of whether the local market is expanding or contracting.
“The truth is that our core competencies just match up with the core needs of our customers because [those competencies] are effective in any kind of market,” Gordon said. “If a market is booming, it enables scaling, and we are positioned to support that. If there is a difficult time in the market, it enables efficiency, and we are positioned to support that as well. There is always more than one path to the bottom line.”
Gordon said that over the past year, Home Depot has seen an increasing number of real estate investors from institutional operators to individual mom-and-pop owners focusing on the efficiency of their investment strategies and operations.
“People are paying more attention to efficiencies of product,” he said. “Product standardization was always important, but now it is more important than ever because you want to pick products for your properties and projects that are affordable and also durable. You do not want to have to change an inexpensive product in a rental out every time you turn it.”
Gordon said Home Depot’s immense reach on a national level equips the company with access to data and organizational systems that enable investors to achieve the “delicate balance” between using affordable products and attaining durability of service with those products.
“People are making plans to be as efficient as possible in preparation for what could be another challenging year in this space,” Gordon observed. “Our breadth of product offerings and the ability to configure information about those products for customers looms large in this environment.”
Partnerships & Productivity for Finding Predictable, Actionable Solutions
Gordon observed that having an immense product offering is only one of the ways that Home Depot works with real estate investors and other professionals in the real estate space.
“The other piece of the puzzle is the partnerships in which we participate,” Gordon said. “We are really fortunate that we get asked to sit down at the table with some of the country’s biggest operators who simply tell us about the challenges they are facing and then ask for our input on how to resolve those issues and think of solutions. That strategic mindset and the Home Depot willingness to roll up our sleeves and help figure things out is a huge advantage that people can leverage.”
Gordon recalled a recent meeting in which a customer was working to itemize three indicators that would help better project outcomes for a variety of investments. The key, he said, turned out to be simple: predictability.
“I would like to say it is rocket science,” Gordon laughed, “but what really comes out of most of our meetings are new and different ways to look at and create predictability because if you are an investor, predictability is second only to a crystal ball.”
The Home Depot team prioritizes knowing as much as possible about product performance in order to deliver predictability data to customers.
“There are three areas where you can best create efficiencies and, ultimately, profit,” Gordon said. “Those are: price, process, and product. The best thing an investor can do is start out by taking a close look at business processes, products, and prices, then work with these three factors to create an optimal combination.”
For investors working on a less institutional scale, Home Depot has created a tool internally designated Home Depot Pro Xtra (pronounced “extra”) designed to help them access the same insights the biggest operators enjoy. The program is available to anyone who signs up for a free Pro Xtra account and offers spend tracking, preferred pricing, and rewards and perks redeemable at time of purchase. The biggest advantage that comes with a Pro Xtra membership is the data, Gordon said.
“There is just a ton of data,” he explained. “Every single transaction is captured, and we can tell you the SKU of the product if you need it, how much you paid for it, whether there was a discount associated with it last time you purchased it, and so much more.”
Gordon noted Pro Xtra data can also be exported into QuickBooks or other accounting platforms. “We help investors manage their businesses better,” he said.
Gordon explained that because Home Depot has had such success working with its biggest clients, it prioritizes initiating and sustaining dialogue with customers across the size spectrum.
“If you are using Pro Xtra or you are in a Home Depot store and you go by the Pro Desk, they will ask you all kinds of questions to help figure out if there is another element of the organization where you could benefit,” he explained. This partnership extends into the data arena as well. Gordon noted Home Depot often helps customers and businesses of all sizes identify the most commonly used windows, flooring, and other materials.
“That is a huge benefit to people in the small-to-midsize portfolio group where they can really benefit from data that includes aggregated data from appropriate industry segments,” Gordon said. He continued, “We can identify trends or say, ‘Hey, people who are ordering at three, four, or even five times your magnitude are choosing this product or this product, and here is what we understand is the reason why.’ It is a huge benefit to know what is happening in the big, big game.”
Prioritizing Strategic Conversations When Every Minute Matters
When it comes to that “big game,” Home Depot is prepared with an arsenal of tools and tactics to help even the biggest institutional investors succeed in both scaling and streamlining as well. The company works closely with some of the biggest operators in the country, and, as Gordon noted, “When you take just three minutes of headache out of each transaction and a customer has 5,000 homes or more in their portfolio, that translates to saving weeks of labor.”
To help accomplish this, Home Depot makes a practice of having strategic conversations with its Home Depot Pro account customers to make sure that every possible facet of expedition and efficiency has been discussed and optimized for peak performance.
“We make it a priority to have conversations ahead of time so we know what resources we can provide to help both our customers and us move more smoothly and quickly,” Gordon said. “This may mean we help do legwork for identifying products and figuring out in advance what stores are likely to have that product so we can get orders placed at the distribution center level, for example. Once we have this in place, a customer can make a single phone call or send a single email to make those resources available.”
In the recent case of one institutional customer, Gordon recalled working with them to not just make sure the resources that would be needed for property “turns” and maintenance would be available but also engaging in a process he described as “dialing in the product mix.” Essentially, all the properties in the customer’s portfolio needed to have a specific look and feel. “We had one of our interior design experts put together a flip book that organized the products that met their requirements into a design book of trends that met the design aesthetic for that company,” Gordon explained. He continued, “Then, when they had a decision to make for a particular market, it was easy to select attractive products that fit the look and helped them rent faster and longer in that market.”
On the front end, the design flipbook was a boon for contractors, property managers, and facility operators because it kept things running smoothly and consistently. On the back end, the book was equipped with a spreadsheet of Home Depot SKUs and pricing.
“Our goal is always help our large-scale operators not just select the products that are the best fit for their investments, but to also configure those selections in a way that makes sense for that customer and enables them to order and fulfill product needs through a single point of contact,” Gordon said. “That is our definition of success.”
Refining the Process of Best Practice
As the real estate space continues to change and evolve in the wake of the COVID-19 pandemic and other economic factors, Home Depot, like real estate investors, continues to essentially “just keep on doing what works,” as Gordon puts it. “The market may have slowed a little bit in recent months, and it may speed up again in the coming months or not, but the good news is that we have been refining this process of efficiency and strategy for years now, so we are well positioned to keep on doing it for every investor working with us,” he added.
“What we are seeing is that companies are paying attention to the very best practices possible these days, and we are in a prime position to help them scale, help them be efficient, and help them dial in their specific needs whether they are a very big company or a very small one.”
SIDEBAR
Building the Pro Ecosystem
Home Depot Debuts Long-Awaited Same- and Next-Day Delivery on Almost Everything
In 2020, Home Depot debuted its first flatbed distribution center in Dallas, Texas, as part of the fulfillment of a $1.2 billion investment in same-day and next-day delivery. That was just the first in a series of grand openings that culminated in a swath of 150 similar facilities that enable Home Depot to reach nine in 10 U.S. customers with same- and next-day delivery whether the order includes power drills, roofing shingles, or a diverse array of renovation- and rehab-related materials.
Today, Justin Powell, vice president of renovator and remodeler trades at Home Depot, views that 2020 milestone as just one of many ongoing ways in which his company is serving its Pro customers and real estate investors.
“Working with and for real estate investors has always been one of our core strengths,” he explained, adding, “Many people do not realize that what we call our ‘Pro ecosystem’ of services benefit both large-scale and individual real estate investors directly as well as our DIY customers.”
The Home Depot Pro program and its offshoot, the Home Depot Pro Xtra program, are free-to-join loyalty programs designed not just to reward customer activity at the story but to optimize financial outlay and project efficiency. Powell said, “When we see a need in the market, we move to fill that need for our Pro and Pro Extra customers. That is where the distribution centers come in.”
Powell described the process of getting to that first distribution-center reveal as “a journey” that started back in 2017. At the time of inception, Home Depot had already recognized that each facility would require what the company described as “a variety of formats to meet the unique needs of customers, from small parcel packages to big and bulky product.”
This level of specificity for such a large-scale project meant that in Atlanta, Georgia, for example, Home Depot would ultimately establish three local facilities instead of just one hub. There would be a flatbed delivery center focused on that essential same- and next-day delivery service for bulk and oversized orders, a “replenishment” facility focused primarily on making sure stores maintained in-demand stock, and a fulfillment center, which focuses on same- and next-day delivery of “the most popular products primarily ordered by institutional business customers for their maintenance, repair, and operations needs.”
Powell, who has personal experience in owning and managing real estate investments in his own portfolio, emphasized that the large scale of the project represents massive opportunities for Pro Xtra customers who take advantage of the company’s e-commerce platform designed to collect order history, receipts, and project details for future reference.
“This platform is great if you want to go back and review a specific project, use the data to calculate taxes at the end of the year, or look at costs over time on investment projects,” Powell said. “Everything is organized nicely so that investors can track that information.”
Learn more about Home Depot Pro and Home Depot Pro Xtra at HomeDepot.com/c/Pro_Xtra.
