Two years ago, the economy shuddered to a halt, and the folks at Home Depot's Atlanta headquarters began thinking about one word: recovery.
Even though the bottom was yet to be seen, Home Depot began looking far ahead to when consumers would start spending again. After all, implementing changes in a chain with almost 2,000 U.S. stores and more than 300,000 employees takes time.
In the world of retail, there are many things to consider when the economy starts declining, including how much to spend sprucing up stores, how many new stores to open and where, how to improve the merchandise mix, and how to increase investors' return.
In 2009, Home Depot reported an increase in earnings but a decrease in overall sales and sales in stores open more than a year - a key indicator of a retailer's long-term health.
One part of the solution for the world's largest home improvement retailer: to put much of its energy, money and time into customer service. The recession reinforced the fact that customers are choosy, and most retailers recognize that they need to do more to keep customers happy.
At Home Depot, there weresimple changes, like offering checklists of supplies needed for common household projects. And there were complicated changes, such as convincing employees they had the power to make decisions to help customers on the spot without corporate approval.
The long-term goal, said vice president of learning Thomas Spahr: "If we start doing this right now, our hope is that when the economy starts to come back, people won't go anywhere else."
Most businesses should plan for eventual recovery even during the deepest downturns, said John Graham, finance professor at the Duke University Fuqua School of Business. Most companies are not expecting big growth in 2010, but many are also unprepared for growth when it comes, he said.
"Tomorrow, if the economy suddenly started growing rapidly, I do think a lot of companies would be caught by surprise," he said. "The real question is: Can you be very cautious, careful and prudent, but can you also have a plan?"
Customer FIRST
Home Depot began by taking its chief customer complaint - lack of service - head on.
By doing so, it hoped to make its stores the first choice for shoppers. In the Triangle there are 10 Home Depots, trailing the 14 Lowes Home Improvement stores and 15 Ace Hardware stores.
In March 2009, Home Depot introduced its new mantra "FIRST," which stands for: Find a customer, Inquire, Respect, Solve and Thank.
To implement the FIRST philosophy, Home Depot started by placing a greeter at the front door to ask people what they are searching for and direct them to the right spot.
The company also designated the times when stores are the busiest as "power hours." During power hours, all employees are instructed to come to the end of the aisles, toward the front of the store, so that customers can easily see that there is help available.
Occasionally this strategy backfires, with one customer being asked if he or she needs help several times. But "I'll take that complaint any day," said Joe Verdicchio, Home Depot's Triangle district manager.
Home Depot headquarters also mandated that no busy work like restocking shelves be done during these times so that more help is available for shoppers. To help, the home office in Atlanta does not send e-mail messages or make calls to stores or store managers during power hours.
Even though the company has not hired more people, this change in logistics has resulted in a better perception for shoppers, Verdicchio said.
"I hear it from customers all the time: 'How'd you get so many people?'" he said.
The company also is improving the speed with which customers can check out, installing self-check-out registers in stores and training more employees on the cash register system.
And it is training employees to be more knowledgeable about the products being sold and the home repairs customers may need to do. The company holds training sessions via video conference, inviting a vendor like Behr paint to do a demonstration in Atlanta that is simulcast live to 300 stores across the country. Employees at the stores then try the products or do a practice repair.
That experience is invaluable when those employees talk to customers, Spahr said.
"In our world, every customer comes in holding something and saying, 'I need one of these,'" he said. "The key to all of it is the solve piece. Give them everything they need before they leave the store."
Motivating workers
Of course, in an operation the size of Home Depot, it's essential to encourage employees to follow through on all that training.
So the company created badges for employees who are "PK Certified," or product knowledge certified. That means the employees have passed a test about the items in their departments. Ninety-two percent of Home Depot's employees are PK Certified within six months of starting.
But employees can take it beyond that. They can also become Expert Certified, meaning they have passed the product knowledge tests for two sections adjacent to their own.
The program was introduced in spring 2009, and by October of that year, two-thirds of employees had reached at least the first certification level.
Peers or supervisors also can recognize outstanding employees for something they did or said. Supervisors hand out "Homer Badges," named for the company's mascot. Employees pin them to their trademark orange aprons and wear them in the store.
So far, more than 1.3 million Homer Badges have been handed out, along with nearly $18 million in related Homer Awards.
Home Depot also offers financial incentives. The company's 401(k) match continued despite the rough economic times. And there are success-sharing bonuses, which amounted to $146 million last year.
Making changes
It may seem odd to make all of these changes in a time when business is hurting, Spahr said. But the strategy is long-term and is intended to build customer loyalty as homeowners start remodeling and developers start building.
"It's about the lifetime value of a customer," he said. "We understand that the lifetime value of a customer is thousands of dollars. I might not get the sale today, or I may give you something free today just to make you say 'Wow,' but I know that customer is coming back."
And Spahr said it's a task that Home Depot and other retailers will have to continue to work to refine. "There's no finish line," he said.
Indeed, customer service and better execution are tasks that retailers are always refining, said Ananth Raman, professor of business logistics at the Harvard Business School and co-author of "The New Science of Retailing" (Harvard Business Press, $29.95).
"There's a cliché: Retail is detail. But it's so true," he said. "On a superficial level, we can all say we're all about customer service. But as one senior executive told me, that's like motherhood. How can I be against that? ... The payoff comes the next time they have a choice to go to Home Depot or Store X. Even something as simple as we have a check list for customers and they don't, that might make the difference."
