Presented by Edmund Davis Mary Ann Horton Narender Mendiratta Shamsuddin Pattharwala
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Transcript of Presented by Edmund Davis Mary Ann Horton Narender Mendiratta Shamsuddin Pattharwala
Presented by
Edmund DavisMary Ann Horton
Narender MendirattaShamsuddin Pattharwala
Do-it-yourself Do-it-for-me
HBI : Case Analysis
• Research methodology• Recommendations• Drivers behind the concept• Outlook of Home Furnishing industry• Customer identification and market
positioning• How should HBI proceed
Research Methodology
• The HomeBase case• Library databases, periodicals, articles and
analyst opinions• HomeBase, Home Depot, House2Home
store visits• Web sites of HBI and competitors
Recommendations for HBI
• Proceed with House2Home concept• Create a leading brand name• Build strong customer relationships• Establish a strong e-commerce presence
Home Improvement Industry• $165 billion industry• Cyclical and sensitive in nature• Industry S&P index in 2001 fell by 30.8%
vs. 8 % decline in overall S&P 500 index
• S &P industry survey predicts sluggish sales
HBI VS INDUSTRY
-10
0
10
20
30
GROWTH % ROE % ROA % OPERATINGMARGIN %
PE
RC
EN
TAG
E
INDUSTRY HBI
HBI vs. HDHOMEBASE
• Product differentiation• Uncompetitive prices• High cost of sales, low
SGA expenses• State of the art MIS
HOME DEPOT• Customer satisfaction• Competitive prices• Low cost of sales,
high SGA expenses • $200 million
investment in IT per year
HomeBase Current Scenario
Market leaders?
Market challengers?
Niche marketers?
NO
NO
NO
What should HomeBase do?
HBI’s options
• Improve market position in current industry• Sell and close down- retire• Exit and shift industry
Identified Industry
Home Furnishing Industry“DO IT FOR ME”
Home Furnishing Industry Overview
• $125 billion industry• Highly fragmented• Less cyclical• 7% growth rate since 1970• S & P’s industry survey predictions:
10% growth rate, more than that of retail industry due to concentration of upper-income professionals
Porter 5 Forces: Home Furnishings
1. Barriers to entry: high- capital intensive2. Bargaining power of suppliers: high
3. Bargaining power of buyers: high 4. Substitutes: many in fragmented industries5. Industry rivalry: competitive
House2Home SWOT
• Weaknesses– Poor brand image of HBI– Inexperience in new market– Poor bond rating
• Threats– Large retailers diversifying product offerings– Turndown in economy
House2Home SWOT
• Strengths – Extensive retail supply chain– Experience in the retail industry– Management commitment to the new strategy
• Opportunities– Fragmented nature of home furnishing industry– Home furnishing market projected growth(10%)
more than overall retail growth– High product margin in home furnishing(40%)
The Winning Strategy
Utilize experience in retail in the highly fragmented home furnishing
industry
Who is the customer?
• Female shoppers, 35-54, middle to upper-middle income level
• Like to decorate their homes• Like to make purchasing decisions but
prefer to leave installation to professionals• Part of dual income families• Avid Internet users
What does the customer value?
• Time• Convenience• Family• Home
House2Home
Ikea Pier 1 Bed, Bath & Beyond
Linens n’ ThingsSears JC Penney
Target
Wal-Mart K-Mart
High Price
High Quality Products and Services
Home Furnishings Positioning Map
HD Expo
Product
• 4 categories: Outdoor living, indoor living, home décor, and seasonal goods
• Offer deep and wide selection• Provide more value added services on the
line of custom installation, silk flower and balloon arrangements
• Additional product offerings based on customer demand( wish list)
Price
• Both designer label and value brands at different price levels
• Core products priced significantly lower to drive repeat traffic
• More pricing schemes similar to gift registry services
Place
• Conversions of HomeBase stores only in appropriate western markets
• Expand in mild climates with mean household income $50,000 +
• Potential Markets: Northern Virginia, Atlanta, Georgia and Austin, Texas
• E-commerce: delivery and pick-up, customer service, advice
Promotion
• Creating a “buzz” about unique concept• Magazines: Martha Stewart Living, O – The
Oprah Magazine, Regional lifestyle• Radio: Morning and Evening rush hours• Web: Oxygen sites, Food Network, Better
Homes and Gardens• TV: Lifetime, other family and educational
programming
How HBI Should Proceed
• Convert HomeBase stores only in those markets with appropriate demographics
• Invest in the e-commerce infrastructure to maintain a strong Internet presence
• Open additional stores in western market• Expand in new markets
Conclusion
HBI can become a leader in market share with the House2Home concept by
positioning as value and quality leader in terms of product offerings and price positioning in high margin industry