Home Depot Supply’s results for the second quarter are wagging some tongues. The company’s wholesale distribution business is on pace to exceed $11 billion in sales in 2006. Its second-quarter sales were 13 percent of Home Depot’s overall sales of $26 billion for the quarter. The company’s goal is to reach $23 billion in wholesale sales by 2010.
These numbers are worth considering. For 2006, Home Depot is likely to post sales near $100 billion, with its wholesale distribution division contributing somewhere in the neighborhood of 15 percent. When you consider the vendor commonality between the retail and wholesale divisions, you start to redefine the meaning of leverage.
From a competitive standpoint, the scale and pace at which Home Depot is changing independent distribution channels is breathtaking. But we have to consider that as part of a global trend. Britain-based Wolseley, which owns Ferguson and Stock Building Supply in North America, doubled its sales since 2001 from $10.4 billion to $21 billion.
To put that in a little more perspective, for decades W.W. Grainger has been considered the dominant force, at least the largest in terms of revenues. Grainger’s $4.6 billion in revenues in 2003 still topped most charts in comparing the various MRO sectors industrial, construction, facilities maintenance and institutional.
How does all this change business for an independent distributor in 2007 and beyond? There will be fewer, bigger players, operating across oceans, and potentially more elbow room for those who offer unique value in the smaller niches of this world. Consolidation inevitably breeds service losses for some customers, and that in turn creates local opportunity. That won’t change.
