Home Depot's New Project: Fix That Website
from
January/February 2002
by Susan Caminiti
In a season when companies everywhere are reconsidering their strategies, Rebecca Bass, the newly named head of e-business at Home Depot, and Meg Whitman, the CEO of eBay, have put together a deal in which the two high-profile companies will join forces on the Web. For the first few months, the home-improvement chain will be selling a small selection of its products—power tools and ceiling fans among them—on the eBay auction site, albeit at set prices. If that works, expect to see most of Home Depot’s goods (including the kitchen sink) offered online, in some cases at auction.
The partnership, which the two women quietly clinched in October, is the latest in a number of bricks-and-clicks alliances between traditional and Internet companies. As Corporate Board Member reported last year, Toys “R” Us formed a similar deal with Amazon.com just in time to help it handle the 2000 holiday-season rush. (See the box on page 59 for how Toysrus.com made out.)
Home Depot’s sortie onto the Web is only part of the company’s drive to renovate itself. That’s a task the board has assigned to Robert Nardelli, 53, a former General Electric executive who joined Home Depot as president and CEO in December 2000. Under him, the company has been smartening up its stores, installing better inventory-management systems, improving relations with suppliers—and getting serious about e-tailing.
The hiring of Rebecca Bass, 49, is an example of how fast Nardelli is moving in his renovation project. Three months after taking over from former CEO and company co-founder Arthur Blank, Nardelli was searching for someone to define Home Depot’s Web strategy. A GE connection—Bass had once worked there—soon led him to his choice, an Atlanta-based lawyer and entrepreneur with a bent for technology.
E-commerce is “very, very high on Bob’s agenda,” says Bonnie Hill, 60, a Home Depot director since 1999 and the chairwoman of the board’s human-resources committee. “We had some needs in this area, but it took Bob to come in and identify what they were and how deep.” Not every director shares Hill’s awareness. Asked what he thinks of the company’s e-commerce strategy, longtime Home Depot board member and lead director Ken Langone, 66, says, “It’s a minor part of the business. I can’t say it’s even on my radar screen or that I’ve given it a lot of thought.”
What was clear to all the board from the start, however, was that Home Depot needed fresh ideas from Nardelli, and quickly. Lowe’s, the home-improvement chain from Wilkesboro, North Carolina, has moved beyond its small-town roots to open stores in prime Home Depot locations like Dallas, Boca Raton, and even (gasp) Atlanta, not far from Home Depot headquarters. Analysts say that Home Depot’s bare-bones warehouse format, which worked so well in the ’80s and ’90s, needs to be retooled to reflect the growing number of women shoppers in the home-improvement market. Sure enough, since Nardelli took over, fewer forklifts clog the aisles during prime shopping hours and more goods are stacked within easy reach rather than six feet overhead.
Like other retailers, Home Depot launched a website in 1999. But it never developed the site into anything more than a place where customers could get information about home projects or check on the company’s stock price. As it happens, the latter hasn’t provided much of a show recently: Home Depot shares were trading at around $38 in early November, above the $30.30 they hit on September 21 but well below the year’s high of $53.73 on May 21.
Bass is charged by Nardelli with transforming Homedepot.com into a dynamic e-tailer that, in her words, can “drive sales, reduce costs, and increase shareholder value.” The speed with which she accomplishes this is of no small interest to Nardelli, who is every inch a grad of the Jack Welch school of management. When Bass accepted his offer to put her in charge of the company’s e-business initiative, she didn’t ask for a lot of time to mull it over. “You could have probably measured my response to Bob in seconds rather than minutes,” she says. “Which is a good thing when you consider that I work for a CEO who looks at his watch and not a calendar when it comes to wanting results.”
Bass’s 10 years with GE included a stint as business manager of the company’s $1.5 billion program to develop the GE90 aircraft engine for the Boeing 777. She and Nardelli never crossed paths. “My job at Home Depot has nothing to do with the old boys’ network,” she says. Later she joined LexisNexis, the online library of legal, financial, and business information, then moved on to Motorola, which hired her to start up its first division dedicated to Latin America and the Caribbean. In 1999, when a chance to run the Atlanta-based Web-software company Galileo Development Corp. came along, she says she grabbed the opportunity to use the skills she’d learned at large companies in an entrepreneurial setting.
Working with Galileo’s founder, Michael Stritch, Bass raised the corporation’s first round of venture capital financing and led its release of Internet-based software that helps companies keep track of time and expenses. She was making a name for herself in technology circles. Atlanta’s Business to Business Magazine put her on its list of “divas” in a July 2000 feature on women in business—“and I don’t even sing,” she jokes. Earlier in 2001, she helped negotiate Galileo’s sale to Crius Inc., a Washington, D.C., consulting firm. Soon thereafter Bass got a phone call from Dennis Donovan, a former GE executive who now worked for Home Depot as executive vice president for human resources. He said that Bob Nardelli was interested in speaking with her.
During the initial meeting, Bass recalls, “Bob and I talked about what it means to be a change leader, how to learn from mistakes, and how to have a heart in business but want results too.” By the time she left, she knew she wanted to work for the company. “Bob very smartly suggested that I meet with other senior officers of the company, and I did,” she says. The picture she got from them—the emphasis on results that would come with the freedom to run her business without a lot of bureaucracy—appealed to her entrepreneurial side. “What I’m doing now is like the best of both worlds,” she says. “I get to grow a new business within a solid, established, and financially strong company.”
Bass’s first move was to define her objectives. Home Depot wants its Web presence to offer the same easy shopping and ready service that have made its stores so popular.
The alliance with eBay, though still unproven, is a terrific start for Bass. It hooks Home Depot up with one of the best-known and most heavily visited sites on the Internet. EBay has 37.6 million registered users and sells about $26 million worth of merchandise each day. Bass had met with other potential partners, but it was Meg Whitman and eBay that had what she was looking for. “The eBay audience is extremely large and loyal, and that was attractive to me,” she says. This way Home Depot reaps the benefit of the eBay traffic without making the huge capital investment needed to get an online store off the ground. “It comes down to a matter of make versus buy,” says Bass. “You can build the software yourself, or go out and buy what’s already available. And I’m of the belief that if it’s ready and proven, as it is with eBay, then usually it’s the smarter thing to buy, because that will help us leapfrog our competition.”
The partnership is also a no-brainer for eBay. It will make money on every Home Depot item sold on its site, and will also benefit from its association with the world’s No.1 home-improvement retailer. That relationship, in turn, should enable eBay to persuade other well-known brands and retailers to use its site.
September 11 made little difference to Home Depot’s plans of the brick or the click variety. “You can talk about the benefits of tax rebates and a lot of other things, but from a company standpoint, the strongest show of confidence in our business is that we’re not backing off expansion,” Nardelli told The Atlanta Journal-Constitution . By the end of October, Home Depot was on track to hire 40,000 sales associates by year’s end, bringing the total to 290,000, and to open 200 stores, for a total of 1,495. “Bob intends to take this company from $47 billion to $100 billion in sales during the next four years,” says Bass. “I view my role as trying to help him make that happen.”
Even before the eBay deal was clinched, she began to play her part. She put a product up for sale on the Homedepot.com site—a 10-inch miter saw, $179 (shipping included). To the non-do-it-yourselfer, that may seem like a rather pedestrian offer, but it caught the customers’ attention. “I can’t sell these saws fast enough,” says Bass. The success of the experiment illustrates how willing consumers are to buy Home Depot products online. “We now have to figure out what else they want to buy, and the best way to get it to them,” Bass says.
She won’t disclose her miter-saw sales, or the figures she’s aiming for. “There are no sales target numbers in place at this point,” she says. “You don’t go from a pilot program to the world. We just want to see the response to the site right now, and that will tell us where to go and what to change.”
Bass had an opportunity to explain who she is and what she was hired to do during a marketing meeting with Home Depot’s 100 vendors, which include GE, Black & Decker, and Kohler. “I can’t tell you how many people came up to me afterwards and said, ‘We’ve been waiting for someone like you to come to Home Depot,’” she says. “The vendors all understand that what’s good for Home Depot will be good for them too.”
Her next appearance will be before the Home Depot board—folks who should recognize a good renovation plan when they see one.
