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. HD

HOMEBASE

• 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 intensive

2. Bargaining power of suppliers: high

3. Bargaining power of buyers: high 4. Substitutes: many in fragmented industries

5. 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’ Things

Sears 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