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| Bill Huey |
Well, The Home Depot is trying it again. With its recently announced $18 billion acquisition of roofing distributor SRS Distribution, Big Orange is once again trying to occupy two different market positions simultaneously.
The home improvement retailer tried this during a century-end buying spree beginning in 1997, when it acquired a company called Maintenance Warehouse and subsequently renamed it Home Depot Supply. The move was announced with great fanfare, and touted as a strategic maneuver that would target building professionals alongside Home Depot’s home improvement business. They even built separate stores so that professionals would not be inconvenienced by weekend warriors looking to buy 2 x 4 lumber pieces, deck screws or bathroom caulking material.
It didn’t work. Customers didn’t understand it, and confusion flourished about what business Home Depot was really in. Home Depot ended up selling HD Supply to a private equity firm and subsequently working to rebuild its brand image as a DIY retailer. Nevertheless, in 2020 it reacquired HD Supply for $8 billion, setting the stage for another crack at the professional market, which it claims is currently 50 percent of its business.
Will trying to occupy two positions at once work this time? The odds seem better because Home Depot has acquired two going businesses with existing customer bases and logistical resources, but careful positioning strategy and execution will be required to make it work.
If you are ever requested to counsel a business about such a move, try to make them aware of the hazards of bolting on a new identity and market positioning without doing a lot of spadework to prepare the market and current stakeholders. The results of doing so could be gratifying, while the penalties of ignoring this important task could be disastrous.
Incidentally, the 132-year-old GE will split into two companies this week, GE Aerospace and GE Vernova, which will trade under the new ticker symbol GEV. While this has potential for confusion, the key difference from The Home Depot is that both GE entities are strictly B2B. Nevertheless, GE has mounted an advertising campaign that debuted on MLB’s opening day of March 28, saying the new company’s opening day would be on April 2. It is the best advertising GE has done in years, and should help to burnish the new stock offering.
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Bill Huey is president of Strategic Communications and the author of Advertising's Double Helix: A Proposed New Process Model. Journal of Advertising Research, May/June 1999. His article about advertising effects has been cited in books and academic papers around the world.
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