Please bow your head. Today, we come together as one community—the convenience channel—to mourn the passing of yet another imposter, a big bully with billions of dollars and bold pretensions of shaking down our humble business.
We pay last respects to Home Depot’s convenience concept, unimaginatively named Fuel. Big orange ended the failed experiment in February, nearly 11 years to the day after opening its first store in Brentwood, Tenn.
Home Depot planned to open 300 stores in the first five years and as many as 1,000 units by 2015. It opened six, now to be rebranded under the control of Tri Star Energy.
“If successful, which we think it will be, we think we’ll have 300 stores in the system, with average estimated annual revenues of $5 million to $7 million per site. So the annual opportunity is over $1.5 billion,” Home Depot spokesman Jerry Shields said at the time.
He added this glowing forecast: “The economics are very attractive. Unlike other retailers with gas stations, the convenience store doesn’t compete with the home-improvement store, so we can achieve a high rate of return.”
As Amazon and Wal-Mart stand as the latest to test their prestige in the c-store arena, I am reminded by the anxiety associated with Home Depot’s convenience launch.
The news prompted me to hold an emergency editorial meeting with my staff . It was just a week before we were to close on the April 2006 issue. I sought the team’s input: “Do we pull our story and go with Home Depot? Which story do you think our readers want on the cover?”
We were unanimous in thought but deadline realities hovered. Our former editor Bill Donahue and I dropped everything and worked the phones over the next three days. Jennifer Bulat, then our executive editor and now Winsight’s director of editorial production, reworked the editorial map to ensure we had the pages necessary to deliver a powerful piece. We told the sales and marketing teams of the sudden shift in course.
Incidentally, in the very same April issue was another headline: “Land of Opportunity: UK’s Tesco to Enter U.S. Through C-Store Channel.” While that vessel sunk nearly as soon as it set sail, Home Depot’s bobbed with no sense of charter.
Many of the working assumptions made sense: Home Depot was already the first stop for construction workers, the coveted class of convenience operators. The new store featured a proprietary coffee program called Terra Java, a handsomely designed cold vault, a rich staple of candy, smokes, a loyalty discount for its 14-pump fuel island and a touch-free car wash.
“They’ve got the huge parking lots and lots of built-in traffic, and gas will attract even more traffic,” Retail Forward President Al Meyers told us at the time. “It could be a brilliant move.”
So … What Happened?
The answer is simple: Robert Nardelli. Named in 2000 as chairman, president and CEO of Atlanta-based Home Depot, Nardelli set on an aggressive expansionist course, eager to dominate the wholesale housing-supply business through HD Supply, an off shoot of Home Depot’s core retail business. In 2005, HD Direct, another off shoot, launched an online home-furnishing store. Less than a year later, Home Depot acquired Home Decorators Collection.
In his bid to diversify in what he thought were complementary businesses, Nardelli lost focus on the core. He also was never a people person. He cut jobs and benefits and alienated the managers and associates who helped turn Home Depot into the world’s largest home-improvement network.
With Home Depot’s financial fortunes lagging, Nardelli resigned (with a $123.7 million parachute) in January 2007. Home Depot sold off much of what Nardelli had built; whatever remained of noncore assets petrified.
I once visited Home Depot’s Fuel store. While it was aesthetically appealing and coordinated with the corporate design, several racks were out of stock and a pathetic indifference permeated the customer experience.
It was clear that another behemoth had miscalculated our tiny box that remains so unique and individualized. In a big footprint, the customer enjoys a certain anonymity, a solitude amid the maze of endless SKUs. But in the c-store, that same customer is part of a community, a fraternity of coffee drinkers, smokers, newspaper readers, snackers. The experience is opposite that of the big box.
Until these hulks of hubris find humility, they’ll continue to fail in the small box that is our convenience store.
Mitch Morrison is vice president and director of Winsight’s Retail Executive Platform. Reach him at email@example.com.
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