The market for maintenance, repair and operations (MRO) products is a big one—with $55 billion in annual sales, according to some industry analysts.
The MRO products market also is becoming a battleground for B2B ecommerce as some of the largest ecommerce companies and distributors—including Amazon Business, W.W. Grainger Inc. and MSC Industrial Supply Co., among others—are out to become the largest digital seller.
No one has yet to emerge as a dominant online seller in the highly fragmented market of MRO products. But if Home Depot Inc. has its way the biggest chain retailer for home improvements products intends to be at least one of the finalists.
On Monday, Home Depot, with 2019 annual sales of $110.2 billion, announced it was spending $9 billion to acquire HD Supply Inc., which sells products ranging from power tools and power generators to janitorial supplies and heating, ventilation and air-conditioning (HVAC) equipment to some 300,000 customers and generates annual sales of about $6.1 billion. In acquiring HD Supply, Home Depot is buying back a company is sold in 2007.
Home Depot already has a significant ecommerce base. In 2019, Home Depot grew ecommerce year over year by about 21% to about $10.37 billion, according to the Digital Commerce 360 Top 1000. About 60% of all online orders also fulfilled at stores that are part of the retailer’s network of 2,200 stores, the company says.
But the acquisition of HD Supply also fits nicely into Home Depot’s emerging digital strategy and gives it a way to leverage that strategy into more B2B digital sales, primarily in the MRO market, Home Depot CEO Craig Menear told analysts Tuesday on the company’s third quarter earnings call based on a transcript from SeekingAlpha.com. “We continue to invest in our digital assets, introducing new capabilities and different way to engage with The Home Depot,” he said.
With HD Supply, Home Depot has a good opportunity to target MRO buyers with an omnichannel retail approach that enables them to purchase goods online or in store. “The MRO customer is an important pro customer for The Home Depot,” he told analysts. “The success we’ve had with our existing MRO business makes us confident in our ability to accelerate sales growth in a highly fragmented $55 billion MRO marketplace.”
HD Supply—which operates HDSupplySolutions.com for facilities maintenance, repair and operations, or MRO, products—has a branch network of 44 distribution centers in 25 states and Canada and carries a product inventory of about 200,000 SKUs.
It also operates HDSupplyHIS.com, which sells home improvement products to contractors and do-it-yourself consumers.
Last month, HD Supply sold off its White Cap construction and industrial products business, including the ecommerce site WhiteCap.com, in a transaction valued at about $4 billion to an affiliate of investment firm Clayton, Dubilier & Rice and The Sterling Group. As part of that deal, White Cap was combined with Construction Supply Group.
When Home Depot’s acquisition of HD Supply is complete, which Home Deport expects to happen by the end of January, HD Supply will round out Home Depot’s already robust B2B ecommerce business, Menear told analysts. “Our B2B website is seeing record volumes and engagement with our pro customer,” he said, although the company didn’t break out any metrics.
For the third quarter ended Nov. 1, Home Depot posted total sales of $33.53 billion, an increase of 23% over sales of $27.22 billion in the third quarter of 2019. Q3 net earnings were $3.4 billion compared with $2.8 billion in the prior year.
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