Is Home Depot reconsidering its DM strategy?

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After a year of singing the praises of direct marketing as a retail strategy, The Home Depot Inc. could be having second thoughts, according to a rumor circulating in parts of the industry.

Home Depot launched two new catalog brands last fall: 10 Crescent Lane and Paces Trading Company. It acquired the Home Decorators catalog business this spring and went on record saying its direct sales will reach $1 billion by 2010.

However, according to an industry source, Home Depot may have already shuttered one catalog and could be taking a second look at its direct business.

That's "old news," said Budd Bugatch, analyst with financial services firm Raymond James, when asked about Home Depot's direct strategy.

He refused to specify whether he was referring to the closing of a catalog or a broader retreat.

Home Depot had not responded to an e-mail about its catalogs and direct business by this article's deadline.

Exiting an underperforming catalog is one thing. However, a retreat in the age of multichannel marketing -- and after investing significant amounts of money and resources -- is another.

"It would shock me," if Home Depot were to rethink its direct business, said Jim Treis, executive vice president of sales and marketing for catalog printer Arandell Corp., Menomonee Falls, WI.

"All of our new customers are getting into the business because of the three-legged stool of catalog, Internet and retail, with catalog as the driver," Mr. Treis said.

However, there are indications that Home Depot's business development interests may rest elsewhere. Its push into supplying and servicing professional builders, contractors and maintenance workers was noted as a significant opportunity for the company by several analysts in an Oct. 1 Chicago Tribune article.

The home supply market is $410 billion while the do-it-yourself category tops out at $200 billion, according to industry estimates.

In the second quarter, the most recent period for which Home Depot has released results, the company's retail segment grew 5.1 percent while same-store sales declined 0.2 percent. The supply segment, however, grew by 325 percent, driven by the recent acquisition of Hughes Supply as well as double-digit organic growth.

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