What Did Home Depot Learn From Sol Price?
Ben Gilbert says Home Depot learned the warehouse store from Sol Price, then changed it for hardware. Bernie Marcus had visited Price in San Diego and seen Price Club, the concept that later fed into Costco. The warehouse was the store. There was no separate back room, and Price Club bought from manufacturers and sold off the pallet at a small markup. Bernie told Ken Langone that somebody would bring that idea to hardware and wipe out Handy Dan.
Hardware could not copy Price Club line for line. A strong Handy Dan did about $3 million a year. Bernie thought a warehouse could do $7 million to $9 million, with about 25,000 items in a 60,000-square-foot store instead of 8,000 items in 10,000 square feet. He went back and had dinner with Sol. Sol asked whether he was talented enough to build it, then told him to go do it. The hardware version would take about a 30 percent gross margin instead of the usual 45 percent, carry far more items than Price Club's 4,000, and put people on the floor who could teach a customer how to build a deck. Bernie also wanted to be sure Sol was not about to open that hardware store himself.
