Why Did Local Buying Raise Home Depot Sales?

Ben Gilbert thinks Bernie Marcus estimated 15% to 20% higher sales per store because the regions were making their own decisions. Early on, the philosophy of Home Depot was radical decentralization. Stores used local knowledge of the market to buy the right products in the right quantities and stay in touch with the customer.

As Home Depot scales, the benefits of local buying start to get outweighed by the purchasing power left on the table unless the merchandising organization is centralized. Operations turn chaotic. Fragmented stores lack the ability to use shared technology and systems. A zillion decision makers and a zillion negotiators deal with vendors, and 57 different regional or store-level buyers cannot get the best prices from suppliers. Home Depot invented the national hardware store chain, and there was no chance to buy hardware nationally before, because nobody was buying nationally. Arizona still needed different products than Alaska, but a table saw is a table saw, and different parts of the country do not need different table saws.