Home Depot Acquire Hughes Supply |
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CAL CONDUIT PRESIDENT ADDRESSES ACQUISITION OF HUGHES SUPPLY BY HOME DEPOT
Dan Markus, President of Cal Conduit Products, has been speaking with customers, distributors and manufacturers at NAED and other industry events. At every event, the recent acquisition of Hughes Supply by Home Depot is one of the main topics.
“People are worried,” comments Markus. “Who can compete with Home Depot with their 2,000 stores and their growth strategy, when it specifically calls for them to develop contractor services and wholesale distribution straight through to the customer? Adding Hughes Supply only adds to this dominance. ”Mergers and acquisitions have long been part of the electrical industry. Large companies like WESCO have purchased independents over the years, continuing to operate them under the WESCO name. But Home Depot, with its size and scope, has the power to change the landscape permanently.
“Home Depot is an organization with the scale and buying power to go directly to China, South America or anywhere in the world to make huge purchases of commodity items—and then sell them directly to end users,” continues Markus. “What happens to small manufacturers and electrical wholesalers in an environment like that? Home Depot is able to buy in shipload quantities, not just truckloads. ”For example, consider electrical conduit. Currently, there are a dozen or so vendors that serve the majority of the market, either nationally or regionally. If a company the size of Home Depot decides to dominate the sale and distribution of that commodity, they can tie up just one or two major domestic suppliers and supplement that stock with large purchases direct from offshore mills. That would give them price control over what other distributors have to pay for product while lowering their own selling price to contractors.” Hughes Supply will become a part of the Home Depot’s Contractor Supply Division, where this scenario has been outlined as a specific strategy already being implemented with other commodities (*TED Magazine*, February 8, 2006: “How The Deal Went Down”).
“Everyone in this industry should keep an eye on this situation,” concludes Markus. “It’s not so much about not being able to compete, and I’m not suggesting we should fold up our tents and go home—but we need to learn from what is happening in other markets, be preemptive and find a defendable market to operate in.”
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