Retail Traffic


In many ways, Home Depot's New York City store is a far cry from the orange warehouses that dot every suburb. The retailer has coated the old cast iron Hasbro headquarters on 23rd Street with enough white paint to make it look like a wedding cake. And the remodeling costs, reportedly a cool $20 million — even more than the $16 million spent on the urban Depot in Chicago's Lincoln Park — consumed some three times the dough and twice the time of a familiar orange box, according to Rich Marshall, who heads national construction for the home improvement retailer.

That's no surprise to Andy Frankl, COO of retail contractor Ibex, who sees a big difference between fitting out a store in New York and building a suburban store. “New York costs are higher; when you come across the river, you're dealing with different unions. Plus, you're going into existing buildings with unknown conditions, and that's very expensive. The further you go from New York, the cheaper things get.” And construction costs on existing buildings mount up fast. “You're trying to put high ceilings where there are low ceilings. Plus, you've got to put in vertical transport,” Frankl says, referring to the Vermaport in the 23rd Street store, which moves carts, along with shoppers, up the escalator. And urban stores get “higher grade finishes, because traffic is, like, four times what you'd get in the suburbs.”

Will Home Depot's costly store pay off? Frankl says it's a big risk with a potentially big payoff. He points out that Bloomngdale's, for example, makes more money at its 59th Street store than at the whole rest of the chain put together. Not everyone agrees. Robert Futterman, the boss of the retail brokerage bearing his name, believes leasing costs are “in the $25-to-$30-a-square-foot range,” and he guesses that occupancy and build-out costs are about 25 percent to 35 percent higher on 23rd Street than for a regular orange box. “I don't know if it'll be the most profitable store they ever built and I'm not even sure if they came in on budget,” he says. “But it's not always about making the most money. It's about making a statement.”

Home Depot already operates in the outer boroughs, but the Chelsea emporium is different. There are no parking lots on 23rd Street and no goods-laden pallets on concrete floors; you enter an atrium filled with service desks and streaming with light. Nor do you haul goods home by car; New York's Depot arranges same day/next day delivery via a fleet of orange trucks.

Urban Style

To reach New Yorkers, the Home Depot is emphasizing breadth of style over nuts and bolts. The lighting department offers 1,000 fixtures, with 500 in stock. The paint section includes nine mixing stations and 3,200 samples, more hues than at any other Home Depot. “It seems to have adjusted the mix to include more lighting, as opposed to more two-by-fours,” says Wendy Liebmann, president of New York consulting firm WSL Strategic Retail. “It's not just hardware, it's decorating.” She believes the chain is courting young professionals who are moving into the increasingly tony neighborhood. “There are lots of new people and new apartments in Chelsea, compared to 59th Street, where Home Depot is planning its second Manhattan store.”

If the new store is hardware-light, it's also service-heavy. It offers New Yorkers doormen to hail cabs, a concierge for scheduling design appointments, a rental service offering everything from power tools to carpet shampooers, and four kiosks featuring touch screens that print out instructions and materials lists for fix-it projects.

While meeting the needs of neighborhood DIY-ers, HD is also pursuing growth by targeting contractors and less handy consumers, the so-called DIFM-ers (do it for me-ers), CEO Bob Nardelli recently noted. The Chelsea store will speed contractors through separate checkouts and provide them a dedicated sales force that goes to job sites — the first time the retailer claims it has offered that service in the Northeast.

So far, New Yorkers seem to welcome Home Depot. They had better. By year's end, it will have 17 outlets in the boroughs.

TAGS: Retail
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