Businessmodel of HD Supply

Customer Segments

HD Supply serves more than 500,000 commercial and institutional customers – principally maintenance, infrastructure, and specialty construction markets, with each of its operating segments targeting different customer segments:

• Facilities Maintenance, which serves the owners of multifamily, hospitality, healthcare and institutional facilities, focusing on living spaces such as apartment units, hotel or motel rooms, and senior care living facilities;
• Waterworks, which serves contractors and municipalities in the water and wastewater industries, including non-residential and residential water systems and sewage systems markets; and
• Construction and Industrial-White Cap, which principally serves to non-residential and residential contractors. HD Supply also serves some government entities. HD Supply principally serves customers across the US and Canada. It also serves an international customer base through subsidiaries in Mexico, China, and Hong Kong.

Value Propositions

HD Supply provides its customers in the following ways:

• Its reputation and track record, with the Company established as one of the leading companies in its field, having a track record for providing quality products and services reliably and efficiently;
• Its specialist personnel and technical expertise, with the Company employing specialist staff across its three operating segments, as well as an experienced team of industry executives;
• Its broad range of products and services, with the Company offering an extensive portfolio of products and related services to customers across multiple business segments, primarily in the US but also abroad; and
• Its supply chain and network of quality suppliers, with the Company maintaining a broad procurement chain, sourcing its catalogue of products from an international network of suppliers. ### Channels

HD Supply operates a website at www.hdsupply.com, through which it provides information on its various products, services, and target industries. While the Company provides online supplier and associate portal, it does not appear to operate an online sales channel of customer portal.

HD Supply operates through a network of approximately 550 locations across 48 US states and six Canadian provinces. It also serves customers through its network of around 14,000 associates which deliver localised, customer-centric products, services and expertise. HD Supply operates its own in-house sales teams, organised by geographic region, which serve customers through call centre operations and branch-supported direct marketing programs. The Company also utilises the services of various third-party sales agents.

HD Supply also operates its own distribution infrastructure, which allows the Company to provide fast and reliable delivery and customer pickup services across the US and Canada, shipping products to customers via its internal fleet and third-party carriers.

Customer Relationships

HD Supply provides online platform for its associates and suppliers, but does not provide a self-service online sales channel for its customers.

The majority of HD Supply’s sales are made through its direct sales teams, which consult directly with customers in order to agree the detail of sales and distribution contracts, which often span multiple years. The Company seeks to establish positive, longstanding relationships with its customers and secure recurring business.

HD Supply provides ongoing support to its customers, with online resources such as news articles and FAQs. It also provides contact information for its various operating divisions, enabling customers to contact members of HD Supply’s support staff and receive personalised responses to enquiries and queries.

Customers are also able to interact directly with HD Supply through its social media accounts, including with LinkedIn, Facebook, and Twitter.

Key Activities

HD Supply is a distributor of various industrial products and services to customers across the US and Canada. The Company provides a range of products and value-add services to approximately 500,000 customers, primarily to commercial enterprises in the maintenance, repair and operations, water infrastructure and residential and non-residential construction sectors.

HD Supply’s activities are organised into three business segments: Facilities Maintenance which distributes maintenance and repair products, providing value-added services, and fabricating custom products; Waterworks, which distributes lines of water and wastewater transmission products, serving contractors and municipalities in the water and wastewater industries for non-residential and residential uses; and Construction and Industrial-White Cap, which distributes specialised hardware, tools, engineered materials and safety products to non-residential and residential contractors.

Key Partners

HD Supply works alongside a number of external companies and organisations across its multiple operating segments. These partners, that support HD Supply’s operations, can be broadly categorised as follows:

• Supplier and Sourcing Partners, comprising suppliers of various tools, equipment, products, and materials, that are principally responsible for providing the Company’s catalogue of products;
• Vendor and Service Partners, comprising various service providers and vendors to which the Company outsources certain non-core and non-technical functions;
• Distribution and Channel Partners, comprising various companies, independent sales agents, and associates that assist in extending the reach of the Company’s own in-house sales and distribution network; and
• Social Responsibility and Community Partners, comprising various non-profits and charitable organisations with which the Company collaborates on social and community projects. HD Supply has a number of partnerships in place, including with government bodies. In 2016 the Company expanded its partnership with Cobb County to expand its operations in the area, creating local jobs.

Key Resources

HD Supply’s key resources are its supply chain and product portfolio, online associate and supplier portals, its intellectual properties, its IT and communications infrastructure, its sales and distribution channels, its partnerships, and its personnel.

HD Supply owns and leases 550 properties across the US and Canada, of which approximately 50 are owned and 500 are leased. The Company’s leased locations comprise approximately 16 million square feet while its owned locations comprise approximately 1 million square feet. HD Supply currently leases approximately 110,000 and 100,000 square feet of office space in Atlanta, Georgia and Orlando, Florida, respectively, for its corporate headquarters.

HD Supply owns a number of intellectual properties, which are registered or legally protected in the US, Canada and elsewhere. Together with its subsidiaries, HD Supply owns approximately 160 trademarks registered worldwide.

Cost Structure

HD Supply incurs costs in relation to its procurement of products and the management of its supply chain, the development of its online associate and supplier portals, the maintenance of its IT and communications infrastructure, the operation of its sales and distribution channels, the management of its partnerships, and the retention of its personnel.

In 2015 HD Supply recorded cost of sales in the amount of $4.93 billion, which principally comprised its procurement of products and goods. The Company’s total operating expenses amounted to $1.72 billion, the vast majority of which related to its selling, general, administrative costs – including the payment of salaries and benefits to its workforce of 14,000 employees – which totalled $1.60 billion.

Revenue Streams

HD Supply generates its revenue primarily through the sale of construction, infrastructure, maintenance, and renovation and improvement related products and the provision of related services. The Company includes shipping and handling fees billed to customers in its net sales.

In 2015 HD Supply generated net sales of $7.39 billion, up slightly on the $6.97 billion recorded by the Company in 2014. The Company’s Facilities Maintenance segment generated $2.69 billion in net sales for the year, its largest generator of sales. The Company’s Waterworks segment generated net sales of $2.51 billion, while its Construction and Industrial segment generated net sales of $1.73 billion.