March 26, 2018 / by Mani Subramaniam / Retail Industry Dynamics / No Comments

What does it matter if Home Depot purchases or GE buys?

Why using the language of the industry is important…

Around 2003, before the campaign for the US Presidential election picked heat, I was visiting the Atlanta headquarters of The Home Depot. At the time, it was the largest account for the Retail SBU of Wipro, and we had excellent relationships at senior levels…

The person I was visiting, a VP at the time, suddenly realized that it was time for him to attend another meeting. Not knowing how to dispose of me, he invited me along. He said that there was a “Town Hall” of buyers, and the CEO of Home depot, Bob Nardelli was addressing the buyers and merchandisers of The Home Depot, and he said it would be nice for me to sit and observe.

Bob had joined The Home Depot from GE, where, after a succession fall-out, four potential CEO successors left The Home Depot. Three of them went on to become CEO’s of large retailers, including Albertsons and The Home Depot.

GE has always had a tight purchasing discipline, and a tightly followed process to close a deal. Along the way, several suppliers choked on their think margins and collapsed, but GE, the juggernaut could not care less.

After the initial warm up, Bob started talking about why The Home Depot should have a better “purchasing” practice and discipline. A senior executive interrupted Bob to ask him if he meant “Purchasing” or “buying”. Bob did not get the nuance of the argument, and insisted that he was talking about “Purchasing”. Perhaps there was an undercurrent of dissatisfaction with his style, but almost the entire audience walked out of the hall. Someone in the hall told Bob that he had to learn to speak Retail before he could lead a retail company…

The reason? “Purchasing” is not a common term used to denote the backbone of retail. Retail depends on “Buying”. Anything that a retailer buys, that is meant for resale in one of its businesses, is “bought” and not purchased. Anything that is used in the conduct of its business may be purchased. Staples, the office products stores, both “buys” and “purchases” pens and pencils. Those that are “bought” find their way into its retails shelves for sale and profit realization. Those that are purchased find their way to office desks within the company for use in that company.

It is important that if we work in an industry, we use the language of that industry. In retail, terms such as “buying”, markdown, assortment, allocation, period are considered sacrosanct and everyone who is in retail should learn to use the right words and terms. Otherwise, you might as well proclaim loudly that you are not from the industry and don’t care too much about the language used in that industry.”

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