Memorandum To: Chris Lemley Date: September 5, 2002 From: M3 Consulting Re: Request for Marketing Audit on The Home Depot for Mold Remediation Services ______________________________________________________________________________ The Firm: The Home Depot (HD) is the world's largest home improvement retailer currently operating 1,437 stores, including 1,296 Home Depot stores, 50 EXPO Design Centers and one Floor Store in the United States, 83 Home Depot stores in seven Canadian provinces, seven Home Depot stores in Puerto Rico and eight in Mexico. The Home Depot is credited as being the innovator of the home improvement industry, as well as offering a level of service unprecedented among warehouse professionals. Home Depot stores cater to do-it-yourselfers, as well as home improvement, construction and building maintenance professionals. Each store stocks approximately 40,000 to 50,000 different kinds of building materials, home improvement supplies and lawn and garden products. The Situation: Mold contamination has become a huge issue in residential and commercial construction as well as building ownership and maintenance. Almost every building has a structural mold exposure. Mold can also be the result of inappropriate HVAC design, inadequate dehumidification, poor building design, a failure to ventilate, unsuitable mixing of the supply air, or a failure to adequately maintain the building envelope. Some of the health affects of a mold-contaminated environment include respiratory problems, mucous membrane irritation, dry cough and eye irritation, bronchitis and chronic pulmonary disease, allergic rhinitis and asthma particularly among those who are predisposed to allergies, whose immune systems are compromised, or who are of a sensitive age. Medical research is conflicting on the direct relationship between mold and many of the serious diseases it is claimed to cause, but there is enough medical evidence to prompt a growing number of successful litigations. Contractors, building owners, material suppliers and insurers are scared. Cases like the one brought by a Texas family in June 2001 who suffered from alleged personal injuries and property damage associated with toxic mold found in their home, resulted in a $32 million judgement including $12 million in punitive damages. In 2000, a group of parents in Toronto sought upwards of $1 billion in a class-action lawsuit against a local school board for exposing the children to “toxic mold.” Two apartment owners in New York were hit by a $8 billion suit alleging that mold and fungus contamination in the buildings caused by water leaks had resulted in personal injuries ranging from chronic fatigue syndrome to wrongful death. The number of cases resulting from Mold exposure continues to grow with over 10,000 new cases in the U.S. and Canada in the last two years. With this new public awareness and fear regarding mold, comes the need for a new service…Mold Remediation. Market for Remediation Services Many institutions, contractors, hotels, schools, etc don't have the staff, time, or expertise to want to deal with the health and safety issues involved in cleaning up mold in contaminated buildings. So, they hire outside recovery firms to provide this service. Additionally, mold remediation does not qualify as a „do-it-yourself‟ project in residential buildings given the health and safety issues involved. Yet, the process of mold remediation is relatively simple. With few proven techniques of physically removing mold from most residential surfaces, the remediation process focuses on finding the source of the mold (often a leaking pipe, broken seal or faulty HVAC system), fixing it, and then replacing all of the mold-infected items (carpet, wallboard, floor tile, ceiling tile.) Home Depot is in the perfect position to provide this service to a specific target market of residential contractors and small commercial sites. Why The Home Depot? Given The Home Depot‟s accessibility to residential home developers, contractors, owners, renters and associations as well as to clean-up and replacement materials, we believe Mold Remediation/Clean-up services would be a profitable investment for the world‟s largest home improvement retailer because: - No other remediation contractor sells the products that it is installing (new wallboard, carpet, paint, etc); - To our knowledge, no other home improvement retailer offers mold remediation services; - Home Depot can become the one-stop-shop for residential and small- commercial mold remediation projects. In addition, The Home Depot currently offers the following environment-based consumer education programs: - Before you Renovate, Investigate Through a partnership with the Department of Housing and Urban Development, The Home Depot has launched a program about the proper ways to renovate homes that may contain lead- based paint. - Environmental Greenprint Series Since 1990, The Home Depot's Environmental Greenprint Series has provided guidance about simple choices consumers can make in his or her home to improve everything from energy efficiency to indoor air quality. Marketing Budget The Home Depot reported net sales for fiscal year 2001 of $53.6 billion and employs approximately 250,000 people. For eight consecutive years, the company has been ranked by Fortune magazine as America's Most Admired Specialty Retailer. It is highly probable that The Home Depot has funds to support a nationwide rollout of this service, but an in-depth financial analysis, coupled with market research, would determine exactly how much is required to fund a rollout of this service. Experience The Home Depot is currently committed to environmental soundness and has staff with expertise in various areas of environmental clean up. HD values the environment and is capable of offering the highly skilled technical training to its employees required for Mold remediation while using environmentally friendly products throughout the remediation. For example, HD supports efforts to provide accurate, informative product labeling of environmental claims and impact, recycles and encourages the use of materials and products with recycled content strives to comply with all environmental laws and will maintain programs and procedures to ensure compliance. In additions, HD is committed to minimizing environmental health and safety risk for our employees and our customers and encourages customers to become environmentally conscious shoppers.
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