Home Depot opens doors to green materials

Most spring Saturday mornings at The Home Depot, a steady stream of customers comes to peruse cabinets, countertops and showerheads; rose bushes, tomato plants and compost; barbecues, lawn chairs and weed whackers. Trying to be all things to all do-it-yourself-ers, The Home Depot (NYSE: HD) introduced its Eco Options label in 2007 as a way to meet a growing demand from customers that had begun adding “energy-efficient,” “low-VOC,” and “organic” to their home improvement shopping lists.

Through a reportedly stringent process of elimination, the company pinpointed about 3,000 items ranging from compact fluorescent light fixtures (CFLs) to organic plants it deemed had less impact on the environment than their conventional counterparts. The campaign paid off. In 2007, Eco Options products sold as well or better than similar products, exceeding sales goals and reaching $3 billion, according to Ron Jarvis, The Home Depot’s senior vice president of environmental innovation.

With a goal of increasing the number of products in the Eco Options line to 6,000 by 2009, the company is scrambling to find products that fit the green mold. But not all manufacturers of green building products are viewing the big-box retailer or its largest competitor, Lowe’s (NYSE: LOW), as a silver bullet.  

As U.S. home sales and the value of the dollar continue  to decline, market analysts are predicting more homeowners will opt to stay closer to home in 2008, spending more than $170 billion remodeling their homes. Even more, spending on home improvements is likely to increase 44 percent between 2005 and 2015, according to “State of the Nation’s Housing 2007,” published in June 2007 by the Joint Center for Housing Studies at Harvard University. The center cites U.S. homeowners’ growing desire to invest in energy-efficient retrofits as a key factor driving such spending.

Despite an increasing number of environmental building supply stores opening up along the West Coast, most homeowners end up at big-box retailers to meet their home improvement needs. A 2007 survey conducted by Germantown, Tenn.–based Consumer Specialists showed customers slightly prefer shopping at Lowe’s. However, with a total of 2,234 retail stores worldwide, The Home Depot ranked significantly higher for its convenient locations, which was the strongest factor in determining where respondents chose to spend their money.

The world’s largest home improvement retailer, The Home Depot reported net earnings of $4.4 billion in fiscal year 2007. While a significant drop from its 2006 net earnings of $5.8 billion, the figure was almost double that of Lowe’s, which reported 2007 net earnings of $2.81 billion. Its buying power makes the retailer highly regarded by manufacturers vying for prominent shelf space, including companies serving the green building sector.