- The Washington Times - Saturday, March 30, 2002

NEW YORK (AP) Home Depot's soon-to-be opened store in the Mill Basin section of Brooklyn might not seem that different from its other stores.

But once local customers scour the aisles of the 61,000-square-foot outlet set to open Thursday, they will find products and services tailored to the tastes and needs of this working-class neighborhood.

There are customized installation services for round-top doors found in many of the area's homes, sinks that make it easier for religious Jewish customers to observe dietary laws, and window bars to keep out intruders.

"We want to take the brand deeper into the urban community," said John Wicks, divisional president of the Mid-Atlantic region of Home Depot, whose Mill Basin store is the first in a series of smaller stores designed for urban markets. One is scheduled to open in New York's Staten Island in September; the other in Chicago's Lincoln Park section in January 2003.

Home Depot, the nation's largest home-improvement retailer, is among the "big box" retailers trying to further its business in once-overlooked areas of urban markets despite logistical challenges, such as finding adequate space.

The trend, which has gained momentum during the past 18 months, is being fed in part by the gentrification of urban areas and retailers' recognition of the spending power of residents.

"Over the past year, we have become more aware of the potential of these urban communities," said Jim Sinegal, president and chief executive of Costco Wholesale Corp., which has had success in downtown San Francisco, Brooklyn and Queens, another New York City borough.

Big Lots Inc., the nation's largest seller of discontinued or overproduced goods, has expanded the number of stores in such markets to 121 this year from just 15 in 1998, about half of them in Southern California, according to Al Bell, vice chairman and chief administrative officer.

Wal-Mart Stores Inc., well entrenched in rural and suburban areas, also is pursuing the urban customer, with its newest stores in Baltimore and Milwaukee.

The nation's largest urban retail operator Kmart Corp., which has filed for bankruptcy is now trying to capitalize on its position as part of its revival efforts. It started a new marketing campaign that targets black and Hispanic shoppers.

Clearly, many merchants have been encouraged by strong sales results so far. Mr. Sinegal noted that Costco warehouse clubs in cities equal or surpass the chain's average annual store sales of $100 million. Mr. Bell said Big Lots stores in city locations generate about $120 in sales per square foot on an annual basis, $20 more than what the average store produces.

Mr. Wicks said that one of Home Depot's current two stores in Brooklyn, located closer to Manhattan, is the top revenue generator for the 1,300-store chain.

The company's new urban stores, which will range from 50,000 to 80,000 square feet, are much smaller than typical Home Depot outlets, which average about 130,000 square feet. Currently, Home Depot operates 10 of its traditional larger stores and one Expo Design Center store in the New York's five boroughs. The design centers feature showrooms that showcase bath, kitchen and lighting products.

The goal is to have 20 Home Depot stores in the city by 2004.

"The urban areas of America are the next retail sales opportunity, because they are underserved by virtually every major retail category that exists, and have by far, one of the best and most loyal customers," said C. Britt Beemer, chairman of America's Research Group, a Charleston, S.C.-based market research company.

Consumers like Authirne Gordon, who lives near the Mill Basin Home Depot store, said she is looking forward to buying paint, fixtures and rugs at Home Depot after having no place to shop with a local home-improvement retailer having gone out of business last year.

"I have been going out of my mind," Miss Gordon said, though the area does have mom-and-pop hardware stores.

But Steve Skinner, a partner in retail practice at the consulting firm Accenture, cautioned that "the momentum is building in the urban markets, but the question is how to execute the strategy."

Retail executives say finding adequate space for a store with sufficient parking is one of their biggest problems.

Mr. Sinegal said Costco's two-story unit in Brooklyn, located between Coney Island and the Brooklyn Bridge, is its only bilevel store in the country. "It's difficult to get 15 acres in Brooklyn. We had to settle for 7½," Mr. Sinegal said.

Customers in these markets also have different needs, compared with suburban shoppers. Store executives of Big Lots, Costco and Home Depot said they learned that they had to reduce their inventory of bulkier items in favor of portable merchandise, since many customers take public transportation.

But to develop its new urban format, Home Depot spent months studying neighborhoods, interviewing suppliers and analyzing U.S. Census data. The company wanted to be sure it didn't offer merchandise that local residents couldn't use.

The Mill Basin store, for example, won't carry vinyl siding, since many homes in the area are made of brick.

"We have to be more scientific," said Richard Kantor, divisional sales manager.

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