Nov 12, 2004

Home Depot Institutes Pay-by-ScanSource: Various

In a November 11 letter to preferred suppliers, Home Depot announced its intentions to institute pay-by-scan and invited representatives from approximately 100 companies to attend a “Partners Council Forum” on November 17 in Atlanta.

The letter, which provided very little information, announced that pay-by-scan will be rolled out in the first quarter of 2005 but did not indicate how it would be implemented, what areas would be converted or how growers would be affected. Based on the list of companies invited to attend the meeting implementation appears to be nation-wide, which implies an early January start date to accommodate the early markets of the Sunbelt and Southern California. The agenda promised more details in sessions such as “supplier impact” , “changes in payables process” and “supplier performance management.” The Home Depot declined to comment on the letter or the impending shift to pay-by-scan.

GPN phoned representatives from some of the invited companies to gauge their reactions and got mixed reports of everything from “cautiously optimistic” to “more than a little nervous.” Regardless of the reaction, no one was surprised by the announcement, as pay-by-scan rumors have been floating around the industry for more than a year. Additionally, many Home Depot suppliers are already guaranteeing sales, which means they will see very little difference between their current situation and pay-by-scan.

The main issues sited by growers were multiple suppliers within a store, increased compensation and not having a choice. One grower questioned the logistics of actually getting credit for the sale if there are multiple people supplying the same product in a store. Another grower expressed misgivings about having the fate of their company rest on the shoulders of a $6-per-hour employee. What if that employee scans on 6-inch annual over and over, not realizing that most of the plants in the cart are actually 1-gal. perennials? And what about being compensated for assuming more risk? Growers were anxious to hear whether or not this new program would include a price increase to help cover plants that don’t sell as well as any infrastructure upgrades required for implementation.

At this point, there clearly seem to be more questions than answers, and the biggest is how will such a massive redirection be accomplished in such a short time frame. Hopefully, more details will be forthcoming after this week’s meeting.