Bernie Marcus: Capitalism’s Ripple Effect

Bernie Marcus bet big on merchandising, management and the belief that Home Depot could serve both homeowners and contractors. Persuading manufacturers to sell through the DIY giant helped countless other companies grow in lockstep with the chain.

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Here is a transcript of the video:

In the past, anytime a toilet ran, and you couldn’t stop it, you had to call the plumber. We taught you how to fix it by yourself for a cost of maybe five dollars. Suddenly, people were doing work in the house they never did before. We built a DIY business. It’s probably the Cinderella story of all time. It really is.

I grew up in Newark, New Jersey. We lived in a fourth-floor tenement. I was the son if immigrants from Russia. Their belief was that you can do anything you want in the United States, but you have to work hard.

Being poor as hell, I started working at the age of 12. I was a bus boy, a waiter. I paid for my own college education. I started out with a company called Two Guys of Harrison. You name it, they had it. I learned how to deal with people, selling volumes of merchandise. This is back in the 50s and 60s. I learned my skills of merchandising then. Two Guys had a great concept and very bad management. Their demise was on the horizon. I wanted other opportunities, so I ended up at Handy Dan California which owned home improvement centers. They were small stores and the concept of Home Depot began to form in my mind. I was thinking about this business going forward.

Suddenly, I got fired. The world came to an end. I had a good friend, Ken Lygone, and he said, “Let’s open up that store you told me about.”

And so, Arthur and I, we opened Home Depot in 1979 in Atlanta, Georgia. The odds were we were going to fail. I was 50 years old. It was a new concept. I did it with my life on a thread. I worked 80-hour weeks. It was brutal for years.

Arthur and I, we started Home Depot very undercapitalized. We were able to get capital money by going to the market as a small company. You didn’t have the restrictions that you have today.

These are enormous stores. You couldn’t have empty shelves. So, we used to buy boxes and shove them up on the shelves with paint cans stacked up to the ceiling, only 10% of which had any paint in them. We did this on every single shelf. The customers loved what they saw. We had everything they could possibly need. It was a matter of struggling and figuring out how to do it from day to day.

First of all, we bought direct from manufacturers, which wasn’t done in those days. It took  a lot of arm bending to convince them we were the future. One that was a manufacturer in California who was doing maybe 2 million dollars a year. In the year 2000 that business was sold for 1 Billion dollars. If it wasn’t for Home Depot, many of the manufacturers wouldn’t even be here today. Or, they would still be those little companies doing 2, 3, 4, 5 million dollars rather than doing the billions of dollars they do today.

The key was the do-it-yourself business. If you think about this for a second. In the stores with clinics, we taught people how to put lights into your house. Plumbing. Everything in a house you can now do yourself.

We also took care of the contractors. Because we had all of the things that the contractors needed. That was revolutionary. It’s one of the fastest growing retailers in America today.

Home Depot’s success has created many multi-millionaires. Vendors and manufacturers grew dramatically. We actually created a whole business of people who re-did houses. So, we became the generator of all these businesses. Isn’t that fun? That’s really fun to think about.