Home Depot is expanding into rural areas as it encounters saturated metropolitan markets and fierce competition from Lowe's. The home improvement retailer is mining zip-code data from its customer database to plan locations for the new stores:

The couple's next visit to a Home Depot may not be so miserable. That is because the company will soon open a 118,000-square-foot store here, just 10 minutes from their home. Avon was chosen, in part, by using ZIP code data from its stores' sales receipts to track long-distance customers like the Campbells. Based on that information, Home Depot, which is based in Atlanta, will also open two other stores in rural Colorado in the next three months.

However, unlike Wal-Mart and Lowe's, Home Depot is not well position to go after rural markets:

Mr. Szymanski, for one, says store managers in rural areas will need extra latitude to tailor their inventories and services to local customers. Because management has moved to centralize buying decisions in Atlanta, he said, "it's going to be very difficult to go into these smaller markets and have the micro perspective to figure out who these people are and how to satisfy them."

Others note that Lowe's and Wal-Mart began in rural areas and have long employed large regional distribution centers to serve their stores, but that Home Depot stores receive most of their goods directly from individual vendors.

"It's a real disadvantage," said Aram H. Rubinson, a retail industry analyst with Banc of America Securities, who gives Home Depot's shares a neutral rating. "You become a slave to the vendors' shipping schedules and minimum order requirements, not to mention the fact that the freight charges are more expensive."