Why Home Depot’s eCommerce Business is Outperforming
When thinking about which retailers are great at eCommerce which ones come to mind? Amazon is the obvious choice but outside of Amazon which ones are outperforming? It may surprise you but Home Depot has one of the top five largest eCommerce businesses in the United States. Home Depot generated $10 billion in eCommerce sales in 2019. That puts it ahead of retailers like Target and Wayfair which are known for their eCommerce capabilities.
Back in 2017 Home Depot launched a multi-year strategy called One Home Depot with an $11 billion investment to “further unlock a frictionless interconnected shopping experience allowing our customers to seamlessly blend the digital and physical worlds” said Craig Menear Home Depot’s CEO. This strategy has involved not just improving eCommerce capabilities but a $5 billion investment in Home Depot’s stores.
Home Depot has correctly recognized that its success online is tied to its success offline. In 2019 over 50% of Home Depot’s online orders were picked up at its stores. Speaking about this Home Depot’s Treasurer and VP of Investor Relations, Isabel Janci said: “first of all, when you think about our sales growth, online sales growth, and what we've seen in the stores, the 50% that's picked up in the stores, as we continue to make that easy for our customers, we are seeing just incredible repeat as we think about transactions. So we're going to continue to lean into things that really simplify the experience for more customers.”
Because so many of Home Depot’s customers pick up their orders in-store the in-store experience takes on added importance. It becomes an opportunity to increase each customer’s basket size when they arrive in-store to pick up their eCommerce order. Home Depot’s interconnected shopping experience is clearly working. In the fourth quarter of 2019, Home Depot’s eCommerce sales grew by 20% and same store sales were up 5.2%. Here are some of the key elements of its shopping experience.
Digital signs – which allows Home Depot to provide ratings and reviews of merchandise in store so that customers have quick access to them while shopping. Reflecting on this investment Menear said: “as a complement to our store investments, we are investing to strengthen the competitive advantages that we have built through the blending of our physical and digital platforms into a more seamless interconnected experience. For example, our chain wide rollout of digital appliance labels connecting ratings from the digital world to the physical world enhancing the in-store shopping experience”
A digital product locator – in Home Depot’s mobile app directs customers to what they are looking for in-store using mapping technology. Home Depot describes the functionality as “a GPS for your shopping list. Once you have downloaded the app to your smartphone it will help you quickly navigate your way through the aisles of your local store.” The app also contains a shopping list function so that while you are browsing online and selecting items you are interested in when you arrive at a Home Depot store you can quickly and easily use the app to direct you to the location of the product you are looking for. Customers can also use the app to check in-store inventory availability.
Fast delivery – Home Depot is trying to make online ordering as convenient as possible, targeting 2022 as the year when it will be able to provide same day or next day delivery throughout the United States.
Pick up lockers - 1,300 Home Depot stores have lockers where customers can pick up eCommerce orders. This is a highly valued service by customers with 95% of customers rating Home Depot’s pick up service five out of five stars. “[We] have seen a 250 basis point increase in checkout scores for stores with lockers versus those without” said Menear.
Quick access to ratings and reviews - while in store customers can also scan a item’s barcode and receive product reviews and ratings within seconds.
Augmented reality shopping - In 2017 Home Depot expanded the functionality in its main mobile app to allow users to overlay Home Depot merchandise on any room in their home. The app ascertains the dimensions of a select number of Home Depot items ranging from refrigerators to chandeliers. That enables the consumer to have a 3D visual of a product in any space they want to see a product in. This app is worth a try as Forrester Research recently ranked Home Depot’s mobile app as the number one retailer mobile app due to its functionality and user experience.
Visual search – Home Depot’s mobile app also has a visual search function. To use it simply take a picture of a piece of merchandise you are interested in, perhaps a mirror you saw while eating at a restaurant for dinner. Or upload a photo you have already stored on your phone. Home Depot’s app then uses artificial intelligence to provide product recommendations similar to the item you are looking for.
Since Home Depot has more than one million items in its inventory you can see how functionality like this can be an important resource for your next DIY project. “[I]n our view, Home Depot has excelled at making life easy for the customer by removing roadblocks on the purchase journey — something that helps it to gain market share and to stimulate spend" said Neil Saunders, Retail Managing Director, GlobalData. "A lot of this is about multichannel execution, which is attractive to both trade and regular shoppers as it saves them time. However, greater investment in digital — including functions like visual search, which allows people using the app to take a picture of a product which Home Depot then matches with products it stocks — are helping to further improve engagement.”
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