Home Depot hammers away at online growth
Key to future e-commerce growth for The Home Depot Inc. is to link the chain retailer’s 2,200 stores to its web and mobile properties, says president of online Kevin Hofmann.
The Home Depot, No. 10 in the Internet Retailer 2015 Top 500 Guide, has grown web sales at a compound annual growth rate of nearly 40% over the five years through 2014, and by 26% over the prior year for the first nine months of 2015. To grow online, the home improvement products retailer concentrates on what Hofmann calls the basics of quicker fulfillment and sticking with an e-commerce game plan that works. Home Depot, which is growing accustomed to increasing its annual web sales by about $1 billion each year, calls its game plan for e-commerce success “interconnected retail,” reflecting the crucial role of its 2,200 stores in growing web sales. “We stick to what we know and can do best,” Hofmann says. “It’s been working pretty well so far.”
Making the best use of existing assets, especially stores, is how Home Depot plans to grow online in 2016. At the end of 2014 about 25%, or nearly $1 billion, of its total web sales of $3.76 billion came from its buy online, pickup in store and buy online ship to-store program, the company says. Through new and expanded initiatives, including equipping store associates with web-enabled tablets that allow them to complete an order online if an item is not in stock, the percentage of e-commerce sales that involve a Home Depot store increased to about 40% by the end of September, Hofmann says. “We have 300,000 store associates, and that’s an incredible asset to utilize,” he says.
Home Depot continues to invest heavily in e-commerce and faster fulfillment. Over the past several years it has spent about $300 million to upgrade its e-commerce distribution capability, on integrating its web and store inventory, and on supply chain initiatives. In September, Home Depot opened its fifth fulfillment center dedicated to e-commerce, this one in Troy, Ohio. The others are in Atlanta; Perris, Calif.; Hagerstown, Md.; and Mexico, Mo.
Home Depot plans to expand a pilot deliver-from-store program to all stores this year. Once it does, the retailer will be able to reach 90% of its U.S. e-commerce customers in two business days or less via ground delivery services, Hofmann says. “We are looking at new ways to do old things that will always resonate with customers,” he says. “By bringing more of the stores in play, we can now give web shoppers a precise window when their item will be available for pick-up.”
Home Depot also will continue to expand online in other ways, Hofmann says. Its online inventory exceeds 1 million products, compared with about 35,000 in a typical Home Depot store. In 2015 the company launched a new e-commerce site in Mexico and updated its Canadian e-commerce site. E-commerce continues to account for a bigger slice of total sales. Home Depot won’t release its year-end 2015 numbers until February, but through the first nine months of 2015, the web accounted for 5%, or $3.37 billion, of total sales of $67.54 billion, compared with 4.3%, or $2.75 billion, in the prior year. To maintain growth online, the company plans to continue to give web shoppers what they want most: more assortment, quicker delivery and even more convenient ways to shop, Hofmann says. “Anywhere the customer is, we need to be there,” he says.
The Home Depot Inc. took home the top honor in the inaugural Internet Retailer Excellence Awards in June in Chicago at the annual Internet Retailer Conference & Exhibition.