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Home Depot Prioritizes Growth Driving E-Commerce

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Home Depot’s online channel initiatives

Home Depot’s (HD) online sales in fiscal 2015 were estimated to be ~$3.8 billion or ~4.5% of revenue. In comparison, the Web generated revenues of ~$1.1 billion for rival Lowe’s (LOW) in 2013, representing 2.1% of the home (XHB) improvement retailer’s (XRT) revenues.[1. Internet Retailer estimates] Walmart (WMT), the world’s largest retailer, derived ~2.5% of its revenues, or $12.2 billion, from online channels in fiscal 2015.

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Interconnected retail

Home Depot is curtailing physical store expansion in the US and concentrating on the e-commerce channel to drive sales. But the often bulky nature of goods to be shipped can present logistical challenges. HD is getting around this hurdle by launching programs like its click-and-collect program, Buy Online Pickup In Store.

Click-and-collect programs are doing extremely well. Nearly 40% of online orders were picked up in-store in fiscal 2015. This gives HD the ability to leverage its physical stores network, reducing the need for greater investments in logistics.

Home Depot has also upgraded its mobile commerce capabilities. The new smartphone interface, First Phone, gives customers the capacity to convert web sales made in the aisle and check out using mobiles, eliminating the need to line up.

E-commerce and logistics investments

Digital investments are a priority at Home Depot. The company acquired Blinds.com in 2014. Blinds.com sells window coverings online. Acquisitions like these have helped Home Depot expand its online product selection. The typical store carries about 30,000 to 40,000 items. In contrast, the online selection exceeds 700,000.

To respond to demand, the company has built two new fulfillment centers, one in Georgia and the other in California. A third one is expected to be up and running by the end of 2015. Each fulfillment center has a capacity of ~100,000 products. With these, HD expects to be able to deliver 90% of orders within two days and offer same-day shipping for most products.

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