Home Depot outlines multichannel strategies
Kevin Hofmann, senior vice president and president of the online business of The Home Depot (HD), provided an update to analysts on June 18 at the Goldman Sachs dotCommerce Day 2015. He shared HD’s omnichannel thrust and initiatives and how they’re playing a vital role in the retailer’s financial results.
Online influence in sales mix
The e-commerce channel is becoming an increasingly vital sales driver for The Home Depot (HD) and its peers. HD’s online sales in fiscal 2015 were estimated at ~$3.8 billion, or ~4.5% of revenue. Web revenue for Lowe’s (LOW) came in at ~$1.1 billion in 2013, or ~2.1% of its revenue. Newer premium player Restoration Hardware (RH) derived 50% of its sales from this channel during its last fiscal year.
HD, LOW, and RH together constitute ~9.3% of the portfolio holdings of the SPDR S&P Homebuilders ETF (XHB). HD and LOW are also part of the SPDR S&P 500 ETF (SPY). SPY has 13.5% of its holdings invested in the consumer discretionary sector.
Benefits of omnichannel
Despite the many advantages of web-only sales, brick-and-mortar stores play a vital role in driving conversion rates. Stores often double as fulfillment centers. About 40% of HD’s orders are fulfilled through its stores. Millions of deliveries are made from stores each year. The following are HD’s multichannel programs that enable it to effectively leverage its store network.
- buy online, ship to store (or BOSS)
- buy online, pick up in store (or BOPIS)
- buy online, return in store (or BORIS)
These programs, as their names suggest, enable quicker order pickups and returns, reducing customer time and also saving on storage and costs. BOPIS is HD’s fastest growing e-commerce channel. E-commerce sales also typically have a higher average ticket size, according to Hofmann. We’ll take a look at this in the next article in this series.