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How Home Depot and Lowe’s Stepped Up Omni-Channel Initiatives

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Analyzing Home Depot’s e-commerce performance

Online sales accounted for 5.1% of Home Depot’s (HD) sales in fiscal 3Q16, growing 25% year-over-year. 42% of the total number of web transactions were picked up in-store. That would imply web sales of $1.1 billion in the quarter. Key omni-channel initiatives in 3Q included:[1. According to Craig Menear, CEO of HD]

  • HD launched its e-commerce site in Mexico and re-platformed its Canada site.
  • HD’s third distribution center, located in Ohio, came online in 3Q, giving the company the ability to deliver to 90% of the US population within two business days.
  • HD piloted the BODFS program (or buy online deliver from store), which is currently available in 108 stores. The company plans to roll out the program next year.

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Opportunities and strategies

HD’s online sales are growing exponentially and the company is one of the best omni-channel retailers (XRT) around, which is spurring store productivity metrics. HD’s sales per square foot have risen at a CAGR (compound annual growth rate) of 4.7% over the past five years, which has allowed HD to lower capital spending on US stores, as it leverages its existing store footprint to double as fulfillment centers.

While Lowe’s (LOW) didn’t disclose specific e-commerce figures, the company is also looking to derive benefits from multichannel initiatives. Its relaunched LowesForPros.com website provides greater fulfillment options for pro customers, including store pickup from preferred locations and delivery[2. According to Ricky D. Damron, chief operating officer of Lowe’s].

Home furnishing firm Restoration Hardware (RH), which derives nearly half its sales from the e-commerce channel, uses its stores as showrooms for displaying merchandise.

Williams-Sonoma (WSM) also derived about half its sales from the web. Online sales grew 7% in fiscal 3Q16 coming in at $628 million, representing ~51% of total sales.

Home Depot and Lowe’s together constitute 1.2% of the portfolio holdings in the Vanguard S&P 500 ETF (VOO).

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