Analyzing Home Depot’s omni-channel performance in fiscal 2016

Home Depot (HD) reported e-commerce sales of $4.7 billion in fiscal 2016, an increase of ~25%, or nearly $1 billion, year-over-year (or YoY). In fiscal 4Q16, Home Depot’s web sales (XLY) (XRT) came in at $230 million, up 23% YoY[1. Based on comments by Carol Tomé, CFO of HD].

In contrast, furniture and furnishings e-retailer Wayfair (W) reported 76.7% growth in sales to $594 million in fiscal 3Q16. Wayfair reports full-year earnings on February 25.

Has Home Depot Been Making the Right Omni-Channel Moves?

Omni-channel fulfillment options

Home Depot employs an “interconnected retail” strategy, one that combines elements of both digital and brick-and-mortar channels, to drive sales growth. That’s particularly relevant, as over 40% of web orders are picked up in-store under the company’s buy-online-pickup-in-store and buy-online-ship-to-store programs.

The company is also planning to roll out a buy-online-deliver-from-store program in the near future. This will provide the retailer the ability to deliver online orders to brick-and-mortar stores, which will have fulfillment options including delivery to the customer.

Channel mix comparisons

HD’s digital sales as a percentage of the total came in at 5.3% in fiscal 2016. In contrast, the digital penetration rate came in at 47% for Restoration Hardware (RH) in fiscal 3Q16 and 51% for Williams-Sonoma in fiscal 3Q16.

Omni-channel investments

Home Depot is trying to enhance its digital and omni-channel sales. It launched a new website in Mexico and re-platformed its Canadian portal in fiscal 2016. The company isn’t looking to add new stores in the US in the future, however. Instead, HD plans to leverage its network of physical stores to double as fulfillment centers and also drive higher omni-channel sales.

That being said, HD is investing in more fulfillment centers to enhance shipping speeds. The company opened three direct fulfillment centers, which would enable the retailer to provide two-day parcel shipping to 90% of the US population.

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