Channeling Success

There is no better customer than a multi-channel customer. That's the theory behind the inception of Home Depot Direct, a division of Home Depot that went into full swing in the spring of 2005, according to President Harvey Seegers. "The philosophy of Home Depot Direct is to enhance and extend customer service," he explains. "All Home Depot divisions are working together to serve the same customer."

Home Depot has taken this commitment to cross-channel consistency to a new level by instituting a system that gives individual stores credit for online sales, as announced by Home Depot Chairman and CEO Bob Nardelli in November 2006. "All HomeDepot.com sales are being credited to the appropriate merchandise department as well as to the appropriate Home Depot store based on the store's proximity to the delivery location," Seegers explains.

The new system has received buy-in from all stakeholders, says Seegers. "This will perfectly align the incentives between the online channel and the store channel for us to cross-promote each other," Seegers notes. "Everybody will want all channels to succeed. This is going to be huge."

Managing the merchandise

Home Depot is able to facilitate the new sales credit process with the help of a new order management system from Escalate Retail. Implementing a new order management system was one of Seegers' first objectives when he came to Home Depot Direct in 2005. "We had been using a proprietary legacy system that was home grown, awkward and not as reliable as I would like," Seegers explains.

To help implement these new systems, Seegers brought Anastasios Tsolakis into his IT department. Tsolakis had served as Seegers' chief technology officer at General Electric, where Seegers ran the eCommerce business for more than seven years. "Tsolakis came aboard and got our order management system up and running in less than a year," Seegers says.

Seegers explains how the order management system runs the company's order credit process: "Every order that is placed online is seamlessly integrated with the financial system at Home Depot, and is transmitted to our store general ledger system that allows it, in turn, to be credited to the various merchandising departments. We know the zip code of every delivery that is made, giving us the ability to make a logical association between the zip code and the nearest Home Depot store."

The logic behind this system is simple, Seegers notes: "If the store is doing their job right, they are promoting HomeDepot.com and every online sale into its market should be credited to that store."

Leveraging the brand

From the start Seegers knew that the Home Depot brand was the anchor that would steady Home Depot Direct and vice versa. "From a business perspective it became blindingly obvious to us that the single biggest asset we had was the Home Depot brand," he says. "If we were to leverage the brand online we would have the opportunity to grow the business faster than just about anything else in the B2C eCommerce world."

Seegers' hypothesis proved to be right and he has numbers to back it up. "Almost from the day we launched, the traffic has been growing and growing to the point that now we are seeing 10 million unique visits a month."

Previously the Home Depot Web site was a vehicle to provide advertising for in-store sales. "Then Bob Nardelli asked me to turn it into a real business and an extension of the stores," says Seegers. This transition didn't happen sooner, he notes, because some key executives believed the Web site might cannibalize store sales. In truth for Home Depot, the online channel has only served to augment total brand sales.

Service through TV

Now that the HomeDepot.com site is up and running, Seegers is focusing on other initiatives at Home Depot Direct, beginning with HomeDepot.com TV. "That is going to be the big thing here during the next 15 months," Seegers states. HDTV is going to be featuring on-demand home improvement videos, 30-minute product infomercials and live weekend clinics. "We think it could be a huge addition to the project know-how that our customers are asking for."

HomeDepot.com TV will be available to consumers 24/7 anywhere they have access to the Internet. "Eventually it will be available through PDAs," Seegers notes. In addition to the regular content, Seegers says HDTV will present product segments. "We may have a 'power hour' where we profile all the new power equipment in the store," he explains.

Creating a cross-channel connection to HDTV, Home Depot Direct is rolling out in-store kiosks that will feature access to the HomeDepot.com videos as well as the ability to find product information and shop online. "It will test customers' appetite to shop for products in the store and online from an in-store kiosk," Seegers says.

Approximately 50 to 100 kiosks will be rolled out in the first quarter of 2007, primarily in the greater Atlanta area, near Home Depot corporate headquarters. The initial rollout is a test and will be expanded if considered a success.

The kiosks are being provided by Frank Mayer and feature POS credit card swiping capability. The kiosks link to an in-store RF network, in turn connected to the Internet, according to Seegers.

Tieing in catalogs

Although some retail executives have written off the catalog business as an out-of-date money drain, others are finding value in using catalogs with a new perspective. "From where I sit the catalog industry is changing in profound ways," Seegers explains. "The profound change is catalogs are becoming more and more advertisements for online stores. We try to entice the customer to come to the Web site after reviewing the catalog."

Given the fact that there are fewer direct catalog sales, and more catalog-to-Internet sales, how does Seeger justify the expense of running the catalog business? "That's a very good question," says Seegers. "Right now I have to apply judgment because it is becoming more and more difficult to really understand what the online return is from your catalog and what the online return is from your search marketing. Having said that, though, I do measure my catalog people on things such as cost per square inch, but I have to be a little more philosophical with respect to giving them credit for sales versus giving all the sales credit to my Webmaster."

What is the future of the catalog business? According to Seegers, catalogers need to start moving more toward the online world to survive. "I think what will eventually happen is that the appetite for catalogs will sufficiently be diminished and the Internet will take over entirely as consumers' medium of choice for searching products outside the store."

Seegers offers the following advice for catalogers: "Make the transition to the Web. The beauty of the catalog business is that it is a direct marketing model. Don't think of yourself as a cataloger €" think of yourself as a direct marketer and be smart enough to be able to make the transition from the old way of advertising to the new way of advertising."