Home Depot Builds Out Supply Chain for Two Day DTC Delivery

As online evolves and e-commerce grows, Home Depot's vision of interconnected retail continues to morph. The retailer is leveraging its brick-and-mortar presence, blended with its virtual assets to better optimize the new technology and new shopping behaviors.
"That really is from our company's perspective. The center point of our strategy and interconnected retail isn't a tangential distraction, we are convinced that this is the future," said Kevin Hofmann, SVO and president of online for Home Depot at the Goldman Sachs Dotcommerce Conference. "So when you peel back the cover of a Home Depot store and you dissect the businesses inside that store, not a single business isn't heavily impacted and influenced either by consumers doing research and shopping upfront before they hit the physical location – or in some cases they're actually going to shop and browse and transact online."
The retailer is faced with the reality that customers are doing a lot of price checking and inventory lookup to make the physical shopping experience more convenient. Each year this becomes more evident – and more of a challenge – and increasingly consumers are shopping and browsing more online and using that to be a preview to their physical shopping event.
Looking at the supply chain that Home Depot has built-out over the past several years, the retailer has been able to resolve several issues, including the challenge of ship-to-home transactions. "You got to solve the last mile delivery issue, and we learned so much over the last few years around what levers we can pull and what existing assets we can leverage to improve the economics," noted Hofmann.
Leveraging the new supply chain is more than 50 different distribution centers, rapid deployment centers, stocking distribution centers and bulk distribution centers, all moving mass quantities of products. The economics of getting the product to the customer is challenging for everybody, but one would argue that Home Depot is setup to leverage the buying power and then scale in the point of distribution, which very few retailers are capable of.
"About 35% of all of our online orders, for example, get filled out of our store locations. Leveraging that core supply chain, leveraging those little working warehouses that exist today and it's already an existing investment," Hofmann said. "So increasingly we're getting smarter about what levers we pull, about how we leverage all of the assets, the physical assets and the virtual assets to fine tune the economics."
With the launch of direct-to-consumer shipping, the online business has grown by more than $900 million last year – about 53% growth last year in the first quarter. There has been nearly 40% growth on top of that. To better accommodate the need to service the parcel shipments across the country, the retailer built new direct-to-consumer distribution facilities.

"We just opened our first one, it’s a one million square-foot facility in south Atlanta," commented Hofmann. "We have two more under construction now and really this will allow us to continue to build onto the existing Home Depot supply chain, and any products we chose to stock in those new distribution centers, will be able to service 90% of the country within two days."
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