Home Depot Has Best Quarter Ever, Continues Investment in Interconnected Retail

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Home Depot Has Best Quarter Ever, Continues Investment in Interconnected Retail

By Tim Denman - 09/06/2016
Thanks in part to its continued investment in its interconnected retail initiatives, enhanced supply chain capabilities, and customer-centric merchandising Home Depot enjoyed its best quarter in company history in Q2. The home improvement giant saw its sales reach $26.5 billion, up 6.6% over last year, with comp sales increasing 4.7% in the quarter.

Online sales increased by approximately 19% year-over-year, representing 5.6% of total revenue. One of the reasons for the bump in online sales is the enhancements to the supply chain the retailer continues to implement.
For example, the Home Depot has begun rolling out its dynamic ETA feature for online purchases that allows Home Depot to provide its customers with faster and more accurate delivery dates for digital orders.

"In the past, we issued a generic delivery window estimate, which allowed for extra time or cushion for the delivery commitment to customers," said Craig Menear, CEO and chairman, Home Depot said on a recent earnings call with analysts. "As we’ve begun to implement the dynamic ETA, our promised delivery date to customers is earlier and more accurately estimated. As a result, we're seeing an increased conversion in customer satisfaction."

In addition to its dynamic ETA feature, the Home Depot is rolling out its Sync feature to its DCs to supercharge is supply chain efforts.

"We continue to see opportunity to improve our in-stock, our inventory productivity, our logistics costs," said Mark Holifield, EVP, supply chain and product development. "Sync is the biggest initiative we’ve going in that. Sync is currently in two thirds of our RDCs, 12 of our 18 RDCs, and we're handling about 60% of the cost of goods sold, the dollar volume that goes through there on the Sync initiative. From that we're seeing mainly improved transportation costs and smoother demand flow and we are working with our suppliers to continue to improve those benefits for all in the supply chain. So we will continue along that path until — but we're not in a hurry. It's still early days and it's a multiyear initiative."

While its digital channels continue to show impressive growth, the vast majority of Home Depot's sales are still conducted in-store and the retailer is investing to enhance the in-store experience. A pillar of an engaging shopper experience is having the right products in stock and ready for purchase. In the omnichannel world retailers have the ability to sell their entire inventory both in-store and out, but some products just lend themselves better to the in-store environment, a lesson Home Depot learned first-hand when it removed many of its patio sets from its in-store assortment.

"In our ongoing effort to update and refresh our assortments, we continually leverage our merchandising tools to fine tune our online and in store assortments," said Ted Decker, EVP, merchandising. "One specific example of this is with our patio offering. We found that many customers want to come into our stores to purchase and pick up their patio sets. We altered our assortment and put certain patio sets back into the store. This strategic move was well-received by our customers, leading to record sales and sell-through in our stores."

As store assortments continue to be redesigned to align with customers shopping habits, Home Depot's digital channels, especially its mobile offerings, are being fine-tuned. Over 50% of the retailer's digital traffic comes from smartphones and tablets, highlighting the importance of an engaging, interconnected experience.

"We are enhancing the functionality in mobile with features like larger and clear product images, live mobile chat, and a simplified checkout experience," Decker said. "As evidence of the success of our interconnected strategy, approximately 42% of our online orders are now leveraging our store footprint for fulfillment and nearly 90% of our online product returns are processed through the convenience of our stores."