Home Depot Invests in Technology to Support Outstanding E-Commerce Growth

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Home Depot Invests in Technology to Support Outstanding E-Commerce Growth

By Christopher Mulrooney - 11/24/2015
Home Depot same-store sales rose by 7.3%, easily beating analyst estimates of 5.9%. All of Home Depot’s merchandising departments saw comparable-sales growth from the year before. While the reasons for the strong sales growth were in part a result of macroeconomic factors such as a positive housing data and decade-high homebuilder sentiment numbers, Home Depot CEO Craig Menear highlighted in his latest earnings call that the recent gains were also due to the fact that the company had anticipated the customer shifts toward digital shopping this past quarter.

Menear explained that the increasing focus on technology by the consumer is altering how Home Depot is doing business and that the company has been making the right investments to move with the market. “The retail environment has been and is changing,” he said. “Our customers, both Pro and DIY, are changing the way they shop for our products and services. Our goal is to provide our customers with the convenient and fulfillment options they require. Whether they buy products online through a personal computer, a tablet or their mobile phone, we’re enabling them to pick up product in our stores or have products shipped to their home. We're investing in making the process easier and frictionless.”

Home Depot’s made significant headway in enhancing its technology in the past few months. The company launched its Mexico digital commerce site in the first half of the year in addition to significantly improving Canada’s website earlier this month. The retailer also opened a 111-square-foot customer service center in Arizona with 800 employees this past October. Additionally, Home Depot is investing in improvements to its supply chain management as consumers continue to place a strong emphasis on receiving their items right away. The chain opened its third direct fulfillment center in Troy Township, Ohio, which now allows the company to reach 90% of US customers within two business days via parcel shipping. 

Online sales increased by 25% in the third quarter and Home Depot is testing new technologies to provide a more seamless online experience down the road. The company is currently in the pilot stage for both their new order alignment system and a web feature that allows customers to buy products online and pick them up at their local store. Menear hopes that the recent technology enhancements together with the new pilot programs will spur future online sales growth. “As our customers are transacting more frequently through our online channels, we have invested in creating the right fulfillment options to support that growing business,” he said.

With Home Depot’s significant focus on technology improvements, the retailer stands to see significant online sales gains in the coming year as consumers increasingly rely on online tools to shop. While Home Depot saw a large uptick in customer traffic at 371 shopping transactions last quarter (a 4.4% jump compared to the prior-year period), online sales currently only account for 5% of net sales. That percentage has ample room to grow as Home Depot continues to offer better online capabilities to the customer. 

Perhaps most importantly, the significant investments that Home Depot is devoting to technology enhance both online and in-store shopping. Roughly 42% of online orders are picked up at Home Depot locations, and Menear sees the infrastructure he is putting in place as part of a business model that blends together digital options with brick-and-mortar retail. 

“The way we look at it quite candidly is as one business and an interconnected approach,” he said.