If there’s one retailer that can install a window of opportunity for all merchants by improving its own shopper expectations, it might be Home Depot.
The chain is in the midst of an ambitious strategy to unify online and offline operations — a plan that may have been a key contributor to the 9% increase in overall home-improvement product sales during the holiday season. And Home Depot’s plan, if it is indeed fortifying industry sales gains, could alter shopper expectations across the board.
This is because Home Depot’s integration strategy is designed to hone in on what shoppers want most: synthesized access, product availability and pinpoint delivery — not an easy task when many of the items purchased require a forklift to unload. But Home Depot’s five-year plan to create a “one-store” or seamless retail experience for shoppers, fittingly called One Home Depot, appears to be delivering on its promise in the early stages. Home Depot recently increased its fiscal 2018 sales projection to 7.2%, from 7%.
The coming year will be the true test of the program. Home Depot was fortunate to begin implementing its “one” plan when low unemployment gave homeowners the financial confidence to invest in renovations. In 2019, it could have to prove how well the model works despite economic conditions. The ways in which shoppers respond could represent an opportunity for all retailers.
Home Of One Big Idea
Home Depot’s effort to create an all-in-one presence necessitates the need, faced by all retailers, to provide a seamless retail experience online and offline.
Among the components of its plan:
Enhanced search and navigation: Home Depot invested in more efficient online search functions, more direct communications with its delivery team and other upgrades to improve its digital transaction results. Combined, these efforts enable Home Depot to narrow package arrival times to two- to four-hour windows, an option especially important to its time-is-money professional customers. In some cases, the company has said, it will have a forklift waiting on site to unload.
Streamlined delivery: By restructuring its supply chain and distribution, Home Depot can now reach nearly 95% of the U.S population with parcel shipping in two days or less. The goal is to reach 90% of the population with same-day or next-day delivery. Again, this is essential for its professional customers who spend more than DIY shoppers. Also, in some instances, the customer may want to shop online and then pick up their items in the store for speed and convenience and to control timing. Home Depot also rolled out car and van delivery to more than 40% of the U.S. population.
In-store work: Home Depot has updated store signage in nearly 700 locations to make it easier to find items, and it is investing in pickup lockers for click-and-collect online orders. But key to in-store success is product availability. To this end, Home Depot has implemented replenishment strategies that include an application enabling workers to quickly see if a sought-after product is in overhead storage (previously, they would have to look for it manually). So far, Home Depot has reduced the number of out-of-stocks among top-selling items, per store, by 24%.
28% Site Improvement
Items that are in stock are more likely to sell, and they evidently did according to Home Depot’s fiscal third-quarter results.
Sales in the period, ended October, rose 5.1% to $26.3 billion (by comparison, Lowe’s third-quarter sales rose 3.8%). Online sales rose 28%, driven by revenue from buy online, pickup-in-store transactions. And purchases of more than $1,000 — many of which are made by professional customers — rose 9.1% in the quarter, to represent nearly 20% of U.S. sales.
As a result, Home Depot’s earnings advanced 36.4% in the quarter, to $2.51 per diluted share from $1.84 the year before.
For the year, which will end January 31, Home Depot projects 7.2% sales growth and earnings per share of $9.75.
Building Out Shopper Expectations
Maintaining this outlook requires that Home Depot consistently satisfies, even impresses, its shoppers through its improvements with the goal of creating a seamless retail experience. As it builds out its One Home Depot strategy over the coming years, this is how Home Depot will reframe what shoppers will come to expect from all retailers.
- Out-of-stocks will be a brand deal-breaker. Home Depot is not creating a new standard by ensuring its products are in stock; it’s simply recognizing that shoppers no longer have to wait for goods that are not available. Shoppers want a seamless retail experience. The expansion into the home improvement category, from Amazon to dollar stores, translates to more readily accessible purchase options for all.
- Shoppers will expect their questions answered immediately and with authority. Mobile apps will not only enable store workers to swiftly determine if products are in stock; they will enable shoppers to have direct communications with knowledgeable representatives. However, the key word here is knowledge — regular training and trust must be in place.
- Stores still matter. Many purchase decisions are still made in stores, so products must engage at the shelf. An aisle of lumber can include visuals that solve common structural challenges or inspire add-on projects. Also, shoppers picking up online orders may realize they need something else once there, so the front of the store should include merchandise that not only tempts, but anticipates needs.
Lastly, whatever changes a retailer adopts for its shoppers, it should make them synonymous with its brand. Like a kitchen island or walk-in shower, these options may be available elsewhere, but it’s their regular use that makes them personal. Shoppers need a compelling reason and seamless retail experience to return.
Bryan Pearson a Featured Contributor to The Wise Marketer and is the President of LoyaltyOne, where he has been leveraging the knowledge of 120 million customer relationships over 20 years to create relevant communications and enhanced shopper experiences.