Here’s How Home Depot’s E-Commerce Strategy Is Driving Growth

Home Depot (NYSE:HD) has shown a steady increase in revenues over the last year. For the nine months ended October 2016, the company reported a more than 7% increase in revenues and a nearly 6% increase in comparable sales for its U.S. stores. The company’s focus on online retailing has played a major role in driving this growth. It has been named as one of the world’s most innovative company’s in 2017 by Fast Company. This recognition comes in the light of the fact that Home Depot generated an estimated $90 billion in revenues in 2016 without opening any new stores in the last three years. The company’s online sales formed 5.6% of its revenues in Q3 2016 – a significant increase from the 1% number in 2011. The company has been focusing on delivering an integrated experience across all sales platforms leading to an increase in conversions in its e-commerce site. Over 40% of Home Depot’s online orders are picked up from stores. (Read The Year That Was: Home Depot). This integration of the online and offline channels is helping Home Depot to make its stores more efficient, leading to higher revenues and profitability.

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By focusing on an integrated channel strategy, Home Depot has been able to increase revenues per square foot, rather than generating revenues from new square footage. This has ensured that its existing store network is being effectively used to drive revenues. Home Depot has been specifically focused on products that are e-commerce unfriendly and where customers need advice from experiences associates in the store. By integrating its online and offline channels, the company has ensured that customers can come to stores for a demo or advice and then buy the product online. For orders placed online, the customer can pick up the product in store and seek advice at the time of pick up. This integrated strategy is being adopted by other players such as Best Buy and has worked well. Through this strategy, Home Depot has been able to create an experience which is appreciated by most of its customers, leading to higher sales.

Companies which have physical stores are likely to deliver a better customer experience compared to pure online retailers. By integrating the online and store experiences, they can provide both the convenience of online shopping and the benefit of personal interaction, product demos and advice. Best Buy has exploited this advantage is able to sustain revenues despite significant competition from Amazon. Home Depot is also adopting a similar strategy which is showing results.

We believe that, with further expansion of its e-commerce business and strengthening of the delivery channels, Home Depot can expand its online customer base going forward, driving revenues over the long term.

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