There are various metrics to measure a retailer’s performance as we detail in chapter 6. On nearly every one of them, Home Depot is achieving remarkable success. Consider, for example, the following statistics:
In a recent year in which the home improvement retail sector overall grew by .6 percent, Home Depot tripled that, increasing its revenues by 1.8 percent.- Its market share puts it far ahead of its next closest competitor, such that Home Depot accounts for 29 percent of the market, according to the $110.2 billion in annual revenues it earned, whereas Lowe’s only brings in 19 percent and $72.2 billion.
- Even beyond the home improvement sector specifically, Home Depot is a leading retailer, ranking fifth in ecommerce market share (behind retailers like Amazon, that focus almost exclusively on online channels) but also attracting substantial foot traffic in its stores.
- Although expenses related to dealing with the demands of the coronavirus raised its overall costs, same-store sales still increased, compared with the previous year, in the early months of the pandemic.
- After cancelling its popular annual in-store spring sale—usually one its most prominent sales promotions—due to COVID-19 concerns, its online sales rose about 30 percent in March, then by triple digits in April.
So the key question becomes: What has it done to achieve these powerful indicators of success? As might come as no surprise, they reflect a multipronged, concerted, coordinated effort by the retailer to provide value to shoppers.
A key element is its focus on ensuring a seamless, omnichannel experience, as exemplified by an $11 billion investment in a “One Home Depot” initiative, with six, interconnected goals that would support the transformation of the retailer into the place that consumers could go to complete their projects. This reframed strategic focus also was reflected in the company’s revised advertising slogan: “How Doers Get More Done.”
Beyond just the tagline though, Home Depot’s efforts have had meaningful implications for the way it does business. For example, rather than try to push customers to adopt a particular sales channel, the retailer decided to embrace their tendencies to switch among channels, such as by initiating their shopping processes by searching online, but then visiting the store to pick up the items or get assistance with how to use certain products.
In particular, its effort devoted to developing its mobile app has clearly paid off; it consistently earns top ratings in evaluations and rankings of various retailers’ apps. Both the app and website offer cross-channel services, such as image search functions and product locator aids. In turn, these digital channels are linked to labels on products, such that shoppers can quickly click to find more information on the mobile site, even as they are standing in an aisle in their local store.
Other benefits greet consumers in the stores too. Whether they are there to pick up items they already have purchased or to browse the offerings in person, most shoppers encounter freshly renovated storefronts, effectively trained staff, and novel product introductions. The redesigned stores feature dedicated counters for online order pickups and returns. The basic checkout lanes are more efficient too. The employees staffing these counters and walking through the aisles are receiving a combined 1 million hours in training, to improve their ability to help shoppers, along with bonuses and incentives based on the company’s overall performance. Finally, on the shelves themselves, the product assortments are growing; for example, the pipes and fittings departments have been greatly expanded to include more stockkeeping units that can match each shopper’s precise needs.
Another aspect of the interconnected One Home Depot initiative involves the supply chain. For Home Depot, which serves both consumer and business customers, supply chains need to account for various logistics and delivery options. Whereas previously it outsourced most home delivery operations for consumers to third-party providers, it has moved a substantial proportion of these services in-house, which helps the retailer ensure the quality of the delivery, as well as establish another contact with the consumer. At the same time, it invested in making the supply chain more efficient, to ensure stocking levels for those expanded product lines.
All these initiatives and changes align with Home Depot’s broader, strategic recognition: Consumers and professional building contractors today are not necessarily driven solely by price, which was the appeal summarized in Home Depot’s previous tagline, “More Saving. More Doing.” Instead, they seek out options that will enable them to feel a sense of satisfaction and achievement by completing home improvement projects on their own. By creating an ecosystem that facilitates their efforts, across channels and operational features, Home Depot can focus more on growing its revenues even further.
Discussion Questions:
- Which metrics are most indicative of Home Depot’s success, in your view? Why did you choose them and not others?
- How can Home Depot account for the costs associated with its improvement initiatives, as well as its necessary responses to the coronavirus, accurately?
Source: Pamela N. Danziger, “Home Depot’s Transformation to a Fully Interconnected Retailer Shows Record-Breaking Results,” Forbes, February 26, 2020; Will Feuer, “Home Depot Sales Rise 7% But Higher Coronavirus-Related Costs Drag Down Earnings,” CNBC, May 19, 2020; Demitrios Kalogeropoulos, “For Home Depot’s Online Business, It Was Black Friday Nearly Every Day in April,” The Motley Fool, May 27, 2020.