Home Depot Looks to Offer Same Day Shipping
Years ago retailers which dominated an industry or a market segment were referred to as category killers. During its early years Kmart came on the scene with aplomb as was correctly termed a category killer. As Walmart and Target eclipsed Kmart and it was realized that the Kmart platform wasn’t prepared to compete with seemingly similar formats for the future, Kmart somewhat retained the category killer moniker but was only a dominant factor in communities in which Walmart and Target had decided not to enter.
Best Buy and Circuit City were once seen as category killers in specialty consumer electronics retailing. Staples, Office Depot and OfficeMax made the grade in specialty office supply retailing. Years ago, A&P would have qualified as a category killer, however it was born long before the concept was coined and now is a shell of its once dominant self. Toys “R” Us, founded in 1948, is often considered to be the first retailer termed category killer.
During the current century, general discount retailers, both brick and mortar and Internet-based, have crossed so many product frontiers, that their low pricing ability has set onetime category killers on their heels. Walmart’s leap into housing grocery departments bordering on supermarkets, alongside their already big box discount format, stunned the supermarket industry, as Walmart quickly rose to become America’s number one grocer. At the same time its vast and inexpensive product assortments have humbled the likes of Best Buy and Circuit City (until it was slammed into oblivion), Barnes & Noble and Borders (oblivion) and on and on.
If one company has outplayed even Walmart’s hand, it is Amazon. Amazon is even slowly attempting to enter the grocery market with its usual patient prudence. Amazon began life as a basically enormous discount bookstore and it soon became clear that this Internet pioneer had the correct algorithms to easily handle the entrenched brick and mortar competition. Moreover, Amazon quickly tested the waters in related categories such as prerecorded music and movies, eventually to become the second most dominant renter of movies and TV shows through the most modern technology, video streaming. Down went another onetime category killer which couldn’t keep up- Blockbuster.
While there are currently many successful retailers on the scene, Internet-only Amazon and brick and mortar-based Walmart are the two most dominant and ever morphing retailers around. Walmart of course continually strives to improve its web presence, no doubt closely monitoring Amazon’s continuing accomplishments.
While Amazon’s growth seems to know no bounds, the company does face considerable challenges to best compete with brick and mortar retailing. The term ‘showrooming’, much reviled by brick and mortars, has entered the modern lexicon, mostly due to the overall presence of Amazon’s massive and informative website and the introduction of mobile computer devices. Lately, retailers which long dreaded the concept of showrooming have now begun to embrace the concept, or at least accept it as a phenomenon they must eventually come to terms with, the sooner the better.
These retailers are beginning to realize that their physical stores actually offer advantages in selling to consumers. In a physical store, consumers enjoy the ability to touch and try on garments, to feel the workmanship on furniture, to probe the functionality of an appliance. Here the retailer has a visitor likely inclined to make a purchase if they can overcome price competition and perhaps selection from the Internet.
Thus Amazon is experimenting with methods aimed at efficiently and economically achieving same day delivery to customers who require such timing. This is clearly a key to the company achieving a position of leadership and eventually significant market share when it comes to purveying groceries.
Walmart too has been examining all possibilities in terms of same day shipping, especially on products exclusive to the Internet or temporarily unavailable at a store, which is not unusual. The company is believed to have even considered asking shoppers within a store to deliver merchandise to neighbors.
Recently a retailing professional noted the merchandising advantages enjoyed by both traditional brick and mortar establishments and Internet-based retailers and predicted that eventually each party would focus on its advantages and not stress out on driving down prices and margins to gain an emotional advantage. He predicted that Internet retailers must eat shipping costs, even on cumbersome or particularly fragile items and may ultimately be better off leaving those products for the consumer to pick up at a nearby brick and mortar site.
Now comes The Home Depot, a true retail trailblazer. This company’s creation was based on a carefully created blueprint, which led to a new format- the home center warehouse. This concept more than one upped the existing big box concept- the home center, both in terms of size as well as presumed buying power.
The buying power, which was expected to be enjoyed by the fledgling Home Depot, was an essential element of their new corporate design. In fact, rival big box warehouse chains were not able to incorporate the dominant buying power design created by Home Depot and with the exception of Lowe’s and Menard, quickly exited the marketplace The Home Depot was basically the Walmart of the industry, an instant category killer from its creation.
Now word comes that Home Depot is about to employ an ambitious and costly plan, one result of which is expected to allow the company to offer customers same day delivery on orders. The plan calls for an expenditure of at least $300 million during the coming fiscal year.
The investment is to be used for online, technology and supply chain, improvements. This will include the addition of three fulfillment centers, to be strategically placed across the country and to be completed within the next two years along with an overhaul of its warehouse technology systems.
It is expected that these costly improvements will pave the way for same day shipping among other customer friendly implementations. Depot management sees this as allowing it to better meet the needs of its broad range of clientele, especially contractors.
Same day delivery should certainly lead to considerably enhanced online sales. Corporate executives feel that professional contractors often find themselves in a bind, suddenly short of product or in need of product replacement. Here they no longer have to leave a job site or call it a day as they await supplies and tools, even lumber.
This flies in the face of predictions long made by ‘experts’ who claimed that many products which are industry mainstays are not suited for shipping, at least as a general rule. Home Depot’s current management, has shown itself to be adept at making solid choices, even under severe stress, as when the company strategically unloaded HD Supply, early in the recession. Though sold off quickly, and at a considerable loss, this sale permitted the company to return to its original roots, invest in the considerable task of hiring seasoned professional to man its stores as many suddenly found themselves out of work due to the sudden, rapid decline in building.
If Home Depot management has again calculated correctly, its $300 million plus investment could bring it to a new level of customer service and fulfillment. In the best case scenario, the retail giant could enjoy a strong new hold in the elusive contractor market. This could help erase the memories of the Home Depot Supply fire sale during the early stages of the recession.