Home Depot Puts Its Money Where Its Omni Channel Is
From its inception, Home Depot has operated from a platform which quickly took this industry by storm. The company’s founders saw that by creating a new type of retail scale, new for this industry at least, Home Depot could radically change the marketplace. The founders saw themselves bringing consumers and manufacturers together as had never been seen before in this market. In fact from the start, the newly christened Home Depot had more in common with Walmart than it had with any of its intra-industry peers/rivals.
Well financed, the early Home Depot was able flex its young muscles with surprising alacrity when it came to dealing with manufacturers. In fact the infant company quickly saw that it could enforce demands on manufacturers as had been planned from the outset. The new big box, home center warehouse format was an instant hit with consumers who quickly picked up on the Home Depot platform of offering everyday low prices from a dazzling product selection, from an even more dizzying sized retail venue. As consumer sales leaped, the company was easily able to expand its store presence nationwide and shortly across international borders north and south.
As manufacturers observed the new format’s enormous popularity and rapid growth, they realized that it was almost futile to resist the buying terms which The Home Depot demanded. Most manufacturers simply feared the consequences of being left out of the excitement and of course the income. Several manufacturers were unable to keep up with the ever tougher demands and dejectedly left the fold. Others could be dismissed seemingly on a whim. Meanwhile other retailers struggled to catch up.
Of course, Home Depot’s rapid rise was due to its quick acceptance and growing popularity with consumers. Customers found an incredible variety of product combined with very affordable prices, with which few competitors could compete. Plus, the Depot had created a system of training a generally impressive floor staff so that most customers could be given the help they needed, both in terms of product and instruction, to proceed with their home projects.
This progressive growth and dominance continued as a few competitors emerged and others adjusted to life against Home Depot for well more than an eventful decade. Then the founders left as incredibly rich men and a carefully chosen successor was put in place. The company soon abandoned basic founding principles. Profits became the chief corporate focus. Shortcuts replaced many of the founder’s principles, especially in terms of associate hiring, training and customer service.
This was followed by a downturn in performance which approached its apex during the subprime crisis and hit it during the recession. Investors rebelled and management gave way to the third generation.
New CEO Frank Blake immediately announced that the company would return to its roots. He took the lead and quickly sold off large pro-oriented operations which had been a part of the company’s leaving its founder’s roots. He also shuttered what seemed extraneous, ancillary retail operations such as Home Depot’s EXPO Design Centers. Blake took advantage of the recessionary unemployment horror and aggressively set off a campaign to bring talented carpenters, plumbers, electricians and qualified builders to the Home Depot selling floor to the delight of previously turned off customers.
A couple of months ago, this space featured an insight discussing Home Depot’s initiative to enter the much coveted world of same day shipping. This is an area being targeted initially by the likes of Walmart, Amazon and eBay. Success has been elusive, costly and challenging.
Just a few years ago, most industry observers felt that this industry had relatively little to gain in terms of sales from the Internet. Products such as lumber, flooring and major appliances, to name a few, were seen as difficult fits for web-based sales, services and delivery. Now Home Depot has committed to a holy grail of Internet transactions.
Home Depot is attempting to clear the next step in its comprehensive selling evolution. As many companies hand out executive titles which point to an omni-channel selling focus, Home Depot has opened its first direct fulfillment center. The facility covers approximately one million sq. ft. and is located less than an hour south of the company’s Atlanta headquarters. This is the first of three direct fulfillment centers the company plans to build in the next two years.
The next two facilities will be strategically placed in California and Ohio. They are expected to stock over 100,000 products and will have the ability to ship product to 90% of the US zip codes within 48 hours.
The facilities are designed from the perspective of serving customers rather than the convenience of the company. They feature same day order picking with an emphasis on closely monitoring in-stock levels to greatly limit out-of- stock situations.
The facilities are being designed to work in tandem with the company’s vast network of stores to offer a seamless to-customer experience. This is largely based on Home Depot’s current eCommerce experience, in which about a third of customers ordering online, pick up orders shipped to stores or product already waiting in stores.
Not to be forgotten is the bane of many non-brick and mortar companies, the cost of returns. Consumers resent having to pay for shipping returns on products which are defective or sent through any number of order fulfillment errors. To this Home Depot’s policy of accepting returns of online purchases at the store level has already proved an overwhelming success. The investment in these new systems will only serve to increase that simplicity and satisfaction.
Another key feature Home Depot is growing to contribute to a customer-friendly, seamless experience include the ability to offer an almost infinite number of products which originate from other sources and are available and shipped through Home Depot. This could grow Home Depot into a true mass merchandiser while increasing profits significantly.
For years Amazon has set its sights on siphoning sales from other retailers. Home Depot has been on the losing end of this for some time. With Home Depot’s omni-channel plans now set into motion, a siphoning in reverse is likely about to take place.