Why stores matter to Home Depot’s e-commerce push

 BY MARK BROHAN Research Director

Home Depot keeps growing online because it’s taking the time and effort to make sure stores play a pivotal role in the mix, president of online Kevin Hofmann told Wall Street analysts.

The Home Depot Inc. added $1 billion in new web sales in 2014, posting total web sales of $3.5 billion, in large measure because of effective use of stores. That’s the key point Home Depot senior vice president and president of online Kevin Hofmann told analysts last week at the sixth annual Goldman Sachs dotCommerce conference in New York.

Home Depot, No. 10 in the Internet Retailer 2015 Top 500 Guide, operates 2,200 stores, and in 2014 more than one-third of its e-commerce transactions involved buying online and picking up in a store. “About 40% of our orders leverage our existing physical assets,” Hofmann says according to a transcriptposted on SeekingAlpha.com. “We want that customer and to help them get in and out fast, but what we always say at Home Depot ‘you come into Home Depot for what you thought you wanted, but you leave Home Depot with what you really needed.’”

Home Depot, the winner of the 2015 Internet Retailer of the Year award from Internet Retailer, carries an inventory online of about 1 million items compared to about 35,000 SKUs for a typical Home Depot store, Hofmann told attendees. “Our 1 million online items come from a combination of vendor direct, from our vendors or from our house distribution centers,” Hoffman said.

In addition to providing a variety of ways to ship online orders, Home Depot is spending significant time and resources on helping its store employees use the web to help customers research and purchase from HomeDepot.com, Hofmann says. “You’re not here to just buy items from us, you’re going to buy things that are going to live with you figuratively for 10 years or 20 years,” Hofmann told attendees. “We bring that to the table with over 300,000 associates in our store.”

While not going into great detail Home Depot over time has made it a priority to build up multiple ways to help consumers, especially Home Depot’s core audience of do-it-yourselfers and professional contractors, shop online.

“We have built out and augmented those associates in the store with centralized associates in our contact centers: thousands and thousands of chat sessions and email sessions a day with our customers in very specific categories like bath, flooring and appliances,” Hofmann said.

Over the past several years Home Depot has invested about $300 million to upgrade its e-commerce distribution capability and do a better job of integrating its web and store inventory and supply chain.

And while not discussing many details, Hofmann told analysts Home Depot is experiencing exceptional growth online because its integration plans are paying off “The information technology investment we are making is really to optimize that whole supply chain offering that Home Depot has,” Hofmann told attendees. “If someone wants to buy a patio set from us, we have choices because we can ship that patio set from a store, vendor direct from a warehouse from one of our suppliers, or we could ship that patio set from one of our house facilities.”