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The new retail: The Home Depot case study


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Find out how The Home Depot is adapting to the shift in consumer behaviour through investment in mobile technology.

This case study forms part of a research piece entitled 'The New Retail: From mobile aspirations to business results', published by The Economist Intelligence Unit and sponsored by AT&T.

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The new retail: The Home Depot case study

  1. 1. © The Economist Intelligence Unit Limited 2014 A case study from the Economist Intelligence Unit For contractors and amateur builders alike, mobile technology has made buying products from The Home Depot a much smoother process. The Atlanta-based retailer of lumber, appliances and other home-improvement products has introduced smartphone applications that help customers check product availability, order products for pickup and navigate the aisles of its big-box stores. It also plans to equip sales associates with phones that will allow them to place orders from anywhere in the store and quickly search for information that might help customers. So far the company’s mobile innovations have had promising results. Mobile technology helped drive sales from the company’s online channels up by more than 50% during the third quarter. Online sales now account for about 3% of Home Depot’s total sales. “Our customers’ shift to mobile technology has been much faster than we anticipated,” Frank Blake, the company’s chief executive, said in a recent conference call with analysts. “We are having to play catch-up in this area and it will be a major focus of our investment in 2014.” An interconnected approach Cara Kinzey, senior vice president of information technology, said the company approaches mobile and online technology from “an interconnected standpoint” that combines its digital operations with its more than 2,200 brick-and-mortar retail outlets across the United States. “We have a constant cycle of people researching and buying in both online and in our physical stores,” she said. “We have a pretty rounded strategy around drawing back and forth.” The company has seen unexpectedly strong results from a program that allows customers to buy products online and have them shipped to stores for pickup at a later date. The benefit of this particular element of The Home Depot’s omni- channel strategy is that when customers do come to the brick-and-mortar store to pick up their orders, they often buy additional items. “We did not have high expectations of volume from that but once we implemented it, it was very surprising at how much it was utilised,” Ms Kinzey said. This year, The Home Depot plans to introduce a new service that will let customers order products through their mobile devices or online and have them delivered from one of its stores. That would improve customer service by shortening delivery times and boost supply chain efficiency, as the company currently ships from distribution centres that may be farther away from its customers. Currently, Home Depot ships items from stores only for its professional customers and does not ship from stores at all for orders placed online. However, customers could use the new service for larger goods, such as patio sets, grills or lumber, which may be too big to fit in their cars. Ms Kinzey said the company expects the feature to attract more customers. Mobile for all: customers and employees Several million people have downloaded The Home Depot’s mobile app, which was first introduced in late 2009. Others visit the company’s website on The Home Depot: driving sales through mobile technology March 2014 Sponsoredby
  2. 2. © The Economist Intelligence Unit Limited 20142 The Home Depot: driving sales through mobile technology their mobile devices, often to locate a local Home Depot store or search for a particular product and find out if it is in stock. “They may not want to go to the store unless they know we have a part that’s there, like a belt for a lawnmower, for example,” explains Ms Kinzey. At the store, customers may use app features such as a barcode scanner or a floor plan map— currently available for about two-thirds of the retailer’s stores—to help find products on the store’s shelves. The Home Depot first deployed mobile technology to sales personnel before developing its consumer app and mobile web technology. Today, the country’s biggest home-improvement company has learned that it needs to provide sales associates with the same physical tools used by its customers, so the company plans to unveil soon a new mobile device for salespeople resembling a smartphone. The device will allow sales associates to search products for a customer or to quickly find and play a how-to video on, for example, the installation of a particular pipe. “These capabilities will make our customers more comfortable with what they’re doing and what they’re buying,” Ms Kinzey said. Salespeople at The Home Depot have an incentive to help customers learn to use the company’s mobile apps and website because of a profit-sharing program that rewards them for online sales. A sale anywhere within the ZIP code of a brick-and-mortar Home Depot is credited to that store, thus benefitting sales associates. “Now associates want to teach you actually how to download the app and how to navigate it. They can tell you tricks in the store, especially if you’re a pro, so you will utilise the app more and they can earn more sales credit,” Ms Kinzey said. “It helps them as well as the customer.” In an effort to make products easier to find and facilitate transaction closings, the company may change the landing page of its mobile website to include questions that help narrow customers’ choices and show them what different purchase options might mean. “We engage you, and then we might start telling you how long it would take to get a product to your house,” she said. “There are a lot of options possible. We do facilitate pretty well now, but it still can be improved.” Segmenting the mobile market The company is continuing to differentiate its mobile options, having long ago realised that its customers can range from home-improvement hobbyists to career builders and contractors. For professional builders, The Home Depot recently launched a specialised app that allows users to obtain receipts electronically. “Instead of them keeping them in a manila envelope in their truck, they can just have [the receipts] on their app and they can print them if they ever need them,” Ms Kinzey said. The ability to gather receipts through the app, she added, was the attribute most frequently mentioned by contractors when they were asked for feedback. Now the company is developing a feature in the professionals’ app that will enable builders to authorise payments for supplies picked up by workers or “runners” at Home Depot stores. “I think this will be a huge help for our pros,” she said. Based on information gleaned from search results, The Home Depot recently embarked on efforts to offer the ability to purchase services through its mobile technology, such as the installation of appliances or carpets. Like other retailers, the company is also trying to improve the accuracy of its barcode scanning technology for mobile app users. Mobile’s future role The company is seeing a significant amount of revenue growth from the “interconnected traffic” between its online technology and its stores, particularly given that The Home Depot is not currently building stores or expanding internationally, Ms Kinzey said. The rise of mobile technology will continue to play an influential role in the company’s business and could even have an effect on the appearance of its stores. “We’re going to change what we have in stores somewhat, but we continue to evaluate and research,” she said. “It will eventually cause things to look a little bit different.”