An executive at the home improvement retailer said at an SMC³ conference that e-commerce orders are growing fast, but challenges persist on many fronts.
Source: Eric Broder Van Dyke / Shutterstock
The Home Depot is aiming for 20 percent year-over-year e-commerce sales growth
The Home Depot is in an interesting place when it comes to the omni-channel revolution currently confronting retailers of all shapes and sizes.
On the one hand, more than 90 percent of the home improvement chain’s sales still come from its roughly 2,000 brick and mortar outlets across the United States. But it is increasingly seeing the need to turn new online engagements with shippers into efficient supply chain processes.
At SMC³’s annual JumpStart conference in Atlanta Monday, Erin Donnelly, director of delivery support at The Home Depot, said that the company is shooting for 20 percent year-over-year e-commerce sales growth and is involved in a number of omnichannel projects.
“Last year our goal was get to 90 percent of the (U.S.) population within 2 days,” she said. “The goal this year is to see how much of the population we can reach in one day.”
Though speed of delivery is often the most talked about metric in omnichannel fulfillment, Donnelly stressed that communicating delivery times accurately is also crucial.
“Telling them when they will get their delivery is more important than how fast,” she said.
For instance, if the retailer quotes a seven-day delivery window but delivers in three days, the receiver might be out of town, believing the delivery was due to come later. That receiving customer might not be happy about the package sitting on a porch for four days.
Overall, the focus is on homogenizing the in-store versus online experience.
“Customers expect to get the same experience,” she said. “Sometimes they order in store and want it delivered at home or order online and want to pick up in-store.”
She also stressed that customers want delivery cost options, to be able to choose free but longer delivery times or the option to pay for quicker delivery. Demand for more final mile visibility is also rising.
“Seeing a note on our website that ‘it shipped,’ that’s not good enough,” she said.
One other issue The Home Depot is wrestling with is that big purchases, like a bedroom vanity, create different (and generally higher) expectations for customers.
“Their expectations for that delivery are even higher than their expectation for a small parcel,” she said. “So there’s a bigger gap between what they’re expecting and what we’re delivering.
The company has taken a few other steps to drive omnichannel fulfullment efficiency. It has engineered its network of distribution centers to get closer to customer populations, consolidating volume where appropriate to use zone skipping to greater effect, and fulfilling more direct from stores instead of DCs.
“Using store inventory is an aspect we’re focusing on this year,” she said. “We have 2,000 stores, so we’re close to a lot of our customers. It’s about connecting the store and online, getting the systems to talk to each other.
On the inbound side, Donnelly said the company has “just scratched the surface” in terms of coordinating import containers with outbound fulfillment.
“Every week we ask, how much did we lose because we shipped something across the country from where we needed it?” she said.
Much of the company’s focus has been on the outbound leg out of necessity because the cost impact of e-commerce comes primarily from that side.
In terms of how The Home Depot views its value proposition versus pure online retailers, Donnelly said there are advantages to selling through physical stores, especially since many of the products the company sells are for projects where a customer might need some help.
“Our value is we can add expertise in-store, like if someone has a plumbing question,” she said.
Another interesting area is the delicate relationship between the company and its suppliers, some of whom theoretically could become competitors by fulfilling orders direct from consumers themselves. According to recent research by IDC Manufacturing Insights and the Council of Supply Chain Management Professionals, half of manufacturers will have the ability to fulfill B-to-C orders by 2020.
Donnelly said it is pilot testing a program with one of its key suppliers to provide final mile delivery for that supplier. She said the project is going well, with the supplier sending goods to its DC, but admitted the “we don’t have a lot of visibility into that product right now.”